M/s. International Human Rights, Jalandhar V. The Commissioner of Income-tax,-I, Jalandhar

ITA 561/ASR/2011

• Counselvise Citation: 56120914 RSA 2011
• Duration Of Justice: 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-11-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 31-10-2012
• Assessment Year: misc
• Appeal Filed On: 29-11-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R L CHHANALIA
• Assessee Lawyers: J S BHASIN
• Keywords: Charitable institution; Opportunity of being heard; Principle of natural justice
• Section: 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.561(ASR)/2011 ASSESSMENT YEAR: NIL PAN :AAATI8061L M/S. INTERNATIONAL HUMAN RIGHTS VS. COMMISSIONER OF INCOME TAX-1, ORGANIZATION YOUTH DEVELOPMENT JALANDHAR. COUNCIL, MODEL TOWN, JALANDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY:SH. J.S.BHASIN, ADVOCATE RESPONDENT BY:SH. R.L. CHHANALIA, DR DATE OF HEARING:31.10.2012 DATE OF PRONOUNCEMENT:01/11/2012 ORDER PER BENCH ; THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX-1, JALANDHAR, DATED 23.0 9.2011 PASSED UNDER SECTION 12AA(1)(B)(II) OF THE INCOME TAX ACT, 1961. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: ITA NO.561(ASR)/2011 2 1. THAT THE LD. CIT HAS MISDIRECTED HIMSELF IN LAW AND ON FACTS IN ARBITRARILY REJECTING THE ASSESSEES APPLICATION FO R REGISTRATION U/S 12A(A), ON HIGHLY ERRONEOUS AND EXTRANEOUS CONS IDERATIONS. 2. THAT THE PRIMARY PURPOSE OF THE TRUST, INTER ALI A BEING ADVANCEMENT OF OBJECTS OF GENERAL PUBLIC UTILITY, R EJECTION OF REGISTRATION SOUGHT FOR, BY ALLEGING SERVICE ON SEL ECTIVE AND DISCRETIONARY BASIS, IS PATENTLY ARBITRARY, UNJUST AND DE HORS THE FACTS ON RECORD. 3. THAT THE TRUST HAVING BEEN CREATED ONLY ON 10.06 .2010, WITH HARDLY ANY EFFECTIVE ACTIVITIES UNDERTAKEN THUS FAR , THE ADVERSE INFERENCES DRAWN BY THE LD. CIT AS TO ITS PALTRY AC TIVITIES, ARE TOO PREMATURE AND SCANTY TO BE SUSTAINED. 4. THAT THE IMPUGNED ORDER BEING ARBITRARY, UNJUST AND IN VIOLATION OF THE SACRED PRINCIPLES OF NATURAL JUSTICE WHEN TH E INFERENCES DRAWN WERE NEITHER PROPERTY CONFRONTED NOR DISCUSSE D, DESERVES NOT TO BE SUSTAINED AT ALL, WHILE GRANTING THE REGI STRATION SOUGHT FOR. 5. THAT THE ORDER UNDER APPEAL IS AGAINST LAW AND F ACTS OF THE CASE. 2. THE LD. COUNSEL FOR THE ASSESSEE, MR. J.S. BHASI N, ADVOCATE, ARGUED THAT THE ASSESSEE-TRUST CAME INTO EXISTENCE ON 10.0 6.2010 VIDE TRUST DEED PLACED AT PB 1 TO 7. IT WAS POINTED OUT THAT THE SE TTLER OF THE TRUST MR. OPINDER SINGH KALSI S/O SH. HARDAYAL SINGH, 9L, BLO CK B, MODEL HOUSE, JALANDHAR HAD SETTLED THE AMOUNT OF RS.5000/- VIDE SAID TRUST DEED ON 10.06.2010 AND FOLLOWING TWO MEMBERS WERE APPOINTED AS THE TRUSTEES BEING A HUSBAND AND WIFE: ITA NO.561(ASR)/2011 3 I) SH. KANWARJIT SINGH S/O SH. JOGINDER SINGH, RESI DENT OF 9L, BLOCK B, MODEL HOUSE, JALANDHAR. II) SMT. RUPINDER KAUR W/O SH. KANWARJIT SINGH, RES IDENT OF 9L, BLOCK B, MODEL HOUSE, JALANDHAR. 2.1. THE TRUST WAS REGISTERED WITH THE SUB-REGISTRA R, JALANDHAR ON 12.07.2010. THE ASSESSEE FILED AN APPLICATION IN FO RM 10A WITH THE LD. COMMISSIONER OF INCOME TAX ( IN SHORT, THE CIT ) ON 04.04.2011. IN RESPONSE TO QUERY BY THE LD. CIT WITH REGARD TO THE CHARITABLE ACTIVITIES, THE ASSESSEE SUBMITTED THAT THE TRUST IS SUPPORTING TWO POOR GIRLS, HAS ADOPTED SANT KAUR ADARSH VIDYALAYA FOR IMPROVEMENT OF EDUCA TIONAL FACILITIES, AWARDING PRIZES FOR EXCELLING IN EDUCATIONAL CONTRI BUTION AND AT TIMES, MEDICAL AND EYE CHECK UP CAMPS ARE ALSO ORGANIZED. IT WAS POINTED OUT AT PAGES 10 & 11 OF THE PB WHERE THE ASSESSEE SUBMITT ED THE EXPLANATION WITH REGARD TO THE EVENTS, OCCASIONS ORGANIZED ETC. AND AT PB 12, THE ACTIVITIES CARRIED OUT BY THE ASSESSEE-TRUST. THE LD.COUNSEL F OR THE ASSESSEE READ THE ORDER OF THE LD. CIT(A) IN PARA 2.1, 2.2 & 3, WHICH FOR THE SAKE OF CLARITY IS REPRODUCED AS UNDER: 2.1. AIMS AND OBJECTS OF THE TRUST ARE CONTAINED I N THE CLAUSE (3)(A) TO (W) OF THE TRUST DEED SUBMITTED WITH THE APPLICA TION. 2.2. DURING THE COURSE OF HEARING THE ASSESSEES CO UNSEL IS ASKED TO STATE THE FACILITY WHICH HAS BEEN CREATED OR INTEND ED TO BE CREATED TO CARRY OUT THE ACTIVITIES OF CHARITABLE I N NATURE. ITA NO.561(ASR)/2011 4 FURTHER, HE IS ALSO ASKED TO STATE UNDER WHICH CLAU SE 2(15) THE AIMS AND OBJECTIVES AND THE FACILITIES IF CREATED A RE COVERED. IN RESPONSE HE HAS STATED THAT THE TRUST IS SUPPORTING TWO POOR GIRLS BY GIVING SCHOLARSHIPS. IT HAS ADOPTED SANT K AUR ADARSH VIDYALAYA FOR IMPROVEMENT OF EDUCATIONAL FACILITIES . IT IS ALSO AWARDING PRIZES FOR EXCELLING IN EDUCATIONAL CONTRI BUTION. AT TIMES, MEDICAL AND EYE CHECK UP CAMPS ARE ALSO ORGA NIZED. AS REGARDS THE CLAUSE UNDER WHICH THE AIMS AND OBJECTI VES ARE QUALIFIED AS CHARITABLE IT IS STATED THAT IT IS COV ERED BY THE EXPRESSION GENERAL PUBLIC UTILITY USED IN SECTION 2(15). 3. I HAVE CONSIDERED THE SUBMISSIONS. THE WORD UTI LITY AS PER THE DICTIONARY MEANING MEANS WHICH IS USEFUL. A THING I S USEFUL IF IT IS NEEDED. BUT THIS WORD UTILITY HAS BEEN USED WITH GENERAL PUBLIC WHICH MEANS THAT THE NEED SHOULD BE OF A LA RGE CROSS SECTION OF THE PUBLIC OR SOCIETY. THUS, FIRST OF AL L, IT HAS TO BE SHOWN THAT THERE IS SOME GENERAL PUBLIC AND NEXT FO R THAT THE SOCIETY HAS CREATED FACILITY OR HAS TAKEN STEPS TO CREATE IT. BUT AS REGARDS THE WORK WHICH HAS BEEN DONE, IT IS ON VERY SELECTIVE BASIS GIVING AWARDS AND SCHOLARSHIPS ON P ICK AND CHOOSE BASIS AND THUS IT CANNOT BE SAID THAT THE AI MS AND OBJECTIVES ARE ADDRESSED