Sarv Hitkari Educational Society, Delhi V. CIT(E), New Delhi

ITA 5816/DEL/2015

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1055 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: misc
• Appeal Filed On: 23-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 12A; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D : NEW DELHI) BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.5816/DEL./2015 SARV HITKARI EDUCATIONAL SOCIETY, VS. CIT (EXEMPTIO NS), POCKET B, FLAT NO.94-C, NEW DELHI. DILSHAD GARDEN, DELHI. (PAN : AABTS9050K) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SANJAY KUMAR, CA AND SHRI AKASH GARG, ADVOCATE REVENUE BY : SHRI J.K. MISHRA, CIT DR DATE OF HEARING : 27.11.2018 DATE OF ORDER : 30.11.2018 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, SARV HITKARI EDUCATIONAL SOCIETY (HE REINAFTER REFERRED TO AS THE ASSESSEE SOCIETY) BY FILING T HE PRESENT APPEAL, SOUGHT TO SET ASIDE THE IMPUGNED ORDER UNDER SECTIO N 12AA (3) OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) DATE D 03.09.2015 PASSED BY LD. CIT (EXEMPTIONS), NEW DELHI ON THE F OLLOWING GROUNDS INTER ALIA THAT:- ITA NO.5816/DEL./2015 2 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE ORDER PASSED BY THE LD. CIT (E) IS BAD IN LAW AND ILLEGAL AND DESERVES TO BE QUASHED. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT (E) HAS GROSSLY ERRED IN WITHDRAWING THE RE GISTRATION U/S 12A GRANTED TO THE ASSESSEE SOCIETY SINE 27.12.1999 VIDE AN ORDER U/S 12AA (3) DATED 03.09.2015, FURTHER FOLLOWED BY AN ADDENDUM ORDER DATED 04.09.2015 U/S 12AA (3) MAKING THE WITH DRAWAL RETROSPECTIVELY EFFECTIVE FROM 2008-09 WITHOUT AFFO RDING AN OPPORTUNITY. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE GROUNDS ON WHICH THE AFORESAID REGISTRATION GRANTED TO THE SOCIETY HAS BEEN WITHDRAWN HAVE NO SUBSTANCE/MERITS IN LAW AND THUS THE ORDER OF LD. CIT (E) DESERVED TO BE QUASHED. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : ON RECEIPT OF THE REPORT FROM THE ASSESSING OFFICER THAT THE ASSESSEE SOCIETY HAD DIS POSED OFF A LAND BELONGING TO IT FOR A CONSIDERATION OF RS.7,50,000/ - OUT OF BOOKS OF ACCOUNT AND CONSEQUENT ADDITION OF RS.7,50,000/- WA S MADE U/S 69B OF THE ACT. TREATING THE FACTUM OF DISPOSING OF F ITS LAND FOR RS.7,50,000/- BY THE ASSESSEE TRUST WITHOUT PERMISS ION AS INGENUINE ACTIVITY, THE LD. CIT (A) CANCELLED THE R EGISTRATION GRANTED TO THE ASSESSEE SOCIETY U/S 12A OF THE ACT. 3. FEELING AGGRIEVED, THE ASSESSEE SOCIETY HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL CH ALLENGING THE IMPUGNED ORDER PASSED BY THE LD. CIT (E). ITA NO.5816/DEL./2015 3 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. UNDISPUTEDLY, THE ASSESSEE SOCIETY BEING ENGAGED INTO CHARITABLE ACTIVITIES WAS GRANTED REGISTRATION U/S 12A OF THE ACT ON 27.10.1999. IT IS ALSO NOT IN DISPUTE THAT DURING THE YEAR UNDER ASSESSMENT, THE CONCERNED AO MADE ADDITION OF RS.7, 50,000/- TO THE INCOME OF THE ASSESSEE SOCIETY U/S 69B OF THE A CT BY NOTICING THAT ASSESSEE SOCIETY HAS SOLD LAND BELONGING TO IT WITHOUT PERMISSION OF LD. CIT (E) WHICH MAKES ITS ACTIVITIE S INGENUINE. IT IS ALSO NOT IN DISPUTE THAT INITIAL SALE DEED DATED 24.07.2006 QUA LAND MEASURING 11 CANALS 19 MARLAS WAS EXECUTED BY ONE DARSHAN SINGH IN FAVOUR OF ASSESSEE SOCIETY. IT IS ALSO NO T IN DISPUTE THAT VIDE SALE DEED DATED 26.09.2007, THE SAME LAND MEAS URING 11 CANALS 19 MARLAS STOOD RE-TRANSFERRED TO DARSHAN SI NGH BY THE ASSESSEE SOCIETY. IT IS ALSO NOT IN DISPUTE THAT T HE ADDITION OF RS.7,50,000/- MADE BY THE AO U/S 69B HAS BEEN ACCEP TED BY THE ASSESSEE SOCIETY HAVING NOT BEEN APPEALED AGAINST. 6. FURTHER, ON THE OTHER HAND, THE LD. DR FOR THE R EVENUE TO REPEL THE ARGUMENTS ADDRESSED BY LD.AR FOR THE ASSE SSEE CONTENDED THAT SINCE THE CIT (E) HAD IMPOSED A CONDITION WHIL E GRANTING ITA NO.5816/DEL./2015 4 REGISTRATION U/S 12A OF THE ACT THAT THE ASSESSEE S OCIETY WILL NOT TRANSFER ITS PROPERTY EXCEPT WITH PERMISSION, THE R EGISTRATION HAS BEEN RIGHTLY CANCELLED. 7. NO DOUBT, SECTION 12AA (3) EMPOWERS THE LD.CIT ( E) TO CANCEL THE REGISTRATION OF ANY TRUST IN CASE, HE IS SATISFIED THAT THE ACTIVITIES OF SUCH TRUST ARE NOT GENUINE OR ARE NOT EVEN CARRIED OUT IN ACCORDANCE WITH THE OBJECT OF THE TRUST. 8. BEFORE PROCEEDING FURTHER, WE WOULD LIKE TO PERU SE THE SHOW-CAUSE NOTICE ISSUED BY LD. CIT (E) FOR CANCELL ATION OF REGISTRATION GRANTED U/S 12A TO THE ASSESSEE SOCIET Y, AVAILABLE AT PAGES 60 & 61 OF THE PAPER BOOK, WHICH IS EXTRACTED FOR READY PERUSAL AS UNDER :- OFFICE OF THE DIRECTOR OF INCOME TAX (EXEMPTIONS), 3 RD FLOOR, AAYKAR BHAWAN, LAXMI NAGAR DISTRICT CENTRE, DELHI.110092 PAN: DATED: TO, THE PRINCIPAL OFFICER, SARVE HITKARI EDUCATIONAL SOCIETY NEW DELHI REGD 389, DEEPALI, PITAMPURA, NEW DELHI-34 SIR, SUB : SHOW CAUSE NOTICE FOR WITHDRAWAL OF REGISTRATION U/S 12AA(3) OF THE INCOME-TAX ACT, 1961 REPLY REGARDING. ITA NO.5816/DEL./2015 5 THIS OFFICE IS IN RECEIPT OF A REPORT FROM THE CONCERNED ASSESSING OFFICER OF YOUR SOCIETY, WHEREI N IT HAS BEEN REPORTED THAT SOCIETY HAS SOLD A LAND FOR RS.7 ,50,000/- OUT OF BOOKS. SINCE THE SAID LAND WAS SOLD OUT OF B OOKS, A SUM OF RS.7,50,000/- WAS