M/s. Metro Health Care Society, Lucknow V. Commissioner of Income Tax (E), Lucknow

ITA 610/LKW/2019

AI Insights

The case involves Metro Health Care Society, a charitable society, which had its registration under section 12AA of the Income-tax Act, 1961, cancelled by the Commissioner of Income-tax (Exemption), Lucknow. The cancellation was based on a report from the Income Tax Officer (Exemption), Lucknow, which suggested that the society had not engaged in any charitable activities since its inception and was primarily using its status to avoid tax on commercial receipts. The society contested the cancellation, citing violations of natural justice, including the lack of a proper hearing and non-receipt of crucial documents and reports that were used to justify the cancellation. The Tribunal found merit in the society's arguments and allowed the appeal, emphasizing the need for a fair hearing.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 112623 (ITAT-LUCKNOW)
• Duration Of Justice: 3 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Next Hearing Date: 30-11-2022
• Assessment Year: 2019-2020
• Appeal Filed On: 24-10-2019
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHEELA CHOPRA
• Keywords: Opportunity of being heard; Principle of natural justice; Condonation of delay; Cancellation of registration
• Section: 12A; 12AA

Judgement Text

1 ITA No.610/LKW/2019 Metro Health Care Society, AY: 2019-20 IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, LUCKNOW BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENT AND SHRI GIRISH GRAWAL, ACCOUNTANT MEMBER ITA No. 610/LKW/2019 Assessment Years: 2019-20 M/s. Metro Health Care Society, 1/25, Vijay Khand- 1, Gomti Nagar, Lucknow, UP-226010 (PAN: AACAM1883R) Vs. Commissioner of Income-tax (exemption), Lucknlow (Appellant) (Respondent) Present for: Appellant by : N o n e Respondent by : Smt. Sheela Chopra, CIT, DR Date of Hearing : 01.12.2022 Date of Pronouncement : 09.01.2023 O R D E R PER BENCH: This appeal by the assessee is against order by CIT(E), Lucknow vide order dated 26.02.2019 in respect of cancellation order of registration u/s. 12AA(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”). 2. Grounds of appeal raised by the assessee are reproduced as under: i) The order dated 26.02.2019 is arbitrary, malafide and illegal and has been passed in violation of principles of natural justice. ii) The order dated 26.02.2019 has been passed without affording opportunity of hearing to the appellant. 2 ITA No.610/LKW/2019 Metro Health Care Society, AY: 2019-20 iii) The order dated 26.02.2019 has been passed on the basis of a complaint dated 04.02.2019 which was never served upon the appellant along with the show cause notice dated 15.02.2019. iv) The order dated 26.02.2019 has been passed relying upon a report dated 14.02.2019 of the Income Tax Officer (Exemption), Lucknow which was not mentioned in the show cause notice dated 15.02.2019. v) The order dated 26.02.2019 has been passed relying upon a report dated 14.02.2019 of the Income Tax Officer (Exemption), Lucknow which was never served upon the appellant along with the show cause notice dated 15.02.2019. vi) The order dated 26.02.2019 has been passed on the basis of false and frivolous grounds which are contrary to the actual facts of the case. vii) The order dated 26.02.2019 has been passed without application of mind. viii) The CIT (Exemption) vide order dated 26.02.2019 has arbitrarily held that the appellant is misusing the grant of exemption under section 12A without proper perusal and inspection of the financial records of the appellant. ix) The CIT(Exemption) has falsely and malafidely stated that no one appeared on behalf of the appellant on 25.02.2019, whereas the true facts of the case are that the appellant had appeared before the CIT(Exemption) on the said date, however the CIT(Exemption) refused to take the reply and the documents of the appellant on record.” 2. At the outset, we note that there is a delay of 178 days in filing the instant appeal. The impugned order of Ld. CIT(E), Lucknow is dated 26.02.2019 which was served on the assessee on 01.03.2019. The present appeal ought to have been filed on or before 29.04.2019 which has been filed on 25.10.2019. Assessee has placed on record a petition for condonation of delay along with affidavit wherein it has explained the reasons for delay which are owing to lapse on the part of professional engagement for filing the appeal. We have gone through the petition and are of an understanding that assessee has satisfactorily explained the cause for delay which are viewed from a pragmatic and justice oriented approach. Accordingly, we condone the delay and proceed to adjudicate upon the matter. 