TO THE PUBLIC AT LARGE. IF THE SOCIETY HAS A GENERAL POLICY TO AWARD SCHOLARSHIPS TO ANY O R EVERYONE WHO EXCELS IN EDUCATION BY SETTING SOME CRITERIA OF EXCELLENCE THEN IT COULD HAVE BEEN CONSIDERED TO BE A WORK OF CHARITABLE IN NATURE. BUT THIS WORK IS BEING DONE PURELY ON DISCR ETIONARY BASIS AND THUS IT CANNOT BE SAID THAT THE AIMS AND OBJECTIVES ARE SUCH AS TO ADVANCE ANY OBJECT OF GENERAL PUBLIC UTI LITY. THE APPLICATION THUS FOR REGISTRATION IS REJECTED. 2.2. THE LD. COUNSEL FOR THE ASSESSEE, MR. J.S. BHA SIN, FURTHER ARGUED THAT THE ASSESSEE HAD SUBMITTED COPIES OF PHOTOGRAPHS AN D NEWSPAPER CUTTINGS WHICH ARE PART OF THE PAPER BOOK AS AN EVIDENCE OF CARRYING OUT CHARITABLE ACTIVITIES AT PAGES 13 TO 20. MR. J.S. BHASIN, AGI TATED THE FINDINGS OF THE LD. CIT THAT THE AWARDS AND SCHOLARSHIPS HAVE BEEN GIVE N ON PICK AND CHOOSE ITA NO.561(ASR)/2011 5 BASIS AND THEREFORE, AIMS AND OBJECTIVES ARE NOT AD DRESSED TO THE PUBLIC AT LARGE. THE WORK IS BEING DONE PURELY ON DISCRETIONA RY BASIS AND THE AIMS AND OBJECTS ARE NOT FOR THE ADVANCEMENT OF ANY OBJ ECT OF GENERAL PUBLIC UTILITY. MR. J.S. BHASIN, RELIED UPON THE DECISIONS OF VARIOUS COURTS OF LAW IN THIS REGARD AS UNDER: I) C.I.T. VS. ANDHRA CHAMBER OF COMMERCE, (1965) 55 ITR 722 (SC). II) CIT VS. TEXTILE MANUFACTURERS ASSOCIATION (1972) 8 3 ITR 247 (P&H). III) SAINT KABIR EDUCATIONAL TRUST VS. CIT (2010) 41 DTR (ASR)(TRIB.) 267. IV) CIT VS. D.P.R. CHARITABLE TRUST (2011) 61 DTR (MP) 410. V) BHAGWAN MAHAVIR PURUSHARTH PRERNA NIDHI NYAS VS. CI T (2012) 67 DT (JP) (TRIB) 185. 2.3. WITH REGARDS TO THE FINDING LD. CIT AS MENTION ED IN PARA 2.2 HEREINABOVE, MR. J.S. BHASIN, LD. COUNSEL FOR THE A SSESSEE, RELYING UPON THE ABOVE DECISIONS ARGUED THAT THE OBJECTS BENEFICIAL TO A SECTION OF THE PUBLIC IS AN OBJECT OF GENERAL PUBLIC UTILITY. THE LD. C IT-1, JALANDHAR HAS TO EXAMINE WHETHER THE OBJECTS OF THE TRUST ARE CHARIT ABLE IN NATURE AND GENUINENESS OF THE ACTIVITIES. BUT THE LD. CIT HAS NO POWER TO EXAMINE ITA NO.561(ASR)/2011 6 WHETHER INCOME DERIVED BY THE TRUST IS BEING SPENT FOR CHARITABLE PURPOSE OR FOR EARNING PROFIT AT THE STAGE OF REGISTRATION. 3. THE LD. ADDL. CIT (DR), MR. R.L. CHHANALIA, ON T HE OTHER HAND, RELIED UPON THE ORDER OF THE LD. CIT. HE FURTHER AR GUED THAT IT IS A FAMILY TRUST SINCE THE ADDRESS OF THE SETTLER AND THE TRUS T IS THE SAME AND THE TRUSTEES ARE HUSBAND AND WIFE. THE FAMILY TRUST CAN NOT BE A TRUST FOR CHARITABLE IN NATURE AND THE ASSESSEE HAS TO ESTABL ISH THAT IT IS FOR CHARITABLE IN NATURE. MOREOVER, THE ASSESSEE HAS NOT SHOWN ANY ACTIVITY TO BE GENUINE TO THE SATISFACTION OF THE LD. CIT. THEREFORE, HE PRAYED TO DISMISS THE APPEAL OF THE ASSESSEE. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT THE TRUST HAS BEEN CREATED BETWEEN ONE SH. OPINDER SINGH KALSI, THE SETTLER AND WHAT IS TH E RELATION WITH THE TRUSTEES WHEN SPECIFICALLY ASKED FROM MR. J.S. BHAS IN, THE LD. COUNSEL FOR THE ASSESSEE, HAS DENIED OF HAVING ANY KNOWLEDGE O F THE RELATION OF THE SETTLER WITH THE TRUSTEES BUT APPEARS TO BE FAMILY MEMBER HAVING THE SAME ADDRESS AS THE TRUSTEES. THE TRUSTEES SH. KANWARJIT SINGH AND SMT. RUPINDER KAUR, ARE HUSBAND AND WIFE. THERE IS NO D ISPUTE TO THE FACT THAT IT ITA NO.561(ASR)/2011 7 IS A FAMILY TRUST. WHETHER SUCH A FAMILY TRUST CAN BE ALLOWED REGISTRATION UNDER SECTION 12AA OR NOT, NO FINDINGS HAVE BEEN GI VEN BY THE LD. CIT-1, JALANDHAR IN THIS REGARD. AS REGARDS THE OBJECTS IN THE TRUST DEED, THE ASSESSEE HAD SUBMITTED VIDE PAGE 12 THE ACTIVITIES CARRIED OUT BY THE ASSESSEE. THE LD. CIT-1, JALANDHAR, WITHIN HIS POWE RS U/S 12AA TO SATISFY ABOUT THE GENUINENESS OF THE ACTIVITIES, HAS NOT V ERIFIED THE SUBMISSIONS GIVEN BY THE ASSESSEE AT PAGE 12 IN RIGHT SPIRIT. T HE ASSESSEE AT PAGE 12 HAS MENTIONED THAT THE ASSESSEE HAD SUPPORTED TWO POOR GIRLS FOR THE EDUCATIONAL SCHOLARSHIP AND NEWS CUTTINGS FOR THE SAME HAVE BEE N SUBMITTED BY THE ASSESSEE. THE LD. CIT HAS NOT VERIFIED WHETHER THE ASSESSEE HAS IN FACT SUPPORTED THE GIRLS WHICH ARE POOR. AS REGARDS THE CLAUSE (B) OF THE SAID LETTER, THE ASSESSEE HAD SUBMITTED THAT THE TRUST H AD ADOPTED SANT KAUR ADARSH VIDYALAYA FOR THE IMPROVEMENT OF EDUCATIONA L FACILITIES AND THE NEWS CUTTINGS WERE SUBMITTED. IT HAS NOT BEEN BROUG HT ON RECORD REGADING ADOPTION OF SOME SCHOOLS FOR THE IMPROVEMENT OF EDU CATIONAL FACILITIES WHICH WILL TANTAMOUNT TO CHARITABLE ACTIVITIES AND IS WITHIN THE OBJECTS AS STATED IN THE TRUST DEED. NO FINDING HAS BEEN GIVEN BY THE LD. CIT WHETHER SANT KAUR ADARSH VIDYALAYA IS A SCHOOL WHICH IS RUN FOR CHARITABLE PURPOSES OR FOR PROFIT MOTIVE. AS REGARDS THE AWARDING OF SC HOLARSHIP PRIZES FOR EDUCATIONAL COMPETITIONS FOR WHICH THE ASSESSEE SUB MITTED PHOTOGRAPHS, NO ITA NO.561(ASR)/2011 8 FINDING HAS BEEN GIVEN WHETHER SCHOLARSHIP PRIZES H AVE ACTUALLY BEEN GIVEN FOR EDUCATIONAL COMPETITIONS. SIMILARLY ORGANIZING OF GENERAL MEDICAL AND EYE CHECK-UP CAMPS, DONATION OF SEEDS AND DISTRIBUT ION OF FREE RATION HAVE NOT BEEN EXAMINED BY THE LD. CIT, WHETHER THE ASSES SEE HAS ACTUALLY ORGANIZED SUCH CAMPS AND HAS DONATED SEATS OR DISTR IBUTED FREE RATION. AS REGARDS THE ENVIRONMENT ALSO, THE LD. CIT HAS NOT E XAMINED THE ACTIVITIES. MOREOVER, THERE IS NOTHING ON RECORD PLACED BEFORE THE LD. CIT OR EVEN BEFORE US WITH REGARD TO THE EXPENDITURE INCURRED ON SUCH ACTIVITIES TO INQUIRE INTO GENUINENESS OF ACTIVITIES OR THERE IS NOTHING ON RECORD WHETHER SUCH EXPENDITURE IS FOR CHARITABLE PURPOSE I.E. THE ASSESSEE