ADDED U/S 69B OF THE ACT A ND TAXED IN A.Y. 2008-09 ACCORDINGLY. IN VIEW OF ABOVE, IT IS CLEAR THAT SOCIETY HAS ENTE RED INTO PURCHASE AND SALE CONSIDERATION OUT OF BOOKS W HICH IS A SERIOUS VIOLATION UNDER THE IT ACT. FURTHER, WHILE GRANTING REGISTRATION U/S 12AA, THE OFFICE OF DIT(E) VIDE OR DER DATED 25/10/1999 HAS IMPOSED CERTAIN CONDITIONS, ONE OF T HE CONDITIONS, VIDE ITEM NO.(VII) IS REPRODUCED AS UND ER:- NO ASSET SHALL BE TRANSFERRED WITHOUT THE KNOWLEDGE OF THE UNDERSIGNED TO ANYONE INCLUDING TO ANY TRUST SOCIETY NON-PROFIT COMPANY. SINCE THE SOCIETY HAS SOLD THE LAND WITHOUT THE PERMISSION OF THIS OFFICE AND MOREOVER THE TRANSACT ION HAS NOT BEEN ACCOUNTED IN THE BOOKS OF ACCOUNTS WHICH W AS CONFRONTED TO THE SOCIETY AND THE SAME ADMITTED. TH ERE IS GROSS VIOLATION OF IT PROVISIONS. HENCE GENUINENESS OF CHARITABLE ACTIVITIES EARNED BY YOUR SOCIETY IS NOT ESTABLISHED. 2. IN LIGHT OF ABOVE FACTS AND NON-COMPLIANCE TO TH E CONDITIONS LAID DOWN IN THE REGISTRATION CERTIFICAT E, YOU ARE REQUIRED IN SHOW CAUSE IN WRITING AS TO WHY REGISTR ATION GRANTED U/S 12A TO THE SOCIETY BE NOT WITHDRAWN IN YOUR CASE. 3. IN THIS REGARD, YOUR CASE IS FIXED FOR HEARING ON 14/6/2011 AT 10.30 AM. IF YOU DO NOT WISH TO AVAIL THE OPPORTUNITY PERSONALLY, YOU MAY SUBMIT YOUR REPLY I N WRITING THROUGH AN AUTHORIZED REPRESENTATIVE WHILE ANY SUCH ORDER IS PASSED. PLEASE NOTE IF IN CASE OF NO N- COMPLIANCE, IT WILL BE PRESUMED THAT YOU HAVE NOTHI NG TO SAY IN THIS REGARD AND THE MATTER WILL BE DECIDED ON TH E BASIS OF MATERIAL AVAILABLE ON RECORD AND IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. ALSO PRODUCE BOOKS OF ACCO UNT FOR F.Y. 2006-07 AND 2007-08 ON THE ABOVE DATE. SD/- (P.V.RAO) DIRECTOR OF INCOME TAX (EXEMPTIONS). DELHI. ITA NO.5816/DEL./2015 6 9. BARE PERUSAL OF SHOW-CAUSE NOTICE, REPRODUCED AB OVE, GOES TO PROVE THAT THE LD. CIT (A) HAS NOT CALLED UPON T HE ASSESSEE TRUST TO SHOW-CAUSE THAT ITS ACTIVITIES ARE NOT GENUINE O R ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECT OF THE TR UST RATHER CANCELLED THE REGISTRATION ON THE SOLE GROUND THAT THE ASSESSEE HAS TRANSFERRED ITS LAND WITHOUT PRIOR PERMISSION OF TH E CIT (E) AND HENCE INDULGED INTO INGENUINE ACTIVITY. 10. THE LD. AR FOR THE ASSESSEE SOCIETY TO SUBSTANT IATE HIS ARGUMENTS THAT THE LAND IN QUESTION HAS NEVER BEEN TRANSFERRED IN THE NAME OF THE SOCIETY AS IT WAS WITHOUT ANY CONSI DERATION, DREW OUR ATTENTION TOWARDS REMAND REPORT GIVEN BY THE AO , AVAILABLE AT PAGES 98 TO 102 OF THE PAPER BOOK. AO, IN HIS REMA ND REPORT REGARDING PURCHASE OF LAND BY THE ASSESSEE SOCIETY VIDE SALE DEED DATED 24.07.2006 FROM DARSHAN SINGH, BROUGHT ON REC ORD THE FACT THAT SINCE THE SON OF DARSHAN SINGH, OWNER OF THE L AND IN QUESTION, WAS WORKING AS WORKSHOP SUPERINTENDENT IN ASSESSEE SOCIETYS COLLEGE, HE HAS TRANSFERRED THE LAND IN QUESTION IN THE NAME OF ASSESSEE SOCIETY SO AS TO SHOW THE TOTAL HOLDING OF 18.5 ACRES OF LAND WITH THE ASSESSEE SOCIETY AS PER CONDITIONS LA ID DOWN BY ALL INDIA COUNCIL OF TECHNICAL EDUCATION (AICTE). ITA NO.5816/DEL./2015 7 11. THOUGH AN ACCOUNT PAYEE CHEQUE NO.420931 DATED 24.07.2006 FOR A CONSIDERATION OFRS.7,37,000/- WAS TAKEN BY HIM BUT THE SAME WAS NEVER ENCASHED AND POSSESSION OF T HE LAND WAS ALSO NOT TRANSFERRED TO THE ASSESSEE SOCIETY. AO, IN HIS REMAND REPORT, HAS ALSO CATEGORICALLY MENTIONED THAT STAMP DUTY FOR REGISTRATION OF BOTH THE SALE DEEDS DATED 24.07.200 6 & 26.09.2007 HAVE BEEN INCURRED BY THE ASSESSEE SOCIETY WHICH HA VE BEEN DULY RECORDED IN THE BOOKS OF ACCOUNT AND NO PAYMENT HAS BEEN MENTIONED IN THE BOOKS OF ACCOUNT FOR THE COST OF P URCHASE OF LAND IN QUESTION. AO, IN HIS REMAND REPORT, HAS ALSO ME NTIONED THAT THE REAL MOTIVE FOR EXECUTION OF THE SALE DEED BY DARSH AN SINGH IN ASSESSEE SOCIETYS NAME TO SATISFY THE CONDITIONS L AID DOWN BY AICTE TO SHOW THE LAND MEASURING 18.5 ACRES TO STAR T A POLYTECHNIC COLLEGE. 12. NO DOUBT, THE LAND IN QUESTION WAS TRANSFERRED IN THE NAME OF ASSESSEE SOCIETY BY DARSHAN SINGH BY VIRTUE OF THE SALE DEED DATED 24.07.2006 BUT ITS SALE CONSIDERATION HAS NEVER BEE N PASSED AS THE CHEQUE FOR RS.7,37,000/- HANDED OVER TO DARSHAN SIN GH HAS NEVER BEEN ENCAHSED NOR ANY PAYMENT IN CASH IS PROVED TO HAVE BEEN MADE TO DARSHAN SINGH BY ASSESSEE SOCIETY AS BOOKS OF ACCOUNT HAS BEEN DULY SCRUTINIZED BY THE AO. SO THE SALE DEED D ATED 24.07.2006 IN FAVOUR OF THE ASSESSEE SOCIETY BEING WITHOUT ITA NO.5816/DEL./2015 8 CONSIDERATION IS VOID AB INITIO. MOREOVER, THE LAN D IN QUESTION STOOD RE-TRANSFERRED IN THE NAME OF DARSHAN SINGH B Y VIRTUE OF SALE DEED DATED 26.09.2007. 13. WHEN THE ASSESSEE SOCIETY HAS NOT BECOME THE OW NER OF THE LAND IN QUESTION BY VIRTUE OF SALE DEED DATED 24.07 .2006, THE SAME BEING WITHOUT CONSIDERATION, THERE IS NO QUESTION O F VIOLATING THE TERMS AND CONDITIONS LAID DOWN BY THE LD. CIT (E) F OR TRANSFERRING THE LAND OF THE ASSESSEE SOCIETY WITHOUT HIS PERMIS SION. MOREOVER, WHEN IT IS ALSO UNDISPUTED FACT THAT POSSESSION OF LAND REMAINED THROUGHOUT WITH DARSHAN SINGH, IT SHOWS THE STATEME NTS OF DARSHAN SINGH AND RAKESH CHAND BAJAJ RECORDED BY THE AO DUR ING REMAND PROCEEDINGS THAT THE LAND IN QUESTION HAS MERELY SH OWN TO HAVE BEEN TRANSFERRED TO SATISFY THE CONDITIONS LAID DOW N BY THE AICTE TO START A POLYTECHNIC COLLEGE ARE TRUE AND CORRECT AND AS SUCH, NO MALAFIDE CAN BE ATTRIBUTED. RATHER IT WAS A MUTUAL ARRANGEMENT BETWEEN THEM. 14. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WE AR E OF THE CONSIDERED VIEW THAT WHEN THE ASSESSEE SOCIETY HAS NOT BECOME THE OWNER OF THE LAND IN QUESTION, THERE IS NO QUESTION OF INDULGING IN INTO INGENUINE ACTIVITIES OR THAT THE ACTIVITIES OF ASSESSEE SOCIETY ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OB JECT OF THE TRUST. MOREOVER, IT IS NOWHERE THE CASE OF THE CIT (E) THA T THE ASSESSEE ITA NO.5816/DEL./2015 9 SOCIETY IS NOT RUNNING IN ACCORDANCE WITH ITS AIMS AND OBJECTS. NO DOUBT, ASSESSEE SOCIETY HAS ENTERED INTO A SHAM TRA NSACTION BY VIRTUE OF THE SALE DEEDS DATED 24.07.2006 AND 26.09 .2007 QUA THE LAND IN QUESTION IN ORDER TO MISREPRESENT AICTE TO GET THE APPROVAL FOR SETTING UP A POLYTECHNIC COLLEGE, BUT THIS FACT HAS NOT PROVED IN ANY MANNER THAT THE ACTIVITIES OF THE ASSESSEE TRUS T ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH ITS AIMS AND OBJECTS. RATHER IN THE REMAND REPORT IT IS RECORDED BY THE A O THAT ASSESSEE SOCIETY IS RUNNING AN EDUCATIONAL INSTITUTION HAVIN G 1000 STUDENTS ON ITS ROLL WITH HUGE TEACHING STAFF AND NO COMPLAI NT HAS BEEN RECEIVED AS TO ITS ACTIVITIES. 15. THE CONTENTION OF THE LD. DR THAT ONCE THE ADDI TION MADE BY THE AO U/S 69B OF THE ACT QUA THE SALE OF LAND IN Q UESTION FOR A CONSIDERATION OF RS.7,50,000/- BY THE ASSESSEE SOCI ETY HAS BEEN ACCEPTED BY THE ASSESSEE, THE ASSESSEE SOCIETY IS E STOPPED FROM CLAIMING THAT IT HAS NOT TRANSFERRED THE LAND IN TH E NAME OF DARSHAN SINGH, IS NOT SUSTAINABLE AS DISCUSSED IN THE PRECE DING PARAS THAT IT CANNOT BE TREATED AS A SALE TRANSACTION AT ALL BEIN G WITHOUT CONSIDERATION, FACTUM OF MERELY ACCEPTING THE ADDIT ION MADE BY AO U/S 69B, WOULD NOT CHANGE THE LEGAL POSITION. 16. SO, WE ARE OF THE CONSIDERED VIEW THAT LD. CIT (E) HAS ERRED IN CANCELLING THE REGISTRATION GRANTED TO THE ASSES SEE SOCIETY U/S ITA NO.5816/DEL./2015 10 12A OF THE ACT. CONSEQUENTLY, APPEAL FILED BY THE ASSESSEE IS ALLOWED AND CIT (E) IS DIRECTED TO RESTORE/GRANT TH E REGISTRATION TO ASSESSEE SOCIETY U/S 12A OF THE ACT. ORDER PRONOUNCED IN OPEN COURT ON THIS 30 TH DAY OF NOVEMBER, 2018. SD/- SD/- (N.K. BILLAIYA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 30 TH DAY OF NOVEMBER , 2018 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(E), NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.