Danpur Himalayan Rural & Agriculture Society, Uttrakhand V. CIT (Exemptions), Lucknow

ITA 2114/DEL/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3042 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 07-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard
• Section: 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : B : NEW DELHI BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO.2114/DEL/2017 ASSESSMENT YEAR : NA DANPUR HIMALAYAN RURAL & AGRICULTURE SOCIETY, DANI BHAWAN, NIYAR MUKHANI CHAURAH, HALDWANI DISTT., NAINITAL, UTTARAKHAND. PAN: AAAJD0844P VS. CIT (EXEMPTIONS), T.C. 46V, U.P. STATE CONSTRUCTION & INFRASTRUCTURE DEVELOPMENT CORPORATION, VIBHUTI KHAND, GOMTI NAGAR, LUCKNOW. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K. SAMPATH, ADVOCATE DEPARTMENT BY : MS RACHNA SINGH, CIT, DR DATE OF HEARING : 21.03.2018 DATE OF PRONOUNCEMENT : 23.03.2018 ORDER PER R.S. SYAL, VP: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER PASSED BY THE CIT(EXEMPTIONS) ON 11.01.2017 DENYING THE BENEFIT O F REGISTRATION U/S ITA NO.2114/DEL/2017 2 12AA(1)(B)(II) OF THE INCOME-TAX ACT, 1961 (HEREINA FTER ALSO CALLED `THE ACT). 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE-SOCIETY FILED AN APPLICATION FOR REGISTRATION U/S 12A(A) OF THE A CT ON 26.07.2016. THE LD. CIT RECORDED ON PAGE 2 OF THE IMPUGNED ORDER THAT T HE ASSESSEE COULD NOT PRODUCE ANY BOOKS OF ACCOUNT OR VOUCHERS FOR VERIFI CATION AND, FURTHER, THERE WERE INSTANCES WHERE PAYMENTS IN CASH FROM FI VE BANK ACCOUNTS OF THE SOCIETY WERE MADE TO THE SOCIETY MEMBERS WHICH ESTA BLISHED THE FACT THAT THE APPLICANT SOCIETY WAS A CLOSELY HELD PRIVATE GR OUP. THE LD. CIT (E) ALSO CONSIDERED THE INCOME AND EXPENDITURE ACCOUNTS OF T HE ASSESSEE FOR THE F.Y.S 2013-14, 2014-15 AND 2015-16 AND NOTICED THAT HUGE GRANTS FROM VARIOUS PROJECTS, NAMELY, NRHM AND IWMP ETC. WERE RECEIVED AND THE ASSESSEE COULD NOT SHOW THAT THE EXPENSES WERE INCU RRED IN RELATION TO IMPLEMENTATION OF RESPECTIVE PROJECTS. CONSIDERING THESE FACTS AND RELYING ON CERTAIN DECISIONS REFERRED TO IN THE ORDER, THE LD. CIT(E) REJECTED THE ASSESSEES APPLICATION, AGAINST WHICH THE ASSESSEE HAS COME UP BEFORE THE TRIBUNAL. ITA NO.2114/DEL/2017 3 3. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE REL EVANT MATERIAL ON RECORD. IT IS NOTICED THAT THE ASSESSEE SOCIETY WA S INCORPORATED ON 18.01.2006. REGISTRATION WAS APPLIED FOR ON 26.07. 2016. AT THE TIME OF FILING APPLICATION FOR REGISTRATION, THE ASSESSEE A LSO FILED ITS INCOME AND EXPENDITURE ACCOUNTS FOR THE F.Y.S 2013-14, 2014-15 AND 2015-16. IT IS ON PERUSAL OF SUCH INCOME AND EXPENDITURE ACCOUNTS THA T THE LD. CIT(E) FOUND THAT THE ASSESSEE WAS AVAILING GRANTS AND THE EXPEN SES WERE NOT INCURRED IN REFERENCE TO THE RELEVANT PROJECTS. IT HAS FURTHER BEEN OBSERVED BY THE LD. CIT(E) THAT THE ASSESSEE COULD NOT PRODUCE ANY BOOK S OF ACCOUNT OR VOUCHERS FOR VERIFICATION AND THERE WERE CERTAIN PA YMENTS IN CASH FROM BANK ACCOUNTS OF THE ASSESSEE TO THE SOCIETY MEMBER S THEMSELVES. 4. THE LD. AR SUBMITTED THAT THE LD. CIT(E) OUG HT NOT TO HAVE TRAVELLED BEYOND THE EXAMINATION OF THE OBJECTS OF THE ASSESS EE SOCIETY AND GRANTED THE REGISTRATION ON THE BASIS OF SUCH OBJECTS WITHO UT CALLING FOR OR EXAMINING THE ACTIVITIES OF THE ASSESSEE OR ITS BOO KS OF ACCOUNT. IN THIS REGARD, IT IS FOUND THAT REGISTRATION UNDER SECTION 12AA OF THE ACT IS A CONDITION PRECEDENT FOR AVAILING THE BENEFIT U/SS 1 1 AND 12 OF THE ACT. ITA NO.2114/DEL/2017 4 SECTION 12AA PRESCRIBES THE PROCEDURE FOR REGISTRAT ION. RELEVANT PART OF SUB-SECTION (1) OF SECTION 12AA READS AS UNDER :- 12AA. (1) THE PRINCIPAL COMMISSIONER OR COMMISSION ER, ON RECEIPT OF AN APPLICATION FOR REGISTRATION OF A TRUST OR INSTITUT ION MADE UNDER CLAUSE (A) OR CLAUSE (AA) OR CLAUSE (AB) OF SUB-SECTION (1) OF SECTION 12A, SHALL (A) CALL FOR SUCH DOCUMENTS OR INFORMATION FROM TH E TRUST OR INSTITUTION AS HE THINKS NECESSARY IN ORDER TO SATISFY HIMSELF ABOUT THE GENUINENESS O F ACTIVITIES OF THE TRUST OR INSTITUTION AND MAY ALSO MAKE SUCH INQUIRIES AS HE MAY DEEM NECESSARY IN THIS BEHALF; AND (B) AFTER SATISFYING HIMSELF ABOUT THE OBJECTS OF THE TRUST OR INSTITUTION AND THE GENUINENESS OF ITS ACTIVITIES , HE (I) SHALL PASS AN ORDER IN WRITING REGISTERING T HE TRUST OR INSTITUTION; (II) SHALL, IF HE IS NOT SO SATISFIED, PASS AN ORD ER IN WRITING REFUSING TO REGISTER THE TRUST OR INSTITUTION, . (EMPHASIS SUPPLIED BY US) 5. A CAREFUL PERUSAL OF SECTION 12AA INSERTED BY TH E FINANCE (NO.2) ACT, 1996 W.E.F. 01.04.1997 INCORPORATING THE PROCEDURE FOR REGISTRATION, TRANSPIRES THAT THE CIT SHALL PASS AN ORDER ALLOWI NG OR REFUSING REGISTRATION AFTER PASSING THROUGH TWO STAGES ENSHRINED IN CLAUS ES (A) AND (B). RATHER THE USE OF THE WORD `SHALL IN SUB-SECTION (1) MANDATES IT ON CIT TO NECESSARILY PROCEED THROUGH CLAUSES (A) AND (B) BEFORE PASSING AN ORDER GRANTING OR REFUSING REGISTRATION. CLAUSE (A) EMPOWERS THE CIT ` TO SATISFY HIMSELF ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUST BY CALLING FOR SUCH DOCUMENTS ITA NO.2114/DEL/2017 5 OR INFORMATION ETC. FROM THE TRUST AS HE THINKS NEC ESSARY AND ALSO BY MAKING SUCH ENQUIRIES HE DEEMS NECESSARY IN THIS BEHALF. CLAUSE (B) OF SECTION 12AA(1) PROVIDES THAT THE REGISTRATION SHALL BE GRA NTED OR REFUSED BY THE CIT : AFTER SATISFYING HIMSELF ABOUT THE OBJECTS OF THE TRUST OR INSTITUTION AND THE GENUINENESS OF ITS ACTIVITIES . A MERE GLIMPSE AT CLAUSES (A) AND (B) OF SECTION 12AA(1) AMPLY DECIPHERS THAT THE CIT CAN NOT ONLY CALL FOR ANY DOCUMENTS OR INFORMATION BUT IS RATHER OBLIGED TO SATISFY HIMSELF ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUST AND ALSO ITS OBJECTS BEFORE PASSING AN ORDER GRANTING THE REGISTRATION. AU CONTRA , IF THE CIT, ON EXAMINATION OF DOCUMENTS OR INFORMATION IS NOT SATI SFIED ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUST AFTER MAKING NECESSARY INQUIRIES, HE WILL HAVE TO REFUSE THE REGISTRATION. IT IS, TH US, CLEAR THAT AFTER THE INSERTION OF SECTION 12AA W.E.F. 01.04.1997, THE PO WER OF THE CIT IS NOT ONLY CONFINED TO EXAMINING THE OBJECTS BUT ALSO EXT ENDS TO INSPECTING THE GENUINENESS OF THE ACTIVITIES BEFORE TAKING A DECIS ION ON THE GRANT OR REFUSAL OF REGISTRATION. 