3 ITA No.610/LKW/2019 Metro Health Care Society, AY: 2019-20 3. Brief facts of the case are that assessee is a charitable society which was granted registration u/s. 12AA of the Act vide order no. ITBA/EXM/S/12AA/2018-19/1009910051(1) dated 24.05.2018 with registration no. as CIT(E),LUCK/12AA/2019-19/A/10106 with salient activities as relief of the poor, effective from AY 2018-19. Subsequently, office of Ld. CIT(E), Lucknow noted that assessee is not involved in performance of any charitable cause and its activities are not being carried out in accordance with the objective of the society. Such an observation was based on report of ITO (Exemption), Lucknow for which a show cause notice dated 15.02.2019 was issued to the assessee to show cause as to why the cancellation of registration granted u/s. 12AA be not cancelled. Ld. CIT(E) noted that none appeared in the proceedings nor any application for adjournment was received by him. Also, assessee failed to provide any reply with respect to the show cause issued by him. Accordingly, Ld. CIT(E) cancelled the registration w.e.f. 01.04.2018 by passing the impugned order. 4. Before us, none represented the assessee and Smt. Sheela Chopra, CIT, DR represented the department. 5. From the perusal of the grounds taken before us all of which are related to not affording reasonable opportunity of being heard, violation of principles of natural justice and non-supply of the report of the ITO (Exemption) which formed the basis for cancellation of registration u/s. 12AA(3) of the Act, we are inclined to adjudicate upon the matter by taking assistance from the Ld. CIT, DR. 6 From the perusal of the order of Ld. CIT(E), it is noted in para 2 that a report was called from the Income-Tax Officer (Exemption), Lucknow on the matter raised by the Ld. CIT(E) which was received by him vide file No. ITO(E)/LKO/Inspection Report/2018-19/1303 dated 4 ITA No.610/LKW/2019 Metro Health Care Society, AY: 2019-20 14.02.2019 wherein a recommendation was made to cancel the registration u/s. 12A by virtue of section 12AA(3) of the Act. Ld. CIT(E) noted that the facts brought to light by this report of ITO(E), Lucknow are vital wherein the assessee was found not having initiated any single act of charity since inception. Further, the registration u/s. 12AA of the Act was secured for prime motive of turning the commercial receipts into receipts of a 12A registered entity to avoid tax burden on the said receipt. Thus, by taking the findings of the report of ITO(Exemption), Lucknow, the registration was cancelled. 6.1. From the perusal of grounds of appeal, we note that ground (i) relates to violation of principles of natural justice, (iii) relates to a complaint which was never served on the assessee along with the show cause notice, (iv) and (v) relate to reliance placed upon a report of ITO(E), Lucknow which was never served on the assessee. 6.2. Considering the facts of the case as noted above and the grounds taken by the assessee, we are of the considered view that in the interest of justice and fair play and good conscience, it is proper to afford an opportunity to the assessee to represent its case before the Ld. CIT(E) by providing reasonable opportunity of hearing. We also direct the Ld. CIT(E) to provide copies of the material which forms the basis of invoking the provisions relating to cancellation of registration granted u/s. 12A of the Act so as to enable the assessee to make rebuttal on the same and justify its claim for continuity of registration already granted. We also direct the assessee to be diligent in attending on the hearings before the Ld. CIT(E) and make all the required submission to justify its claim. Accordingly, the appeal of the assessee is allowed for statistical purposes. 5 ITA No.610/LKW/2019 Metro Health Care Society, AY: 2019-20 7. In the result, appeal of the assessee is allowed for statistical purposes. Order pronounced in the open Court on 09 th January, 2023 as per the rules framed under Rule 34(4) of the Income Tax Appellate Tribunal Rules, 1963. Sd/- Sd/- (Mahavir Singh) (Girish Agrawal) Vice President Accountant Member Dated: 09 th January, 2023 JD, Sr. P.S. Copy to: 1. The Appellant: 2. The Respondent:. 3. CIT(E), Lucknow 4. CIT , Lucknow 5. DR, ITAT, Lucknow Bench, Lucknow 6. Guard file. //True Copy// By Order Assistant Registrar ITAT, Lucknow Benches, Lucknow