Anil Salgaoncar Foundation, Panaji V. Commissioner of Income Tax (Exemption), Bangalore

ITA 421/PAN/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7717 (ITAT-PANAJI)
• Duration Of Justice: 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2018-2019
• Appeal Filed On: 26-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y V RAVIRAJ
• Assessee Lawyers: P J PARDIWALLA
• Keywords: Opportunity of being heard; Principle of natural justice
• Section: 80G; 12A; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI SHAMIM YAHYA , A M AND SHRI RAM LAL NEGI , J M ITA NO S . 421 & 422 / PAN . / 201 8 (ASSESSMENT YEAR: 201 8 - 1 9 ) ANIL SALGAOCAR FOUNDATION SALGAOCAR BHAVAN, ALTINHO, PANAJI, GOA - 403 001 VS. CIT(EXEPTIONS) 6 TH FLOOR, UNIT BLD. ANNEX, P. KALINGA RAO ROAD, BANGALORE - 560 027 PAN/GIR NO. AAFTA 5327 B ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : SHRI P. J. PARDIWALLA RESPONDENT BY : SHRI Y. V. RAVIRAJ DATE OF HEARING : 15.11.2018 DATE OF PRONOUNCEMENT : 14.01 .2019 O R D E R PER SHAMIM YAHYA, A. M.: THE S E ARE APPEAL S BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX ( EXEMPTIONS), BANGALORE , PERTAINING TO ASSESSMENT YEAR 2018 - 19 AGAINST THE REJECTION OF APPLICATION FOR REGISTRATION U/S. 12A AND 80G OF THE INCOME TAX ACT, 1961 (THE ACT FOR SHORT) RESPECTIVELY. 2. THE GROUND S RAISED IN ITA NO. 421 /PAN./2017 READS AS UNDER: 1. THE ORDER PASSED U/S. 80G(5)(VI) OF THE INCOME TAX ACT, 1961 (ITA) BY THE LD. CIT(EXEMPTIONS) REJECTING APPELLANT'S APPLICATION SEEKING RECOGNITION U/S. 80G OF THE ITA BASED ON REASONS STATED IN REJECTION OF APPLICATION FOR REGISTRATION U/S. 12A OF THE ITA, IS BAD IN LAW AS THE SAME IS PASSED WITHOUT GIVING AN Y SHOW CAUSE/OPPORTUNITY TO THE APPELLANT TO EXPLAIN FACTS OF THE CASE. 2. IN DOING SO, THE LD. CIT(EXEMPTIONS) ERRED IN HOLDING (I) RS. 200,000 DONATION WAS NOT IN ACCORDANCE WITH THE OBJECTIVES/NOT CHARITABLE NATURE EVEN WHEN THE SAME WAS SPENT ON CONFERENCE FOR EDUCATING MEDICAL FRATERNITY WHICH WAS CHARITABLE IN NATURE AND AS PER OBJECTIVES, (II) INVESTMENT CLAUSE WAS NOT IN ORDER AS IT PERMITTED INVESTMENTS IN NAME OF TRUSTEES EVEN WHEN FULL DETAILS OF INVESTMENTS MADE WERE BEFORE HIM AND WHICH W ERE HELD IN THE NAME OF APPELLANT TRUST. (III) THE WINDING UP CLAUSE WAS NOT IN ORDER AS IT EMPOWERED THE TRUSTEES TO MISUSE FUNDS EVEN WHEN NO SUCH POWER WAS GIVEN IN TRUST DEED. 3. THE GROUNDS RAISED IN ITA NO. 422 /PAN./2017 READS AS UNDER: 1. THE O RDER PASSED U/S. 12AA OF THE INCOME TAX ACT, 1961 (ITA) BY THE LD. CIT(EXEMPTIONS) REJECTING APPELLANT'S APPLICATION SEEKING REGISTRATION U/S. 12A OF THE ITA IS BAD IN LAW AS THE SAME IS PASSED WITHOUT ACCORDING ANY SHOW CAUSE/OPPORTUNITY TO THE APPELLANT TO EXPLAIN FACTS OF THE CASE. 2 ITA NOS. 421 & 422/PAN./2018 2, IN DOING SO, THE LD. CIT (EXEMPTIONS) ERRED IN HOLDING (I) RS. 200,000 DONATION WAS NOT IN ACCORDANCE WITH THE OBJECTIVES/NOT CHARITABLE NATURE EVEN WHEN THE SAME WAS SPENT ON CONFERENCE FOR EDUCATING MEDICAL FRATERNITY WHICH WAS CHARITABLE IN NATURE AND AS PER OBJECTIVES. (II) INVESTMENT CLAUSE WAS NOT IN ORDER AS IT PERMITTED INVESTMENTS