Boondein, Kanpur V. Commissioner of Income Tax(Exemptions) , Lucknow.

ITA 21/LKW/2023

AI Insights

The case involves an appeal by the assessee against the order of the Commissioner of Income Tax (Exemption), Lucknow, which rejected the assessee's application for registration under section 12AB of the Income Tax Act, 1961. The CIT(E) had found that the activities of the trust were not genuine and not in consonance with the objects of the trust as stated in the trust deed. The Tribunal found that the CIT(E) had misapprehended the facts, particularly regarding the financial transactions of the trust, and had not properly considered the evidences provided by the assessee. The Tribunal noted that the powers of the Tribunal are co-extensive with that of the Commissioner under section 12AA of the Act, and thus, it can direct for registration if satisfied about the genuineness of the activities of the trust.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 123008 (ITAT-LUCKNOW)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 06-06-2023
• Assessment Year: misc
• Appeal Filed On: 26-01-2023
• Other Referred Cases: CIT (Exemption), U.P. vs. Reham Foundation, Lucknow [2019] 111 taxmann.com 379 (Alld.)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Principle of natural justice; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH ‘A’, LUCKNOW BEFORE SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER ITA No.21/Lkw/2023 Assessment Year: N.A. Boondein, 14/113 Room No.813VIII Floor, Kan Chambers, Civil Lines, Kanpur Nagar, U.P.-208001 PAN: AADTB8602Q Vs. Commissioner of Income Tax (Exemption), Lucknow (Appellant) (Respondent) O R D E R PER SUDHANSHU SRIVASTAVA, J.M.: 1. This appeal is preferred by the assessee against the order dated 29.11.2022 passed by the Ld. Commissioner of Income Tax (Exemption), Lucknow [hereinafter called the CIT(E)], wherein, vide the impugned order, the ld. CIT(E) has rejected the assessee’s application for registration u/s.12AB of the Income Tax Act, 1961 (hereinafter called ‘the Act’). 2. The brief facts of the case are that the application for registration of the assessee trust u/s. 12AB of the Act was filed Appellant by Shri P.K. Kapoor, CA Respondent by Shri S.H. Usmani, CIT (DR) Date of hearing 07/06/2023 Date of pronouncement 27/07/2023 I.T.A. No.21/Lkw/2023 2 on 16.05.2022 in Form 10AB under Rule 17A of the Income Tax Rules, 1962. As per the query letter issued by the ld. CIT(E), the assessee was required to submit a note on all activities conducted since inception/during the last three years and till 30.06.2022 and also submit a note specifying the main area of charitable/religious activities and a projection/plan for the main charitable/religious activities to be undertaken in the next two years. Also, the assessee was required to furnish the requisite documentary evidences to substantiate the charitable nature of activities being carried out by it in the recent past. 2.1 In response to the various queries raised by the ld. CIT(E), the assessee filed details submissions. However, the ld. CIT(E) noted that the assessee had filed expenditure account only for Financial Year ending 31.03.2021. It was also observed by the ld. CIT(E) that the assessee had not incurred any expenditure as per the objects mentioned in the trust deed. It was further observed by the ld. CIT(E) that a perusal of the receipt/payment account of the assessee showed that the assessee’s trust had collected mess fees 50 times of the admission fee and had also incurred expenditure on fooding @ 50% of the gross receipts. Thereafter, the ld. CIT(E) reproduced a chart on page 5 of the I.T.A. No.21/Lkw/2023 3 impugned order laying out the various expenses incurred by the assessee during Financial Year 2020-21. The ld. CIT(E), in the impugned order, has also stated that the assessee has filed some documents which were not related to the objects of the trust. The ld. CIT(E) has stated that the activities of the trust were not appearing genuine and were not in consonance with the objects of the trust. It has been further observed that the assessee had failed to furnish documentary evidences to enable her to satisfy herself of the charitable nature of the activities of the trust. 3.0 Now, aggrieved, the assessee has approached this Tribunal, challenging the rejection of the assessee’s application for registration u/s.12AB of the Act by raising the following grounds of appeal: 1. BECAUSE the Ld. Commissioner of Income-tax (Exemption) has erred in law and on facts in rejecting the application of the appellant for grant of registration under sub-clause (iii) of clause (ac) of sub-section (1) of section 12A of the Income-tax Act 1961 by erroneously holding that "the activities of the trust are not appearing genuine and in consonance of the object to the trust". 