M/s Giani Gurmukh Singh Musafir Trust, Chandigarh V. CIT-I, Chandigarh

ITA 364/CHANDI/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81025 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 20-11-2014
• Assessment Year: misc
• Appeal Filed On: 03-04-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR AMA RVEER SINGH
• Keywords: Opportunity of being heard; Cancellation of registration
• Section: 12A; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R.SOOD, ACCOUNTANT MEMBER ITA NO. 364/CHD/2013 (UNDER SECTION 12AA(3) OF THE ACT) GIANI GURMUKH SINGH VS. THE COMMISSIONER OF INCOME TAX-I MUSAFIR TRUST, PLOT NO.3-4, CHANDIGARH. SECTOR 24, CHANDIGARH. PAN: AAATG0701G AND ITA NO. 646/CHD/2014 ASSESSMENT YEAR : 2010-11 GIANI GURMUKH SINGH VS. THE A.C.I.T., MUSAFIR TRUST, PLOT NO.3-4, CIRCLE 3(1), SECTOR 24, CHANDIGARH. CHANDIGARH. PAN: AAATG0701G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI JASPAL SHARMA RESPONDENT BY : DR.AMARVEER SINGH, DR DATE OF HEARING : 20.11.2014 DATE OF PRONOUNCEMENT : 26.11.2014 O R D E R PER BHAVNESH SAINI, J.M. : THIS ORDER SHALL DISPOSE OFF BOTH THE ABOVE APPEAL S FILED BY THE SAME ASSESSEE. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BE LOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECORD. WE D ECIDE BOTH THE APPEALS AS UNDER :- 2 ITA NO.364/CHD/2013 : 3. THIS APPEAL IS FILED AGAINST THE ORDER OF LEARNE D COMMISSIONER OF INCOME TAX-I, CHANDIGARH DATED 11.3 .2013, CHALLENGING THE ORDER UNDER SECTION 12AA(3) OF THE INCOME TAX ACT CANCELING THE REGISTRATION GRANTED TO THE ASSES SEE. 2. BRIEFLY, THE FACTS OF THE ASSESSEES CASE ARE TH AT THE REGISTRATION UNDER SECTION 12A(A) OF THE INCOME TAX ACT WAS GRAN TED TO THE ASSESSEE BY THE COMMISSIONER OF INCOME TAX, AMRITSA R VIDE ORDER DATED 18.11.1982 SUBJECT TO CERTAIN CONDITION S. THE SAME ARE NOTED IN THE IMPUGNED ORDER. THE LEARNED COMMISSIONER OF INCOME TAX NOTED THAT AS PER THE IN COME TAX ACT, THE BASIC REQUIREMENT FOR GRANTING APPROVAL UN DER SECTION 12A OF THE ACT IS THAT THE INSTITUTION SHOULD HAVE BEEN ESTABLISHED FOR THE PURPOSES OF CHARITY AND REPRODU CED SECTION 2(15) OF THE ACT EXPLAINING THE MEANING OF CHARITAB LE PURPOSE. THE ASSESSING OFFICER IN THIS CASE HAS SUBMITTED A PROPOSAL FOR CANCELLATION OF REGISTRATION UNDER SECTION 12A OF THE ACT MENTIONING THEREIN THAT THE ASSESSEE TRUST IS NOT C ARRYING OUT ANY SUBSTANTIAL ACTIVITIES. IT WAS ALSO MENTIONED BY THE ASSESSING OFFICER THAT THE ASSESSEE TRUST HAS ACCUM ULATED SUBSTANTIAL AMOUNT OF FUNDS DURING THE YEARS AFTER ITS INCEPTION BUT HAS NOT UTILIZED THE FUNDS FOR THE OB JECTIVES LAID DOWN. ACCORDINGLY, SHOW CAUSE NOTICE WAS ISSUED T O THE ASSESSEE FOR FILING THE OBJECTIONS. THE ASSESSEE S UBMITTED BEFORE THE LEARNED COMMISSIONER OF INCOME TAX THAT THE TRUST IS CARRYING OUT EDUCATIONAL, SOCIAL WELFARE AND CHA RITY RELATED 3 ACTIVITIES, SUCH AS BLOOD DONATION CAMPS, EYE CAMPS AND CAMPS FOR DIFFERENTLY ABLED AND SEMINARS OF NARCOTI C DRUG ABUSE AND FEMALE FOETICIDE. THE ASSESSEE ALSO STA TED THAT THE ASSESSEE IS PROVIDING ITS INFRASTRUCTURE FACILITIES FOR CONDUCTING VARIOUS ACTIVITIES CONNECTED WITH EDUCAT ION, PUBLIC AND SOCIAL WELFARE AND OTHER OBJECTS CONNECTED WITH GENERAL UTILITIES FOR THE PUBLIC. THE ASSESSING OFFICER HA S ALSO SUBMITTED HER COMMENTS. THE LEARNED COMMISSIONER O F INCOME TAX ON PERUSAL OF THE SUBMISSIONS OF BOTH TH E PARTIES, NOTED THAT NO SUBSTANTIAL ACTIVITIES AS CLAIMED BY THE ASSESSEE TRUST HAVE BEEN CARRIED OUT. ON GOING THROUGH THE INCOME AND EXPENDITURE ACCOUNT OF THE ASSESSEE TRUST FOR A SSESSMENT YEARS 2010-11, 2011-12 AND 2012-13, IT WAS FOUND TH AT NO SUBSTANTIAL CHARITABLE ACTIVITIES HAVE BEEN CARRIED OUT DURING THESE YEARS. ALL THE EXPENSES SHOWN IN THE INCOME AND EXPENDITURE ACCOUNT RELATED TO ADMINISTRATIVE EXPEN SES. IT WAS ALSO MENTIONED BY THE ASSESSEE IN ITS REPLY THA T ONCE THE MUSAFIR AUDITORIUM BUILDING IS COMPLETED IN ALL RES PECTS AS REQUIRED BY THE CHANDIGARH ADMINISTRATION BUILDING BYE-LAWS, THE ACTIVITIES CONNECTED WITH CHARITY WOULD BE STEP PED UP SUBSTANTIALLY AS LAID DOWN IN THE TRUST DEED. TH E LEARNED COMMISSIONER OF INCOME TAX ON GOING THROUGH THIS SU BMISSION OF THE ASSESSEE ALSO NOTED THAT THE ASSESSEE IS NOT DOING CHARITABLE ACTIVITIES AS CLAIMED BY IT. IT WAS, T HEREFORE, FOUND THAT THE ASSESSEE TRUST HAS NOT APPLIED ITS F UNDS WHOLLY AND EXCLUSIVELY FOR THE OBJECTIVES FOR WHICH IT WAS FORMED. IT WAS ALSO REPORTED BY THE ASSESSING OFFICER THAT THE ASSESSEE TRUST HAS BEEN ACCUMULATING ITS FUNDS FROM YEAR TO YEAR SINCE 4 ITS INCEPTION BUT NO SUBSTANTIAL CHARITABLE ACTIVIT IES HAVE BEEN CARRIED OUT AND THE ASSESSEE HAS INCURRED ONLY ADMINISTRATIVE EXPENSES, WHICH CANNOT BE ATTRIBUTED TO THE CHARITABLE ACTIVITIES AS CLAIMED BY THE ASSESSEE. THE LEARNED COMMISSIONER OF INCOME TAX WAS, THEREFORE, SATISFIE D THAT THE ASSESSEE TRUST IS NOT CARRYING OUT ANY GENUINE ACTI VITIES TOWARDS THE OBJECTS AND ACCORDINGLY, CANCELLED THE REGISTRATION UNDER SECTION 12A OF THE INCOME TAX AC T. 3. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LEARNED COMMISSIONER OF INCOME TAX AND ADDED THAT MUSAFIR AUDITORIUM BUILDING IS N OT COMPLETED AND AS SUCH, NO ACTIVITIES HAD BEEN CONDU CTED BY THE ASSESSEE. HE HAS SUBMITTED THAT APPLICATION OF FUNDS MAY NOT BE RELEVANT AT THE TIME OF GRANT OF REGISTRATIO N UNDER SECTION 12A OF THE INCOME TAX ACT. THEREFORE, REG ISTRATION SHOULD NOT HAVE BEEN CANCELLED. HE HAS SUBMITTED THAT THE ASSESSEE HAS ALLOWED OTHER INSTITUTIONS TO CARRY OU T BLOOD DONATION CAMPS, SEMINARS, ETC. FOR PUBLIC WELFARE. THEREFORE, REGISTRATION SHOULD NOT HAVE BEEN CANCELLED. HE HAS RELIED UPON THE DECISIONS OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASES OF CIT VS. SURYA EDUCATIONAL & C HARITABLE TRUST, 15 TAXMANN.COM 123 AND CIT VS. JANKI EDUCATI ON SOCIETY, 39 TAXMANN.COM 2 (P&H) FOR THE PROPOSITION THAT WHILE EXAMINING APPLICATION SEEKING REGISTRATION UN DER SECTION 12A OF THE INCOME TAX ACT, MANNER OF APPLICATION OF FUNDS DID NOT FALL WITHIN THE PURVIEW OF THE COMMISSIONER. HE HAS ALSO RELIED UPON THE DECISION OF THE HON'BLE PUNJAB & HA RYANA 5 HIGH COURT IN THE CASE OF CIT VS. B.K.K. MEMORIAL T RUST, 29 TAXMANN. COM 286 (P&H), IN WHICH IT WAS HELD THAT WHERE THE TRUST WAS YET TO WORK TOWARDS ITS OBJECTS, THE COMMISSIONER COULD NOT DENY REGISTRATION ON THE GRO UND THAT IT WAS NOT UTILIZING ITS INCOME FOR CHARITABLE PURP OSES. HE HAS ALSO RELIED UPON THE ORDER OF THE INCOME TAX AP PELLATE TRIBUNAL, CHANDIGARH BENCH IN THE CASE OF YODHA SAM ARAK SAMITI VS. CIT, 138 ITD 512 (CHD), IN WHICH IT WAS HELD THAT THE OBJECTS OF SETTING UP MEMORIALS TO PERPETUATE M EMORIES OF NATIONAL WAR HEROES HELD AS CHARITABLE IN NATURE. HE HAS ALSO RELIED UPON THE ORDER OF THE INCOME TAX APPELL ATE TRIBUNAL, CHANDIGARH BENCH IN THE CASE OF H.P. GOVT . ENERGY DEVELOPMENT AGENCY VS. CIT, 7 TAXMANN.COM 69 (CHD), IN WHICH IT WAS HELD THAT THE SATISFACTION ABOUT THE O BJECTS OF TRUST BEING AS PER SECTION 2(15) OF THE INCOME TAX ACT IS NOT CONDITION MENTIONED IN SECTION 12AA(3) OF THE INCOM E TAX ACT TO CANCEL THE REGISTRATION. 4. ON THE OTHER HAND, THE LEARNED D.R. FOR THE REVE NUE RELIED UPON THE IMPUGNED ORDER. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE LEARNED COMMISSIONER OF INCOME TAX CANCELLED THE REGISTRATI ON UNDER SECTION 12AA(3) OF THE INCOME TAX ACT, WHICH READS AS UNDER:- 12AA. (3) WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANTED REGISTRATION UNDER CLAUSE (B) OF SUB-SECTION (1) [OR HAS OBTAINED REGISTRATION AT ANY TIME UNDER SECTION 12A] AND SUBS EQUENTLY THE COMMISSIONER IS SATISFIED THAT THE ACTIVITIES OF SUCH T RUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDAN CE WITH THE OBJECTS OF THE TRUST OR INSTITUTION, AS THE CASE MAY BE, HE SHALL PASS AN ORDER IN WRITING CANCELLING THE REGISTRATION OF SUCH TRUST OR INSTITU TION: 6 PROVIDED THAT NO ORDER UNDER THIS SUB-SECTION SHALL BE PASSED UNLESS SUCH TRUST OR INSTITUTION HAS BEEN GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD. 6. THE SUB-SECTION (3) OF SECTION 12AA OF THE INCOM E TAX ACT PERMITS THE COMMISSIONER TO CANCEL THE REGISTRATION UNDER SECTION 12AA OF THE INCOME TAX ACT. IN ORDER TO D O SO, SUB- SECTION (3) MANDATES THAT THE COMMISSIONER OUGHT TO BE SATISFIED ON TWO COUNTS; FIRSTLY, THAT THE ACTIVITI ES OF THE TRUST OR INSTITUTION ARE NOT GENUINE AND; SECONDLY, THAT THE ACTIVITIES ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION. THE ASSESSEE HAS FILED THE COPY OF THE TRUST DEED, WHICH PROVIDES THE OBJECTS OF THE ASSESSEE TRUST, MAINLY OF EDUCATIONAL IN NATURE. THE ASSESSEE HAS BEEN GRANTED REGISTRATION WAY BACK IN THE YEAR 1982 AND TILL THE DATE OF PASSING OF THE IMPUGNED O RDER, IT IS ADMITTED FACT THAT THE ASSESSEE IS NOT CARRYING OUT ANY ACTIVITIES TOWARDS THE OBJECTS OF THE ASSESSEE TRUS T. THE INCOME AND EXPENDITURE OF THE ASSESSEE TRUST SHOWS THAT ONLY ADMINISTRATIVE EXPENSES HAVE BEEN INCURRED. THERE FORE, THE ASSESSEE TRUST HAS NOT CARRIED OUT ANY ACTIVITIES I N ACCORDANCE WITH THE OBJECTS OF THE ASSESSEE TRUST. IT IS ALS O ADMITTED FACT THAT THE MUSAFIR AUDITORIUM BUILDING IS STILL UNDER CONSTRUCTION AND THE BUILDING IS NOT COMPLETE. TH EREFORE, IF SOME OTHER INSTITUTIONS HAVE CARRIED OUT SOME BLOOD DONATIONS CAMPS OR SOME SEMINARS, ETC. IN THE PREMISES OF THE ASSESSEE, WOULD NOT PROVE THAT THE ASSESSEE TRUST HAS CARRIED OUT ANY GENUINE ACTIVITIES TO ACHIEVE ITS OBJECT. THE REP ORT OF THE ASSESSING OFFICER ALSO SUPPORTS THE FINDINGS OF THE LEARNED 7 COMMISSIONER OF INCOME TAX THAT NO ACTIVITIES HAVE BEEN CONDUCTED BY THE ASSESSEE FROM THE DATE OF GRANT OF REGISTRATION IN 1982 TILL PASSING OF THE IMPUGNED O RDER IN THE YEAR 2013. THEREFORE, THE CASE OF THE ASSESSEE WO ULD SQUARELY FALL WITHIN THE PURVIEW OF SECTION 12AA(3) OF THE INCOME TAX ACT FOR CANCELING THE REGISTRATION ALREA DY GRANTED. THE DECISIONS RELIED UPON BY THE LEARNED COUNSEL FO R THE ASSESSEE WOULD NOT SUPPORT THE CASE OF THE ASSESSEE BECAUSE THEY ARE RELATED TO GRANT OF REGISTRATION AND EVEN THE ORDER OF THE TRIBUNAL IN THE CASE OF H.P.GOVT.ENERGY DEVELOP MENT AGENCY (SUPRA) WOULD NOT SUPPORT THE CASE OF THE AS SESSEE. CONSIDERING THE FINDING OF FACT RECORDED BY THE LEA RNED COMMISSIONER OF INCOME TAX IN THE IMPUGNED ORDER IN THE LIGHT OF REQUIREMENT OF SECTION 12AA(3) OF THE INCO ME TAX ACT, WE ARE OF THE VIEW THAT THE LEARNED COMMISSIONER OF INCOME TAX CORRECTLY EXERCISED HIS JURISDICTION IN CANCELI NG THE REGISTRATION IN THE CASE OF THE ASSESSEE. WE, THE REFORE, DO NOT FIND ANY ERROR IN THE ORDER OF THE LEARNED COMM ISSIONER OF INCOME TAX IN CANCELING THE REGISTRATION. THE APP EAL OF THE ASSESSEE HAS THUS NO MERIT AND IS ACCORDINGLY, DISM ISSED. ITA NO.646/CHD/2014: 7. THIS APPEAL IS DIRECTED AGAINST THE ORDER OF LEA RNED COMMISSIONER OF INCOME TAX (APPEALS), CHANDIGARH DA TED 22.4.2014 FOR ASSESSMENT YEAR 2010-11, CHALLENGING THE ADDITION OF RS.5,18,970/-. 8 8. THE LEARNED CIT (APPEALS) NOTED FROM THE INCOME AND EXPENSES ACCOUNT THAT THE ASSESSEE HAS RECEIVED DON ATION OF RS.3,11,700/- AND INTEREST OF RS.2,07,270/-. AGAI NST THESE RECEIPTS, THE ASSESSEE HAS CLAIMED EXPENSES ON ACCO UNT OF ACCOUNTING CHARGES, COMPUTER EXPENSES, ELECTRICITY AND WATER EXPENSES, ETC. TO THE TUNE OF RS.1,16,634/- BUT NON E OF THESE EXPENSES RELATE TO CARRYING ON OF ANY CHARITABLE AC TIVITY. AS NO CHARITABLE ACTIVITIES WERE CARRIED ON BY THE ASS ESSEE, NO EXPENDITURE COULD BE ALLOWED AGAINST THE DONATION R ECEIVED. FURTHER AS NO EXPENDITURE WAS INCURRED TOWARDS THE EARNING OF INTEREST, NO EXPENDITURE CAN BE ALLOWED AGAINST THE INTEREST DECLARED BY THE ASSESSEE. IT WAS, THEREFORE, FOUN D THAT NO EXPENDITURE IS ALLOWABLE TO THE ASSESSEE AGAINST TH E RECEIPTS DECLARED OF RS.5,18,970/-, WHICH IS TAXABLE AS SUCH . THEREFORE, THE ADDITION WAS UPHELD AND THE APPEAL O F THE ASSESSEE WAS DISMISSED. 9. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE ASSESSEE. SINCE THE REGISTRATION HAS BEEN CANCELLED UNDER SECTION 12AA( 3) OF THE INCOME TAX ACT, THEREFORE, IT IS CLEAR THAT THE ASS ESSEE HAS NOT CARRIED OUT ANY CHARITABLE ACTIVITIES AND AS SUCH, WHATSOEVER AMOUNT HAS BEEN RECEIVED BY THE ASSESSEE, IS TAXABL E, AGAINST WHICH NO EXPENDITURE WOULD BE ALLOWED AS DEDUCTION WHICH ARE NOT CONNECTED WITH THE ACTIVITY OF THE ASSESSEE . WHILE CONSIDERING THE APPEAL OF THE ASSESSEE AGAINST THE CANCELLATION OF REGISTRATION, WE HAVE NOTED THAT TH E ASSESSEE HAS NOT CARRIED OUT ANY ACTIVITIES TOWARDS ITS OBJE CTS, 9 THEREFORE, NO EXPENDITURE IS ALLOWABLE. THIS APPE AL OF THE ASSESSEE HAS ALSO NO MERIT AND IS DISMISSED. 10. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF NOVEMBER, 2014. SD/- SD/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 26 TH NOVEMBER, 2014 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH