M/S LATE SHRI K.D. PASSI EDUCATIONAL AND SOCIAL WELFARE SOCIETY, JALANDHAR V. COMMISSIONER OF INCOME TAX (EXAMPTIONS), CHANDIGARH

ITA 521/ASR/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1431 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 03-07-2018
• Assessment Year: 2016-2017
• Appeal Filed On: 09-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRABHJOT KAUR
• Keywords: Charitable institution; Principle of natural justice; Competent authority
• Section: 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I.T.A. NO. 521/ASR/2017 AS SESSMENT YEAR: 2016-17 LATE SH. K. D. PASSI EDUCATIONAL & SOCIAL WELFARE SOCIETY, LASSARA, PHILAUR, JALANDHAR-144401, PUNJAB [PAN: AAATL 8468K] VS. THE COMMISSIONER OF INCOME TAX (EXEMPTIONS), CHANDIGARH (APPELLANT) (RESPONDENT) APPELLANT BY : SH. SUDHIR SEHGAL, ADVOC ATE RESPONDENT BY: SMT. PRABHJOT KAUR, CIT-DR DATE OF HEARING: 03.07.2018 DATE OF PRONOUNCEMENT: 07.09.2018 ORDER PER SANJAY ARORA, AM: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (EXEMPTIONS), CHANDIGARH (CIT(E)' FOR SHORT) DATED 29.06.2017 UNDER SECTION 12AA(1)(B)(II) OF THE OF T HE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER), DENYING THE ASSESSEE REGISTRATIO N U/S. 12AA OF THE ACT. 2. IT MAY BE RELEVANT TO NOTICE THE RELEVANT FACTS. THE ASSESSEE IS A SOCIETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, 18 60 ON 27.09.2007 (PB PG. 16), ENGAGED IN PROVIDING SCHOOL EDUCATION THROUGH AN IN STITUTION BY THE NAME NIRMAL SAGAR PUBLIC SCHOOL, AFFILIATED TO THE CENTRAL BOA RD OF SECONDARY EDUCATION, NEW ITA NO. 521/ASR/2017 LATE S H. K.D. PASSI EDUCATIONAL & SOCIAL WELFARE SOCIETY V. CIT(E) 2 DELHI (CBSE) SINCE 2008, WHICH (PROFESSIONAL AFFILI ATION) STANDS LAST EXTENDED BY IT ON 06.03.2014 FOR A PERIOD OF FIVE YEARS (PB PGS . 86-89). ITS ANNUAL GROSS RECEIPT BEING BELOW RS. 1 CR., IT HAD BEEN CLAIMING EXEMPTI ON U/S. 10(23C)(IIIAD) UP TO THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR (AY) 2016 -17 (PB PGS. 35-41). IT APPLIED FOR REGISTRATION U/S. 12AA IN ANTICIPATION OF ITS ANNUAL TURNOVER EXCEEDING RS.100 LACS, NECESSITATING APPROVAL U/S. 10(23C)(VI ), ON 21.12.2016. THE SAME STANDS REJECTED BY THE LD. CIT(E) FOR THE FOLLOWING REASONS: (A) THE ASSESSEE HAD NOT FILED THE MEMORANDUM OF AS SOCIATION (MOA)/ BYELAWS OF THE SOCIETY, IN THE ABSENCE OF WHICH IT WAS NOT POS SIBLE TO CORROBORATE THE AIMS AND OBJECTS OF THE SOCIETY WITH THE ACTIVITIES BEING PU RSUED BY IT; (B) IT HAD REFRAINED FROM PROVIDING THE DETAILS OF THE CASH DEPOSITS MADE DURING THE DEMONETIZATION PERIOD, AND WHICH HINDERED THE PROCE SS OF CORROBORATING ITS ACTIVITIES, AT LEAST DURING THE SAID PERIOD. AGGRIEVED, THE ASSESSEE IS IN APPEAL, RAISING THE F OLLOWING GROUNDS: 1. THAT THE LD. COMMISSIONER OF INCOME TAX (EXEMPT IONS), CHANDIGARH HAS ERRED IN NOT GRANTING REGISTRATION U/S. 12AA(1)(B)(II) OF THE IN COME TAX ACT 1961 AND HAS REJECTED THE SAME SUMMARILY WITHOUT ANY VALID REASON. 