M/s.Indira Gandhi Memorial Trust, Cochin V. The ACIT (Exemption), Cochin

ITA 314/COCH/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7720 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 17-08-2016
• Assessment Year: misc
• Appeal Filed On: 28-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A DHANARAJ
• Assessee Lawyers: DIVYA RAVEENDRAN
• Keywords: Charitable institution; Opportunity of being heard; Principle of natural justice; Competent authority
• Section: 12A; 12AA; 12; 11

Judgement Text

ITA NO 314/C/2015 1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH KOCHI BEFORE S/ SHRI B P JAIN , AM & GEORGE GEORGE K, JM ITA NO 314/COCH/2015 M/S INDIRA GANDHI MEMORIAL TRUST VENGACHOTTI BUILDING IRAMALLOOR PO KOTHAMANGALAM ERNAKULAM DIST 686 691 VS THE ASST COMMR OF INCOME TAX (EXEMPTION) COCHIN ( APPELLANT) (RESPONDENT) PAN NO. AAATI5308K ASSESSEE BY SMT DIVYA RAVEENDRAN REVENUE BY SH A DHANARAJ, SR DR DATE OF HEARING 17 TH AUG 2016 DATE OF PRONOUNCEMENT 18 TH AUG 2016 ORDER PER GEORGE GEORGE K, JM; THIS APPEAL, AT THE INSTANCE OF THE ASSESSEE TRUST, IS DIRECTED AGAINST THE ORDER OF THE CIT(EXEMPTION) DATED 26.3.2015 PASSED U/S 12AA OF THE I T ACT 1961. 2 THE BRIEF FACTS OF THE CASE ARE AS FOLLOWS: THE ASSESSEE IS A TRUST ESTABLISHED AS PER DEED OF TRUST DATED 29 . 08 . 2001 . THE PRINCIPAL OBJECT OF THE TRUST IS TO ESTABLISH AND RUN A DENTA L COLLEGE . IT IS CLAIMED THAT THE ASSESSEE TRUST MADE AN APPLICATION FOR REGISTRATION U/S 12A OF THE I T ACT ON 1 8.4.2006 AND A DEFECT NOTICE WAS ISSUED BY THE OFFICE OF THE ITA NO 314/C/2015 2 CIT(E) ON 20.6.2006. IT WAS SUBMITTED THAT THE DEFECTS WERE CURED AND A COPY OF THE TRUST DEED WAS ALSO SUBMITTED ALONG WITH THE DEED OF AMENDMENT DATED 4 . 02.2005 . ACCORDING TO THE ASSESSEE TRUST, S INCE THERE WAS NO RESPON SE FROM THE STATUTORY AUTHORITY BASED ON THE APPLICATION FOR REGISTRATION SUBMITTED IN THE YEAR 2006 , A SECOND APPLICAT I ON WAS SUBMITTED ON 3.09.2014 POINTING OUT THAT THERE WAS ALREADY AN APPL I CAT I ON SUBMITTED EARLIER . UPON RECEIPT OF THE FRESH APPLICATION FOR REGISTRATION DATE D 2.9.2014 , THE OFFICE OF THE CIT(E) ISSUED A DEFECT MEMO DATED 27.10.2014. ACCORDING TO THE ASSESSEE THE DEFECT POINTED OUT WAS DULY RECTIFIED , AS PER LETTER DATED 28.1.2015. THE TRUE COPY OF THE DEFECT MEMO DATED 27.10.2014 AND THE LETTER CURING THE DEFECTS DATED 28.1.2015 ARE PLACED ON R ECORD. 3 THE CIT(E) DISMISSED THE APPLICATION FOR REGISTRATION OF THE ASSESSEE TRUST. THE RELEVANT FINDINGS OF THE CIT(E) READ AS FOLLOWS: 2 . THE CASE WAS POSTED FO R HEAR I N G ON 13 - 02 - 2 0 15 V I D E T H IS OFFICE LETTER DATED 03 - 02 - 2015 AND IN RESPONSE TO THE SAID LETTER , S H R I VISHNU P R ASAD MENON , C A , APPEARED . DURING THE COURSE OF H EA RING I T W AS NOTICED THAT THE A P PLICAN T HAS DE D UC T ED T A X AT SOURCE BU T HAS NOT PAID THE S AME TO THE GOVE RN MENT A CCOUN T , WHIC H ENTAILS PROSECU T ION A L SO . T HIS IS A V I OLATION OF SERIOUS N AT UR E . I T WAS FURT H ER NOTICED T HAT THE APPLICANT I S EN J OYING THE SECURITY DEPOSIT FROM ITS OWN EMPLOYEES . THE A R WA S REQUESTE D T O E XPLAIN W HY TH E SAME SH OULD NOT BE TREATED AS AGAINST P HIL A NTHR O PIC CA U SE PURPORTEDLY C A RR IE D ON BY THE APPLICANT . ON FURTHER VERIFICATION OF THE RECORDS IT I S NO TI CED TH A T THE APPL I CA N T H AS PU RCHASED GOLD COINS FROM TRUST ACCOUNT . THE ASSESSEE WAS AS K ED T O FI LE D ETA I LS OF SUCH P UR CH AS ES AND THE PURPOSE OF THE PU R CHASE . FOR FURNISHING THE ABOVE PA R TICULAR S , T HE CASE WA S A D J OUR N ED TO 18 - 02 - 20 1 5. S I NCE NO RESPONSE WAS RECEIVED FROM TH E ASSESSE E ON THE DATE O F HEA RING THE CASE WAS FURT H ER POSTED FOR HEA RING ON 19 - 03 - 2015 TO CLARIFY THE ABOVE ISSUES. ON 19.3.2015 ALSO THERE IS NO COMPLIANCE FROM THE ASSESSEE . THE DETAILS WERE CALLED FO R FROM THE ACIT (EXEMPTION), KOCHI. IT WAS REPORTED BY HIM THAT THE AR OF THE ASSESSEE HAS AGREED THAT THE GOLD COINS WERE UTILIZED FOR PERSONAL USE AND NOT FOR THE ITA NO 314/C/2015 3 PURPOSE OF CHARITABLE CAUSE. IN VIEW OF THIS, THE ASSESSEE S CASE FOR REGISTRATION U/S 12AA DOES NOT HOLD ANY MERIT. FURTHER, IT WAS ALSO REPORTED BY THE ACIT (EXE MPTION), KOCHI THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2012 - 13, IT WAS SEEN THAT THE ASSESSEE HAS TRANSFERRED INTEREST BEAR I NG LOAN FUNDS TO THE BANK ACCOUNT OF M/ S SOUTHERN CONSTRUCT I ONS OWNED BY ONE SHRI T . K.BAVA . THE TRANSF ER OF TRUST F U NDS O TH E R THAN FOR CHARITABLE PURPOSE ALSO DISENTITLE THE ASSESSEE FROM GETTING BENEFITS OF SECTIONS 11 AND 12 OF THE INCOME TAX ACT . 3 . T HE APPLICANT TRUST IS ENGAGED I N RUNNING A NUMBER OF EDUCATIONAL INST I TUT I ONS INCLUDING DENTAL COLLE GE, ENGINEERING CO L LEGE AND ARTS AND SC I ENCE COL L EGE . T H E APP LI C A N T TR UST HAS BEEN I N EXIS T ENCE FROM 29 - 08 - 200 1. THE APPLICANT CLA IM S THAT THEY HAD APP LI ED FOR R EGISTRAT I ON U / S 1 2 AA SOON AF T ER THE FO R MA TI O N OF THE TRUST BUT THEY DID NO T R ECE I VE ANY ORDER S FOR REG I STRAT I ON U/S 12AA . T H E APP LI CA N T , T HER E FORE , C L A I MS THAT IT I S DEE M ED ' TH AT THEY HAVE REGISTRATION. HOW EVE R, THE ASSESSEE H AS N O T FURNI SHED ANY PROO F R EG AR D I NG FILIN G O F AP PLI CAT I O N F O R R EG I STRA TI ON U/ S 12 AA EA R L I ER . HOWEVER , EVEN IF THE C LAIM OF ASSESSEE I S ACCEPTED DUE TO T H E ACT I ONS C OM M I T T ED B Y THE ASSESSEE E N U MER A T ED I N THE PARA 2 OF T H I S ORDE R, T HE ASSESSEE L O OSES TH E EXEM PT I ON . 