2. BECAUSE during the course of proceedings of registration under sub-clause of clause (ac) of sub section (1) of section 12A, the appellant had placed before Commissioner of Income-tax (Exemption) all such material and evidences which were required by the said Income- I.T.A. No.21/Lkw/2023 4 tax authority which also fully met the requirement of law and on a due consideration of the said material and evidences, the registration under section 12A(1)(ac)(iii) deserved to be granted. 3. BECAUSE on a due consideration of material and information placed the ld. Commissioner of Income-tax (Exemption) during the course of proceedings of registration under sub-clause (iii) of clause (ac) of sub- section (1) of section 12A, the Commissioner of Income- tax (Exemption) could not have validly come to the erroneous conclusion that the activities of the appellant society were not genuine that the same were not in consonance with its objects 4. BECAUSE the impugned order has been passed by ld. Commissioner of tax (Exemption), without properly appreciating the submissions made during the course of registration proceedings. 5. BECAUSE the ld. Commissioner of Income-tax (Exemption) has passed the impugned order without affording due and effective opportunity of being heard to the appellant. 6. Because the order appealed against is contrary to the facts, law and principles of natural justice.” 4.0 At the outset, the ld. Authorized Representative submitted that the observation of the ld. CIT(E) on page 5 of the impugned order vis-à-vis the income and expenditure account was factually incorrect in as much as the assessee did not incur any expenditure on food nor did collect any mess fees or admission fees. Our attention was drawn to the paper book filed by the assessee in this regard and specifically to page 127 wherein, the I.T.A. No.21/Lkw/2023 5 copy of the income and expenditure account has been reproduced and it was pointed out that the income items include contribution from members, donations and bank interest. It was submitted that, thus, the ld. CIT(E) had completely mis-appreciated the fact of the case. Our attention was also drawn to pages 114 to 116 of the paper book filed by the assessee and it was submitted that these pages contained copies of invoices submitted before the ld. CIT(E) and pertain to charitable expenditure and was debited in the income & expenditure account. It was submitted that these invoices were filed before the ld. CIT(E) but the same were not considered at all while deciding on the assessee’s application for registration u/s.12AB of the Act. Our attention was further drawn to pages 56 to 90 of the paper book filed by the assessee and it was submitted that these pages contained copies of photographs as well as brochure of the assessee trust and reflected the charitable nature of activities and it was submitted that these documents had been filed before the ld. CIT(E) but the same were not considered at all while deciding upon the assessee’s application for registration u/s.12AB of the Act. The ld. Authorized Representative also submitted that the action of the I.T.A. No.21/Lkw/2023 6 ld. CIT(E) in rejecting the assessee’s application was guided by mere suspicion and not by any facts on or documents of record. Our attention was further drawn to pages 42 to 46 of the paper book filed by the assessee and it was submitted that these pages contained the detailed reply of the assessee in response to the queries raised by the ld. CIT(E). The ld. Authorized Representative submitted that it might be true that all objects as stated in the memorandum, were not being carried out but even carrying out of some of the objects would entitle the assessee trust to obtain registration under the Act. Reliance was placed on the Full Bench judgment of the Hon'ble Allahabad High Court in the case of CIT (Exemption), U.P. vs. Reham Foundation, Lucknow reported in [2019] 111 taxmann.com 379 (Alld.) for the preposition that the Tribunal can direct for registration of the Trust/Institution as the powers of the Tribunal are co-extensive to that of Commissioner u/s.12AA of the Act. 5.0 Per contra, the ld. Senior Departmental Representative (DR) strongly supported the order of the ld. CIT(E) and submitted that the ld. CIT(E) had given a concrete finding that the activities of the trust were not genuine and that the I.T.A. No.21/Lkw/2023 7 expenditure incurred by the assessee trust was not in accordance with the objectives of the trust. It was pointed out by the ld. CIT (DR) that the objectives and activities of the trust were not in consonance. It was specifically pointed out by the ld. CIT DR that chara expenses incurred on Gau Sewa and the plantation expenses incurred did not fall within any of the objects as mentioned in the Memorandum of the Trust. It was submitted that the trust was bound to carry out activities within four corners of its objects as laid down in the memorandum and that any other activity, even if charitable nature, would not entitle the assessee trust to obtain a registration if the same was beyond the scope of the objects as mentioned in the Memorandum of Association. The ld. CIT(DR) prayed that since the ld. CIT(E) had rightly rejected the assessee’s application for registration, the assessee’s appeal deserved to be dismissed. 6.0 We have heard the rival submissions and have also perused the material on record. We have also carefully gone through the reply filed by the assessee in response to the queries raised by the ld. CIT(E). As far as the contention of the ld. AR that the ld. CIT(E) has narrated incorrect facts in the I.T.A. No.21/Lkw/2023 8 impugned order is concerned we are in full agreement with the same. A perusal of the income and expenditure account, furnished by the assessee, shows that the assessee did neither collect any admission fee nor any mess fee and further no expenditure was incurred on fooding as has been stated by the ld. CIT(E). Thus, apparently the facts, as considered by the ld. CIT(E), while dismissing assessee’s application, were not correct. It is our considered view that the ld. CIT(E) should have considered the correct facts of the case before rejecting the assessee’s application for registration. It is also true that the assessee had submitted voluminous documents in support of the activities being claimed as charitable. However, the fact remains that the veracity of assessee’s claim was not properly verified by the ld. CIT(E) because, apparently, she was looking at wrong set of facts. The ld. Authorized Representative has relied upon the judgment of the Jurisdictional High Court in the case of CIT vs. Reham Foundation, Lucknow (Supra) and has argued that the powers of the Tribunal are co-extensive to that of the Commissioner u/s.12AA of the Act and, thus, it can direct for registration of the trust or institution. However, this power, in our considered view, comes with a caveat i.e. the I.T.A. No.21/Lkw/2023 9 order of registration can be issued only after recording satisfaction with regard to the genuineness of the activities of the trust as provided u/s.12AA of the Act. In this Full Bench judgment, the Hon'ble High Court has further held that where the Commissioner has refused to accept application for registration of trust u/s.12AA of the Act after recording his finding on the basis of material on record before him holding that the activities and objects of the trust were not genuine, the Tribunal, on the basis of same material on record, can come to the conclusion that the order of the Commissioner was perverse. In such a situation, the Tribunal can direct the registration of trust without remanding the matter to the Commissioner. However, the evidences furnished before us in the form of paper book [which were also submitted before the ld. CIT(E)], are unfortunately not sufficient evidence to enable us to satisfy ourselves that the objects of the trust are indeed genuine. It is true that the ld. CIT(E) has ignored/misconstrued /misinterpreted the evidences placed before her. However, the material before us is also not sufficient for us to reach a conclusion regarding the genuineness of the activities of the assessee trust. Therefore, on the peculiar facts of this case, we I.T.A. No.21/Lkw/2023 10 deem it appropriate to restore the issue to the file of the ld. CIT(E) with the direction to decide the issue afresh after giving adequate opportunity to the assessee to present its case and we also direct the ld. CIT(E) to fully consider the various evidences furnished by the assessee in proper perspective and also call for additional evidences, if so required. 7.0 In the final result, appeal filed by the assessee stands allowed for statistical purposes. (Order pronounced in the open court on 27/07/2023) Sd/- Sd/- ( ANADEE NATH MISSHRA ) (SUDHANSHU SRIVASTAVA) Accountant Member Judicial Member Dated: 27/07/2023 Aks Copy of the order forwarded to : 1. The Appellant 2. The Respondent. 3. Concerned CIT 4. The CIT(A) 5. D.R., I.T.A.T., Lucknow Asstt. Registrar