2. THAT THE FINDING OF THE LD. CIT (EXEMPTIONS) THA T COPY OF THE MEMORANDUM & ARTICLES OF ASSOCIATION AND BYLAWS HAS NOT BEEN FILED, IS CONTR ARY TO THE FACTS ON RECORD BECAUSE, THE SAME HAD BEEN FILED IN OUR REPLY IN RESPONSE TO QUE STIONNAIRE, DATED 5.6.2017 OF THE CIT (EXEMPTIONS). 3. THAT THE FINDING OF THE LD. CIT (EXEMPTIONS) IS CONTRADICTORY BECAUSE ON ONE HAND, THE CIT (EXEMPTIONS) HAS MENTIONED THAT THE AIMS & OBJE CTS OF THE SOCIETY ARE NOT CLEAR WHETHER THE EDUCATIONAL SOCIETY HAS BEEN REGISTERED OR NOT AND ON THE OTHER HAND, THE CIT (E) HAS HELD THAT SOCIETY IS ENGAGED IN EDUCATIONAL ACTIVITY. 4. THAT THE CERTIFICATE OF REGISTRATION OF SOCIETY HAD ALREADY BEEN FILED ALONGWITH LETTER IN RESPONSE TO THE QUESTIONNAIRE, DATED 5.6.2017 AND, THUS, THE FINDING OF THE CIT (EXEMPTIONS) IS NOT CORRECT. 5. THAT THE CIT (EXEMPTIONS) HAS FAILED TO APPRECIA TE THE FACT THAT THE SOCIETY HAD BEEN RUNNING THE SCHOOL FOR THE LAST FEW YEARS AND FILIN G THE INCOME TAX RETURN AND NO ADVERSE VIEW HAS BEEN TAKEN BY THE DEPARTMENT AND, THUS, TH E DENIAL OF EXEMPTION U/S. 12AA (1)(B)(II) OF THE INCOME TAX ACT 1961 IS CONTRARY T O FACTS AND CIRCUMSTANCES OF THE CASE. ITA NO. 521/ASR/2017 LATE S H. K.D. PASSI EDUCATIONAL & SOCIAL WELFARE SOCIETY V. CIT(E) 3 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 3.1 THE LD. COUNSEL FOR THE ASSESSEE, SH. SUDHIR SE HGAL, ADVOCATE, WAS DURING HEARING AT PAINS TO EMPHASIZE THAT BOTH THE OBJECTI ONS STATED IN THE IMPUGNED ORDER ARE FACTUALLY INCORRECT. THIS IS AS, APART FROM BEI NG FILED ALONG WITH ITS APPLICATION FOR WHICH HE WOULD REFER TO PAGES 6 TO 15 OF THE ASSESSEES PAPER-BOOK (PB), THE ORIGINAL MOA WAS ALSO, AS REQUIRED VIDE REQUISITION DATED 05.06.2017 (REFER PARA 5(III) OF THE IMPUGNED ORDER), PRODUCED FOR VERIFIC ATION, FOR WHICH REFERENCE WAS MADE TO PARA 6 OF THE IMPUGNED ORDER, BESIDES TO PA RA 3 OF THE REPLY DATED 13.06.2017 (PB PGS. 44-47). SIMILARLY, THE DETAILS OF THE CASH DEPOSITED DURING THE PERIOD 08.11.2016 TO 30.12.2016 WERE FILED ALONG WI TH (PB PGS. 51-82), BESIDES BEING ALSO TRANSMITTED ELECTRONICALLY, MAKING REFER ENCE TO PARA 15 OF THE REPLY AFORESAID. THERE IS, THUS, NO VALID BASIS FOR DENYI NG REGISTRATION U/S. 12AA. FURTHER, QUESTIONING THE ASSESSEE FOR APPLYING FOR REGISTRAT ION WHERE IT HAD HITHERTO BEEN CLAIMING EXEMPTION U/S. 10(23)(C)(IIIAD) IS NEITHER HERE NOR THERE, WITH THE LD. CIT(E) HIMSELF ADMITTING THAT THE TWO CODES ARE SEP ARATE, AND COULD BE ALTERNATIVELY OPTED FOR. THE LD. CIT(E), IT WAS PRA YED, BE, SETTING ASIDE THE IMPUGNED ORDER, ACCORDINGLY DIRECTED TO GRANT REGIS TRATION FORTHWITH. THE LD. CIT- DR WOULD RESPOND BY STATING THAT IT APPEARS THAT TH ERE IS SOME CONFUSION WITH REGARD TO THE FILING OF THE MOA, STATED TO BE FILED ALONG WITH THE APPLICATION SEEKING REGISTRATION. PRODUCTION OF THE ORIGINAL, A S STATED IN THE REPLY DATED 13.06.2017, CANNOT BE EQUATED WITH THE FILING OF TH E MOA; THE EXAMINATION OF THE SOCIETYS OBJECTS BEING A VITAL ASPECT OF THE GRANT OF REGISTRATION; THE LAW POSTULATING THE SATISFACTION OF THE COMPETENT AUTHO RITY THEREWITH. REFERENCE IN THIS CONTEXT WAS ALSO MADE BY HER TO SOME SUB-CLAUSES OF THE OBJECT CLAUSE 3 (BEARING THE MAIN OBJECTS) OF THE MOA, FOR WHICH THE SOCIETY IS FORMED, WHICH READ AS UNDER, AND ON THAT BASIS SUBMITTED THAT THE ASSESSE E-SOCIETY HAS MIXED OBJECTS: ITA NO. 521/ASR/2017 LATE S H. K.D. PASSI EDUCATIONAL & SOCIAL WELFARE SOCIETY V. CIT(E) 4 (III) TO ERECT CONSTRUCT, RUN AND MAINTAIN THE PLA CES OF WORSHIP, GURDWARAS, MANDIRS, SARAIS, LANGAR HALLS, KIRTAN HALLS, PUBLIC PLACES ETC. FOR THE WELFARE OF GENERAL PUBLIC, TO SAFE GUARD AND PROTECT THE SCARCITY OF WORSHIP PLACES. (V) TO PREACH THE SOCIAL REFORMS AND WELFARE ACCORD ING TO THE SINGINGS AND TEACHING OF RELIGIOUS SAINTS. (VI) TO ARRANGE RELIGIOUS OR SOCIAL TOURS AND TRIP S. (VII) TO ORGANIZE AND CELEBRATE RELIGIOUS FUNCTIONS , CONFERENCE SAMMELANS, STAGE SHOWS, MEDICAL CAMPS, RECREATIONAL CAMPS, TOURNAMENTS, SPO RTS ACTIVITIES, EDUCATIONAL CAMPS AND TO ORGANIZE THE PROCESSIONS ETC. 3.2 SH. SEHGAL WAS ACCORDINGLY ENQUIRED BY THE BENC H IF THE ASSESSEE HAD APPLIED FOR REGISTRATION AS A CHARITABLE OR A RELIG IOUS INSTITUTION. HE SUBMITTED IT TO BE CHARITABLE IN-AS-MUCH AS THE ONLY OBJECT BEING, AND INTENDED TO BE, PURSUED IS THE PROVISION OF EDUCATION, AS CONTEMPLATED BY SUB- CLAUSE (I) OF THE OBJECT CLAUSE (3). IN-AS-MUCH AS THE ASSESSEE COULD VALIDLY IN LA W PURSUE ANY OF THE SEVERAL OBJECTS FOR WHICH IT IS FORMED/CONSTITUTED, WE DO N OT THINK THE SAME TO BE A VALID ARGUMENT. REFERENCE IN THIS CONTEXT MAY ALSO BE MAD E TO THE DECISION IN DELHI STOCK EXCHANGE ASSOCIATION LTD. V. CIT [1997] 225 ITR 235 (SC), WHEREIN IT STANDS HELD THAT IT IS THE EXISTENCE OF THE POWER T HAT IS RELEVANT AND NOT NECESSARILY THE EXERCISE OF IT (ALSO REFER SUTLEJ EDUCATIONAL CHARITABLE TRUST V. CIT , IN ITA NO. 676/ASR/2017, DATED 09.05.2018). IT IS OPEN FOR THE ASSESSEE-SOCIETY TO, IN LAW, PURSUE ANY OF THE SEVERAL OBJECTS FOR WHICH IT IS F OUNDED. WHY, NOT ONLY THAT, THE SURPLUS ARISING FROM ONE ACTIVITY RELIGIOUS OR CH ARITABLE, COULD BE USED FOR THE OTHER, I.E., GOING BY THE TERMS OF THE MOA IN-AS-MU CH AS THERE IS, AS IT APPEARS, NO SUCH BAR FOR THAT THEREIN. WE ALSO DO NOT THINK THA T THERE IS IN LAW BAR FOR AN INSTITUTION TO BE REGISTERED AS BOTH A RELIGIOUS AN D A CHARITABLE INSTITUTION, I.E., WHERE ITS OBJECTS SO WARRANT, THOUGH, WITHOUT DOUB T, THE DECISIONS BY THE HONBLE HIGH COURTS ON THIS ASPECT WOULD NEED TO BE EXAMINE D, AND STIPULATION/S, IF ANY, IN CONSONANCE THEREWITH, MADE, OF COURSE AFTER ALLOWIN G THE ASSESSEE PROPER ITA NO. 521/ASR/2017 LATE S H. K.D. PASSI EDUCATIONAL & SOCIAL WELFARE SOCIETY V. CIT(E) 5 OPPORTUNITY TO STATE ITS CASE IN THE MATTER, WHO M AY, AT ITS LIBERTY, AMEND ITS CHARTER TO EXCLUDE SOME OBJECTS. FURTHER, IT IS APPARENT FROM THE IMPUGNED ORDER THA T THE LD. CIT(E) HAS NOT EXAMINED THE MOA/BYE-LAWS IN-AS-MUCH AS HIS ORDER B EARS THAT OUT. HIS ORDER CANNOT THEREFORE BE UPHELD. REGISTRATION, FOR WHICH THE SATISFACTION OF THE COMPETENT AUTHORITY WITH THE OBJECTS AND GENUINENES S OF THE ACTIVITIES IS A PREREQUISITE, DOES NOT THEREFORE FOLLOW AUTOMATICAL LY. THAT IS, WHILE WE FIND NO BASIS FOR DISSATISFACTION IN THE ABSENCE OF THE EXA MINATION OF THE RELEVANT MATERIAL, THERE IS NO SPECIFIC SATISFACTION FOR GRANTING REGI STRATION IN TERMS OF S. 12AA(B)(I), WHICH IS TO BE RECORDED IN WRITING. WHY, THE ASSESS EES OBJECTS, AS THEIR PERUSAL REVEALS, CONTAIN RELIGIOUS OBJECTS AS WELL, AND WHI CH WOULD ALSO HAVE TO BE TAKEN INTO ACCOUNT. FURTHER, NOT ONLY IS THE SAID AUTHORI TY OBLIGED TO EXAMINE THE SAME, BUT, WHERE NOT SATISFIED, CONFRONT THE ASSESSEE WIT H HIS OBJECTIONS, FOLLOWING THE PRINCIPLES OF NATURAL JUSTICE, BESIDES BEING MANDAT ED BY LAW (REFER PROVISO TO SECTION 12AA(B)), EXPLAINED BY THE HONBLE JURISDIC TIONAL HIGH COURT IN CIT(E) V. AMELIORATING INDIA [2017] 399 ITR 196 (P&H). THE AFORESAID INFIRMITIE S WOULD THEREFORE QUALIFY ONLY AS AN IRREGULARITY WARRANTIN G A RESTORATION BACK TO THE FILE OF THE COMPETENT AUTHORITY FOR THE PURPOSE. 3.3 WE, IN VIEW OF THE FOREGOING, THEREFORE, RESTOR E THE MATTER FOR THE PURPOSE BACK TO THE FILE OF THE COMPETENT AUTHORITY, WITH A FURTHER DIRECTION TO DISPOSE OF THE ASSESSEEA APPLICATION, WHICH IS THUS PENDING SINCE LONG, ON PRIORITY BASIS, NOT EXTENDING BEYOND A PERIOD OF THREE MONTHS FROM THE RECEIPT OF THIS ORDER, IN ACCORDANCE WITH LAW. WE DECIDE ACCORDINGLY. ITA NO. 521/ASR/2017 LATE S H. K.D. PASSI EDUCATIONAL & SOCIAL WELFARE SOCIETY V. CIT(E) 6 4. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON SEPTEMBER 07, 2018 SD/- SD/- (N. K. CHOUDHRY) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 07.09.2018 /GP/SR. PS. COPY OF THE ORDER FORWARDED TO: (1) THE APPELLANT: LATE SH. K. D. PASSI EDUCATI ONAL & SOCIAL WELFARE SOCIETY, LASSARA, PHILOUR, JALANDHAR-144401, PUNJAB (2) THE RESPONDENT: THE COMMISSIONER OF INCOME TAX (EXEMPTIONS), CHANDIGARH (3) THE CIT(EXEMPTIONS), CHANDIGARH (4) THE CIT CONCERNED (5) THE SR. DR, I.T.A.T TRUE COPY BY ORD ER