4 . IN TH E ABOVE CIRCUMSTAN C ES I T CA N NOT BE SA I D THAT THE ACT I V I T I ES OF THE TR US T ARE GEN UINE . I , TH EREFORE , REF USE TO REG I STER THE TRUST AND THE APPL I CAT I ON FOR REG I STRAT I ON U / S 12A F I LED ON 03 - 09 - 2014 STAND REJECTED. 4 AGGRIEVED BY THE ORDER OF THE CIT(E) IN REJECTING THE APPLICATION FOR REGISTRATION, THE ASSESSEE IS IN APPEAL BEFORE US , RAISING THE FOLLOWING GROUNDS: 1 THE ORDER OF THE CIT(EXEMPTION) KOCHI VIDE NO . C I T ( E )/C HN /1 2A / 5 6/ 20 1 4 - 1 5 DATED 26 . 3 . 20 1 5 U / S . 12A A OF THE INCOME TAX ACT , 1961 , IS OPPOSED TO LAW , FACTS AND CIRCUMSTA NCES OF THE CASE . 2 THE LEARNED COMMISSIONER OF INCOME TAX W ENT WRONG IN HER FINDINGS THAT THE ACTIVITIES OF THE TRUST CANNOT BE SAID TO BE GENUINE AND IN REFUSING REGISTRATION TO THE TRUST UNDER SECTION 12 A OF THE ACT . THE ABOVE FINDINGS ARE ILLEGAL AND UNSUSTAINABLE. 3 THE APPELLANT RESPECTFULLY SUBMITS THAT THE APPELLANT IS AN EDUCATIONAL TRUST . THE PRIMARY OBJECT OF THE TRUST IS TO ESTABLISH AND CONDUCT A DENTAL COLLEGE AND FOR POST GRADUATE COURSE IN DE NTAL EDUCATION. IT HAS SEVERAL SUBSIDIARY OBJECT AS ENUMERATED IN THE DEED OF TRUST EXECUTED ON 29 . 8 . 2001. THE TRUST IS GOVERNED BY THE BOARD OF TRUSTEES AND CONFORMS ITA NO 314/C/2015 4 TO REQUIREMENT OF LAW AND QUALIFIES TO BE REGISTERED U/S . 12A OF THE ACT . 4 IN THIS CONNECTION , IT IS RESPECTFULLY SUBMITTED THAT THE APPELLANT MADE AN APPLICATION FOR REGISTRATION U/S . 12A OF THE ACT ON 18 . 4 . 2006 BEFORE THE COMM I SSIONER OF INCOME TAX , KOCHI . A DEFECT NOTICE WAS ISSUED ON 20 . 6 . 2006 WITH RESPECT TO THE ABOVE APPLICATION , WHICH WAS CURED AND DEFECTS RECTIFIED AND RE PORTED TO THE COMMISSIONER OF INCOME TAX AS PER LETTER DATED 5 . 5 . 2006 . THE ABOVE APPLICATION WAS PENDING CONSIDERATION BEFORE THE COMMISSIONER OF INCOME TAX FROM 18 . 4 . 2006 AND BY VIRTUE OF THE DEEMING PROVISION CONTAINED IN THE STATUTE , IT WAS BONA FIDE BELIEVED THAT REGISTRATION HAD BEEN GRANTED . IT IS IN THE ABOVE CONTEST THAT A SECOND APPLICATION FOR REGISTRATION ON 3 . 9 . 2014 CAME TO BE FILED IN FORM NO . 10A . THE REJECTION OF THE ABOVE AP P LICATION BY ORDER DATED 26 . 3 . 2015 IS NOT SUSTAINABLE . ON THE OTHER HAND , THE DOCUMENTS SUBMITTED BEFORE THE ADJUDICAT I NG AUTHORITY COULD ES T ABLISH THAT THE APPELLANT HAS CONDUCTED ITSELF IN ACCORDANCE WITH LAW AND FURTHER THAT THE TRUST WAS ENTITLED FOR REGISTRATION AS AN EDUCATIONAL T R UST FROM ITS INCEPTION . IT IS SUBMITTED THAT A CONTRARY VIEW TAKEN BY THE ASSESSING OFFICER IS NOT LEGAL OR VALID OR SUS TAINABLE. FO R THESE A ND OTHER G R O U NDS THAT MAY BE U R GED AT THE TIME OF HEAR I NG , THE APPELLA NT HUMB L Y PRAYS THAT THE HO N' BLE INCOME TAX APPELLATE TRIBUNA L , COCH I N BENCH , MAY K I NDLY BE PLEASED SET ASIDE THE IMPUGNED ORDER DATED 26 . 