HAS REALLY SUPPORTED THE POOR GIRLS, THE ASSESSEE HAS ADOPTED SANT KAUR ADARSH VIDYALYA AND THE SAID VIDYALYA IS BEING RUN FOR CHA RITABLE PURPOSES, NOTHING HAS BEEN BROUGHT ON RECORD WHETHER SCHOLARSHIPS HAV E BEEN AWARDED FOR EDUCATIONAL COMPETITIONS OR ORGANIZATION OF CAMPS, ENVIRONMENT ACTIVITIES, DONATION OF SEEDS, DISTRIBUTION OF FREE RATION, NO EVIDENCE HAS BEEN BROUGHT ON RECORD AND HAS NOT BEEN PLACED IN THE PAPER BOOK FOR OUR PERUSAL, WHETHER THE SAME ARE GENUINE ACTIVITIES FOR THE OBJECTS FOR WHICH THE TRUST HAS BEEN FORMED. THOUGH, THE TRUST HAS BEEN FORMED ON 10.06. 2010 AND THE LD. CIT HAS PASSED THE ORDER ON 23.09.2011. THE ARGUMENTS O F THE LD. CIT MR. J.S. BHASIN THAT NO SUCH ACTIVITIES HAVE BEEN DONE BY TH E TRUST WILL NOT WITHDRAW ITA NO.561(ASR)/2011 9 THE POWER OF THE LD. CIT GIVEN BY THE STATUTE UNDER SECTION 12AA(1) OF THE ACT. WHATEVER THE ACTIVITIES DONE BY THE ASSESSEE-T RUST, THE LD. CIT HAS TO BE SATISFIED WITH REGARD TO THE GENUINENESS OF THE ACT IVITIES OF THE TRUST. IN THE PRESENT CASE, THE ASSESSEE HAS ALSO NOT SUBMITTED A NY EVIDENCE OF SUCH ACTIVITIES HAVING BEEN DONE EXCEPT CERTAIN PHOTOGRA PHS AND NEWSPAPER CUTTINGS WHICH ARE EVEN NOT LEGIBLE. THE SAID PHOTO GRAPHS AND NEWSPAPER CUTTINGS CANNOT BE A DOCUMENTARY EVIDENCE FOR ANY C HARITABLE ACTIVITIES OR GENUINENESS OF THE ACTIVITIES AS CLAIMED BY THE ASS ESSEE. THE DECISIONS RELIED UPON BY THE LD. COUNSEL FOR THE ASSESSEE, MR. J.S. BHASIN AND THEREFORE, ARE OF NO HELP AT THIS JUNCTURE. IT IS PRE-MATURE FOR T HE LD. CIT TO DECIDE WHETHER THE TRUST SHOULD BE GRANTED REGISTRATION U/S 12AA O R NOT WITHOUT EXAMINING OR WITHOUT MAKING THE INQUIRY ABOUT THE OBJECTS AND GENUINENESS OF THE ACTIVITIES, AS DISCUSSED HEREINABOVE. THEREFORE, IN THE INTEREST OF JUSTICE, THE MATTER IS SET ASIDE TO THE LD. CIT-1, JALANDHAR, WH O WILL ENQUIRE INTO THE ACTIVITIES OF THE TRUST AND AFTER SATISFYING HIMSEL F ABOUT THE OBJECTS OF THE TRUST AND GENUINENESS OF ITS ACTIVITIES, HE SHALL P ASS THE ORDER ACCORDINGLY U/S 12AA(1) OF THE ACT. THE ASSESSEE IS REQUIRED TO SUB MIT ALL THE DETAILS, AS DISCUSSED HEREINABOVE AND AS REQUIRED BY THE LD. CI T. THE LD. CIT IS DIRECTED TO DECIDE THE ISSUE DENOVO AS DIRECTED HER EINABOVE BUT BY AFFORDING ITA NO.561(ASR)/2011 10 ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . THUS, ALL THE GROUNDS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.561(ASR)/2011 IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 1ST NOVEMBER, 2012. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1ST NOVEMBER, 2012 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. INTERNATIONAL HUMAN RIGHTS ORGANI ZATION 2. THE CIT-1, JALANDHAR. 3. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER