M/s Norati Devi Charitable Trust, Chandigarh V. CIT I, Chandigarh

ITA 414/CHANDI/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80899 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-09-2014
• Assessment Year: misc
• Appeal Filed On: 15-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARI
• Keywords: Charitable institution; Opportunity of being heard; Reasonable cause
• Section: 12A; 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI T.R.SOOD ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 414/CHD/2013 (UNDER SECTION 12AA) M/S NORATI DEVI CHARITABLE TRUST, VS THE COM MISSIONER OF INCOME TAX, KIRAN CINEMA, CHANDIGARH. SECTOR 22, CHANDIGARH. PAN : AAATN3364J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHWANI KUMAR RESPONDENT BY : SMT. JYOTI KUMARI DATE OF HEARING : 09.09.2014 DATE OF PRONOUNCEMENT : 17.09.2014 O R D E R PER SUSHMA CHOWLA, JM THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER OF THE COMMISSIONER OF INCOME TAX-I, CHANDIGARH DAT ED 07.03.2013 AGAINST THE ORDER PASSED UNDER SECTION 12AA(3) OF T HE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT'). 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND OF APPEAL : THAT THE ORDER DATED 07-03-2013 PASSED U/S 12AA(3) OF THE INCOME-TAX ACT, 1961 BY THE LEARNED COMMISSIONER OF INCOME-TAX -L, CHANDIGARH IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED IN CANCELLING THE REGISTRATION OF THE APPELLANT TRU ST GRANTED TO IT U/S 12A OF THE INCOME- TAX ACT, 1961 BY THE COMMISSIONE R OF INCOME-TAX, PATIALA VIDE ORDER DATED 02-12-1980 ON A PROPOSAL S UBMITTED BY THE ASSISTANT COMMISSION OF INCOME TAX, CIRCLE 3(1), CH ANDIGARH ON THE GROUND THAT THE ACTIVITIES OF THE TRUST ARE NOT GEN UINE AND ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH ITS OBJECTS IN TERMS OF SECTION 12AA(3) OF THE INCOME TAX ACT, 1961. 2 3. THE ISSUE RAISED IN THE PRESENT APPEAL IS AGAINS T ORDER OF COMMISSIONER OF INCOME TAX, PATIALA IN CANCELING TH E REGISTRATION GRANTED TO THE ASSESSEE UNDER SECTION 12AA OF THE A CT. 4. IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE T RUST WAS GRANTED REGISTRATION UNDER SECTION 12A OF THE ACT V IDE ORDER DATED 02.12.1980. THEREAFTER, THE ASSESSEE WAS SHOW CAUS ED AS TO WHY THE REGISTRATION GRANTED TO IT SHOULD NOT BE WITHDR AWN AS THE ASSESSEE, THOUGH HAD RECEIVED SUBSTANTIAL DONATIONS BUT MAJOR PART OF THE DONATIONS WAS UTILIZED FOR ADMINISTRATIVE EX PENSES AND NEGLIGIBLE AMOUNT WAS UTILIZED FOR CHARITABLE PURPO SE. AFTER CONSIDERING THE REPLY OF THE ASSESSEE AND THE RECEI PTS FOR PRECEDING THREE YEARS AND THEIR APPLICATION, THE CO MMISSIONER OF INCOME TAX WAS OF THE VIEW THAT FROM 38 PERCENTAGE OF EXPENSES ON MEDICINES TO THE TOTAL RECEIPTS IN ASSESSMENT YE AR 2009-10, THE EXPENDITURE HAD REDUCED TO 25.2% IN ASSESSMENT YEAR 2011-12. CONSEQUENTLY, THE COMMISSIONER OF INCOME TAX HELD T HAT THE ACTIVITIES CARRIED ON BY THE ASSESSEE WERE NOT GENU INE AND WERE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECT IVES OF THE ASSESSEE TRUST. THUS, THE REGISTRATION GRANTED UNDE R SECTION 12A OF THE ACT WAS CANCELLED BY THE COMMISSIONER OF INCOME TAX UNDER SECTION 12AA(3) OF THE ACT. THE ASSESSEE IS IN APP EAL AGAINST THE SAID ORDER OF WITHDRAWAL OF REGISTRATION UNDER SECT ION 12AA(3) OF THE ACT. 5. SHRI ASHWANI KUMAR APPEARED FOR THE ASSESSEE AND SMT. JYOTI KUMAR APPEARED FOR THE REVENUE AND PUT FORWAR D THEIR CONTENTIONS. 3 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE W AS CREATED BY TRUST DEED DATED 06.06.1980 AND ITS PRINCIPAL OBJEC T WAS TO BUILD A HOSPITAL OR A DISPENSARY OR TO CONTRIBUTE TOWARDS BUILDING OF A HOSPITAL OR DISPENSARY. THE ASSESSEE WAS RUNNING A MEDICAL DISPENSARY FOR PROVIDING AYURVEDIC TREATMENT AND WA S DISPENSING MEDICINES TO THE POOR. THE ASSESSEE WAS GRANTED REG ISTRATION UNDER SECTION 12A OF THE ACT BY THE COMMISSIONER OF INCOM E TAX, PATIALA VIDE ORDER DATED 02.12.1980 SUBJECT TO FULF ILLMENT OF THE CONDITIONS AS ENLISTED AT PAGE 1 AND 2 OF THE ORDER PASSED UNDER SECTION 12AA(3) OF THE ACT. THEREAFTER, THE ASSESS EE WAS REGISTERED UNDER SECTION 80G(5)(VI) OF THE ACT VIDE ORDER DATED 30.09.2009, COPY OF WHICH IS PLACED AT PAGE 2 OF TH E PAPER BOOK. THEREAFTER, THE COMMISSIONER OF INCOME TAX ISSUED A SHOW CAUSE NOTICE DATED 03.01.2013 TO THE ASSESSEE FOR CANCELL ATION OF REGISTRATION UNDER SECTION 12AA OF THE ACT, COPY OF WHICH IS PLACED AT PAGES 3 AND 4 OF THE PAPER BOOK. IN TURN , THE ASSESSEE SUBMITTED THE REPLY WHICH IS PLACED AT PAGES 5 TO 7 OF THE PAPER BOOK. THE ASSESSING OFFICER, I.E. ACIT, CIRCLE 3(1 ), CHANDIGARH SUBMITTED A PROPOSAL FOR CANCELLATION OF REGISTRATI ON UNDER SECTION 12A OF THE ACT VIDE LETTER DATED 19.12.2012 THROUGH THE JOINT COMMISSIONER OF INCOME TAX, RANGE III, CHANDIGARH V IDE HIS OFFICE LETTER DATED 24.12.2012. THE ALLEGATION OF THE ASSESSING OFFICER WAS THAT THE ASSESSEE HAD RECEIVED SUBSTANT IAL DONATIONS BUT MAJOR PART OF THE DONATIONS WERE UTILIZED FOR A DMINISTRATIVE EXPENSES AND NEGLIGIBLE AMOUNT WAS UTILIZED FOR CHA RITABLE PURPOSES. THE PLEA OF THE ASSESSEE BEFORE THE COMM ISSIONER OF INCOME TAX IN RESPONSE TO THE SHOW CAUSE NOTICE ISS UED BY THE COMMISSIONER OF INCOME TAX WAS THAT IT WAS RUNNING A MEDICAL 4 DISPENSARY FOR PROVIDING AYURVEDIC TREATMENT AND DI SPENSING MEDICINES TO THE POOR, WEAKER AND UNDER-PRIVILEGED SECTION, WITHOUT ANY DISTINCTION OF CASTE, COLOUR, CREED, RE LATION ETC. 7. THE COMMISSIONER OF INCOME TAX AT PAGE 4 HAS TAB ULATED THE RECEIPTS OF THE ASSESSEE AND THE EXPENDITURE INCURR ED ON MEDICINES AND OBSERVED THAT THERE WAS A DECLINE TREND IN CARR YING OUT THE REAL CHARITABLE OBJECTIVES OF DISPENSING MEDICINES TO THE PATIENTS. THE COMMISSIONER OF INCOME TAX WAS OF THE VIEW THAT THE ASSESSEE HAD NOT APPLIED ITS FUNDS WHOLLY AND EXCLU SIVELY FOR THE OBJECTS FOR WHICH IT WAS FORMED AND AS THE ASSESSIN G OFFICER HAD REPORTED THAT THE ASSESSEE TRUST HAD NOT CARRIED OU T ANY SUBSTANTIAL CHARITABLE ACTIVITIES BUT HAD INCURRED LARGE ADMINI STRATIVE EXPENDITURE, WHICH COULD NOT BE ATTRIBUTED TO CHARI TABLE ACTIVITIES CLAIMED TO HAVE BEEN UNDERTAKEN. THE COMMISSIONER OF INCOME TAX THUS, HELD THAT THE ACTIVITIES OF THE ASSESSEE TRUST WERE NOT GENUINE AND WERE NOT BEING CARRIED OUT IN ACCORDANC E WITH THE OBJECTS OF THE TRUST IN TERMS OF SECTION 12AA(3) OF THE ACT AND CONSEQUENTLY, REGISTRATION GRANTED UNDER SECTION 12 A OF THE ACT WAS CANCELLED. 