The Good Samaritan Humanitarian Action Society, Kunkudumillu V. The CIT Rajahmundry, Rajahmundry

ITA 257/VIZ/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56859 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 12-12-2011
• Assessment Year: misc
• Appeal Filed On: 04-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T LUCAS PETER
• Keywords: Opportunity of being heard
• Section: 80G; 12AA

Judgement Text

ITA NOS.256 & 257/VIZAG/2011 GOOD SAMARITAN HUMANIT ARIAN ACTION SOCIETY, CHAGALLU 1 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI D. MANMOHAN , VICE PRESIDENT AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NO S . 256 & 257 /VIZAG/ 20 11 ASSESSMENT YEAR S : N.A. GOOD SAMARITAN HUM ANITARIAN ACTION SOCIETY KUNKUNDUMILLU, CHAGALLU VS. CIT RAJAHMUNDRY (APPELLANT) (RESPONDENT) PAN NO.AABAT 5819L APPELLANT BY: SHRI G.V.N. HARI, CA RESPONDENT BY: SHRI T. LUCAS PETER, CIT(DR) DATE OF HEAR I NG: 12.12.2011 DATE OF PRONOUNCEMENT: 12.12.2011 ORDER PER SHRI D. MANMOHAN, VICE PRESIDENT:- THESE TWO APPEALS FILED AT THE INSTANCE OF THE AS SESSEE SOCIETY ARE INTERCONNECTED AND ARISE OUT OF PROCEEDINGS OF THE COMMISSIONER OF INCOME- TAX, RAJAHMUNDRY AND HENCE THEY ARE DISPOSED OF BY THIS COMBINED ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ASSESSEE IS A REGISTERED SOCIETY KNOWN AS T HE GOOD SAMARITAN HUMANITARIAN ACTION SOCIETY. IT WAS MAINLY FORMED FOR THE UPLIFTMENT OF THE HIV/AIDS INFECTED PATIENTS IN THE AIDS PRONE AREA L IKE CHAGALLU. THE CASE OF THE ASSESSEE WAS THAT APART FROM THE MAIN ACTIVITY, IT WAS ALSO ORGANIZING AWARENESS PROGRAMMES ON FAMILY WELFARE, SANITATION, ADULT EDUCATION ETC. IN AND AROUND CHAGALLU AND OTHER MANDALS AND ALSO DIST RIBUTING MEDICINES, FOOD, BLANKETS, CLOTHES, ETC. TO THE NEEDY SECTION OF THE SOCIETY AND HENCE IT DESERVES TO BE TREATED AS A CHARITABLE SOCIETY WITH IN THE MEANING OF SECTION 2(15) OF THE INCOME-TAX ACT (HEREINAFTER CALLED AS AN ACT) . ACCORDINGLY, ASSESSEE-SOCIETY FILED AN APPLICATION IN FORM 10A O F THE ACT SEEKING ITA NOS.256 & 257/VIZAG/2011 GOOD SAMARITAN HUMANIT ARIAN ACTION SOCIETY, CHAGALLU 2 REGISTRATION U/S 12AA OF THE ACT. IT TRANSPIRES FR OM THE RECORD THAT UNFORTUNATELY, THE APPLICATION FILED BY THE ASSESSE E WAS NOT SIGNED. DESPITE THE FACT THAT THE APPLICATION SEEKING REGISTRATION WAS NOT SIGNED, THE LD. COMMISSIONER HAS TREATED IT AS AN APPLICATION SEEKI NG REGISTRATION AND ISSUED A NOTICE CALLING UPON THE ASSESSEE TO FURNISH THE D ETAILS OF THE NATURE OF THE ACTIVITIES ETC. ON VERIFICATION OF BOOKS OF ACCOUN TS FOR THE FINANCIAL YEAR 2009- 10, LD. CIT NOTICED THAT THERE REMAINED NEGATIVE CA SH BALANCES FOR ALL MONTHS. ACCORDINGLY HE CONCLUDED THAT THE ASSESSEE SOCIETY DID NOT CARRY OUT ANY CHARITABLE ACTIVITY IN REALITY. ACCORDINGLY, H E REJECTED THE APPLICATION FILED BY ASSESSEE SEEKING REGISTRATION U/S 12AA OF THE AC T. 3. CONSEQUENT UPON REFUSAL OF REGISTRATION, THE CIT REFUSED THE APPLICATION FILED BY THE ASSESSEE SEEKING APPROVAL U/S 80G OF THE ACT ALSO. 4. IT MAY BE NOTICED HERE THAT THE APPLICATION SEEK ING REGISTRATION AS WELL AS SEEKING APPROVAL U/S 80G WERE FILED ON THE SAME DATE I.E. 4.11.2010 AND THEREAFTER THE CASE WAS POSTED FOR HEARING ON 4.3.2 011 ON WHICH DAY THE PRESIDENT OF THE ASSOCIATION APPEARED ALONG WITH TH E ACCOUNTS MANAGER BUT THE LD. CIT DID NOT INFORM THE ASSESSEE SOCIETY WIT H REGARD TO THE DEFECT IN THE APPLICATION. 5. AGGRIEVED BY THE ORDER PASSED BY THE COMMISSIONE R OF INCOME TAX, RAJAHMUNDRY, THE ASSESSEE SOCIETY PREFERRED APPEALS BEFORE THE TRIBUNAL CONTENDING INTER-ALIA THAT THE LD. CIT, RAJAHMUNDRY OUGHT TO HAVE GIVEN AN OPPORTUNITY TO THE APPELLANT SOCIETY TO FURNISH ANO THER APPLICATION DULY SIGNED AND ALSO CONTENDED THAT THE CONCLUSION OF CIT THAT ACTIVITIES OF THE ASSESSEE SOCIETY ARE NOT CHARITABLE, IS NOT BASED ON CORRECT APPRECIATION OF FACTS. THE LD. COUNSEL FOR THE ASSESSEE FILED A PAPER BOOK CON SISTING OF 117 PAGES AND HE HAS REFERRED TO THE COPY OF THE REPORT OF THE IN COME-TAX INSPECTOR (PAGE 112 OF THE PAPER BOOK) TO HIGHLIGHT THAT INDEPENDEN T ENQUIRY CAUSED BY THE INCOME-TAX INSPECTOR, WARD-1, TANUKU HAS REINFORCED THE FACT THAT THE ASSESSEE SOCIETY IS VERY MUCH USEFUL TO THE PUBLIC AT LARGE AND IT DESERVES TO BE REGISTERED U/S 12AA OF THE ACT AND ALSO ENTITLED TO BE APPROVED U/S 80G OF ITA NOS.256 & 257/VIZAG/2011 GOOD SAMARITAN HUMANIT ARIAN ACTION SOCIETY, CHAGALLU 3 THE ACT. HE HAS ALSO REFERRED TO THE CASH AND BANK BALANCE POSITION TO SUBMIT THAT ON THE DATE WHEN THE ASSESSEES ACCOUNT S MANAGER APPEARED BEFORE THE LD. CIT, HE COULD NOT PROPERLY EXPLAIN T HE CASH BALANCE POSITION BUT THE FACT REMAINS THAT THERE WAS NO MISMATCH IN THE AVAILABILITY OF FUNDS AND THE EXPENDITURE. HE MAINLY STRESSED UPON THE F ACT THAT THE COMMISSIONER REJECTED THE REQUEST FOR REGISTRATION SUBSTANTIALLY ON THE GROUND THAT THE APPLICATION FILED BY THE ASSESSEE S OCIETY IS NOT SIGNED, WHEREAS BEFORE TAKING SUCH DECISION HE OUGHT TO HAV E GIVEN THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. THE LD. COU NSEL RELIED UPON THE ORDER OF THE HONBLE HIGH COURT OF MADHYA PRADESH ( INDORE BENCH) IN THE CASE OF CIT VS. HOPE TEXTILE LIMITED 287 ITR 327 IN SUPPORT OF HIS PLEA THAT MERE INCORRECT SIGNING/NON-SIGNING OF THE CORRECT P ERSON IN AN APPEAL MEMO WOULD NOT RENDER THE APPEAL INVALID OR INFRUCTUOUS, SINCE THE REQUIREMENT OF SIGNATURE IS NOT A MANDATORY REQUIREMENT BUT ONLY D IRECTORY IN NATURE. HE ALSO SUBMITTED THAT THE ASSESSEE SOCIETY IS INVOLVE D IN A CHARITABLE ACTIVITY AND SUCH ACTIVITIES ARE APPROVED UNDER THE INCOME-T AX ACT IN THE FORM OF GRANTING EXEMPTIONS UNDER VARIOUS PROVISIONS IN SUP PORT OF SUCH ACTIVITIES IN WHICH EVENT MATTERS CONCERNING THE REGISTRATION UND ER THE ACT SHOULD NOT BE DISPOSED OF BY BEING TOO TECHNICAL ON PROCEDURAL MA TTERS AND INSTEAD A SUBSTANCE OF THE MATTER SHOULD BE GIVEN DUE WEIGHTA GE, AS HELD BY THE APEX COURT IN THE CASE OF CIT VS. CALCUTTA DISCOUNT COMP ANY LIMITED 91 ITR 8. 6. ON THE OTHER HAND, THE LD. D.R. STRONGLY RELIED UPON THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE RECORD. AS WE NOTICE FROM THE ORDER DATED 4.5.2011 , THE LD. COMMISSIONER WAS PRIMARILY OF THE OPINION THAT THE ASSESSEE SOCI ETY HAS TO FILE A VALID APPLICATION AND IT SHOULD SATISFY THAT THE OBJECTS FOR WHICH IT WAS FORMED WAS GENUINE. DESPITE A REPORT OF THE INSPECTOR OF INCO ME-TAX (PAGE 112 OF PAPER BOOK), THE LD. COMMISSIONER APPEARS TO HAVE BEEN MO RE INFLUENCED BY THE FACT THAT THE ASSESSEE HAS FILED AN UNSIGNED APPLIC ATION, OVERLOOKING THE PURPOSE FOR WHICH SECTION 12AA WAS INTRODUCED IN TH E ACT. IN OTHER WORDS, IF ITA NOS.256 & 257/VIZAG/2011 GOOD SAMARITAN HUMANIT ARIAN ACTION SOCIETY, CHAGALLU 4 AN APPLICATION FILED BY THE ASSESSEE IS INVALID FOR WANT OF SEEKING APPROVAL IT SHOULD NOT BE TREATED AS AN INCURABLE DEFECT BUT A PROPER OPPORTUNITY OUGHT TO HAVE BEEN GIVEN BY THE LD. COMMISSIONER AS HELD BY THE HONBLE HIGH COURT OF MADHYA PRADESH (INDORE BENCH) (SUPRA). SE CTION 12AA SUB-CLAUSE (1) OF THE ACT OPENS WITH THE WORDS THE COMMISSION ER, ON RECEIPT OF AN APPLICATION FOR REGISTRATION AND ENDS WITH A PROVISO STATING T HAT NO ORDER, REFUSING REGISTRATION, SHALL BE PASSED UNLESS THE A PPLICANT HAS BEEN GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD. A NOTICE IS SUED BY THE CIT PRESUPPOSES THAT A VALID APPLICATION WAS FILED AS O THERWISE IN THE PLACE OF A NOTICE A DEFECT MEMO OUGHT TO HAVE BEEN ISSUED DIRE CTING THE ASSESSEE TO RECTIFY THE DEFECTS, IF ANY. THE LD. CIT REFUSED R EGISTRATION MAINLY ON THE GROUND THAT THE APPLICATION IS UNSIGNED AND THERE E XISTED NEGATIVE CASH BALANCES ON MOST OF THE DAYS AND ASSESSEE COULD NOT SUBSTANTIATE ITS CLAIM OF EXPENDITURE WITH REFERENCE TO THE NEGATIVE CASH BAL ANCES. SINCE THE COMMISSIONER HAS TREATED THE APPLICATION AS INVALID AND THERE AFTER PROCEEDED TO VERIFY THE BOOKS OF ACCOUNTS TO MAKE O UT A CASE THAT NEGATIVE CASH BALANCES WOULD RAISE A SUSPICION AS TO THE GEN UINENESS OF THE ACTIVITIES WOULD, IN OUR CONSIDERED OPINION, VITIATES THE CONC LUSION OF THE FACTS. IN THE CASE OF CIT VS. DAULATRAM RAWATMULL 87 ITR 349 AT P AGE 362 THE APEX COURT OBSERVED THAT WHEN AN OFFICER USES EXTRANEOUS AND I RRELEVANT MATERIAL IN ARRIVING AT A CONCLUSION EVEN IF THE OTHER CONCLUSI ONS ARE BASED ON VALID MATERIAL, THE FINAL CONCLUSION WOULD BE RENDERED BA D BECAUSE IT WOULD BE DIFFICULT TO PREDICATE AS TO WHAT EXTENT THE EXTRAN EOUS AND IRRELEVANT MATERIAL HAS INFLUENCED THE AUTHORITY IN ARRIVING AT THE CON CLUSION OF FACTS. ON A CONSPECTUS OF THE MATTER AND IN THE INTEREST OF SUB STANTIAL JUSTICE, WE ARE OF THE OPINION THAT SETTING ASIDE THE ORDER OF THE LD. COMMISSIONER WOULD MEET THE ENDS OF JUSTICE. WE ACCORDINGLY DIRECT THE LD. COMMISSIONER TO RECONSIDER THE MATTER IN ACCORDANCE WITH LAW. NEEDLESS TO OBS ERVE THAT THE LD. COUNSEL FOR THE ASSESSEE HAVING AGREED TO FILE A FRESH APPL ICATION TO RECTIFY THE DEFECT IN THE EARLIER APPLICATION, HE IS DIRECTED TO FURNI SH A FRESH APPLICATION FORTHWITH AND ALSO SATISFY THE COMMISSIONER WITH REGARD TO TH E CASH INFLOW AND OUTFLOW. WITH THESE OBSERVATIONS, THE APPEAL FILED BY THE AS SESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ITA NOS.256 & 257/VIZAG/2011 GOOD SAMARITAN HUMANIT ARIAN ACTION SOCIETY, CHAGALLU 5 ITA NO.256/VIZAG/2011: 8. SINCE THE APPEAL FILED BY THE ASSESSEE AGAINST T HE ORDER PASSED BY THE A.O. U/S 12AA(1)(B)(II) OF THE ACT WAS SET ASIDE, T HE ORDER PASSED SEEKING APPROVAL U/S 80G OF THE ACT ALSO DESERVES TO BE SET ASIDE AND WE DIRECT ACCORDINGLY. 9. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE SOCIETY ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 12.12.2011 SD/- SD/- (BR BASKARAN) ( D. MANMOHAN ) ACCOUNTANT MEM BER VICE PRESIDENT VG/SPS VISAKHAPATNAM, DATED 12 TH DECEMBER, 2011 COPY TO 1 THE GOOD SAMARITAN HUMANITARIAN ACTION SOCIETY, D.N O.5 - 105, AMBEDKAR STATUE, KUNKUDUMILLI VILLAGE, CHAGALLU MANDALAM (W. G. DIST.) 2 CIT, RAJAHMUNDRY 3 THE CIT (A) , 4 THE DR, ITAT, VISAKHAPATNAM. 5 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM