Iexcel Community Foundation , Pune V. The Commissioner of Income Tax (Exemption), Pune

ITA 506/PUN/2023

AI Insights

Iexcel Community Foundation, a company incorporated under section 8 of the Companies Act, 2013, sought registration under section 12AB of the Income-tax Act, 1961, to obtain tax exemptions for its charitable activities. Initially granted provisional registration, the foundation's application for final registration was rejected by the Commissioner of Income Tax (Exemption), Pune, due to insufficient evidence supporting the genuineness of its activities. The Tribunal dismissed the appeal, agreeing with the Commissioner that the foundation did not adequately demonstrate its compliance with the statutory requirements for registration.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 136196 (ITAT-PUNE)
• Duration Of Justice: 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 26-06-2023
• Assessment Year: misc
• Appeal Filed On: 27-04-2023
• Other Referred Cases: Chairman Mining Board Vs Ramjee, Biecco Lawrie Ltd v. State of West Bengal, Hindustan Ferodo Ltd. Vs CCE, Parimisetti Seetharamamma Vs CIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Principle of natural justice; Audi alteram partem
• Section: 13

Judgement Text

॥ आयकर अपीलीय न्यायाधिकरण, पुणे “ए” न्यायपीठ, पुणे में ॥ ITAT-Pune Page 1 of 14 IN THE INCOME TAX APPELLATE TRIBUNAL, PUNE “A” BENCH, PUNE BEFORE HON’BLE SHRI S S VISWANETHRA RAVI, JUDICIAL MEMBER AND SHRI G. D. PADMAHSHALI, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No. 506/PUN/2023 Iexcel Community Foundation, Row House, C 704, 5 Gardens Society, Rahatani, Aundh Camp S.O., Pune – 411 027 PAN: AAGCI4381R . . . . . . . अपीलार्थी / Appellant बनाम / V/s The Commissioner of Income Tax (Exemption), Pune . . . . . . . प्रत्यर्थी / Respondent द्वारा / Appearances Assessee by : Shri Kishore B. Phadke Revenue by : Shri Keyur Patel स ु नवाई की तारीख / Date of conclusive Hearing : 27/06/2023 घोषणा की तारीख / Date of Pronouncement : 07/07/2023 आदेश / ORDER PER G. D. PADMAHSHALI ; This appeal of the assessee is directed against the order of refusal to grant registration u/s 12AB of the Income-tax Act, 1961 [‘the Act’ hereinafter] passed by the learned Commissioner of Income Tax(Exemption), Pune [‘CIT(E)’ hereinafter] vide DIN & Order No. ITBA/EXM/F/EXM45/2022- 23/ 1050231926(1) dt. 28/02/2023. 2. We have heard the rival contentions of both the parties; and subject to the provisions of rule 18 of Income Tax Appellate Tribunal Rules, 1963 [‘ITAT- Rules’ hereinafter] perused the material placed on records, case laws relied upon by the appellant as well the respondent and duly considered the facts of Iexcel Community Foundation ITA No. 506/PUN/2023 ITAT-Pune Page 2 of 14 the case in the light of settled legal position, which are then forewarned to parties present for their rebuttal. 3. In the extant case we observed that, 3.1 The assessee is a company incorporated u/s 8 of Companies Act, 2013 on 03/12/2021. It is evident that, pursuant to its initial application for registration, the Revenue accorded a provisional registration through automatic route on 24/02/2022 u/s 12AB r.w.s. 12A(1)(ac)(vi) of the Act. The appellant in order to obtain final / regular registration has applied to respondent in Form No. 10AB vide its application No. CIT EXEMPTION. PUNE/2022- 23/12AA/11970 on 23/08/2022 u/s 12A(1)(ac)(iii) of the Act. 3.2 After careful perusal of aforestated application, in order to ascertain the overall nature of activities of the appellant company and to vouch genuineness thereof, and further to examine the compliance of any other applicable law for the time being in force, the Ld. CIT(E) put the appellant to a notice dt. 19/12/2022 and thereby called upon to upload certain documents vis-à-vis information which inter-alia included details including (i) date of commencement of activities, (ii) date of expiry of provisional registration (iii) details of any other law applicable for achievement of objective (iv) proof of compliance of requirement of such applicable law (v) proof of identity of main trustees / directors, (vi) year-wise list of donations received, (vii) list of donors, (viii) note on activities (ix) supporting credible evidences establishing the activities engaged into (x) details of business undertakings etc., Iexcel Community Foundation ITA No. 506/PUN/2023 ITAT-Pune Page 3 of 14 3.3 In response to aforestated notice, the appellant assessee made online submission on 30/12/2022. On a vigilant examination of such online submission, the Ld. CIT(E) accentuated certain key discrepancies therein, and accordingly these discrepancies were communicated to the appellant through service of show cause notice [‘SCN’ hereinafter] dt. 18/02/2023 for compliance. However these discrepancies remained to be complied effectually in terms of 12AB r.w.s. 12A(1)(ac)(vi) r.w.r. 17A of Income Tax Rules, 1962 [‘IT-Rules’ hereinafter]. At this juncture, it is apt to note these discrepancies from para 2.1 of the impugned order as; “(i) In your submission dated 30-12-2022 submitted that the copy of note on activities held and work done is enclosed herewith vide Annexure “H”. It is seen that the attachment given by you as annexure “H” is a Memorandum of Association (MoA) and not a note on activities. As per the provisions of Rule 17A(2)(k) of the Income Tax Rules, 1962 the application in Form No. 10AB shall be accompanies by note of activities giving details of activities actually carried out but you have failed to comply with those provisions. You ought to have been submit the details of actual activities carried out in the last 3 years. Further the supporting evidence of the activities is also not submitted. In the absence of any such tangible material in respect of details and proof of activities being carried out, it is not possible to ascertain as to whether the activities are charitable and in line with the objects of the trust / institution” (Emphasis supplied) Iexcel Community Foundation ITA No. 506/PUN/2023 ITAT-Pune Page 4 of 14 3.4 The appellant’s reply dt. 24/02/2023 to SCN did not inspire any confidence to the registering authority in the absence of any tangible and credible evidences and proof of activities. Consequently the exercise of ascertaining as to whether activities of the appellant are charitable or not failed, thus genuineness of activities. Resultantly, in the foregoing circumstances, the Ld. CIT(E) rejected the application and cancelled the provisional registration granted previously to the appellant on 24/02/2022. 3.5 Aggrieved appellant setup the present case alleging the action of learned registering tax authority on following grounds; 1. The Ld CIT(E) erred in rejecting application of the Appellant for registration of Trust filed u/s 12A(1)(ac)(iii) without providing sufficient opportunity of hearing and hence the order rejecting registration may set-aside and application for registration may be allowed. 2. The Ld CIT(E) erred in rejecting application of the Appellant for registration of Trust filed u/s 12A(1) (ac)(iii) without appreciating that there was no evidence on record to suggest that activities carried out by the Appellant were not charitable and hence the order rejecting registration may be set-aside providing sufficient opportunity of hearing an application for registration may be allowed. 3. The Ld CIT(E) erred in rejecting application of the Appellant for registration of Trust filed u/s 12A(1) (ac)(iii) without appreciating that the grounds for rejections are extraneous to grounds provided for rejection under Section 12AB and also do not result in concluding that the activities carried out by the appellant are not genuine and hence the Iexcel Community Foundation ITA No. 506/PUN/2023 ITAT-Pune Page 5 of 14 order rejecting registration may be set aside providing sufficient opportunity of hearing and application for registration may be allowed. 4. The appellant craves leave to add, amend, alter or delete any of the above grounds of appeal.” 4. Albeit, all the aforementioned grounds and all contentions of learned counsel for the appellant assessee company Mr Phadke [‘AR’ hereinafter] raised in support of foregoing three grounds are exclusively attributable to sole and substantive ground of rejection to grant registration, for the sake of completeness we shall proceed to adjudicate the issue ground-wise in succeeding paragraphs chronologically; Ground No. 1 4.1 The first ground alleges the violation of principle of natural justice for not allowing sufficient opportunity before rejecting appellant’s application. In this regard we note that, the appellant at the time of filing of application seeking regular registration was obligated to provide all such information and documents as enumerated u/r 17A(2) of IT-Rules. These key information vis- à-vis documents are pre-requisite and indispensable to examine the nature and genuineness of activities/objectives with which the appellant is established for and is or purports to engage into. Undisputedly in the present case, without fully accompanying such necessary, requisite and mandatory information vis- à-vis documents as required by rule 17A(2) of IT-Rules, the appellant company filed its application in Form No 10AB on 23/08/2022, which ispo- facto rendered application defective, thus deserved to be rejected in limine. Iexcel Community Foundation ITA No. 506/PUN/2023 ITAT-Pune Page 6 of 14 4.2 Though incomplete application itself deserves to be rejected at the outset, however, the Ld. CIT(E) in terms of section 12AB(1)(b)(ii)(B), accorded subsequent three clear and reasonable opportunities, i.e. first notice dt. 19/12/2022 according time to comply by 30/12/2022 and time allowed by service of second notice dt. 20/01/2023 is extended on appellant’s request for adjournment, whereas the third notice dt. 18/02/2023 further issued granting time to comply and make good the defects by 24/02/2023. However the appellant dejectedly failed to comply therewith to the satisfaction of the registering authority. In these circumstances, the duty-bond registering authority culminated the time-bond process without further opportunity to the appellant. This in our considered view these proceedings remained flawless for twofold reasons that; (i) the Ld. CIT(E) had duly followed the principle of audi alteram partem by fairly making aware the appellant of shortcomings in the application and further by fairly granting two more clear opportunities to it in time-bond process, which remained futile (ii) the appellant on the other hand sadly failed to prove the violation of aforestated principle in clear terms as to how the said violation occurred in its case when it was failed to comply effectively with the statutory requirement on multiple occasions in-spite of due notices. 4.3 In holding that the Ld. CIT(E) had granted fair and reasonable opportunities to the appellant, we place on record the ratio on the subject laid by the Hon’ble Apex Court in ‘Chairman Mining Board Vs Ramjee’ reported in 1977 AIR 965, wherein Hon’ble lordships had occasion to Iexcel Community Foundation ITA No. 506/PUN/2023 ITAT-Pune Page 7 of 14 consider the violation of principle of natural justice in cases the decision maker has equitably granted a fair opportunity to the person proceeded against. Their lordship vide para 5 have categorically held that; “Natural justice is no unruly horse, no lurking landmine, nor a judicial cure-all. If fairness is shown by the decision-maker to the man proceeded against, the form, features and the fundamentals of such essential procedural propriety being conditioned by the facts and circumstances of each situation, no breach of natural justice can be complained of. Unnatural expansion of natural justice without reference to the administrative realities and other factors of a given case can be exasperating. Courts cannot look at law in the abstract or natural justice as a mere artefact... If the totality of circumstances satisfies the Court that the party visited with adverse order has not suffered from denial of reasonable opportunity the Court will decline to be punctilious or fanatical as if the rules of natural justice were sacred scriptures.” (Emphasis supplied) 4.4 We further quote that, the Hon’ble lordship in ‘Biecco Lawrie Ltd v. State of West Bengal’ reported in 10 SCC 32 has delved deeper into the issue of violation of principle and has laid therein that, where the person has a right to receive any notice is clearly intimated the defects in clear and precise terms for compliance thereof, then such person at a later stage shall have no right to allege the violation of principle of natural justice. In the present case, the Ld. CIT(E) beside communicating the shortcomings in the application in clear terms, had fairly & reasonably accorded two more opportunities to cure such defects which remained to be attended effectively. Therefore the adequacy of notice communicating the defects and reasonable time to make good the default has in our considered view sufficiently addressed the adherence to principle of audi alteram partem. Thus for the Iexcel Community Foundation ITA No. 506/PUN/2023 ITAT-Pune Page 8 of 14 reason, in the light of foregoing discussion and judicial precedents, we see appellant’s legal ground without any legs to stand, ergo this legal ground of the appellant company stands dismissed. Ground No. 2 5. By the second ground, the appellant alleged the rejection as contra-legem in the absence of evidence to suggest that the activities of appellant are not charitable. 5.1 It shall be suffice to state that, where an application for registration is made under sub clause (iii) of the clause(ac) of section 12A(1) of the Act, the registering authority shall call for such documents and information from the applicant trust or institution and make such inquiries as he thinks necessary in order to satisfy himself about the genuineness of activities of the applicant trust or institution; and the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects; and after satisfying himself about the objects of the applicant trust or institution and the genuineness of its activities and compliance of the requirements shall pass an order in writing either registering the trust or institution and where the registering authority after making such inquiries and vouching the information vis-à-vis documents or is not so satisfied, then pass an order in writing, rejecting such application and also cancelling its provisional registration if any granted before. Iexcel Community Foundation ITA No. 506/PUN/2023 ITAT-Pune Page 9 of 14 5.2 From the foregoing position of law, we note that, the registering authority after considering the material placed before him, if is not satisfied about the genuineness of the activities of the appellant trust and did not inspire to it any confidence about the compliance towards requirements of any other applicable law, then is empowered to reject the application and cancel the erstwhile provisional registration (if any) granted to the assessee. Per contra the provision nowhere mandates the registering authority to bring on record the evidences to prove the non-genuineness of activities carried out or engaged into by the assessee. If the provisions are so construed or allowed to be inferred, then it shall tantamount to asking the registering authority to prove negative and then there would be no end to it. 5.3 We note that, during the course of hearing, Ld. AR has solidifying the appellants failure to place cogent evidence in support appellants claim, however has placed few photo-print-outs from the web-portal of the appellant to showcase that the assessee indeed has carried out certain philanthropic activities like distribution of school bags, pet pedigree, conducting classroom session etc., however these do neither inspire any confidence to the bench nor found credible. The learned departmental representative Mr. Keyur Patel [‘DR’ hereinafter] on the other hand adverting to the appellant’s paper book page 59-60, has submitted that, the claim that the appellant is engaged in charitable activities in terms of its object clause as it listed in its incorporation document is merely indicative in nature as the appellant failed to adduce necessary and credential evidences in support thereof. The Ld. DR further Iexcel Community Foundation ITA No. 506/PUN/2023 ITAT-Pune Page 10 of 14 contended that, the work claimed to have done predominantly exhibits the appellant entering to various MoU’s with variety of organisations. The establishment objects of these organisation with which the appellant entered into MoU are unknown, hence the very purpose of MoU and activities thereof remained to be vouched. 5.4 Mr Patel adverting further to photo-print-outs submitted by the appellant during the course of hearing contended that, these photographs per se failed to reflect any association either with the appellant or objects thereof. Our attention also sought to page no. 75-82 wherein appellants’ replies to the observation of Ld. CIT(E) are chronologically placed which are sufficient to clinch that the activities of appellant are commercial in nature. Thus are themselves sufficient to hold not in consonance with charitable purposes as envisaged by section 2(15) of the Act. 5.5 In our considered view, the burden of proving that the activities in first place (i) are genuine and in second place (ii) are in line with section 2(15) of the Act, is fastened on the applicant assessee who is seeking a registration under the provisions of the Act. The failure to prove that its activities are genuine would in no case shift the onus and confer a right against the Revenue to prove the negative. That is to say, absence of evidence cannot be the evidence for holding it to be genuine or charitable. Therefore, appellant’s claim for evidence against holding its activities as non-genuineness, in our view catastrophically fails, resultantly the ground raised by the appellant. In Iexcel Community Foundation ITA No. 506/PUN/2023 ITAT-Pune Page 11 of 14 holding so it is apt to quote here the decision of Hon’ble Supreme Court laid while considering the discharge of burden, wherein their Hon’ble Lordships have categorically held in ‘Hindustan Ferodo Ltd. Vs CCE’, reported in 1997 (89) ELT 16(SC), that while discharging the onus for proving any claim, the claimant fails to adduce or led any evidence, the onus stands not discharged, thus the claim fails. This ratio was also reiterated in ‘Parimisetti Seetharamamma Vs CIT’ reported in 57 ITR 532 holding that, the claimant must discharge the burden of proof and its failure shall not reverse the burden on other party to prove the negative. 5.6 In the extant appeal we note that, the burden of proving the activities are genuine was on the appellant assessee, which it has failed to prove by adducing cogent evidences to the satisfaction of the Ld. CIT(E). Such failure of the part of claimant assessee, in our opinion does not reverse the burden on the registering authority to prove that the activities of the appellant are non- genuine. Therefore, this challenge, in the light of aforestated reasoning and judicial precedents deserves dismissal. Ergo ordered accordingly. Ground No. 3 6. Now coming to the final ground of the appellant which challenges the reasoning of rejection being extraneous to the grounds provided for rejection u/s 12AB; 6.1 During the course of hearing, the appellant could hardly be any different and place on record any evidence to attribute the rejection being extraneous to Iexcel Community Foundation ITA No. 506/PUN/2023 ITAT-Pune Page 12 of 14 provisions of section 12AB of the Act. Per contra Mr. Patel drawing our attention to page 49 of the paper-book submitted that, the appellant company till date did neither provide ‘No objection certificate’ from the owner of the premises from which the appellant is operating alongwith proof of ownership nor the rental details so as to vouch the very existence of the assessee and its operation. To solidify the correctness of rejection, the Ld. DR also adverting page 78 to 82 of paper-book has reiterated the observations of Ld. CIT(E) vocalising the objects of the appellant are commercial in nature. 6.2 On a plain reading of statutory provision of section 12AB(1)(b) of the Act, we note that, while dealing with the application for registration made u/s 12A(1)(ac)(iii) of the Act the registering authority is empowered in the process of exercising his discretion to (i) call for such documents or information from the appellant trust/institution or make such inquiries as he thinks necessary in order to satisfy himself about; (A) the genuineness of activities of the trust or institution; and (B) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects. And once registering authority conclusively does so, he shall take a final call on the subject matter of registration either granting the registration or declining to grant the registration. The Commissioner has an authority upon such exercise being completed, if he is not so satisfied, pass an order in writing rejecting such application and also cancelling its registration after affording a reasonable opportunity of being heard. So far as the questions of objects of the Iexcel Community Foundation ITA No. 506/PUN/2023 ITAT-Pune Page 13 of 14 trust and genuineness of activities are concerned, these are subjective calls, and obviously wherein either one is satisfied with the objects of the trust and about the genuineness of the activities, or one is not. However, so far as compliance of the requirements under item (B), of sub-clause (i) is concerned, such a finding can be conditional depending upon the applicability of other laws to the assessee. 6.3 We note that, the impugned rejection order apparently outlined sound reason for rejecting the application of the appellant assessee vocalising his non-satisfaction about (i) genuineness of activities of the appellant and (ii) compliance to requirements of any other applicable law for the time being in force which are material for the purpose of achieving the object of the appellant. Upon devolving deeper into the reasoning of non-satisfaction of Ld. CIT(E), we observed material reasons vis-à-vis defects which significantly contributed to such non-satisfaction, these inter-alia includes; (i) absence of credible evidence in support of activities claimed to have been carried out by the appellant, (ii) absence of tangible material with respect to details of activities claimed to have been carried out by the appellant, (iii) proof of activities being carried out etc. (iv) commercial nature of certain objects listed in the incorporation documents of the appellant (v) failure to establish the place of operation in terms of 2(vii) requirement communicated vide notice dt. 19/02/2022 (vi) failure to effectively make good the shortcoming of mandatory requirement in terms of rule 17A(2)(k) of ITA-Rules etc. Iexcel Community Foundation ITA No. 506/PUN/2023 ITAT-Pune Page 14 of 14 6.4 In our considered view, the aforestated significant reasons collectively beyond an iota of doubt are sufficiently reasonable to form a rational basis to reach to a conclusion that the appellant assessee did failed to satisfy the registering authority to prove both (i) that its activities are genuine or purports to be genuine and (ii) requirements of applicable laws are duly complied with. In these obvious facts, circumstance and discussion, we to do not see any strong reasons to interfere with the decision of the Ld. CIT(E). In view thereof, the impugned order of rejection stands tall, thus this ground also stands dismissed. 7. In result, the appeal of the appellant assessee is DISMISSED. In terms of rule 34 of ITAT Rules, the order pronounced in the open court on this Friday 07 th day of July, 2023. -S/d- -S/d- S S VISWANETHTRA RAVI G. D. PADMAHSHALI JUDICIAL MEMBER ACCOUNTANT MEMBER प ु णे / PUNE ; ददना ां क / Dated : 07 th day of July, 2023. आदेश की प्रतितलतप अग्रेतिि / Copy of the Order forwarded to : 1.अपीलाथी / The Appellant. 2. प्रत्यथी / The Respondent. 3. The Pr.CIT (Exemption), Pune 4. The CIT(A)-10 (MH-India) 5. DR, ITAT, Pune Bench ‘A’, Pune 6. गार्डफ़ाइल / Guard File. Ashwini आदेशान ु सार / By Order वररष्ठ दनजी सदिव / Sr. Private Secretary आयकर अपीलीय न्यायादधकरण, प ु णे / ITAT, Pune.