3 . 20 1 5 , ALLOW THE APPEAL AND A LSO ALLOW THE BENEFIT OF REGISTRATION U / S . 12AA BASED ON THE APPL I CAT I ON SUBM I TTED BEFORE THE COMPETENT AUTHORITY AND RENDER JUSTICE 5 IT WAS SUBMITTED THAT THE CIT(E) HAS PASSED AN ORDER IN GROSS VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE, IN AS MUCH AS , NONE OF THE REASONS STATED IN THE ORDER O F THE CIT(E) FOR REJECTING THE APPLICATION WERE COMMUNICATED TO THE ASSESSEE , NOR OPPORTUNITY WAS GRANTED TO OFFER EXPLANATION. THEREFORE, THE ORDER IS PER - SE ARBITRARY AND ILLEGAL AND NOT SUSTAINABLE. IT WAS FURTHER SUBMITTED THAT ACCORDING TO THE STATUTORY PROVISION CONTAINED IN SEC.12A, THE FIRST APPLICATION WAS SUBMITTED ON 20.6.2006 WAS PENDING BEFORE THE COMPETENT AUTHORITY . THEREFORE, REGISTRATION S HOULD BE DEEMED TO HAVE BEEN ALLOWED . IT WAS STATED THAT THE QUESTION OF GRANT OF DEEMED REGISTRATION IS ALREADY SETTLED ITA NO 314/C/2015 5 BY EARLIER J UDGMENTS AND AS PER THE RECENT JUDGMENT OF THE HON'BLE APEX COURT IN COMM ISSIONER OF INCOME TAX, KANPUR & OTHERS VS . SOCIETY FOR THE PROMOTION OF EDUCATION , ALLAHABAD . 6 THE LD DR PRESENT WAS DULY HEARD. 7 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS THE CLAIM OF THE ASSESSEE THAT THE REASONS STATED IN THE ORDER OF THE CIT(E) PASSED U/S 12AA OF THE ACT FOR REJECTING THE APPLICATION FOR REGISTRATION WAS NEVER PUT TO THE ASSESSEE. IT IS ALSO THE CLAIM THAT THE HEARING DATES WERE NOT INTIMATED TO THE ASSESSEE TRUST AND HENCE, ON THE DATE OF HEARING THERE WAS NO REPRESENTATION. ON PERUSAL O F THE RECORD, WE ARE OF THE VIEW THAT IN THE INTEREST OF JUSTICE AND EQUITY, THE MATTER NEEDS FRESH CONSIDERATION BY THE CIT(E) IN AS MUCH AS THE REASONS STATED BY THE CIT(E) FOR REJECTING THE APPLICATION FOR REGISTRATION IS NOT SEEN COMMUNICATED TO THE ASSESSEE TRUST. THEREFORE, WE AR E OF THE VIEW THAT AN OPPORT UNITY MAY BE GIVEN TO THE ASSESSEE TRUST TO OFFER ITS EXPLANATION WITH REGARD TO THE REASONS STATED BY THE CIT(E) FOR REJECTING THE APPLICATION U/S 12A OF THE ACT . HENCE , THE MATTER IS RESTORED TO THE CIT(E). THE CIT(E) S HALL PASS A FRESH ORDER AFTER P ROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE TRUST. THE ASSESSEE TRUST SHALL COOPERATE WITH THE CIT(E) AND SHALL NOT SEEK ADJOURNMENT UNNECESSARILY IN THE MATTER. IT IS ORDERED ACCORDINGLY. ITA NO 314/C/2015 6 8 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 18 TH DAY OF AUG 2016 . SD/ - SD/ - ( B P JAIN ) ( GEORGE GEORGE K ) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN: DATED 18 TH A UG 2016 RAJ* COPY TO: 1 . APPELLANT 2 . RE SPONDENT 3 . CIT(A) ,ERNAKULAM 4 . CIT, KOCHI 5 . DR 6 . GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN