M/s. Teachers Academy Education Trust, Bangalore V. The Commissioner Of Income Tax (Exemption), Bangalore

ITA 391/BANG/2020

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 9654 (ITAT-BANGALORE)
• Duration Of Justice: 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 02-12-2020
• Assessment Year: misc
• Appeal Filed On: 15-05-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRADIP KUMAR IT AT BENGALURU
• Assessee Lawyers: V SRINIVASAN
• Keywords: Unexplained investment; Charitable institution; Reasonable cause; TDS; Set aside
• Section: 40A(3); 143(3); 142(1); 133A; 12A; 12AA; 13; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B R BASKARAN , ACCOUNTANT MEMBER ITA NO. 391/BANG/2020 ASSESSMENT YEAR : N.A. TEACHERS ACADEMY EDUCATION TRUST, NO.198/1, HBR LAYOUT, 2 ND BLOCK, HENNUR MAIN ROAD, BANGALORE 560 043. PAN: AACTT 2744C VS. THE COMMISSIONER OF INCOME TAX (EXEMPTIONS), BENGALURU. APPELLANT RESPONDENT APPELLANT BY : SHRI V. SRINIVASAN, ADVOCATE RESPONDENT BY : SHRI PRADIP KUMAR, CIT(DR)(IT AT), BENGALURU. DATE OF HEARING : 02 . 1 2 .2020 DATE OF PRONOUNCEMENT : 04 . 0 1 .202 1 O R D E R PER N.V. VASUDEVAN, VICE PRESIDENT THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 16.3.2020 OF THE CIT(EXEMPTIONS), BANGALORE REJECTING THE APP LICATION SEEKING REGISTRATION U/S. 12AA OF THE INCOME-TAX ACT, 1961 [THE ACT]. 2. THE ASSESSEE IS A TRUST WHICH CAME INTO EXISTENC E UNDER THE DEED OF TRUST DATED 30.11.2012. THE DEED OF TRUST WAS A MENDED BY ANOTHER TRUST DEED DATED 1.9.2017. THE OBJECTS OF TRUST WE RE TO ESTABLISH EDUCATIONAL INSTITUTIONS FOR PROVIDING TRAINING IN PROFESSIONAL, TECHNICAL, INFORMATION TECHNOLOGY, MEDICAL AND GENERAL EDUCATI ON FROM NURSERY TO DEGREE CLASSES AND ALSO HIGHER EDUCATION. ITA NO.391/BANG/2020 PAGE 2 OF 11 3. ON 14.8.2017 THERE WAS A SURVEY CONDUCTED U/S. 1 33A OF THE INCOME-TAX ACT, 1961 IN THE PREMISES OF ASSESSEE. AT THE TIME OF SURVEY, IT WAS NOTICED THAT THE ASSESSEE HAD NOT OBTAINED REGI STRATION U/S. 12AA OF THE ACT AND HAD ALSO NOT FILED RETURNS OF INCOME FO R SEVERAL YEARS. THESE FINDINGS WERE COMMUNICATED BY THE DDIT(INV.) WHO CO NDUCTED THE SURVEY TO THE AO. 4. ON LEGAL ADVICE, THE ASSESSEE MADE AN APPLICATIO N FOR GRANT OF REGISTRATION U/S. 12A OF THE ACT. THE ASSESSEE ACC ORDINGLY FILED FORM 10A ON 28.9.2017 SEEKING REGISTRATION U/S. 12AA OF THE ACT. THE ASSESSEE ALSO FILED RETURNS OF INCOME FOR AYS 2016-17 AND 2017-18 . IN THE RETURN OF INCOME SO FILED, IN ANTICIPATION OF GRANT OF REGIST RATION U/S. 12AA OF THE ACT, THE ASSESSEE HAD ALSO CLAIMED EXEMPTION U/S. 11 IN RESPECT OF SURPLUS OF INCOME OVER EXPENDITURE FOR THE AFORESAID ASSESSMEN T YEARS. 5. BY AN ORDER DATED 27.3.2019 THE CIT(E) REJECTED THE APPLICATION FOR GRANT OF REGISTRATION. AGAINST SUCH ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE ITAT IN ITA NO.1253/BANG/2018 CHALLENGING THE R EFUSAL OF REGISTRATION. THE TRIBUNAL SET ASIDE THE ORDER OF CIT(E) AND REMA NDED THE PLEA OF GRANT OF REGISTRATION TO THE CIT(E) FOR CONSIDERATION AFR ESH. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL ARE AS FOLLOWS:- WE HAVE HEARD BOTH PARTIES AND PERUSED THE MATERIA L AVAILABLE ON RECORD. ALTHOUGH, THE ID CIT(E) HAS LISTED OUT V ARIOUS DESCRIPTION BROUGHT OUT DURING SURVEY PROCEEDINGS I N RESPECT OF OBJECTS AS WELL AS THE TRUST, BUT FAILED TO CARRY O UT NECESSARY ENQUIRIES TO ASCERTAIN CORRECT FACTS IN LIGHT OF FA CTS BROUGHT OUT BY SURVEY PROCEEDINGS, WHICH IS EVIDENT FROM THE FACT THAT THE CIT(E) HAS PASSED ORDER ON 27/3/2018 WITHOUT CONFRO NTING THE DISCREPANCIES CONTAINED IN SURVEY FOLDER TO THE ASS ESSEE. WE FURTHER NOTICED THAT EVEN THE ASSESSEE HAS FAILED T O ADDRESS THE ISSUES QUESTIONED BY THE CIT(E) VIDE ITS SHOW CAUSE LETTER DATED 6/1212017 WHICH IS EVIDENT FROM THE FACT THAT EVEN THOUGH THE CIT(E) HAS ASKED FOR VARIOUS PROOF INCLUDING BRIEF NOTE ON ITA NO.391/BANG/2020 PAGE 3 OF 11 CHARITABLE ACTIVITIES UNDER TAKEN BY THE ASSESSEE S INCE ITS INCEPTION NOTHING HAS BEEN FILED IN ORDER TO JUSTIF Y ITS CASE THAT ITS OBJECTS ARE CHARITABLE IN NATURE AND ITS ACTIVITIES ARE IN ACCORDANCE WITH ITS OBJECTS. THEREFORE, WE ARE OF THE CONSIDER ED VIEW THAT THE ISSUE NEEDS TO BE REEXAMINED BY THE ID CIT(E) AND H ENCE, WE SET ASIDE THE ISSUE TO THE FILE OF THE CIT(E) FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW WITH A REASONABLE OPPORTUNITY O F HARING TO THE ASSESSEE. 6. PURSUANT TO THE ORDER OF TRIBUNAL, THE CIT(E) EX AMINED THE PLEA OF ASSESSEE FOR GRANT OF REGISTRATION U/S.12AA OF THE ACT, IN THE LIGHT OF THE OBSERVATIONS OF THE TRIBUNAL REGARDING ENQUIRY ON F ACTS BROUGHT OUT IN THE SURVEY PROCEEDINGS AND PROOF AND EVIDENCE REGARDING ACTIVITIES CARRIED OUT BY THE ASSESSEE. IN THE SET ASIDE PROCEEDINGS BEFOR E THE CIT( E), THE ASSESSEE SUBMITTED THAT AS PER THE PROVISIONS OF SE CTION 12AA OF THE ACT, THE AUTHORITY GRANTING REGISTRATION U/S.12AA OF THE ACT, HAS TO SATISFY ITSELF ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUS T/INSTITUTION AND AS TO WHETHER THE OBJECTS OF THE TRUST ARE CHARITABLE IN NATURE. THE ASSESSEE SUBMITTED THAT ITS OBJECTS ARE TO PROVIDE EDUCATION WHICH WAS A CHARITABLE OBJECT WITHIN THE MEANING OF SECTION 2(15) OF THE A CT. THE ASSESSEE ALSO POINTED OUT THAT AS PER THE STATEMENT OF ACCOUNTS, RECEIPTS AND OUTGOINGS CLEARLY INDICATED THAT TRUST WAS CARRYING OUT THE O BJECTS OF RUNNING EDUCATIONAL INSTITUTION. THE ASSESSEE THUS POINTED OUT THAT IT HAS SATISFIED ALL THE CONDITIONS FOR GRANT OF REGISTRATION U/S. 1 2A OF THE ACT AND THEREFORE REGISTRATION SHOULD BE GRANTED. 7. WITH REGARD TO THE FINDINGS OF THE SURVEY PROCEE DINGS U/S. 133A OF THE ACT, THE ASSESSEE POINTED OUT THE FOLLOWING:- (A) IT WAS STATED IN THE SURVEY REPORT THAT THE ASS ESSEE HAS NOT REGISTERED U/S 12A OF THE ACT, BUT THE ASSESSEE HAS WRONGLY CLAIMED EXEMPTION OF INCOME U/S 11 OF THE ACT. ON T HIS OBSERVATION IN THE SURVEY REPORT, IT WAS SUBMITTED BY THE ASSESSEE THAT APPLICATION FOR GRANT OF REGISTRATION WAS MADE WHICH WAS PENDING. THE ASSESSEE POINTED OUT THAT THE RELEVAN T PROVISIONS OF ITA NO.391/BANG/2020 PAGE 4 OF 11 SEC.12A OF THE ACT STIPULATES THAT EVEN IN RESPECT OF ASSESSMENTS FOR WHICH RETURN OF INCOME FILED ARE PENDING AS ON DATE OF FILING OF APPLICATION FOR REGISTRATION, EVEN IN RESPECT OF THOSE AYS, THE ASSESSEE CAN CLAIM EXEMPTION U/S 11. THE ASSESSEE S UBMITTED THAT THE ASSESSEE WAS CONSTITUTED BY A DEED DATED 1 3.11.2012 WITH CHARITABLE OBJECTS. THE ASSESSEE THUS CLAIMED THAT THE ABOVE REMARKS IN THE SURVEY REPORT HAVE NOTHING TO DO WIT H OR IN ANY WAY A HINDRANCE TO GRANT OF REGISTRATION U/S. 12A O F THE ACT. (B) WITH REGARD TO THE SURVEY FINDING THAT THE APPL ICANT TRUST HAS NOT MAINTAINED PROPER BOOKS OF ACCOUNTS, THE AS SESSEE SUBMITTED THAT ALL BOOKS OF A/C ARE MAINTAINED AND HAVE ALSO BEEN FILED. IN FACT FINAL STATEMENT OF ACCOUNT HAVE ALSO BEEN FILED AS NOTED IN THE ORDER OF CIT(E). THE ASSESSEE SUBMITTE D THAT THE NON-MAINTENANCE OF BOOKS OF ACCOUNTS WAS ALSO AN IR RELEVANT CONSIDERATION AT THE STAGE OF GRANT OF REGISTRATION . (C) WITH REGARD TO THE ALLEGATION IN THE SURVEY REP ORT THAT THE ASSESSEE TRUST WAS FOUND COLLECTING HUGE CASH AS FE E FROM STUDENTS, THE ASSESSEE SUBMITTED THAT STUDENTS PAID FEES BY CASH AND HENCE CASH RECEIPTS WERE GIVEN. THE ASSESSEE SU BMITTED THAT THIS WAS ALSO AN IRRELEVANT CONSIDERATION AT THE ST AGE OF GRANT OF REGISTRATION. (D) WITH REGARD TO THE ALLEGATION IN THE SURVEY REP ORT THAT APPLICATION OF INCOME WAS ALSO CARRIED ON BY PAYMEN TS OF CASH, THE ASSESSEE SUBMITTED THAT THERE IS NO PROHIBITION FOR CASH PAYMENTS AND THAT SECTION 40A(3) DOES NOT APPLY TO CHARITABLE TRUSTS. (E) WITH REGARD TO THE ALLEGATION IN THE SURVEY REP ORT THAT THE APPLICANT TRUST ALSO FAILED TO DEDUCT TDS FROM THE APPROPRIATE EXPENDITURE DEBITED IN THE PROFIT AND LOSS ACCOUNT IN THE REFERRED AYS, THE ASSESSEE SUBMITTED THAT THE TDS FAILURE IS ALSO DUE TO IGNORANCE AS TO THE TDS PROVISIONS. SINCE THE ASSE SSEE WAS NOT ASSESSED TO TAX AND WAS UNDER THE IMPRESSION THAT I T IS NOT LIABLE TO INCOME