IN NAME OF TRUSTEES EVEN WHEN FULL DETAILS OF INVESTMENTS MADE WERE BEFORE HIM AND WHICH WERE HELD IN THE NAME OF APPELLANT TRUST. (III) THE WINDING UP CLAUSE WAS NOT IN ORDER AS IT EMPOWERED THE TRUSTEES TO MISUSE FUNDS EVEN WHEN NO SUCH POWER WAS GIVEN IN TRUST DEED. 4. IN THIS CASE, THE APPLICATION OF REGISTRATION U/S. 12A WAS REJECTED BY THE LD. CIT(A) BY OBSERVING AS UNDER: AS THERE WERE SOME DISCREPANCIES, A LETTER DATED 28 - 03 - 2018 WAS ISSUED, BY THIS OFFICE CALLING FOR CERTAIN DETAILS/CLARIFICATIONS SUCH AS: - 1. UP TO DATE DETAILS OF INVESTMENTS MADE IN MOVABLES & IMMOVABLE &LIST OF FDS HELD. 2. FURNISH CERTIFICATE OF NON - INFRINGEMENT OF SECTION 13(1) (C) SIGNED BY ALL THE TRUSTEES. 3. UP TO DATE LIST OF DONORS & SAMPLE COPIES OF RECEIPTS ISSUED WITH DATE, AMOUN T & MODE OF PAYMENT. 4. LIST OF FIXED DEPOAITS. 5. INCONSISTENCIES/DEFICIENCY OF TRUST DEED IN RESPECT OF (A) BENEFICIARY CLAUSE AND (B) AREA OF OPERATION OF TRUST'S ACTIVITIES. THE APPLICANT TRUST WAS REQUESTED TO COMPLY BY 21 - 08 - 2018. 2. IN R ESPONSE TO LETTER THE TRUST FILED DETAILS. THE DETAILS SUBMITTED HAVE BEEN VERIFIED. THE TRUST HAS ALSO FILED AMENDED TRUST DEED. THE MAIN OBJECTS OF THE TRUST IS SAID TO BE PROVIDING EDUCATION FACILITY, GRANTING SCHOLARSHIP FOR POOR AND DESERVING, DEVELOP ING SLUM, PROVIDING SANITATION AND SAFE DRINKING WATER AND PROMOTING SWATCH BHARATH. THE OBJECTS OF THE TRUST COMES UNDER THE LIMB OF RELIEF TO POOR AND AGPU. 3. ON VERIFICATION OF THE RETURN OF INCOME FILED FOR THE AY 2016 - 17 THE ASSESSEE HAS ACCUMULATED A AMOUNT OF RS.11556088/ - U/S. 11(2) OF THE IT ACT, 1961. IN ABSENCE OF REGISTRATION, THE APPLICANT TRUST HAS TAXABLE INCOME OF RS.11556088/ - . HENCE, THE TRUST HAS MISREPRESENTED FACT BEFORE THE DEPARTMENT AND FAILED TO HONOUR THE TAX LIABILITY IN THE PA ST WHICH IS EVIDENT FROM THE DOCUMENTS SUBMITTED. 4. THE APPLICATION OF INCOME IN PAST BY THE TRUST ON THE OBJECTIVE ARE CAREFULLY EXAMINED. THE APPLICATION ON NON OBJECTIVES ARE BEING NOTICED IN THE MANY CASES, FOR EXAMPLE IN THE F.Y, 2017 - 18 THE APPLICANT TRUST DONATED AN AMOUNT OF RS. 200000/ - TO THE IMA CONFERENCE WHICH NOTHING TO DO WITH THE OBJECTIVES NOT OF ANY CHARITABLE NATURE. 5. FURTHER, INVESTMENT CLAUSE OF THE TRUST DEED IS DEFECTIVE IN NATURE. IN PARA 6(I) IT IS SAID 'ALL THE MONIES W HICH SHALL NOT IMMEDIATELY BE REQUIRED FOR CURRENT NEEDS SHALL BE INVESTED BY THE TRUSTEES IN ELIGIBLE SECURITIES, MUTUAL FUNDS OR ANY OTHER INVESTMENTS, OR IN BANKS. SUCH INVESTMENT SHALL BE IN THE NAME OF TRUST OR 7N/5TEES'INVESTMENT IN THE NAME OF THE T RUST IS PERMISSIBLE WHEREAS INVESTMENTS IN THE NAME OF THE TRUSTEES NEED NOT BE PERMITTED. ATTENTION IS DRAWN IN REFERRED MOST OF THE RECEIPTS IN THE TRUST IS RECEIVED FROM THE GROUP COMPANIES OF THE TRUSTEES IN THE NATURE OF CSR FUNDS AND IF IT IS ALLOWED TO BE INVESTED IN THE NAME OF THE TRUSTEES IT IS IN VIOLATION OF THE PROVISIONS OF THE ACT AND ALSO IN THE INTEREST OF THE TRUST. FURTHER READING OF INVESTMENT CLAUSE IN PARA 6(III) STATES THAT 'THAT THE TRUSTEES SHALL RECEIVE AND HOLD THE 3 ITA NOS. 421 & 422/PAN./2018 INCOME OF THE T RUST ON BEHALF AND FOR THE BENEFIT OF THE BENEFICIARIES UND THE TRUST' RECEIVING AND HOLDING THE INCOME OF TRUST BY THE TRUSTEES ON BEHALF OF THE TRUST IS ALSO IN LINE WITH THE DISCUSSION REFERRED ABOVE WHICH IS NOT PERMISSIBLE. THE INCOME OF THE TRUST NEE D TO BE RECEIVED AND HELD IN THE NAME OF THE TRUST ONLY AND IT CANNOT BE IN THE NAME OF THE TRUSTEES. HENCE, THE INVESTMENT CLAUSE OF THE TRUST IS NOT IN ORDER. 6. FURTHER, THE WINDING UP CLAUSE IN PARA. 21 OF THE TRUST DEED STATES THAT 'THE TRUSTEES SHAL L BE INDEMNIFIED AGAINST ALL LOSSES AND LIABILITIES INCURRED BY THEM IN THE EXECUTION OF THE TRUST AND SHALL HAVE A LIEN OVER THE FUNDS AND PROPERTIES OF THE TRUST FOR SUCH INDEMNITY/' THE REFERRED C!AUS6 IS AGAINST THE INTEREST OF THE TRUST WHICH INDIRECT LY EMPOWERS FOR THE TRUSTEE FOR THE POSSIBLE MISUSE OF FUNDS. HENCE, WINDING UP CLAUSE IS NOT IN ORDER. 7. AT THE STAGE OF REGISTRATION U/S 12AA, THE COMMISSIONER IN RECEIPT OF AN APPLICATION FOR REGISTRATION OF A TRUST OR INSTITUTION HAS TO SA TISFY HIMSELF ABOUT THE OBJECTS OF THE TRUST OR INSTITUTION AND THE GENUINENESS OF ITS ACTIVITIES. IN THE ABSENCE OF RELEVANT DETAILS, IT IS NOT POSSIBLE, TO VERIFY THE GENUINENESS OF THE OBJECTS AND THE ACTIVITIES OF THE TRUST IN THIS CASE . 5. THEREAFTER , THE LD. CIT(A) REFERRED TO SOME C ASE LAW S . HE FURTHER OBSERVED THAT THE ASSESSEE WAS NOT INTERESTED IN PROCESSING THE APPLICATION. ACCORDINGLY, HE REJ ECTED THE APPLICATION. SINCE THE APPLICATION U/S.12A WAS REJECTED, THE LD. CIT(A) ALSO REJECTED THE APPL ICATION FOR REGISTRATION U/S.80 - G. 6. AGAINST THE ABOVE ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE LD. CIT HAS SUMMARILY REJECTED THE APPLICATIONS WITHOUT GIVING PROPER OPPORTUNITY OF BEING HEARD. HE SUBMITTED THAT THE NOTICE AS MENTIONED IN THE ORDER OF THE LD. CIT WAS NEVER SERVED UPON THE ASSESSEE. 8. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (LD. DR FOR SHORT) RELIED UPON THE ORDER OF THE LD. CIT. 9. UPON CAREFUL CONSIDERATION, WE NOTE THAT THE PRINCIPLE OF NATURAL JUSTICE HAVE N O T BEEN DULY FOLLOWED IN THIS CASE INASMUCH AS THE ASSESSEE HAS NOT BEEN GIVEN PROPER OPPORTUNITY OF BEING HEARD. IT IS SETTLED LAW THAT EVEN ADMINISTRATI VE ORDERS HAVE TO BE CONSISTENT WITH THE RULES OF NATURAL JUSTICE. IN THIS REGARD, WE PLACE RELIANCE UPON THE DECISION OF 4 ITA NOS. 421 & 422/PAN./2018 HONBLE APEX COURT IN THE CASE OF M/S SAHARA INDIA (FARMS) VS. CIT & ANR . 300 ITR 403 (SC) . ACCORDINGLY, WE REMIT THE ISSUE INVOLVED IN THESE APPEALS TO THE FILE OF THE LD. CIT. THE LD. CIT SHALL PASS A FRESH ORDER AFTER GIVING THE ASSESSEE PROPER OPPORTUNITY OF BEING HEARD. 10 . IN THE RESULT, T HE SE APPEALS FILED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. O RDER PRONOUNCED BY LISTING THE RESULT ON THE NOTICE BOARD OF THE BENCH UNDER RULE 34(4) OF THE APPELLATE TRIBUNAL RULES, 1963. SD/ - RAM LAL NEGI JUDICIAL MEMBER SD/ - SHAMIM YAHYA ACCOUNTANT MEMBER DATED : 1 4 . 0 1 . 2 0 1 9 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, PANJI CITY CONCERNED; (5) THE DR, ITAT, PANJI ; (6) GUARD FILE . BY ORDER ROSHANI , SR. PS ( SR. P.S. / P.S. ) ITAT