M/s Pragathi Educational trust , Bangalore V. The Commissioner of Income Tax (Exemptions) , Bangalore

ITA 386/BANG/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3466 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2017-2018
• Appeal Filed On: 08-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SMARAH SWAIN JT BENGALURU
• Assessee Lawyers: KRISHNA UPADHYAY
• Keywords: Opportunity of being heard
• Section: 80G; 12A; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI A.K. GARODIA , ACCOUNTANT MEMBER I TA NO S . 385 & 386/BANG/2018 ASSESSMENT YEAR : NOT APPLICABLE M/S. PRAGATHI EDUCATIONAL TRUST, DEEPAK NILAYA, SRI CHAMUNDESHWARI LAYOUT, HAROHALLI, KANAKAPURA TALUK, RAMANAGARA DISTRICT. PAN: AADTP 3135A VS. THE COMMISSIONER OF INCOME TAX (EXEMPTIONS), BANGALORE 560 027. APPELLANT RESPONDENT APPELLANT BY : SHRI KRISHNA UPADHYAY, CA RE SPO NDENT BY : SHRI SMARAH SWAIN, JT.CIT(DR)(ITAT), BENGALURU . DATE OF HEARING : 08 .0 8 .201 8 DATE OF PRONOUNCEMENT : 24 .08.2018 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER BOTH THESE APPEALS ARE FILED BY THE ASSESSEE. ITA NO.385/B/18 IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 0 5.12.2017OF THE COMMISSIONER OF INCOME TAX (EXEMPTIONS), BANGALORE [THE CIT(E)] REJECTING THE APPLICATION FOR GRANT OF REGISTRATION U/S. 12A OF THE INCOME-TAX ACT, 1961 [THE ACT]. ITA NO.386/B/18 IS AN APPEA L BY THE ASSESSEE AGAINST THE ORDER DATED 05.12.2017 REJECTING THE AP PLICATION OF THE ASSESSEE FOR GRANT OF APPROVAL U/S. 80G(5)(VI) OF T HE ACT. ITA NOS. 385 & 386/BANG/2018 PAGE 2 OF 6 2. THE ASSESSEE IS A TRUST WHICH CAME INTO EXISTEN CE UNDER THE REGISTERED DEED OF TRUST DATED 25.10.2013. THE MAI N OBJECT OF THE TRUST WAS TO PROVIDE EDUCATION. THE TRUST DID NOT CARRY ON AN Y ACTIVITY SINCE ITS FORMATION. THE ASSESSEE IN FULFILMENT OF ITS OBJEC T OF PROVIDING EDUCATION TOOK OVER AN EXISTING SCHOOL BY NAME, PRAGATHI VIDY A NIKETANA WHICH WAS RUNNING CLASSES FROM KG TO 10 TH STD. THE SCHOOL THAT WAS TAKEN OVER BY THE ASSESSEE WAS RECOGNIZED BY THE GOVT. OF KARNATA KA EDUCATION DEPARTMENT. THE SCHOOL HAD A STRENGTH OF ABOUT 100 0+ STUDENTS. AS ALREADY STATED, THE TRUST STARTED ITS ACTIVITIES ON LY AFTER 1.4.2017. PRIOR TO 1.4.2017, THERE WAS NO FINANCIAL STATEMENTS OR ANY INCOME-TAX RETURNS FILED. 3. THE ASSESSEE FILED AN APPLICATION FOR GRANT OF R EGISTRATION U/S. 12A OF THE ACT ON 2.6.2017. SIMULTANEOUSLY, THE ASSESSEE ALSO FILED AN APPLICATION FOR GRANT OF APPROVAL U/S. 80G OF THE ACT. THE CIT (E) ISSUED A LETTER DATED 20.11.2017 CALLING UPON THE ASSESSEE TO FURNISH CER TAIN INFORMATION AND CLARIFICATION. THE ASSESSEE VIDE ITS REPLY DATED 2 7.11.2017 CLARIFIED THE QUERIES RAISED BY THE CIT(E) IN HIS LETTER DATED 20 .11.2017. ONE OF THE QUERY RAISED BY THE CIT(E) IN HIS LETTER DATED 20.1 1.2017 WAS WITH REGARD TO CLAUSE IN THE TRUST DEED REGARDING POWER OF AMALGAM ATION WITH OTHER TRUSTS. ON THE ABOVE QUERY, THE ASSESSEE SUBMITTED IN ITS R EPLY THAT IT HAD AMENDED THE TRUST DEED BY PROVIDING SPECIFICALLY TH AT POWER OF AMALGAMATION OF THE TRUST WITH OTHER TRUST SHALL BE SUBJECT TO THE CONDITION THAT THE TRUST WITH WHICH THE ASSESSEE WANT TO AMAL GAMATE SHOULD HAVE SIMILAR OBJECTS AS THAT OF THE ASSESSEE AND SUCH AM ALGAMATION SHALL BE SUBJECT TO APPROVAL OF THE AUTHORITIES UNDER THE AC T. A COPY OF THE AMENDED TRUST DEED DATED 7.12.2017 WAS ALSO FILED ALONG WIT H THE REPLY BY THE ASSESSEE. 4. THE CIT(E) IN HIS ORDER HAS NOT CONSIDERED ANY O F THESE ASPECTS, BUT HAS PROCEEDED TO MAKE THE FOLLOWING OBSERVATIONS IN THE IMPUGNED ORDER:- ITA NOS. 385 & 386/BANG/2018 PAGE 3 OF 6 4. THE APPLICANT TRUST HAS FILED REPLY VIDE LETTER DATED 29.11.2017. THE REPLY OF THE APPLICANT WAS EXAMINED . THE FOLLOWING FACTS ARE AGAINST THE ASSESSEE TO GRANT R EGISTRATION AT THIS STAGE:- 1. THE EXPLANATION OF THE ASSESSEE ON THE OBJECTIVE OF THE EDUCATIONAL CONSULTANCY IS AGAINST THE SPIRIT OF CH ARITY AND THE EXPLANATION OF THE ASSESSEE IS NOT REASONAB LE. 2. THE POWER OF THE DISCRETION TO TRUSTEE TO JOIN, CO-OPERATE OR AMALGAMATE WITH ANY OTHER TRUST NEED TO BE WITHI N THE AMBIT OF INCOME TAX ACT, ON RECOGNITION. 3. THE EXAMINATION OF BANK ACCOUNTS OF THE TRUST IN DICATES RECEIPTS ABOVE 501AKHS AS FEE. THE ASSESSEE FAIL TO FILE FORM 106 OR RETURN OF INCOME THOUGH APPLICANT HAS 1 000+ STUDENTS REMITTINGS FEES. FAILURE TO FILE RETURN OF INCOME AND 10B REPORT ALSO A REASON FOR REJECTION OF THE S AME. 5. IN ADDITION, THE DETAILS OF THE FOLLOWING ARE F URTHER CALLED FROM ASSESSEE APPLICANT:- 1. COPIES OF THE RETURN OF INCOME FILE. 2. SUBMIT THE DETAILS OF ACTIVITIES CARRIED ON FROM THE FORMATION OF THE TRUST. 3. SUBMIT LEDGER EXTRACTS OF CASH DEPOSITS IN THE R EPLY DATED 29.11.2017. THE APPLICANT TRUST HAS SUBMITTED THAT THE TRUST DID NOT CARRY OUT ANY ACTIVITIES TILL 31.03.2017 AND HENCE NO RETURN OF INCOME FILED. REGARDING CASH DEPOSITS,_THE APPLICAN T SUBMITTED THAT THE CASH DEPOSITS ARE ONLY MADE AFTER 01.04.20 17. HOWEVER IT WAS FOUND BY THE DETAILS SUBMITTED BY THE APPLICANT IS CONTRACTING ITS OWN SUBMISSION EARLIER. THE ASSESSEE AS PER THE DETAILS AVAILABLE ON RECORDS CARRYOUT EDUCATIONAL ACTIVITIE S FOR MORE THAN 10 YEARS HAVING 1000+ STUDENTS. THE BANK ACCOUNT OF APPLICANT HAVE CASH DEPOSIT EVEN PRIOR TO THE PERIOD OF 01/04 /2017. THE APPLICANT SUPPRESSED THE FACTS OF ACTIVITIES, GROSS RECEIPTS AND CASH DEPOSITS AS PER THE DETAILS AVAILABLE ON RECOR DS. ITA NOS. 385 & 386/BANG/2018 PAGE 4 OF 6 5. THEREAFTER, THE CIT(E) HAS OBSERVED THAT GRANT O F REGISTRATION U/S. 12A IS SUBJECT TO THE CONDITION THAT THE CIT(E) IS SATISFIED ABOUT THE OBJECTS OF THE TRUST AND GENUINENESS OF THE ACTIVITIES. TH E CIT(E) HAS ALSO OBSERVED THAT SINCE THE RELEVANT DETAILS HAVE NOT B EEN FILED BY THE ASSESSEE, HE IS NOT IN A POSITION TO VERIFY THE OBJ ECTS OF THE TRUST AND GENUINENESS OF ITS ACTIVITIES. THE CIT(E) ACCORDIN GLY REFUSED REGISTRATION U/S. 12A OF THE ACT. 6. AGGRIEVED BY THE ORDER OF CIT(E), THE ASSESSEE I S IN APPEAL BEFORE THE TRIBUNAL. 7. IT IS CLEAR FROM THE ORDER OF CIT(E) AND THE EVI DENCE FILED BY THE ASSESSEE BEFORE THE CIT(E) THAT THERE WAS NO ACTIVI TY CARRIED ON BY THE ASSESSEE PRIOR TO 1.4.2017. IN FACT, THE ASSESSEE HAS FILED A LETTER FROM CANARA BANK DATED 23.05.2018 WHICH SPECIFICALLY MEN TIONS THAT THE ASSESSEE HAS OPENED A BANK ACCOUNT WITH THEM ONLY F ROM 5.5.2017. THEREFORE, THE REFERENCE IN THE IMPUGNED ORDER OF C IT(E) ABOUT CASH DEPOSITS ARE WITHOUT ANY BASIS. SIMILARLY, SINCE N O ACTIVITIES WERE CARRIED ON PRIOR TO 1.4.2017, THERE WAS NO OCCASION FOR THE ASSESSEE TO FILE ANY RETURN OF INCOME OR FORM 10B. IT APPEARS THAT THE IMPUGNED ORDER HAS BEEN PASSED WITHOUT CONSIDERING THE REPLY OF THE AS SESSEE. WE, THEREFORE, DEEM IT FIT AND PROPER TO SET ASIDE THE ORDER OF CI T(E) AND DIRECT THE CIT(E) TO CONSIDER THE QUESTION OF GRANT OF REGISTRATION U /S. 12A OF THE ACT TO THE ASSESSEE AFRESH IN THE LIGHT OF DOCUMENTS FILED BY THE ASSESSEE. THE CIT(E) WILL ALSO AFFORD OPPORTUNITY TO THE ASSESSEE OF BEING HEARD AND ALLOWING THE ASSESSEE TO FILE SUCH DOCUMENTS AS MAY BE NECESSARY TO SATISFY HIMSELF ABOUT THE EXISTENCE OF CONDITIONS F OR GRANT OF REGISTRATION. THE CIT(E) IS REQUESTED TO PASS THE ORDER AS EXPEDI TIOUSLY AS POSSIBLE. ACCORDINGLY, THE APPEAL IN ITA NO.385/BANG/2018 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ITA NOS. 385 & 386/BANG/2018 PAGE 5 OF 6 ITA NO.386/BANG/2018 8. THIS APPEAL IS AGAINST THE REJECTION OF THE APP LICATION OF THE ASSESSEE FOR GRANT OF APPROVAL U/S.80G OF THE ACT. THE APPLICATION FOR GRANT OF APPROVAL U/S. 80G OF THE ACT WAS REJECTED BY THE CIT(E) FOR THE REASON THAT THE ASSESSEE IS NOT REGARDED AS A CHARI TABLE INSTITUTION, CONSEQUENT TO REJECTION OF ASSESSEES APPLICATION F OR GRANT OF REGISTRATION U/S. 12A OF THE ACT. SINCE THE SAID ORDER IS NOW S ET ASIDE, WE ARE OF THE VIEW THAT THE ORDER REFUSING GRANTING OF APPROVAL U /S. 80G SHOULD ALSO BE SET ASIDE AND REMANDED TO THE CIT(E) FOR FRESH CONS IDERATION. THE CIT(E) WILL AFFORD OPPORTUNITY OF BEING HEARD TO THE ASSES SEE AND ALSO ALLOW THE ASSESSEE TO FILE EVIDENCE NECESSARY TO SUBSTANTIATE ITS CASE. FOR STATISTICAL PURPOSES, THE APPEAL IS TREATED AS ALLO WED. 9. IN THE RESULT, BOTH THE APPEALS BY THE ASSESSEE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 24 TH DAY OF AUGUST, 2018. SD/- SD/- ( A.K. GARODIA ) ( N.V. VASUDEVAN ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 24 TH AUGUST, 2018. / D ESAI S MURTHY / ITA NOS. 385 & 386/BANG/2018 PAGE 6 OF 6 COPY TO: 1. THE APP ELL ANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.