TAX ASSESSMENT. ALL THE PARTIES (RECIPIEN TS) HAVE FILED THEIR RETURN OF INCOME AND PAID THE TAXES. AT BEST INTEREST U/S SEC 201(1A) IS ATTRACTED. THIS IS ALSO AN IRRELEVANT CO NSIDERATION AT THE STAGE OF GRANT OF REGISTRATION. ITA NO.391/BANG/2020 PAGE 5 OF 11 (F) WITH REGARD TO THE ALLEGATION IN THE SURVEY REP ORT THAT THE CHAIRMAN OF THE EDUCATIONAL TRUST WHO IS A NON FILE R, WAS ALSO RUNNING A BAR AND WINE SHOP ROUTED THE FUNDS THROUG H THE APPLICANT TRUST, THE ASSESSEE SUBMITTED THAT THE CH AIRMAN AND THE TRUST ARE TWO SEPARATE ASSESSABLE ENTITIES AND THAT ANY IRREGULARITY ALLEGED CAN BE CONSIDERED IN THE CASE OF CHAIRMAN A ND THIS IS ALSO AN IRRELEVANT CONSIDERATION AT THE STAGE OF GRANT O F REGISTRATION. (G) WITH REGARD TO THE ALLEGATION IN THE SURVEY REP ORT THAT THE TRUSTEE'S FAILED TO OFFER THE EXPLANATION ON THE SO URCE OF INVESTMENT MADE IN THE TRUST, THE ASSESSEE SUBMITTE D THAT ALL FUNDS ARE EITHER FROM TRUSTEES OR STUDENTS AND THE AUTHOR ITY DOES NOT EVEN STATE OR POINT OUT SINGLE INSTANCE OF FAILURE TO EXPLAIN THE SOURCES. THIS IS ALSO IRRELEVANT CONSIDERATION AT T HE STAGE OF GRANT OF REGISTRATION. (H) WITH REGARD TO THE ALLEGATION IN THE SURVEY REP ORT THAT SINCE THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/ S 11 OF THE I.T. ACT FOR THE PRECEDING YEARS THE EXCESS OF INCOME OVER EXPEN DITURE IN THOSE YEARS ALSO NEEDS TO TAXED, THE ASSESSEE SUBMI TTED THAT AS PER THE PROVISIONS OF LAW IF THE TRUST IS GRANTED REGIS TRATION U/S 12A EVEN THE PENDING ASSESSMENTS OF EARLIER YEARS ALSO ENJOY THE EXEMPTION. HENCE THE INCOMES OF THE EARLIER YEARS A LSO ARE EXEMPT. THIS IS ALSO AN IRRELEVANT CONSIDERATION AT THE STAGE OF GRANT OF REGISTRATION. (I) WITH REGARD TO THE ALLEGATION IN THE SURVEY REP ORT THAT HAD THERE BEEN NO SURVEY THE TRUST MAY NOT EVEN FILE TH E RETURN OF INCOME, THE ASSESSEE POINTED OUT THAT THE ASSESSEE HAS MAINTAINED ALL BOOKS AND THE REASON FOR NON FILING OF R.I WAS DUE TO THE FACT THAT THE ASSESSEE WAS UNDER THE BONAFIDE IMPRESSION THAT TRUST BEING A EDUCATIONAL INSTITUTE IS NOT LIABLE TO TAX AND NOT LIABLE TO FILE RETURN OF INCOME. THE NON FILLING OF R /I IS N OT ON ACCOUNT OF ANY INTENTION THAT THE R/I AND OTHER LEGAL COMPLIAN CES TO BE CARRIED OUT AFTER SURVEY. THIS IS ALSO AN IRRELEVAN T GROUND FOR IN REGARD TO GRANT OF REGISTRATION U/S 12A. (J) WITH REGARD TO THE ALLEGATION IN THE SURVEY REP ORT THAT THERE CAN BE NO SUCH REFUNDABLE CONTRIBUTIONS UNDER THE P ROVISIONS OF THE IT ACT AND THE CONCLUSION THAT THE SAID ACTION INDICATES THAT THE TRUSTEES WHO ARE NON FILERS USED THE TRUST TO D IVERT THEIR PERSONAL FUNDS THROUGH THE TRUST, THE ASSESSEE POIN TED OUT THAT ITA NO.391/BANG/2020 PAGE 6 OF 11 THERE ARE LOANS GIVEN BY THE TRUSTEES. THERE IS NOT HING WRONG IN LAW IN TRUSTEES GIVING LOANS TO THE TRUST TO HELP O R ASSIST THE TRUST AS LONG AS SEC 13 IS NOT FRINGED. THERE IS NO ALLEG ATION OF ANY INFRINGEMENT U/S 13 BY THE LEARNED CIT(E). NONE OF THE ABOVE FACTS CAN LEAD TO A CONCLUSION THAT THE TRUST IS NO T GENUINELY ESTABLISHED TO CARRY OUT CHARITABLE ACTIVITY. 8. THE ASSESSEE PLACED RELIANCE ON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. M/S. GARDEN CITY E DUCATIONAL TRUST, 330 ITR 480 (KARN.). IN THE AFORESAID DECISION, THE ASSESSEE-TRUST HAD FILED AN APPLICATION FOR GRANT OF REGISTRATION UNDER SECTION 12A. THE APPLICATION WAS REJECTED BY THE COMMISSIONER ON THE FOLLOWING GROUN DS (I) THAT AMONGST ITS OBJECT THE TRUST ALSO HAD ACTIVITIES WHICH WERE COM MERCIAL IN NATURE SUCH AS STARTING OF INDUSTRIES IN RURAL AREAS; (II) THAT TH E TRUST ALSO HAD THE OBJECT OF CARRYING ON BUSINESS IN IMPORT AND EXPORT; (III) TH E TRUST DEED PERMITTED THE TRUSTEES TO DRAW REMUNERATION FOR SERVICES RENDERED AND THE TRUST WAS ALSO CHARGING FEE OR COLLECTING FEE BOTH AS TUITION FEE AND OTHERWISE FROM THE STUDENTS WHO WERE BEING ADMITTED TO THE EDUCATIONAL INSTITUTIONS RUN BY THE TRUST. THE TRIBUNAL NOTICED THAT THE ASSESSEE-TRUST HAD EDUCATION AS ONE OF ITS OBJECTS AND IN FACT IT WAS CARRYING ON THE ACTI VITY OF IMPARTING EDUCATION AND RUNNING AN EDUCATIONAL INSTITUTION. IT HELD TH AT THE ASSESSEE-TRUST WAS ENTITLED TO REGISTRATION. ON APPEAL TO THE HIGH CO URT HELD, DISMISSING THE APPEAL, THAT SO LONG AS THE TRUST HAD EDUCATION AS ONE OF ITS OBJECTS WHICH IS ONE OF THE ENUMERATED HEADS WHICH QUALIFY AND CO ME WITHIN THE SCOPE OF CHARITABLE PURPOSE AS ENUMERATED IN SUB-SECTION (15 ) OF SECTION 2, IT HAD TO BE ACCEPTED THAT THE TRUST WAS HAVING A CHARITABLE PURPOSE AS ITS OBJECT AND COULD QUALIFY FOR CLAIMING EXEMPTIONS IN TERMS OF S ECTION 11 AND 12 SUBJECT TO THE TRUST FULFILLING THE CONDITIONS ENUMERATED T HEREIN. HENCE GRANT OF REGISTRATION SO LONG AS THE PROCEDURAL REQUIREMENTS WERE COMPLIED WITH WAS JUSTIFIED. ITA NO.391/BANG/2020 PAGE 7 OF 11 9. THE CIT(E) EXAMINED THE CLAIM OF ASSESSEE AND CA ME TO THE FOLLOWING CONCLUSIONS:- (1) HE HELD THAT THE DECISION OF THE KARNATAKA HI GH COURT IN GARDEN CITY EDUCATIONAL TRUST (SUPRA) WILL NOT BE OF ANY U SE BECAUSE SUB-SECTION (4) HAS BEEN INSERTED TO SECTION 12AA O F THE ACT BY THE FINANCE ACT, 2014 W.E.F. 1.10.2014 AND IN TERMS OF THE AFORESAID PROVISION, THE CIT(E) HAS POWERS TO EXAMI NE WHETHER THE ACTIVITIES OF THE TRUST ARE NOT BEING CARRIED O UT IN A MANNER THAT THE PROVISIONS OF SEC.11 AND 12 DO NOT APPLY O R THERE IS VIOLATION OF PROVISIONS OF SEC.13(1) OF THE ACT. T HE RELEVANT PROVISIONS OF SECTION 12AA(4) READS AS FOLLOWS:- (4) WITHOUT PREJUDICE TO THE PROVISIONS OF SUB-SEC TION (3), WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANTED RE GISTRATION UNDER CLAUSE (B) OF SUB-SECTION (1) OR HAS OBTAINED REGISTRATION AT ANY TIME UNDER SECTION 12A [AS IT S TOOD BEFORE ITS AMENDMENT BY THE FINANCE (NO. 2) ACT, 19 96 (33 OF 1996)] AND SUBSEQUENTLY IT IS NOTICED THAT T HE ACTIVITIES OF THE TRUST OR THE INSTITUTION ARE BEIN G CARRIED OUT IN A MANNER THAT THE PROVISIONS OF SECTIONS 11 AND 12 DO NOT APPLY TO EXCLUDE EITHER WHOLE OR ANY PART OF TH E INCOME OF SUCH TRUST OR INSTITUTION DUE TO OPERATIO N OF SUB- SECTION (1) OF SECTION 13, THEN, THE PRINCIPAL COMM ISSIONER OR THE COMMISSIONER MAY BY AN ORDER IN WRITING CANC EL THE REGISTRATION OF SUCH TRUST OR INSTITUTION: PROVIDED THAT THE REGISTRATION SHALL NOT BE CANCELLED UNDER THIS SUB-SECTION, IF THE TRUST OR INSTITUTION PROVES THAT THERE WAS A REASONABLE CAUSE FOR THE ACTIVITIES TO BE CARRIED OUT IN THE SAID MANNER. THE CIT(E) THEREAFTER WENT ON TO HOLD THAT IF TH ERE A VIOLATION OF THE PROVISIONS OF SECTION 13(1) OF THE ACT, THEN TH AT WILL AFFORD A GOOD GROUND FOR REFUSAL TO GRANT REGISTRATION. ITA NO.391/BANG/2020 PAGE 8 OF 11 (2) THE CIT(E) THEREAFTER WENT ON TO HOLD THAT THE ASSESSEE HAS NOT REPLIED TO THE SHOW CAUSE NOTICE ISSUED BY THE ERST WHILE CIT(E) DATED 6.12.2017. AS WE HAVE ALREADY SEEN, THIS SHO W CAUSE NOTICE WAS ISSUED IN PROCEEDINGS WHICH WERE ULTIMAT ELY SET ASIDE BY THE TRIBUNAL. THE ASSESSEE HAS IN FACT SEN T REPLY DATED 14.12.2017 TO THIS NOTICE AND COPY OF THE SAME IS P LACED AT PAGES 52 & 53 OF ASSESSEES PAPER BOOK. (3) THE CIT(E) OBSERVED REGARDING ACTIVITIES OF TH E TRUST AS FOLLOWS:- 8. ON THE CONTRARY, THE ASSESSMENT ORDERS PASSED I N THE CASE OF THE ASSESSEE FOR THE AY 2016-17 & 2017-18 O N 30.12.2018 & 27.12.2019 RESPECTIVELY CLEARLY PORTRA Y THAT THE ACTIVITIES OF THE TRUST DO NOT CONFORM TO THE O BJECTS OF THE TRUST. IN THE ORDER OF ASSESSMENT U/S. 144. FOR THE AY 2016-17, AN ADDITION OF RS.2,17,02,742 HAS BEEN MAD E U/S. 69 BEING UNEXPLAINED INVESTMENT. SIMILARLY, IN THE ORDER U/S. 143(3) PASSED FOR AY 2017-18, THERE IS A CORRESPONDING UNEXPLAINED INVESTMENT ADDED TO THE T OTAL INCOME U/S 69 OF RS.2,30,94,440/-. THE ASSESSEE COU LD NOT PROVIDE ANY SATISFACTORY EXPLANATION WITH REGAR D TO ITS SOURCES AND INTRIGUINGLY THERE HAD BEEN NO COMPLIAN CE TO THE REPEATED NOTICES U/S. 142(1) ISSUED SEEKING CLARIFICATION ON THE CORRECTNESS OF INCOME RETURNED FOR THESE TWO ASSESSMENT YEARS. (4) THE CIT(E) THEREAFTER OBSERVED THAT THE ASSESS EE DID NOT ADHERE TO THE DIRECTIONS OF THE TRIBUNAL IN GIVING NECESSA RY CLARIFICATIONS. HE ALSO HELD THAT THE ASSESSEE FAIL ED TO PROVE THAT ITS ACTIVITIES ARE GENUINE AND THUS ITS ACTIVITIES ARE CARRIED OUT IN A MANNER APPLYING THE OBJECTS OF THE TRUST. FOR AL L THE ABOVE REASONS, THE CIT(E) REJECTED THE APPLICATION OF ASS ESSEE FOR GRANT OF REGISTRATION U/S. 12AA OF THE ACT. ITA NO.391/BANG/2020 PAGE 9 OF 11 10. AGGRIEVED BY THE ORDER OF THE CIT(E), THE ASSES SEE IS IN APPEAL BEFORE THE TRIBUNAL. WE HAVE HEARD THE RIVAL SUBMI SSIONS. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE RELIANCE BY THE LD. CIT(E) IN THE IMPUGNED ORDER ON THE INSERTION OF SECTION 12AA(4) OF THE ACT IS COMPLETELY MISPLACED BECAUSE THE PROVISIONS SO INSERTED ALSO T ALKS ABOUT THE APPLICATION OF SECTION 13(1) OF THE ACT. HE POINTE D OUT THAT IN THE IMPUGNED ORDER NO INSTANCE OF VIOLATION OF SECTION 13(1) OF THE ACT HAS BEEN POINTED OUT. 11. HIS NEXT SUBMISSION WAS THAT THE PROVISIONS OF SECTION 12AA(4) ARE NOT APPLICABLE TO A CASE OF GRANT OF REGISTRATION A ND ARE APPLICABLE ONLY TO CASES WHERE THE REGISTRATION ALREADY GRANTED IS SOU GHT TO BE CANCELLED. IT WAS SUBMITTED THAT THE CIT(E)S RELIANCE ON SECTION 12AA(4) OF THE ACT IS COMPLETELY MISPLACED. 12. HE NEXT POINTED OUT THAT IN REPLY TO THE SHOW C AUSE NOTICE WITH REGARD TO THE FINDINGS OF SURVEY, THE ASSESSEE HAS GIVEN CLEAR EXPLANATION AND THE OBSERVATIONS OF THE CIT(E) WITH REGARD TO T HE LACK OF PROPER REPLY ON THE FINDINGS OF THE SURVEY ARE ILL-FOUNDED. THE LD. COUNSEL FOR THE ASSESSEE ALSO BROUGHT TO OUR NOTICE THAT THE FINDIN GS IN PARA 8 OF THE IMPUGNED ORDER ARE AGAIN INCORRECT. THE ADDITION M ADE BY THE AO IN AY 2016-17 IS ALSO IN APPEAL BEFORE THE CIT(APPEALS). IT WAS ALSO SUBMITTED THAT THE ADDITION MADE U/S. 69 OF THE ACT WILL NOT BE A GROUND NOT TO GRANT REGISTRATION TO AN ASSESSEE. 13. THE LD. DR RELIED ON THE ORDER OF CIT(E). 14. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE RI VAL SUBMISSIONS. THE APPLICATION IN THE PRESENT CASE HAS BEEN MADE BY TH E ASSESSEE FOR GRANT OF REGISTRATION U/S. 12A OF THE ACT. THE FACTS THAT N EED TO BE CONSIDERED FOR GRANT OF REGISTRATION U/S. 12A OF THE ACT HAS BEEN LAID DOWN IN SECTION 12AA ITA NO.391/BANG/2020 PAGE 10 OF 11 OF THE ACT. A READING OF THE PROVISIONS OF SECTION 12AA(1) OF THE ACT SHOWS THAT BEFORE THE GRANT OF REGISTRATION, THE CIT(E) H AS TO SATISFY HIMSELF ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUST AND ALSO ABOUT THE OBJECTS OF THE TRUST, WHETHER IT IS CHARITABLE IN NATURE OR NO T. IN THE PRESENT CASE, THERE CAN BE NO DISPUTE REGARDING THE CHARITABLE NATURE O F THE OBJECTS OF TRUST WHICH IS PROVIDING FOR EDUCATION. AS FAR AS GENUIN ENESS OF THE ACTIVITIES OF THE ASSESSEE IS CONCERNED, THE ONLY OBJECTION OF TH E CIT(E) IS CONTAINED IN PARA 8 OF HIS ORDER IN WHICH THERE IS A REFERENCE T O THE ORDERS OF ASSESSMENT FOR AYS 2016-17 AND 2017-18. THE ADDITI ON MADE U/S. 69 OF THE ACT IS ALREADY SUBJECT MATTER OF CHALLENGE IN T HE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY. IT IS NOT THE CASE OF T HE ASSESSEE THAT THE ADDITION U/S. 69 OF THE ACT HAS ANYTHING TO DO WITH THE ACTI VITIES OF THE TRUST. IN THESE CIRCUMSTANCES, THERE APPEARS TO BE NO BASIS FOR THE CIT(E) IN REFUSING GRANT OF REGISTRATION TO THE ASSESSEE. THE HONBLE KARNA TAKA HIGH COURT IN THE CASE OF GARDEN CITY EDUCATIONAL TRUST (SUPRA) HAS TAKEN A VIEW THAT GRANT OF REGISTRATION WILL NOT BY ITSELF CONFER BENEFITS OF EXEMPTION U/S. 11 AND 12 OF THE ACT TO A TRUST AND THAT SO LONG AS THE ACTIV ITIES ARE CHARITABLE IN NATURE AND IF THERE IS NO EVIDENCE TO SHOW THAT THE ACTIVI TIES OF THE TRUST ARE NOT BEING CARRIED OUT GENUINELY, THEN THE REGISTRATION HAS TO BE GRANTED. THE CIT(E) SEEMS TO HAVE TAKEN RECOURSE TO THE PROVISIO NS OF SECTION 12AA(4) OF THE ACT WHICH WAS INSERTED BY THE FINANCE ACT OF 2014 W.E.F. 01.10.2014. WE FIND THAT THOSE PROVISIONS ARE APPLICABLE ONLY W HEN THE CIT(E) SEEKS TO CANCEL THE REGISTRATION ALREADY GRANTED TO A TRUST. THOSE PROVISIONS CANNOT BE MADE APPLICABLE FOR GRANT OF REGISTRATION U/S. 1 2AA OF THE ACT. WE ALSO FIND THAT NONE OF THE FINDINGS GIVEN IN THE SURVEY REPORT CAN JUSTIFY THE REFUSAL OF GRANT OF REGISTRATION TO THE ASSESSEE AN D THE REASONS GIVEN BY THE ASSESSEE IN THIS REGARD ARE FOUND TO BE ACCEPTABLE. THE CIT(E) HAS FALLEN INTO AN ERROR IN CONCLUDING THAT THE ASSESSEE DID N OT ADHERE TO THE DIRECTIONS OF THE TRIBUNAL AND PROVIDE THE NECESSAR Y CLARIFICATION. WE HAVE ALREADY EXTRACTED THE FINDINGS OF THE SURVEY TEAM A ND THE ASSESSEES ITA NO.391/BANG/2020 PAGE 11 OF 11 EXPLANATION ON EACH OF THOSE FINDINGS. BESIDES THE ABOVE, THE ASSESSEE HAS ALSO GIVEN CLARIFICATION ON OTHER ASPECTS, WHIC H WILL HAVE A BEARING ON THE GRANT OF REGISTRATION U/S. 12A OF THE ACT. IN THE IMPUGNED ORDER, THE CIT(E) HAS NEITHER DEALT WITH THOSE CONTENTIONS NOR HAS HE FOUND THOSE CONTENTIONS TO BE NOT CORRECT. IN THESE CIRCUMSTA NCES, WE ARE OF THE VIEW THAT THE ASSESSEE SHOULD BE GIVEN THE BENEFIT OF RE GISTRATION U/S.12AA OF THE ACT. WE HOLD AND DIRECT ACCORDINGLY. 15. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS AL LOWED. PRONOUNCED IN THE OPEN COURT ON THIS 4 TH DAY OF JANUARY, 2021. SD/- SD/- ( B R BASKARAN ) ( N V VASUDEVAN ) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE, DATED, THE 04 TH JANUARY, 2021. / DESAI S MURTHY / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.