M/s. Ajanta Educational Centre, Amritsar. V. The Commissioner of Income tax - I, Amritsar.

ITA 271/ASR/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51168 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 14-12-2011
• Assessment Year: misc
• Appeal Filed On: 21-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Principle of natural justice; Set aside
• Section: 12A; 12AA

Judgement Text

1 THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.L. KARWA, HONBLE VICE PRESIDENT AND SH. D.K. SRIVASTAVA, ACCOUNTANT MEMBER I.T.A. NO. 271(ASR)/2010 M/S. AJANTA EDUCATIONAL CENTRE VS. THE COMMISSION ER OF INCOME TAX-1, C/O SH. DALIP SAREEN, SECRETARY, AMRITSAR. 210, IMPERIAL VILLA, ANAND AVENUE, AMRITSAR. PAN:AAATA1132D (APPELLANT) (RESPONDENT) APPELLANT BY: SH. SALIL KAPOOR, ADV. RESPONDENT BY: SH. TARSEM LAL, DR DATE OF HEARING :13.12.2011 DATE OF PRONOUNCEMENT:13.12.2011 ORDER PER H.L. KARWA, VP THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE COMMISSIONER OF INCOME-TAX-1, AMRITSAR, DATED 31 ST MAY, 2010, IN REFUSING TO GRANT REGISTRATION TO THE ASSESSEE UNDER SECTION 12AA(1(B) OF THE INCOME- TAX ACT, 1961 ( IN SHORT, THE ACT). 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED AS MANY AS EIGHT GROUNDS OF APPEAL AND VIDE GROUND NO.3 OF THE APPEAL, THE ASSE SSEE HAS SUBMITTED THAT 2 THE ORDER UNDER APPEAL, REFUSING TO GRANT REGISTRAT ION UNDER SECTION 12AA, HAS BEEN PASSED WITHOUT GIVING PROPER AND REASONABL E OPPORTUNITY TO THE ASSESSEE AND THE SAME IS LIABLE TO BE SET ASIDE. 3. THE ASSESSEE MOVED AN APPLICATION DATED 8 TH DEC., 2008 SEEKING REGISTRATION U/S 12A OF THE ACT. THE APPLICATION WA S FILED BY ONE SH. RAKESH KAPOOR CLAIMING HIMSELF TO BE THE PRESIDENT OF THE ASSESSEE SOCIETY. THE SOCIETY CAME INTO EXISTENCE AND WAS GIVEN A CERTIFI CATE OF REGISTRATION UNDER SOCIETIES ACT OF 1860 AT S.NO.133 OF 1957-58. THIS SOCIETY WAS INITIALLY RUNNING ONLY ONE SCHOOL AT DHAB KHATIKAN, AMRITSAR . SUBSEQUENTLY, TWO MORE SCHOOLS WERE OPENED AT BASANT AVENUE, AMRITSAR AND AT GURGAON. THE APPLICATION FOR REGISTRATION WAS SUBMITTED UNDER TH E NAME OF AJANTA EDUCATIONAL CENTRE BUT OPERATING FROM 210, ANAND AV ENUE, AMRITAR. THIS ADDRESS IS GIVEN DIFFERENT FROM THE ADDRESS OF BASA NT AVENUE AMRITSAR AND DHAB KHATIKAN WHEREFROM THE TWO SCHOOLS ARE OPERATI NG. THE LD. CIT FOUND THAT ORIGINAL EDUCATIONAL SOCIETY HAD MORPHED INTO THREE SEPARATE SCHOOLS AND THREE MANAGEMENTS WERE AT DAGGERS DRAWN. THERE WAS A LACK OF CENTRAL MANAGEMENT. ALL THE THREE SCHOOLS WERE CLAIMING IND EPENDENT EXISTENCE AND SEPARATE BOOKS OF ACCOUNTS WERE BEING MAINTAINED. A CCORDING TO THE LD. CIT, THERE WERE DISPUTES OF SUCH NATURE THAT THE MA NAGEMENT OF BASANT AVENUE BRANCH AND GURGAON BRANCH HAD NOT ONLY FILED SEPARATE RETURN OF 3 INCOME BUT HAD ALSO FILED COMPLAINTS AND CROSS-COMP LAINTS AGAINST EACH OTHER. FOR THE REASONS