6. THE DECISIONS RELIED BY THE LD. AR TO BUTTRE SS THE CONTENTION THAT THE LD. CIT (E) SHOULD CONFINE HIMSELF TO THE OBJECTS OF THE TRUST AND NOT THE ITA NO.2114/DEL/2017 6 ACTUAL ACTIVITIES ARE NOT RELEVANT IN THE PRESENT C ONTEXT WHEN THE PROVISIONS OF SECTION 12AA HAVE BECOME APPLICABLE W.E.F. 1.4.1 997 AND MORE SO WHEN THE REGISTRATION WAS SOUGHT BY THE ASSESSEE AFTER A PERIOD OF TEN YEARS FROM THE SETTING UP OF THE ASSESSEE SOCIETY AND AT THAT TIME THE CIT(E) HAD THE BENEFIT OF GOING THROUGH THE GENUINENESS OF THE ACT IVITIES OF THE SOCIETY ON TOUCHSTONE OF THE ASSESSEES INCOME AND EXPENDITUR E ACCOUNTS FOR THE PRECEDING THREE YEARS. WE ARE NOT CONFRONTED WITH A SITUATION IN WHICH THE APPLICATION FOR REGISTRATION WAS FILED IMMEDIATELY AFTER THE SETTING UP OF THE TRUST, IN WHICH CASE, OBVIOUSLY, THERE COULD NOT HA VE BEEN ANY POSSIBILITY OF EXAMINING THE ACTIVITIES OF THE TRUST BECAUSE OF TH E VERY LACK OF SUCH ACTIVITIES. WE, THEREFORE, JETTISON THE CONTENTION OF THE LD. AR THAT THE CIT(E) SHOULD HAVE RESTRICTED HIMSELF ONLY TO EXA MINING THE OBJECTS OF THE ASSESSEE TRUST AND NOT THE ACTUAL ACTIVITIES. 7. ADVERTING TO THE FACTS OF THE INSTANT CASE, WE F IND THAT THE LD. CIT(E) HAS RECORDED THAT THE ASSESSEE DID NOT PRODUCE BOOK S OF ACCOUNT, BANK STATEMENTS AND VOUCHERS. AS AGAINST THIS, THE LD. AR SUBMITTED THAT THE ASSESSEE DID PRODUCE BOOKS OF ACCOUNT, BUT, THE LD. CIT(E) DID NOT MAKE ITA NO.2114/DEL/2017 7 NECESSARY INCORPORATION OF THIS FACT IN THE ORDER. WE FIND FROM THE PENULTIMATE PARA OF THE IMPUGNED ORDER WHICH STATES :- 11. IN VIEW OF THE FACTS AND ABOVE DECISIONS, I AM UNABLE TO ACCEPT THE APPLICANTS CLAIM IN ABSENCE OF SUFFICIENT MATERIAL REQUIRED FOR FORMATION OF SATISFACTION. THEREFORE, I DO NOT FIND THE CASE FIT FOR GRANT OF REGISTRATION U/S 12A(1) OF THE INCOME-TAX ACT, 1961 . 8. SINCE THE LD. AR HAS PUT FORTH THAT NECESSARY MA TERIAL FOR FORMATION OF SATISFACTION BY THE LD. CIT IS AVAILABLE WITH THE A SSESSEE AND THE BOOKS OF ACCOUNT CAN BE CHECKED, WE CONSIDER IT EXPEDIENT TO SET ASIDE THE IMPUGNED ORDER AND REMIT THE MATTER TO THE FILE OF CIT. WE ORDER ACCORDINGLY AND DIRECT THE LD. CIT(E) TO EXAMINE THE ISSUE AFRESH A S PER LAW, AFTER ALLOWING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. 9. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES. THE ORDER PRONOUNCED IN THE OPEN COURT ON 23.03.20 18. SD/- SD/- [SUCHITRA KAMBLE] [R.S. SYA L] JUDICIAL MEMBER VICE PRESIDENT DATED, 23 RD MARCH, 2018. DK ITA NO.2114/DEL/2017 8 COPY FORWARDED TO: APPELLANT RESPONDENT CIT CIT (A) DR, ITAT AR, ITAT, NEW DELHI.