Sri Keshav Prasad Singh Shikshan Sanshan, Varanasi V. CIT (E), Lucknow

ITA 320/ALLD/2017

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 4096 (ITAT-VARANASI)
• Duration Of Justice: 4 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Appeal Filed On: 25-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: LD. E; WHILE
• Keywords: Principle of natural justice
• Section: 80G; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CIRCUIT BENCH, VARANASI BEFORE SHRI.VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ITA No. 320/Alld./2017 Assessment Year: N.A. Sri Keshav Prasad Singh Shikshan Sansthan , C-14/160B, Sonia, P.O. Mahmoorganj, Varanasi-221010, U.P. v. The CIT(Exemption), T.C. 46-V , 5 th Floor, UP State Construction& Infrastructure Development Corporation(Behind Ram ManoharLohia Hospital), VibhutiKhand, Gomti Nagar, Lucknow-226010, Uttar Pradesh PAN:AAHAS5129G (Appellant) (Respondent) Appellant by: ShriRahul R. Gabhawala, C.A. Respondent by: Shri Sunil Kumar Bajpai, CIT DR Date of hearing: 21.04.2022 Date of pronouncement: 22.04.2022 O R D E R PER SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER: This appeal, filed by assessee, being ITA No. 320/Alld/2017, is directed against an order dated 18.10.2017 in Order No.2017- 18/80G/27Apassed by learnedCommissioner of Income Tax (Exemption), ITA No.320/Alld/2017 Assessment Year: N.A. SRI Keshav Prasad Singh Sikshan Sansthan, Varanasi 2 Lucknow(hereinafter called "theCIT(E)") on an application under section 80G(5)(vi) of the Income-tax Act, 1961(hereinafter called “ the CIT(E)”) rejecting /dismissing application filed by the assessee for grant of approval/registrationu/s 80G of the 1961 Act.We have heard both the partiesin Open Court through physical hearing mode. 2. The brief facts of the case are that the assessee filed an application for registration/approval u/s. 80G(5) of the Income Tax Act, 1961 , on 07.04.2017 with ld. CIT(E), Lucknow. The ld. CIT(E) was pleased to issue notice vide letter F.No.CIT(Exemp.)/Lko/80G/27A/2017-18/4614 dated 02.09.2017which was sent to the address provided by the applicant via Speed Post , calling for specific queries regarding assesseee’s application for registration/approval u/s 80G(5) , for compliance on 28.09.2017. The assessee filed adjournment application on 28.09.2017. The case was re-fixed for fresh hearing on 11.10.2017. The assessee’s counsel Shri R B Gabhawala, CA and Shri R B Singh, Society Member, appeared before ld. CIT(E) on 11.10.2017, and filed part reply. The ld. Counsel for the assessee sought adjournment, which was granted by ld. CIT(E) , and fresh date of hearing was fixed for 18.10.2017. None appeared before ld. CIT(E) on 18.10.2017 nor any application for adjournment was filed . The ld. CIT(E) observed that the assessee did not produced books of accounts and vouchers for verification. The ld. CIT(E) was pleased to dismiss/reject the application of the assessee for registration/approval u/s 80G(5),vide orders dated 18.10.2017.The ld. CIT(E) while rejecting application of the assessee for grant of registration/approval u/s 80G(5) was of the view, based upon material on record , that the assesseeis not solely existing for educational purposes. The ld. CIT(E) observed that the assessee is primarily engaged in running an educational institution on commercial lines without any element of charity at all to public at large.The ld. CIT(E) noted from ITA No.320/Alld/2017 Assessment Year: N.A. SRI Keshav Prasad Singh Sikshan Sansthan, Varanasi 3 Income and Expenditure Account that in financial year 2014-15, 2015-16 and 2016-17, the assessee has charged huge amount of tution fee along with fees in the form of new admission fees, CBSE Exam Fees, Compartment Exams fee , Exam Fee receipts, T.C. Receipts with the cumulative income to the tune of Rs. 1,86,30,921/- , Rs. 2,46,81,088/- and Rs. 2,64,76,860/- respectively, which is an exponential increase in the fee being levied. The ld. CIT(E) also observed that the assessee has failed to implement/ invest the same funds towards the execution of any charitable objects. The ld. CIT(E) also observed that the assessee has claimed exaggerated and mostly bogus expenses. The ld. CIT(E) observed that the assessee made huge profits. The ld. CIT(E) observed that the assessee is not working for charity nor it is solely involved in educational activities. The ld. CIT(E) also observed that these expenses could neither be corroborated with books of account nor original vouchers were produced. The ld. CIT(E) also observed that even on being asked , the assesee did not furnish details of salary , the assessee did not provide details of salary. The ld. CIT(E) also observed that huge amount is spent on Advertisement/repairs and maintenance, which is for the purposes to augment the business of education, rather than doing any charity.The ld. CIT(E) observed that in order to verify genuineness of these expenses, the assessee was asked to provide vouchers/documentary evidences to prove that these expenses were actually incurred for the conduct of its educational activities, but the assessee did not prove the same. The ld. CIT(E) held that the activities of the assessee are not genuine . The ld. CIT(E) also observed that the assessee is earning huge margin of profits of 14.2% for financial year 2014-15, 21.31% for financial year 2015-16 and 24.24% in financial year 2016-17 , which shows that the assessee is only engrossed in non charitable and commercial activities for generating huge profits. The ld. CIT(E) also observed that no corroborating evidences in the form of ITA No.320/Alld/2017 Assessment Year: N.A. SRI Keshav Prasad Singh Sikshan Sansthan, Varanasi 4 photographs/newspaper clippings or other corroborating evidences are brought on record to prove genuineness of its activities. The ld. CIT(E) observed that the assessee has given copies of three lease agreements , which are between assessee and society members. The ld. CIT(E) observed that as per lease deed , the assesse can make construction and after the lease has expired, the assessee can transfer the land and construction to the owners of the land, which as per the assessee grants benefit to the society members and infringes upon Section 13(1)(c) read with Section 13(3) of the 1961 Act. Thus, in nut-shell the ld. CIT(E) held that the assessee failed to prove that it is undertaking its educational activities for charitable purposes , rather on the other hand it is running its educational activities on commercial grounds, and also that the assessee has not worked towards the performance of objects set out in its Memorandum. Thus, the ld. CIT(E) rejected the application filed by the assessee for grant of registration /approval u/s 80G(5) of the 1961 Act. 3. Aggrieved, the assessee has filed an appeal with Income Tax Appellate Tribunal, Varanasi Circuit Bench, Varanasi, U.P..The ld. counsel for the assesseeopened the arguments before the Division Bench and submitted that proper and adequate opportunity of being heard was not granted to the assessee by ld. CIT(E), while dismissing application filed by the assessee before ld. CIT(E) for registration/approval u/s 80G(5) of the 1961 Act. The ld. Counsel for the assessee submitted that the assessee is duly registered u/s 12AA of the 1961 Act. The ld. Counsel for the assessee submitted that the assessee is engaged in the educational activities and is running school .The ld. Counsel for the assessee submitted that the assessee filed its application for registration/approval u/s 80G(5) of the 1961 Act, on 07.04.2017.The ld. CIT(E) issued notice dated 02.09.2017 fixing hearing for 28.09.2017. The ld. Counsel for the assessee submitted that questionnaire was ITA No.320/Alld/2017 Assessment Year: N.A. SRI Keshav Prasad Singh Sikshan Sansthan, Varanasi 5 issued by ld. CIT(E) raising as many as 23 queries, in its notice dated 02.09.2017 . The assessee sought adjournment on 28.09.2017. The case was fixed for hearing on 11.10.2017 It was submitted that the assessee had filed part reply before the ld. CIT(E) on 11.10.2017, wherein majority of information sought by ld. CIT(E) was furnished. The said notice dated 02.09.2017 along with replies filed are placed on record in file. The case was then fixed for hearing for 18.10.2017. The ld. Counsel for the assessee submitted that on the next date of hearing on 18.10.2017, the assessee/ counsel could not appear before ld. CIT(E) and instead of giving one more opportunity , ld. CIT(E) hastened to dismiss/reject application of the assessee for registration/approval u/s 80G(5) of the 1961 Act. The ld. Counsel for the assessee submitted that its books of accounts and vouchers are all available and it can be produced before ld. CIT(E) for verification , if one more opportunity is accorded to the assessee. The ld. Counsel for the assessee submitted that the assessee is not charging ex-orbitant fee as stated by ld. CIT(E) in its order, rather a monthly fee of around/average of Rs. 2000 per student is charged which is reasonable. It was submitted that school is run on CBSE pattern . It is also submitted that all the surplus generated is expended/invested on the furtherance of educational activities of the assessee, which can be proved/demonstrated byassessee with the records/evidences . The ld. Counsel for the assessee also submitted that Rent is paid for the premises/properties taken from society members, but rent paid are very low as compared to market rent and as such no benefit is given to society members, so as to infringe on Section 13(1)(c) read with Section 13(3). The ld. Counsel for the assessee also submitted that the salaries are paid to teachers/staff working with the assessee, and it was submitted that these staff/teachers are covered under ESI/PF, the details are submitted in paper book. The assessee has also filed paper book containing 75 pages (placed on record in ITA No.320/Alld/2017 Assessment Year: N.A. SRI Keshav Prasad Singh Sikshan Sansthan, Varanasi 6 file),which also contains written submissions rebutting findings of ld. CIT(E). The ld. Counsel for the assessee relied upon the judgment and order of Hon’ble Supreme Court in the case of Queen’s Educational Society v. CIT, reported in (2015) 372 ITR 699(SC).The ld. Counsel for the assessee prayed that since there are factual errors in the order passed by ld. CIT(E), the matter may be restored back to the file of ld. CIT(E) for denovo consideration of the assessee’s application for grant of registration/approval u/s 80G(5), so that the assessee can produce books of accounts, vouchers and other evidence to substantiate its contentions, and if required these books of accounts, vouchers and evidences can be verified by ld. CIT(E). 4. The ld. CIT-DR also fairly submitted that keeping in view facts and circumstances of the case, the matter may be restored back to the file ofld. CIT(E) for denovo consideration of the application of the assessee for grant of registration/ approval u/s 80G(5) of the 1961 Act. 5. We have heard both the rival parties and perused the material on record. The assessee has claimed itself to be engaged in the educational activities. The assesse is registered u/s 12AA of the 1961 Act. The assessee filed an application for registration/approval u/s. 80G(5) of the Income Tax Act, 1961 , on 07.04.2017 with ld. CIT(E), Lucknow. The ld. CIT(E) was pleased to issue notice vide letter F.No.CIT(Exemp.)/Lko/80G/27A/2017-18/4614 dated 02.09.2017 which was sent to the address provided by the applicant via Speed Post , calling for specific queries regarding assesseee’s application for registration/approval u/s 80G(5) , for compliance on 28.09.2017. The assessee filed adjournment application on 28.09.2017. The case was re-fixed for fresh hearing on 11.10.2017. The assessee’s counsel Shri R B Gabhawala, CA and Shri R B Singh, Society Member, appeared before ld. CIT(E) on 11.10.2017, and filed part reply . The ld. Counsel for the ITA No.320/Alld/2017 Assessment Year: N.A. SRI Keshav Prasad Singh Sikshan Sansthan, Varanasi 7 assessee sought adjournment, which was granted by ld. CIT(E) , and fresh date of hearing was fixed for 18.10.2017. None appeared before ld. CIT(E) on 18.10.2017 nor any application for adjournment was filed . The ld. CIT(E) observed that the assessee did not produced books of accounts and vouchers for verification. The ld. CIT(E) was pleased to dismiss/reject the application of the assessee for registration/approval u/s 80G(5),vide orders dated 18.10.2017.The ld. CIT(E) while rejecting application of the assessee for grant of registration/approval u/s 80G(5) was of the view, based upon material on record , that the assesseeis not solely existing for educational purposes. The ld. CIT(E) observed that the assessee is primarily engaged in running an educational institution on commercial lines without any element of charity at all to public at large.The ld. CIT(E) noted from Income and Expenditure Account that in financial year 2014-15, 2015-16 and 2016-17, the assessee has charged huge amount of tution fee along with fees in the form of new admission fees, CBSE Exam Fees, Compartment Exams fee , Exam Fee receipts, T.C. Receipts with the cumulative income to the tune of Rs. 1,86,30,921/- , Rs. 2,46,81,088/- and Rs. 2,64,76,860/- respectively , which is an exponential increase in the fee being levied. The ld. CIT(E) also observed that the assessee has failed to implement/ invest the same funds towards the execution of any charitable objects. The ld. CIT(E) also observed that the assessee has claimed exaggerated and mostly bogus expenses. The ld. CIT(E) observed that the assessee made huge profits. The ld. CIT(E) observed that the assessee is not working for charity nor it is solely involved in educational activities. The ld. CIT(E) also observed that these expenses could neither be corroborated with books of account nor original vouchers were produced. The ld. CIT(E) also observed that even on being asked , the assesee did not furnish details of salary. The ld. CIT(E) also observed that huge amount is spent on Advertisement/repairs and maintenance, ITA No.320/Alld/2017 Assessment Year: N.A. SRI Keshav Prasad Singh Sikshan Sansthan, Varanasi 8 which is for the purposes to augment the business of education, rather than doing any charity.The ld. CIT(E) observed that in order to verify genuineness of these expenses, the assessee was asked to provide vouchers/documentary evidences to prove that these expenses were actually incurred for the conduct of its educational activities, but the assessee did not prove the same. The ld. CIT(E) held that the activities of the assessee are not genuine . The ld. CIT(E) also observed that the assessee is earning huge margin of profits of 14.2% for financial year 2014-15, 21.31% for financial year 2015-16 and 24.24% in financial year 2016-17 , which shows that the assessee is only engrossed in non charitable and commercial activities for generating huge profits. The ld. CIT(E) also observed that no corroborating evidences in the form of photographs/newspaper clippings or other corroborating evidences are brought on record to prove genuineness of its activities. The ld. CIT(E) observed that the assessee has given copies of three lease agreements , which are between assessee and society members. The ld. CIT(E) observed that as per lease deed , the assesse can make construction and after the lease has expired, the assessee can transfer the land and construction to the owners of the land, which as per the assessee grants benefit to the society members , which infringes upon Section 13(1)(c) read with Section 13(3) of the 1961 Act. Thus, in nut-shell the ld. CIT(E) held that the assessee failed to prove that it is undertaking its educational activities for charitable purposes , rather on the other hand it is running its educational activities on commercial grounds, and also that the assessee has not worked towards the performance of objects set out in its Memorandum. Thus, the ld. CIT(E) rejected the application filed by the assessee for grant of registration /approval u/s 80G(5) of the 1961 Act.Aggrieved, the assessee filed an appeal with tribunal.The ld. counsel for the assessee opened the arguments before the Division Bench and submitted that proper and adequate ITA No.320/Alld/2017 Assessment Year: N.A. SRI Keshav Prasad Singh Sikshan Sansthan, Varanasi 9 opportunity of being heard was not granted to the assessee by ld. CIT(E), while dismissing application filed by the assessee before ld. CIT(E) for registration/approval u/s 80G(5) of the 1961 Act. The ld. Counsel for the assessee submitted that the assessee is duly registered u/s 12AA of the 1961 Act, and even assessments have been framed by Revenue. The ld. Counsel for the assessee submitted that the assessee is engaged in the educational activities and is running school .The ld. Counsel for the assessee submitted that the assessee filed its application for registration/approval u/s 80G(5) of the 1961 Act, on 07.04.2017.The ld. CIT(E) issued notice dated 02.09.2017 fixing hearing for 28.09.2017. The ld. Counsel for the assessee submitted that questionnaire was issued by ld. CIT(E) raising as many as 23 queries, in its notice dated 02.09.2017 . The assessee sought adjournment on 28.09.2017. The case was fixed for hearing on 11.10.2017 It was submitted that the assessee had filed part reply before the ld. CIT(E) on 11.10.2017, wherein majority of information sought by ld. CIT(E) was furnished. The said notice dated 02.09.2017 along with replies filed are placed on record in file. The case was then fixed for hearing for 18.10.2017. The ld. Counsel for the assessee submitted that on the next date of hearing on 18.10.2017, the assessee/ counsel could not appear before ld. CIT(E) and instead of giving one more opportunity , ld. CIT(E) hastened to dismiss/reject application of the assessee for registration/approval u/s 80G(5) of the 1961 Act. The ld. Counsel for the assessee submitted that its books of accounts and vouchers are all available and it can be produced before ld. CIT(E) for verification , if one more opportunity is accorded to the assessee. The ld. Counsel for the assessee submitted that the assessee is not charging ex-orbitant fee as stated by ld. CIT(E) in its order, rather a monthly fee of around/average of Rs. 2000 per student is charged which is reasonable. It was submitted that school is run on CBSE pattern . It is also ITA No.320/Alld/2017 Assessment Year: N.A. SRI Keshav Prasad Singh Sikshan Sansthan, Varanasi 10 submitted that all the surplus generated is expended/invested on the furtherance of educational activities of the assessee, which can be proved/demonstrated by assessee with the records/evidences . The ld. Counsel for the assessee also submitted that Rent is paid for the premises/properties taken from society members, but rent paid are very low as compared to market rent and as such no benefit is given to society members, so as to infringe on Section 13(1)(c) read with Section 13(3). The ld. Counsel for the assessee also submitted that the salaries are paid to teachers/staff working with the assessee, and it was submitted that these staff/teachers are covered under ESI/PF, the details are submitted in paper book. The assessee has also filed paper book containing 75 pages (placed on record in file),which also contains written submissions rebutting findings of ld. CIT(E). The ld. Counsel for the assessee relied upon the judgment and order of Hon’ble Supreme Court in the case of Queen’s Educational Society v. CIT, reported in (2015) 372 ITR 699(SC).The ld. Counsel for the assessee prayed that since there are factual errors in the order passed by ld. CIT(E), the matter may be restored back to the file of ld. CIT(E) for denovo consideration of the assessee’s application for grant of registration/approval u/s 80G(5), so that the assessee can produce books of accounts, vouchers and other evidence to substantiate its contentions, and if required these books of accounts, vouchers and evidences can be verified by ld. CIT(E).The ld. CIT-DR has also fairly submitted before the Bench that the matter can go back to the file of ld.CIT(E) for fresh consideration of application of the assessee for registration/approval u/s 80G(5) of the 1961 Act. Keeping in view the totality of the facts and circumstances of the case as enumerated above in this order, we are of the considered view that matter can be restored back to the file of ld. CIT(E) for de novo consideration of assessee’s application for registration/approval u/s.80G(5) of the Act. We have observed that ld. CIT(E) ITA No.320/Alld/2017 Assessment Year: N.A. SRI Keshav Prasad Singh Sikshan Sansthan, Varanasi 11 issued notice dated 02.09.2017 seeking as many as 23 queries. The case was fixed for hearing on 28.09.2017. The assessee sought adjournment, and the case was fixed for 11.10.2017.The assessee had filed part reply before ld. CIT(E) on 11.10.2017, which is placed on record.The case was adjourned to 18.10.2017. On the next date of hearing on 18.10.2017, the assessee/counsel did not appear , and ld. CIT(E) did not give any further opportunity of hearing to the assessee, and rather dismissed the application filed by the assessee for registration/approval u/s 80G(5) of the 1961 Act on the same date viz. 18.10.2017. The ld. Counsel for the assessee has averred before us that many of the findings of ld. CIT(E) are erroneous/perverse, and if one more opportunity is granted, the assessee shall produce books of accounts, vouchers and other evidences to substantiate its contentions, and the assessee shall also furnish necessary details/evidences if any other queries which ld. CIT(E) may require assessee to explain. The ld. CIT-DR has also fairly stated that the matter can go back to the file of ld. CIT(E) for denovo consideration of assessee’s application. Thus, under these circumstances it will be in the interest of justice and fairness to both the parties that the order dated 18.10.2017 passed by ld. CIT(E) be set aside and matter be restored back to the file of ld. CIT(E) for fresh consideration of the assessee’s application for registration/approval u/s. 80G(5) of the 1961 Act. We clarify that we have not commented on the merits of the issue and all the contentions are kept open. Needless to say that ld. CIT(E) will give proper and adequate opportunity of hearing to the assessee in set aside remand proceeding while deciding application of the assessee for grant of registration/approval u/s 80G(5) of the 1961 Act, in accordance with the principle of natural justice and in accordance with law.The ld. CIT(E) is directed to pass reasoned and speaking order in the set aside remand proceeding while deciding application of the assessee afresh for grant of ITA No.320/Alld/2017 Assessment Year: N.A. SRI Keshav Prasad Singh Sikshan Sansthan, Varanasi 12 registration/approval u/s 80G(5) of the 1961 Act. The evidences /explanations submitted by the assessee shall be admitted by ld. CIT(E) in accordance with law and be adjudicated on merits in accordance with law. The appeal of the assessee is allowed for statistical purposes. We order accordingly. 6. In the result, the appeal of the assessee in ITA no. 320/All/2017 for ay: NA is allowed for statistical purposes. Order pronounced on 22/04/2022at Varanasi, U.P. Sd/- Sd/- [VIJAY PAL RAO] [RAMIT KOCHAR] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:22/04/2022 Copy forwarded to: 1. Appellant – Sri Keshav Prasad Singh Shikshan Sansthan C-14/160B , Sonia, P.O. Mahmoorganj, Varanasi-221010, U.P. 2. Respondent –The CIT(Exemption), T.C. 46-V , 5 th Floor, UP State Construction Infrastructure Development Corporation, VibhutiKhand, Gomti Nagar, Lucknow-226010, U.P. 3. The CIT-DR, ITAT, Varanasi, U.P. 4. The CIT, Varanasi, U.P. By order Assistant Registrar