8. THE PROVISIONS OF SECTION 12AA OF THE ACT PROVID E AS UNDER : 12AA. (1) THE PRINCIPAL COMMISSIONER OR COMMISSIONER, ON RECEIPT OF AN APPLICATION FOR REGISTRATION OF A TRUST OR INSTI TUTION MADE UNDER CLAUSE (A) [OR CLAUSE (AA) OF SUB-SECTION (1)] OF SHALL (A) CALL FOR SUCH DOCUMENTS OR INFORMATION FROM THE TRUST OR INSTITUTION AS HE THINKS NECESSARY IN ORDER TO SATISFY HIMSELF ABO UT THE GENUINENESS OF ACTIVITIES OF THE TRUST OR INSTITUTION AND MAY ALSO MAKE SUCH INQUIRIES AS HE MAY DEEM NECESSARY IN THIS BEHALF; AND (B) AFTER SATISFYING HIMSELF ABOUT THE OBJECTS OF T HE TRUST OR INSTITUTION AND THE GENUINENESS OF ITS ACTIVITIES, HE 5 (I) SHALL PASS AN ORDER IN WRITING REGISTERING THE TRUST OR INSTITUTION; (II) SHALL, IF HE IS NOT SO SATISFIED, PASS AN ORDE R IN WRITING REFUSING TO REGISTER THE TRUST OR INSTITUTION, AND A COPY OF SUCH ORDER SHALL BE SENT TO THE APPLI CANT : PROVIDED THAT NO ORDER UNDER SUB-CLAUSE (II) SHALL BE PASSE D UNLESS THE APPLICANT HAS BEEN GIVEN A REASONABLE OPPORTUNITY O F BEING HEARD. [(1A) ALL APPLICATIONS, PENDING BEFORE THE [ PRINCIPAL CHIEF COMMISSIONER OR ] CHIEF COMMISSIONER ON WHICH NO ORDER HAS BEEN PASSED UNDER CLAUSE (B) OF SUB-SECTION (1) BEFORE T HE 1ST DAY OF JUNE, 1999, SHALL STAND TRANSFERRED ON THAT DAY TO THE [ PRINCIPAL COMMISSIONER OR ] COMMISSIONER AND THE [ PRINCIPAL COMMISSIONER OR ] COMMISSIONER MAY PROCEED WITH SUCH APPLICATIONS UNDER THAT SUB-S ECTION FROM THE STAGE AT WHICH THEY WERE ON THAT DAY.] (2) EVERY ORDER GRANTING OR REFUSING REGISTRATION U NDER CLAUSE (B) OF SUB- SECTION (1) SHALL BE PASSED BEFORE THE EXPIRY OF SI X MONTHS FROM THE END OF THE MONTH IN WHICH THE APPLICATION WAS RECEIVED UNDER CLAUSE (A) [OR CLAUSE (AA) OF SUB-SECTION (1)] OF 12A. [(3) WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANT ED REGISTRATION UNDER CLAUSE (B) OF SUB-SECTION (1) [OR HAS OBTAINED REGI STRATION AT ANY TIME UNDER SECTION 12A [AS IT STOOD BEFORE ITS AMENDMENT BY THE FINANCE (NO. 2) ACT, 1996 (33 OF 1996)]] AND SUBSEQUENTLY THE [ PRINCIPAL COMMISSIONER OR ] COMMISSIONER IS SATISFIED THAT THE ACTIVITIES OF S UCH TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT BEI NG CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITU TION, AS THE CASE MAY BE, HE SHALL PASS AN ORDER IN WRITING CANCELLING TH E REGISTRATION OF SUCH TRUST OR INSTITUTION: PROVIDED THAT NO ORDER UNDER THIS SUB-SECTION SHALL BE PASS ED UNLESS SUCH TRUST OR INSTITUTION HAS BEEN GIVEN A REASONAB LE OPPORTUNITY OF BEING HEARD.] [ (4) WITHOUT PREJUDICE TO THE PROVISIONS OF SUB-SECT ION (3), WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANTED REGISTRATION UND ER CLAUSE (B) OF SUB- SECTION (1) OR HAS OBTAINED REGISTRATION AT ANY TIM E UNDER SECTION 12A [AS IT STOOD BEFORE ITS AMENDMENT BY THE FINANCE (N O. 2) ACT, 1996 (33 OF 1996)] AND SUBSEQUENTLY IT IS NOTICED THAT THE ACTI VITIES OF THE TRUST OR THE INSTITUTION ARE BEING CARRIED OUT IN A MANNER THAT THE PROVISIONS OF SECTIONS 11 AND 12 DO NOT APPLY TO EXCLUDE EITHER W HOLE OR ANY PART OF THE INCOME OF SUCH TRUST OR INSTITUTION DUE TO OPER ATION OF SUB-SECTION (1) OF SECTION 13, THEN, THE PRINCIPAL COMMISSIONER OR THE COMMISSIONER MAY BY AN ORDER IN WRITING CANCEL 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 TH ERE WAS A REASONABLE CAUSE FOR THE ACTIVITIES TO BE CARRIED OUT IN THE S AID MANNER. ] 6 9. THE COMMISSIONER IS EMPOWERED TO REGISTER A TRUS T OR INSTITUTION ON RECEIPT OF AN APPLICATION FOR REGIST RATION BY THE SAID TRUST OR INSTITUTION UNDER SUB-SECTION (1) TO SECTI ON 12AA OF THE ACT. UNDER SUB-SECTION (2) TO THE SAID SECTION, TH E ORDER GRANTING OR REVISING REGISTRATION IS TO BE PASSED BEFORE THE EXPIRY OF SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE APPLI CATION WAS RECEIVED UNDER SECTION 12A(1) OF THE ACT. FURTHER, UNDER SUB- SECTION 3 TO SECTION 12AA OF THE ACT, WHICH WAS INS ERTED BY THE FINANCE (NO. 2) ACT, 2004 W.E.F. 01.10.2004, IT HAS BEEN PROVIDED THAT WHERE THE TRUST OR INSTITUTION HAS BEEN GRANTE D REGISTRATION UNDER CLAUSE (B) OF SUB-SECTION 1 OR AS INSERTED BY THE FINANCE ACT, 2010, W.E.F. 01.06.2010 WHERE THE TRUST HAD OB TAINED REGISTRATION AT ANY TIME, UNDER SECTION 12A; AND SU BSEQUENTLY WHERE THE COMMISSIONER IS SATISFIED THAT THE ACTIVI TIES OF SUCH TRUST OR INSTITUTION ARE NOT GENUINE, OR ARE NOT BE ING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITU TION, THEN HE IS EMPOWERED TO PASS ORDER IN WRITING CANCELING THE RE GISTRATION OF SUCH TRUST OR INSTITUTION. 10. IN THE FACTS OF THE PRESENT CASE, ADMITTEDLY TH E ASSESSMENT TRUST WAS CARRYING ON THE CHARITABLE ACTIVITIES AS HAVE BEEN TABULATED BY THE COMMISSIONER OF INCOME TAX AT PAGE 4 OF THE ORDER OF COMMISSIONER OF INCOME TAX. THE ONLY ALLEG ATION OF THE COMMISSIONER OF INCOME TAX IS THAT THE SUCH ACTIVIT IES ARE ON A LESSER SCALE AND HAVE SHOWN A DECLINING TREND. BUT THERE IS NO FINDING OF THE COMMISSIONER OF INCOME TAX THAT SUCH CHARITABLE ACTIVITIES FOR WHICH THE TRUST WAS CREATED, WERE NO T BEING CARRIED ON BY THE ASSESSEE TRUST. IN THE ABOVESAID FACTS A ND CIRCUMSTANCES, WHERE THE ASSESSEE IS ENGAGED IN CAR RYING ON SAID 7 CHARITABLE ACTIVITIES AS ENVISAGED IN THE TRUST DEE D FORMULATED BY THE ASSESSEE, AND MERELY BECAUSE THE SAID ACTIVITI ES WERE ON A LOWER STAGE, DOES NOT ESTABLISH THAT THE ACTIVITIES OF THE TRUST WERE NOT GENUINE OR WERE NOT BEING CARRIED OUT IN ACCORD ANCE WITH THE OBJECTS OF THE TRUST. ACCORDINGLY, WE FIND NO MERI T IN THE ORDER OF THE COMMISSIONER OF INCOME TAX IN CANCELING THE REG ISTRATION UNDER SECTION 12AA(3) OF THE ACT AND WE REVERSE THE SAME. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE ALLOWE D. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH SEPTEMBER,2014. SD/- SD/- ( T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL ME MBER DATED: 17 TH SEPTEMBER,2014 POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGI STRAR/ITAT/CHD