GIVEN IN PARAS 4 TO 11 OF TH E ORDER, THE LD. CIT REFUSED TO GRANT REGISTRATION U/S 12A OF THE ACT TO THE SOC IETY, HENCE THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4. AT THE VERY OUTSET, SH. SALIL KAPOOR, THE LD. C OUNSEL FOR THE ASSESSEE INVITED OUR ATTENTION TO THE FOLLOWING LINES OF PAR A 1 OF THE IMPUGNED ORDER: KEEPING IN VIEW THE FACT THAT THIS CASE WAS SET AS IDE BY THE JURISDICTIONAL TRIBUNAL ONLY TO ENSURE THAT THE ASS ESSEE GETS EVERY OPPORTUNITY TO EXPLAIN ITS CASE, I HAVE WAITED TILL TODAY MORNING. NEITHER THE ASSESSEE NOR ANY OTHER LEGAL REPRESENTA TIVE HAS ATTENDED OFFICE ON 28 TH OR EVEN TODAY AND NO FURTHER EVIDENCE IS BROUGHT T O MY NOTICE. UNDER THESE CIRCUMSTANCES, I BELIEVE THAT WHATEVER THE ASSESSEE HAD TO DAY HAS ALREADY BEEN PLACED ON RECO RD AND THE FINAL ORDER CAN BE NOW ISSUED AFTER CONSIDERING ALL THE F ACTS OF THIS CASE. 4.1. SH. SALIL KAPOOR, THE LD. COUNSEL FOR THE ASSE SSEE ALSO PLACED ON RECORD LETTER DATED 24.05.2010, WHICH WAS RECEIVED BY THE OFFICE OF THE CIT ON 25.05.2010 AND READS AS UNDER: DATED:24.05.2010 THE COMMISSIONER OF INCOME TAX-1, AMRITSAR. RESPECTED SIR, REG: APPLICATION U/S 12A IN THE CASE OF AJANT EDUC ATION CENTRE, AMRITSAR. KINDLY REFER TO OUR DETAILED SUBMISSIONS DATED 21. 05.2010 IN THE ABOVE NOTED CASE. THE UNDERSIGNED HAS RECEIVED INSTRUCTIONS FROM HIS CLIENT IN DELHI THAT THEY ARE IN POSSESSION OF SOME FURTHER EVIDENCE WHI CH SHALL SUPPORT THE CASE OF THE ASSESSEE TO SHOW THAT THE ACTIVITIE S OF ALL THE THREE SCHOOLS OF SOCIETY ARE GENUINE AND THE SAME ARE BEI NG CARRIED OUT 4 WITHOUT ANY PROFIT MOTIVE AND THE SURPLUS IF ANY IS BEING PLOUGHED BACK INTO THE SOCIETY AND THAT THERE IS NO MISUSED OF THE FUNDS OF THE SOCIETY. THIS INFORMATION IS LIKELY TO REACH BY 28.05.2010. YOU ARE THEREFORE REQUESTED TO KINDLY ALLOW TIME UPTO 28.05.2010 AND OBLIGED. THANKING YOU, YOURS FAITHFULLY, SD/- (CHARTERED ACCOUNTANT) 4.2. SH. SALIL KAPOOR, THE LD. COUNSEL FOR THE ASSE SSEE SUBMITTED THAT VIDE LETTER DATED 24.5.2010, THE ASSESSEE HAS REQUESTED THE LD. CIT TO ALLOW TIME UPTO 28.05.2010 TO PRODUCE EVIDENCE IN SUPPORT OF ITS CASE TO SHOW THAT THE ACTIVITIES OF ALL THE THREE SCHOOLS ARE GENUINE AND THE SAME ARE BEING CARRIED OUT WITHOUT ANY PROFIT MOTIVE AND THE SURPLUS IF A NY IS BEING PLOUGHED BACK INTO THE SOCIETY. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD. CIT WITHOUT GIVING PROPER AND REASONABLE OPPORTUNITY TO THE ASSESSEE REFUSED TO GRANT REGISTRATION TO THE ASSESSEE SOCIETY. IN OUR VIEW, IT IS VIOLATION OF PRINCIPLE OF NATURAL JUSTICE. THE LD. CIT, SHOULD H AVE GIVEN THE OPPORTUNITY TO THE ASSESSEE TO ADDUCE EVIDENCE IN SUPPORT OF IT S CLAIM. SH. SALIL KAPOOR, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ORDER OF THE LD. CIT MAY BE SET ASIDE AND THE MATTER BE REMANDED TO THE FILE OF THE CIT WITH A DIRECTION TO DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW AFTER AFFORDING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO TH E ASSESSEE. 5 4.3. THE LD. COUNSEL FOR THE ASSESSEE ALSO DREW OU R ATTENTION TO PARA 5 & 6 OF THE IMPUGNED ORDER AND SUBMITTED THAT THE OBSE RVATIONS MADE BY THE LD. CIT IN THESE PARAS ARE BASED ON SURMISES, CONJECTUR ES AND IRRELEVANT FACTS AND THE SAME DID NOT AFFORD ANY LEGAL JUSTIFICATIO N TO THE ORDER REFUSING TO GRANT REGISTRATION TO THE ASSESSEE. HE FURTHER SUBM ITTED THAT THESE ARE MERE ALLEGATIONS WITHOUT ANY BASIS AND THE SAME ARE NOT SUBSTANTIATED BY ANY COGENT EVIDENCE. HE, THEREFORE, SUBMITTED THAT THE ORDER OF THE LD. CIT MAY BE SET ASIDE IN TOTO. 5. SH. TARSEM LAL, THE LD. DR, ON THE OTHER HAND, S TRONGLY OBJECTED TO THE ABOVE CONTENTIONS OF THE LD. COUNSEL FOR THE AS SESSEE. HE PLACED RELIANCE ON THE ORDER OF THE LD. CIT. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS SEEN THAT VIDE LETTER DATED 24.05.2010, THE ASSESSEE HAS SPECIFICALLY REQUESTED THE LD. CIT TO ADJOURN THE CASE TO 28.5.2010 SINCE THE ASSESSEE WANTED TO SUBMIT FURTH ER SUBMISSIONS AND EVIDENCE IN SUPPORT OF ITS CASE. THE ASSESSEE ALSO WANTS TO PROVE THAT THE ACTIVITIES OF ALL THE THREE SCHOOLS ARE GENUINE AND THE SAME ARE BEING CARRIED OUT WITHOUT ANY PROFIT MOTIVE. IN OUR VIEW, THE LD. CIT SHOULD HAVE ACCEPTED THE REQUEST OF THE ASSESSEE IN THE INTERES T OF JUSTICE AND FAIR PLAY. IN 6 OUR VIEW IT IS VIOLATION OF PRINCIPLE OF NATURAL JU STICE AND, THEREFORE, THE ORDER PASSED BY THE LD. CIT DESERVES TO BE SET ASIDE. 6.1. WE ALSO FIND THAT VIDE PARAS 5 & 6 OF THE ORDE R, THE LD. CIT HAS MADE CERTAIN OBSERVATIONS, WHICH READ AS UNDER: 5. WHILE REGISTERING AN ASSESSEE U/S 12A THE UNDER SIGNED IS EXPECTED TO PRIMARILY EXAMINE THE OBJECTS OF THE AS SESSEE TRUST/SOCIETY WITH A VIEW TO DETERMINE WHETHER THE OBJECT ARE CHA RITABLE OR NOT. IT IS INBUILT INN THIS VERY QUERY THAT A GENUINE TRUST/SO CIETY IS ALSO IN EXISTENCE BECAUSE IF THE TRUST/SOCIETY ITSELF IS NO T TO BE GENUINE THEN OBJECT CANNOT BE PURSUED TO THEIR LOGICAL ENDS. IN THIS CASE, IT IS FOUND THAT THE MANAGEMENT OF THE SOCIETY IS DIVIDED INTO SEVERAL CAMPS. THE TWO PRINCIPAL CAMPS ARE LED BY SH. RAMESH KAPOOR AN D SH. YOGESH MEHRA RESPECTIVELY. IT IS SEEN THAT BOTH THESE CAMP S HAVE BEEN FILING COMPLAINTS AND CROSS-COMPLAINTS AGAINST EACH OTHER. IT IS ALSO SEEN THAT COMPLAINTS ARE SERIOUS IN NATURE AND ALLEGATIONS OF FINANCIAL IMPROPRIETY. THE KIND ATTENTION MAY BE MADE TO AN A PPLICATION FILED BY SH. RAMESH KAPOOR WITH THE SHO, CIVIL LINES, AMR ITSAR, DATED 15.04.2008. ALTHOUGH THE ENTIRE APPLICATION SHOULD BE READ BUT OUT PURPOSE WILL SUFFICE IF HE READ ONLY PARA 3 OF THIS APPLICATION WHICH READS AS UNDER: ACCUSED YOGESH MEHRA ALONG WITH HIS GANG BY USING ILLEGAL MEANS AND ACTIVITIES HAD CREATED SOME FICTITIOUS IL LEGAL MANAGING COMMITTEE OF THE SOCIETY AND TOOK ILLEGAL AND FORCEFUL POSSESSION OF AJANTA PUBLIC SCHOOL, BASANT AVENUE, AMRITSAR AND HAD BEEN EMBEZZLING THE ACCOUNTS AND MISAPPROPRIATING THE FUNDS OF THE SCHOOL FOR HIS PE RSONAL USE. 6. THE ABOVE PARA CATEGORICALLY SHOWS THAT THERE IS EMBEZZLEMENT AND MISUSED OF THE FUNDS OF THE SCHOOL FOR THE PERS ONAL USE BY THE PEOPLE INVOLVED IN THIS MANAGEMENT OF THE SCHOOL. T HESE FACTS ARE FURTHER CONFIRMED BY PARA 4 AND 5 WHICH STATED THAT THERE ARE MANY OTHER LEGAL ACTIONS PENDING AT VARIOUS POLICE STATI ONS AND COURTS IN AMRITSAR BETWEEN THE TWO FACTIONS OF MANAGEMENT. 7 6.2. IN OUR VIEW, THE ABOVE OBSERVATIONS ARE NOT BA SED ON ANY EVIDENCE ON RECORD. IN FACT, THE LD. CIT HAS NOT BROUGHT OUT AN Y MATERIAL ON RECORD TO SUPPORT THE ABOVE OBSERVATIONS. THE LD. CIT HAS OBS ERVED THAT THE MANAGEMENT OF THE SOCIETY IS DIVIDED INTO SEVERAL C AMPS. THE TWO PRINCIPAL CAMPS ARE LED BY SH. RAMESH KAPOOR AND SH. YOGESH M EHRA RESPECTIVELY. HE FURTHER OBSERVED THAT BOTH THESE CAMPS HAVE BEEN FILING COMPLAINTS AND CROSS-COMPLAINTS AGAINST EACH OTHER. THESE ARE MERE ALLEGATIONS AND NOT SUPPORTED BY ANY CREDIBLE EVIDENCE. IN OUR VIEW, ON THE BASIS OF MERE ALLEGATIONS, THE LD. CIT WAS NOT JUSTIFIED IN REFUS ING TO GRANT REGISTRATION TO THE SOCIETY. SECTION 12AA PROVIDES THAT THE LD. CIT IS REQUIRED ONLY TO SATISFY HIMSELF ABOUT THE OBJECTS OF THE INSTITUTIO N AND GENUINENESS OF ITS ACTIVITIES. SH. SALIL KAPOOR, THE LD. COUNSEL FOR T HE ASSESSEE SUBMITTED THAT THE LD. CIT HAS ERRED IN IGNORING THE FACT THAT THE INSTITUTION BEING A REGISTERED SOCIETY UNDER CERTIFICATE NO.133 DATED 8.2.1958, EXISTS SOLELY FOR EDUCATIONAL PURPOSES, HAS ADMITTEDLY BEEN RUNNING S CHOOLS EVER SINCE AND THERE IS NO OTHER ACTIVITY OF THE SOCIETY AT ALL. H E, THEREFORE, SUBMITTED THAT THE LD. CIT WAS NOT JUSTIFIED IN REFUSING TO GRANT REGISTRATION ON THE BASIS OF EXTRANEOUS CONSIDERATIONS AND IRRELEVANT OBSERVATIO NS. IN OUR VIEW, THERE IS MERIT IN THE ABOVE SUBMISSIONS OF THE LD. COUNSEL F OR THE ASSESSEE. CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF T HE PRESENT CASE, WE THINK 8 IT PROPER TO SET ASIDE THE ORDER OF THE LD. CIT IN TOTO AND REMAND THE MATTER TO LD. CIT WITH A DIRECTION TO DECIDE THE ISSUE AFR ESH IN ACCORDANCE WITH LAW AFTER AFFORDING DUE AND REASONABLE OPPORTUNITY OF B EING HEARD TO THE ASSESSEE. WE ALSO DIRECT THE LD. CIT TO DECIDE THE MATTER PREFERABLY WITHIN THREE MONTHS FROM THE DATE OF RECEIPT OF THIS ORDER . 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 13TH DECEMBER, 2011. SD/- SD/- (D.K.SRIVASTAVA) (H.L. KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED: 13TH DECEMBER, 2011 /SKR/ COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE: M/S. AJANTA EDUCATIONAL CENTRE. AMRIT SAR. 2. THE CIT-1, ASR. 3. THE SR DR, ITAT, ASR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH : AMRITSAR.