GETTWELL HEALTH & EDUCATION SAMITI, BHARATPUR V. CIT-EXEMPTION, Jaipur

ITA 638/JPR/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4706 (ITAT-JAIPUR)
• Duration Of Justice: 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 10-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B K GUPTA CIT DHK
• Keywords: Charitable institution; Opportunity of being heard; Diversion of income; Wrong claim
• Section: 143(3); 12AA; 147; 263; 12

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA NO. 638/JP/2018 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2014-15 GETWELL HEALTH & EDUCATION SAMITI, NEAR DR. B.L. RANWA, OPP. S.K. SCHOOL, SIKAR. CUKE VS. CIT(EXEMPTIONS), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AABTG 3870 D VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI B.K. GUPTA (CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 23/10/2018 MN?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 26/10/2018 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE REVISION ORDER DATED 28/03/2018 OF LD. CIT(E), JAIPUR FOR THE A.Y. 2014-15. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY LD. CIT U/S 263 IS ILLEGAL AND BAD IN LAW BE QUASHE D. 2. THE LD. CIT HAS ERRED ON FACTS AND IN LAW IN HOL DING THAT PAYMENT OF RENT OF RS. 5,50,000/- TO B.L. RANWA HUF IS NOT GEN UINE AND DIRECTING THE A.O. TO MAKE ADDITION ON THIS ISSUE, WITHOUT CAUSING ANY INDEPENDENT INQUIRY OF HIS OWN AS TO HOW THE SA ME IS NOT GENUINE OR UNREASONABLE MORE PARTICULARLY, WHEN THE A.O. HAS ITA 638/JP/2018_ GETWELL HEALTH & EDUCATION SAMITI VS CIT(E) 2 ALREADY ASSESSED SUCH RENTAL INCOME IN THE HANDS OF B.L. RANWA IN THE ORDER PASSED U/S 143(3)/147 DATED 26/12/2017 FO R A.Y. 2010- 11 AND INITIATED PROCEEDINGS U/S 147 FOR ASSESSING THE SAME IN HIS HANDS FOR A.Y. 2011-12 AND A.Y. 2012-13. 2.1 THE LD. CIT(E) HAS ERRED IN FACTS AND IN LAW IN HOLDING THAT A.O. HAS NOT MAKE ANY INQUIRY OR VERIFICATION REGARDING THE INCOME OF MEDICAL SHOP RUN BY SMT. KAMLA RANWA (SECRETARY) IG NORING THAT SHE IS NOT RUNNING ANY SUCH SHOP IN THE YEAR UNDER CONSIDERATION AND THIS FACT IS EVIDENT FROM THE ORDER OF CIT(E) U /S 254/12AA DATED 09/10/2015. 3. THE ASSESSEE CRAVES TO AMEND, ALTER AND MODIFY A NY OF THE GROUNDS OF APPEAL. 4. NECESSARY COST BE ALLOWED TO THE ASSESSEE. 2. THE ASSESSEE IS A SOCIETY REGISTERED UNDER RAJAST HAN SOCIETY REGISTRATION ACT, 1958. THE MAIN OBJECT OF THE SOCIE TY IS TO PROVIDE MEDICAL FACILITY IN THE STATE OF RAJASTHAN. THE ASSE SSEE IS RUNNING A HOSPITAL AT SIKAR IN THE NAME AND STYLE OF GETWELL H OSPITAL & RESEARCH CENTRE. THE ASSESSEE FILED ITS RETURN OF INCOME ON 1 9/2/2015 DECLARING NIL INCOME AFTER CLAIMING EXEMPTION U/S 11 OF THE I NCOME TAX ACT, 1961 (IN SHORT THE ACT). THE ASSESSING OFFICER COMPLETED THE SCRUTINY ASSESSMENT U/S 143(3) OF THE ACT ON 23 RD DECEMBER, 2016 AND DENIED THE CLAIM OF EXEMPTION U/S 11 OF THE ACT. ACCORDING LY, THE ASSESSING OFFICER ASSESSED THE INCOME OF THE ASSESSEE AT RS. 27,41,852/- BEING A SURPLUS DECLARED BY THE ASSESSEE. SUBSEQUENTLY ON E XAMINATION OF THE RECORD, THE LD. CIT(E) NOTED THAT THE ORDER PASSED B Y THE ASSESSING ITA 638/JP/2018_ GETWELL HEALTH & EDUCATION SAMITI VS CIT(E) 3 OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTERES T OF THE REVENUE IN RESPECT OF TWO ISSUES VIZ (I) INCOME OF MEDICAL SHOP (M/S GETWELL MEDICAL AGENCY) & (II) BOGUS CLAIM OF RENT PAYMENT. ACCORDI NGLY, THE LD. CIT(E) ISSUED A SHOW CAUSE NOTICE U/S 263 OF THE ACT AS TO WHY THE ORDER PASSED BY THE ASSESSING OFFICER IS NOT SET ASIDE BE ING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THOUGH T HE ASSESSEE REQUESTED FOR TIME FOR FILING THE REPLY HOWEVER, THE LD. CIT(E) DECLINED TO GRANT MORE OPPORTUNITY TO THE ASSESSEE TO FILE THE REPLY AND CONSEQUENTLY PASSED THE IMPUGNED ORDER WHEREBY THE ASSESSMENT ORD ER WAS SET ASIDE FOR FRESH ASSESSMENT. 3. BEFORE US, THE LD AR OF THE ASSESSEE HAS SUBMITT ED THAT THE ASSESSEE FILED AN APPLICATION SEEKING REGISTRATION U/S 12AA OF THE ACT BEFORE THE LD. CIT(E) ON 19/01/2010, HOWEVER, THIS AP PLICATION WAS REJECTED BY THE LD. CIT(E) ON THE GROUND THAT THE PA YMENTS OF RENT VIOLATES SECTION 13(1)(C) OF THE ACT AND FURTHER TH E INCOME OF THE MEDICAL SHOP FROM THE HOSPITAL PREMISES WAS ALSO CONSIDERED BY THE LD. CIT(E) AS IN VIOLATION OF SECTION 13(1)(C) FOR REFUSING THE R EGISTRATION U/S 12AA OF THE ACT WHILE PASSING THE ORDER DATED 09/10/2015. THU S, THE LD AR HAS SUBMITTED THAT SINCE THE REGISTRATION WAS REFUSED, T HEREFORE, THE ASSESSING OFFICER DENIED THE BENEFIT OF SECTIONS 11 AND 12 OF THE ACT AND FURTHER THE RENTAL INCOME WAS ALREADY ASSESSED BY TH E ASSESSING OFFICER ITA 638/JP/2018_ GETWELL HEALTH & EDUCATION SAMITI VS CIT(E) 4 IN THE HANDS OF DR. B.L. RANWA FOR THE A.Y. 2010-11 VIDE ORDER DATED 26/12/2017 PASSED U/S 143(3) READ WITH SECTION 147 O F THE ACT. THE ASSESSING OFFICER HAS ALSO REOPENED THE ASSESSMENT FOR THE A.Y. 2011-12 AND 2012-13 IN CASE OF DR. B.L. RANWA FOR THE ASSES SMENT OF RENTAL INCOME IN HIS HAND. AS REGARDS THE INCOME FROM MEDI CAL SHOP RUN BY SMT. KAMLA RANWA, NO SUCH SHOP IS RUN BY HER IN THE YEAR UNDER CONSIDERATION, THEREFORE, THERE IS NO QUESTION OF A NY INCOME FROM THE MEDICAL SHOP DURING THE YEAR UNDER CONSIDERATION AS AN ISSUE TAKEN UP BY THE LD. CIT(E) BY ISSUING THE SHOW CAUSE NOTICE. THE LD. AR HAS FURTHER SUBMITTED THAT THE ASSESSEE CHALLENGED THE ORDER PASSED BY THE LD. CIT(E) REFUSING TO GRANT REGISTRATION U/S 12AA O F THE ACT IN THE APPEAL FILED BEFORE THIS TRIBUNAL AND THIS TRIBUNAL VIDE ORD ER DATED 28/09/2018 HAS DIRECTED THE LD. CIT(E) TO GRANT REGISTRATION U/ S 12AA OF THE ACT TO THE ASSESSEE. BOTH THE ISSUES WHICH WERE SUBJECT MATT ER OF DENIAL OF REGISTRATION U/S 12AA OF THE ACT HAS BEEN CONSIDERE D BY THE TRIBUNAL WHILE PASSING THE ORDER DATED 28/09/2018 IN THE APPE AL AGAINST THE ORDER OF DENIAL OF REGISTRATION U/S 12AA OF THE ACT. HE H AS FURTHER SUBMITTED THAT EVEN OTHERWISE SMT. KAMLA RANWA FINALLY DONATED THE ENTIRE STOCK OF MEDICINES TO THE ASSESSEES SOCIETY AND THE LD. CIT(E) HAS NOT DISPUTED THIS FACT THAT ON 30/11/2011, THE MEDICINE S STOCK OF MEDICAL SHOP IN QUESTION WAS DONATED TO THE ASSESSEE SOCIETY . THEREFORE, ITA 638/JP/2018_ GETWELL HEALTH & EDUCATION SAMITI VS CIT(E) 5 INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT B Y THE LD. CIT(E) BASED ON THE ORDER PASSED U/S 12AA(1)(B) OF THE ACT AND C ONSEQUENTIAL IMPUGNED REVISION ORDER ARE NOT VALID AND LIABLE TO BE QUASHED. HE HAS RELIED UPON THE DECISION OF HONBLE GAUHATI HIGH CO URT DECISION IN THE CASE OF SMT. LALITA CHAOUDHARY VS CIT & ORS. (2007) 289 ITR 226. 4. ON THE OTHER HAND, THE LD CIT-DR HAS SUBMITTED T HAT THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT U/S 143(3) OF THE ACT HAS NOT CONDUCTED DUE ENQUIRY ON THE ISSUE OF INCOME FROM M EDICAL SHOP AND PAYMENT OF RENT BY THE ASSESSEE SOCIETY TO B.L. RAN WA (HUF) AND THEREFORE, THE ORDER PASSED BY THE ASSESSING OFFICE R IS ERRONEOUS SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. HE HAS REFERRED TO EXPLANATION-2 TO SECTION 263 OF THE ACT AND SUBMITT ED THAT THE ORDER PASSED BY THE ASSESSING OFFICER SHALL BE DEEMED TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE IF IN THE OPINION OF THE COMMISSIONER, THE ORDER IS PASSED WITHOUT MAKING ENQ UIRY OR VERIFICATION, WHICH SHOULD HAVE BEEN MADE. THUS, WHEN THE ASSESSING OFFICER HAS NOT CONDUCTED ANY ENQUIRY ON THIS ISSUE THEN THE ORDER PASSED BY THE ASSESSING OFFICER SHALL BE ERRONEOUS SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. HE HAS RELIED UPON THE ORDER OF THE LD. CIT(E). ITA 638/JP/2018_ GETWELL HEALTH & EDUCATION SAMITI VS CIT(E) 6 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER HAS PASSED THE SCRUTINY ASSESSMENT U/S 143(3) OF THE ACT ON 23 RD DECEMBER, 2016 WHEREBY THE ASSESSING OFFICER HAS DENIED THE EXEMPTION U/S 11 A ND 12 OF THE ACT FOR WANT OF REGISTRATION U/S 12AA OF THE ACT. SUBSEQUENT LY THE LD. CIT(E) HAS ISSUED SHOW CAUSE NOTICE U/S 263 OF THE ACT TO REVIS E THE ASSESSMENT ORDER ON TWO ISSUES AS UNDER: 1. INCOME OF M/S GETWELL MEDICAL AGENCY: THE ASSES SEE SOCIETY IS RUNNING A MEDICAL SHOP AT THE HOSPITAL PREMISE IN T HE NAME OF SMT. KAMLA RANWA WHO IS SECRETARY OF THE SOCIETY. HOWEVE R, INCOME OF MEDICAL AGENCY WAS NOT INCORPORATED IN THE RECEIPTS OF SOCIETY DURING THE YEAR UNDER CONSIDERATION. THEREFORE, FILE S EXPLAIN AS TO WHY INCOME OF MEDICAL AGENCY SHOULD NOT BE CONSIDER ED IN THE SOCIETY FOR THE YEAR UNDER CONSIDERATION. 2. BOGUS CLAIM OF RENT PAYMENT: THE ASSESSEE SOCIET Y MADE PAYMENT OF RENT RS. 5,50,000/- TO B.L. RANWA (HUF) IN THE I NCOME AND EXPENDITURE ACCOUNT DURING THE YEAR. HOWEVER, OWNER SHIP OF SUCH RENTAL PROPERTY HELD IN THE NAME OF SH. B.L. RANWA (INDIVIDUAL). THEREFORE, PAYMENT OF RENT COVERED U/S 13(1) (C) OF THE ACT. THE CLAIM OF RENT PAYMENT OF RS. 5,50,000/- IS NOT ADMI SSIBLE AND REQUIRED TO BE DISALLOWED, THEREFORE, FILE EXPLANAT ION OF THE SAME. THEREFORE, AN OPPORTUNITY OF BEING HEARD IS GIVEN T O FILE REPLY OF THIS NOTICE ON 20/01/2018 AT MY OFFICE SITUATED AT 3 RD FLOOR, KAILASH HEIGHTS, LAL KOTHI, TONK ROAD, JAIPUR. ITA 638/JP/2018_ GETWELL HEALTH & EDUCATION SAMITI VS CIT(E) 7 AS REGARDS THE INCOME OF M/S GETWELL MEDICAL AGENCY, WE NOTE THAT DURING THE YEAR UNDER CONSIDERATION, THERE WAS NO SU CH SHOP RUN BY SMT. KAMLA RANWA AS THE SAID SHOP WAS CLOSED IN THE YEAR 2 011 ITSELF AND THE MEDICINE STOCK OF THE SHOP WAS DONATED TO THE ASSESS EE SOCIETY ON 30/11/2011. THUS, IT IS CLEAR THAT THERE WAS NO SUCH ISSUE IN THE YEAR UNDER CONSIDERATION, HOWEVER, THE LD. CIT(E) HAS TAKE N UP THE SAID ISSUE AS IT WAS ONE OF THE REASONS FOR DENIAL OF REGISTRAT ION U/S 12AA OF THE ACT WHILE REJECTING THE APPLICATION OF THE ASSESSEE VIDE ORDER DATED 09- 14/10/2015. THE SAID ORDER PASSED BY THE LD. CIT(E) U/S 12AA(1)(B) OF THE ACT WAS CHALLENGED BEFORE THIS TRIBUNAL AND THIS TRIBUNAL VIDE ORDER DATED 28/09/2018 IN ITA NO. 245/JP/2016 DIRECTED TH E LD. CIT(E) TO GRANT REGISTRATION U/S 12AA OF THE ACT. THEREFORE T HE ISSUE RAISED BY THE LD. CIT(E) IN THE SHOW CAUSE NOTICE REGARDING THE INC OME OF THE MEDICAL SHOP WAS A NON-EXISTING ISSUE FOR THE YEAR UNDER CON SIDERATION. 5.1 AS REGARDS THE BOGUS CLAIM OF RENT PAYMENT, WE F IND THAT THE LD. CIT(E) HAS GIVEN THE REFERENCE OF SECTION 13(1)(C) O F THE ACT WHEREAS THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT O RDER U/S 143(3) OF THE ACT HAS DENIED THE BENEFIT OF SECTIONS 11 AND 1 2 OF THE ACT, THEREFORE, THE QUESTION OF VIOLATION OF PROVISIONS OF SECTION 13(1)(C) OF THE ACT AS ALLEGED BY THE LD. CIT(E) DOES NOT ARISE. IT APPEARS THAT BOTH ITA 638/JP/2018_ GETWELL HEALTH & EDUCATION SAMITI VS CIT(E) 8 THESE ISSUES WERE PICKED UP BY THE LD. CIT(A) AS THES E WERE THE GROUNDS FOR REJECTING THE APPLICATION FOR REGISTRATION U/S 12AA OF THE ACT. THE ORDER OF THE LD. CIT(E) PASSED U/S 12AA (1)(B) OF T HE ACT HAS BEEN SET ASIDE BY THE TRIBUNAL IN THE APPEAL FILED BY THE ASS ESSEE AND CONSIDERED THESE TWO ISSUES IN PARA 6 TO 8 OF ORDER DATED 28/09 /2018 AS UNDER: 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE RELEVANT MATERIAL ON RECORD. THE PROVISIONS OF SECTION 12AA CONTEMPLATE THAT THE LD. CIT (E) HAS TO SATISFY HIMSELF ABOUT THE GE NUINENESS OF THE ACTIVITIES OF THE TRUST OR INSTITUTION AND ALSO ABO UT ITS OBJECTS. SUBJECT TO THE SATISFACTION ABOUT THE GENUINENESS OF THE ACTIV ITIES AND CHARITABLE NATURE OF OBJECTS, THE LD. CIT (E) WOULD EITHER GRA NT THE CERTIFICATE OF REGISTRATION OR WOULD REJECT THE PRAYER. THUS IN O RDER TO SATISFY HIMSELF, THE PRIMARY CONDITIONS ARE ONLY TO ASCERTAIN WHETHE R THE OBJECTS OF THE TRUST OR INSTITUTION ARE CHARITABLE IN NATURE AND T HE ACTIVITIES ARE GENUINE AND BEING CARRIED OUT TO ACHIEVE THE OBJECT S. THE ENQUIRY BY THE LD. CIT (E) SHALL BE RESTRICTED TO THE EXAMINAT ION WHETHER THE APPLICANT IS ACTUALLY CARRYING ON THE ACTIVITIES WH ICH ARE GENUINE AND THUS THE GENUINENESS OF THE ACTIVITIES HAS TO BE SE EN KEEPING IN MIND THE OBJECTS THEREOF. IN OTHER WORDS, THE LD. CIT (E) S HALL SATISFY HIMSELF ABOUT THE FACT THAT THE ACTIVITIES ARE GENUINE AND IN CON SONANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION. SECTION 12AA LAYS DOWN THE PROCEDURE FOR REGISTRATION AND, THEREFORE, THE ENQU IRY TO BE CONDUCTED BY THE LD. CIT (E) WHILE CONSIDERING THE APPLICATIO N FOR REGISTRATION IS RESTRICTED ONLY ON THE ASPECT OF CHARITABLE NATURE OF THE OBJECTS AND GENUINENESS OF THE ACTIVITIES AND IT WOULD NOT EXTE ND TO ASCERTAIN WHETHER THE INCOME DERIVED BY THE TRUST OR INSTITUT ION IS EITHER NOT BEING SPENT FOR CHARITABLE PURPOSES OR SUCH INSTITU TION IS EARNING PROFIT ITA 638/JP/2018_ GETWELL HEALTH & EDUCATION SAMITI VS CIT(E) 9 EXCEPT THE CASE FALLS IN THE PROVISO TO SECTION 2(1 5) OF THE ACT. IT IS UNDISPUTED FACT THAT THE CASE OF THE ASSESSEE BEFOR E US DOES NOT FALL IN THE CATEGORY OF PROVISO TO SECTION 2(15) AND, THERE FORE, THE SCOPE OF ENQUIRY BY THE LD. CIT (E) AT THE TIME OF GRANT OF REGISTRATION UNDER SECTION 12AA WOULD NOT EXTEND TO SUCH ASPECT OF EAR NING PROFITS. EVEN OTHERWISE, THE LD. CIT (E) HAS NOT QUESTIONED THE C HARITABLE NATURE OF OBJECTS OF THE ASSESSEE AND EVEN THE DOMINANT AND P RIMARY OBJECTS AND ACTIVITIES OF THE ASSESSEE ARE NOT IN DISPUTE. THE OBJECTIONS RAISED BY THE LD. CIT (E) ARE ONLY IN RESPECT OF VIOLATION OF PRO VISIONS OF SECTION 13(3) READ WITH SECTION 13(1)(C) OF THE ACT AND THE GENUI NENESS OF THE DONATIONS DUE TO SPURT INCREASE IN AMOUNT OF DONATI ON. THE MAIN OBJECTION IS REGARDING THE VIOLATION OF SECTION 13( 3) AS IN VIEW OF LD. CIT (E) THE ASSESSEE HAS DIVERTED THE INCOME TO THE PER SONS SPECIFIED IN SECTION 13(3) OF THE ACT. IT IS PERTINENT TO NOTE THAT SECTION 13(3) PROVIDES ONLY THE CLASS OF THE PERSONS TO WHOM IF A NY BENEFIT IS GRANTED BY THE TRUST OR INSTITUTION, THE SAME WOULD NOT BE CONSIDERED AS INCOME APPLIED FOR THE CHARITABLE PURPOSES BUT WILL BE CON SIDERED AS APPLIED FOR BENEFIT OF SUCH PERSONS. FOR READY REFERENCE, WE Q UOTE SECTION 13(3) OF THE ACT AS UNDER :- SECTION 13(3) : THE PERSONS REFERRED TO IN CLAUS E (C) OF SUB-SECTION (1) AND SUB-SECTION (2) ARE THE FOLLOWING NAMELY :- (A) THE AUTHOR OF THE TRUST OR THE FOUNDER OF THE INSTI TUTION, (B) ANY PERSON WHO HAS MADE A SUBSTANTIAL CONTRIBUTION TO THE TRUST OR INSTITUTION, [THAT IS TO SAY, ANY PERSON WHOSE TOTA L CONTRIBUTION UP TO THE END OF THE RELEVANT PREVIOUS YEAR EXCEEDS [FIFT Y] THOUSAND RUPEES], (C) WHERE SUCH AUTHOR FOUNDER OR PERSON IS A HINDU UNDI VIDED FAMILY, A MEMBER OF THE FAMILY; ITA 638/JP/2018_ GETWELL HEALTH & EDUCATION SAMITI VS CIT(E) 10 (CC) ANY TRUSTEE OR THE TRUST OR MANAGER (BY WHATEV ER NAME CALLED) OF THE INSTITUTION; (D) ANY RELATIVE OF ANY SUCH AUTHOR; FOUNDER, PERSON, [ MEMBER, TRUSTEE OR MANAGER] AS AFORESAID; (E) ANY CONCERN IN WHICH ANY OF THE PERSONS REFERRED TO IN CLAUSES (A), (B), (C),(CC) AND (D) HAS A SUBSTANTIAL INTEREST. THERE IS NO DISPUTE THAT THE HOSPITAL BUILDING IN QUESTION IS OWNED BY THE PERSONS, WHO ARE THE PRESIDENT AND SECRETARY OF THE ASSESSEE SOCIETY AND, THEREFORE, THEY FALL IN THE CATEGORY OF SPECIF IED PERSONS UNDER SECTION 13(3) OF THE ACT. HOWEVER, SECTION 13(3) I TSELF WOULD NOT IPSO FACTO LEAD TO THE CONCLUSION THAT AN INCOME OF THE SOCIETY OR INSTITUTION HAS BEEN APPLIED FOR THE BENEFIT OF THE PERSONS WIT HOUT CONSIDERING THE PROVISIONS OF SUB-SECTION (2) OF SECTION 13 OF THE ACT WHICH READS AS UNDER:- (2) WITHOUT PREJUDICE TO THE GENERALITY OF THE PROV ISIONS OF CLAUSE ( C ) 45 [AND CLAUSE ( D )] OF SUB-SECTION (1), THE INCOME OR THE PROPERTY 46 OF THE TRUST OR INSTITUTION OR ANY PART OF SUCH INCOME OR PROPERTY SHALL, FOR THE PURPOSES OF THAT CLAUSE, BE DEEMED TO HAVE BEEN USED OR APPLIED FOR THE BENEFIT OF A PERSON REFERRED TO IN SUB-SECTION (3), ( A ) IF ANY PART OF THE INCOME OR PROPERTY 47 OF THE TRUST OR INSTITUTION IS, OR CONTINUES TO BE, LENT 47 TO ANY PERSON REFERRED TO IN SUB- SECTION (3) FOR ANY PERIOD DURING THE PREVIOUS YEAR WITHOUT EITHER ADEQUATE SECURITY 47 OR ADEQUATE INTEREST OR BOTH; ( B ) IF ANY LAND, BUILDING OR OTHER PROPERTY 47 OF THE TRUST OR INSTITUTION IS, OR CONTINUES TO BE, MADE AVAILABLE FOR THE USE OF ANY PERSON REF ERRED TO IN SUB- SECTION (3), FOR ANY PERIOD DU RING THE PREVIOUS YEAR WITHOUT CHARGING ADEQUATE RE NT OR OTHER COMPENSATION; ( C ) IF ANY AMOUNT IS PAID BY WAY OF SALARY, ALLOWANCE O R OTHERWISE DURING THE PREVIOUS YEAR TO ANY PERSON REFERRED TO IN SUB- SECTION (3) OUT OF THE RESOURCES OF THE TRUST OR IN STITUTION FOR SERVICES RENDERED BY THAT PERSON TO S UCH TRUST OR INSTITUTION AND THE AMOUNT SO PAID IS IN EXCESS OF WHAT MAY BE REASONABLY PAID FOR SUCH SERVICES; ( D ) IF THE SERVICES OF THE TRUST OR INSTITUTION ARE MAD E AVAILABLE TO ANY PERSON REFERRED TO IN SUB- SECTION (3) DURING THE PREVIOUS YEAR WITHOUT ADEQUA TE REMUNERATION OR OTHER COMPENSATION; ( E ) IF ANY SHARE, SECURITY OR OTHER PROPERTY IS PURCHAS ED BY OR ON BEHALF OF THE TRUST OR INSTITUTION FROM ANY PERSON REFERRED TO IN SUB-S ECTION (3) DURIN G THE PREVIOUS YEAR FOR CONSIDERATION WHICH IS MORE THAN ADEQUATE; ITA 638/JP/2018_ GETWELL HEALTH & EDUCATION SAMITI VS CIT(E) 11 ( F ) IF ANY SHARE, SECURITY OR OTHER PROPERTY IS SOLD BY OR ON BEHALF OF THE TRUST OR INSTITUTION TO ANY PERSON REFERRED TO IN SUB- SECTION (3) DURING THE PREVIOUS YEAR FOR CONSIDERATION WHICH IS LESS THAN ADEQUATE; 48 [( G ) IF ANY INCOME OR PROPERTY OF THE TRUST OR INSTITUTI ON IS DIVERTED DURING THE PREVIOUS YEAR IN FAVOUR OF ANY PERSON REFERRED TO I N SUB-SECTION (3): PROVIDED THAT THIS CLAUSE SHALL N OT APPLY WHERE THE INCOME, OR THE VALUE OF THE PROPERTY OR, AS THE CASE MAY BE, THE AGGREGATE OF T HE INCOME AND THE VALUE OF THE PROPERTY, SO DIVERTED DOES NOT EXCEED ONE THOUSAND RUPEES;] ( H ) IF ANY FUNDS 49 OF THE TRUST OR INSTITUTION ARE, OR CONTINUE TO RE MAIN, INVESTED 49 FOR ANY PERIOD DURING THE PREVIOUS YEAR (NOT BEING A PE RIOD BEFORE THE 1ST DAY OF JANUARY, 1971), IN ANY CONCERN 49 IN WHICH ANY PERSON REFERRED TO IN SUB- SECTION (3) HAS A SUBSTANTIAL INTEREST. THEREFORE, THE INCOME WHICH WOULD BE DEEMED TO HAVE BEEN USED OR APPLIED FOR THE BENEFIT OF THE PERSONS SPECIFIED UN DER SECTION 13(3) IS ONLY TO THE EXTENT IF IT WAS WITHOUT ANY ADEQUATE S ECURITY OR INTEREST OR ADEQUATE SERVICE OR CONSIDERATION ETC. IN THE CASE IN HAND, THE ASSESSEE HAS PAID THE RENT TO THE PERSONS SPECIFIED UNDER SE CTION 13(3) ON ACCOUNT OF THE HOSPITAL BUILDING IN WHICH THE ASSES SEE IS RUNNING ITS ACTIVITIES OF PROVIDING MEDICAL FACILITY BEING HOSP ITAL. THE AREA OF THE HOSPITAL BUILDING IS NOT IN DISPUTE AND, THEREFORE, THE ASSESSEE HAS TAKEN THE BUILDING WHICH CONSISTS OF FIVE STORIES ON A PL OT OF 746 SQ. YARDS. THE LD. CIT (E) HAS NOT DISPUTED THIS FACT THAT THE BUI LDING IN QUESTION COMPRISING OF FIVE STORIES ON A PLOT OF 746 SQ. YAR DS AND, THEREFORE, IF THE RENT PAID BY THE ASSESSEE IS UNREASONABLE OR EXCESS IVE BY COMPARING THE FAIR MARKET RENT THEN TO THE EXTENT OF SUCH EXCESS RENT PAID BY THE ASSESSEE WOULD CONSTITUTE THE INCOME OF THE ASSESSE E SOCIETY IS APPLIED OR DEEMED TO HAVE BEEN APPLIED FOR THE BENEFIT OF T HE PERSONS REFERRED UNDER SECTION 13(3) OF THE ACT. HOWEVER, THE LD. C IT (E) WITHOUT ASCERTAINING OR GETTING ANY REPORT OF THE AO ON THI S POINT HAS ASSUMED THAT THE RENT PAID BY THE ASSESSEE IS THE INCOME DE EMED TO HAVE BEEN USED OR APPLIED FOR THE BENEFIT OF THE PERSONS SPEC IFIED UNDER SECTION 13(3) OF THE ACT. THE LD. CIT (E) HAS NOT GIVEN TH E FINDING THAT THE QUANTUM OF RENT IS EXCESSIVE OR UNREASONABLE KEEPIN G IN VIEW THE TOTAL ITA 638/JP/2018_ GETWELL HEALTH & EDUCATION SAMITI VS CIT(E) 12 CONSTRUCTED AREA UNDER THE TENANCY OF ASSESSEE SOCI ETY FOR RUNNING THE HOSPITAL. EVEN OTHERWISE, WHETHER THE RENT PAID BY THE ASSESSEE IS EXCESSIVE OR UNREASONABLE IN COMPARISON TO THE FAIR MARKET RENT, THE SAME IN OUR CONSIDERED VIEW, IS A SUBJECT MATTER OF ASSESSMENT WHEN THE FACT IS NOT IN DISPUTE THAT THE RENT IS PAID AG AINST THE HOSPITAL BUILDING TAKEN ON LEASE BY THE ASSESSEE SOCIETY. H ENCE THE MERE PAYMENT OF RENT ITSELF WOULD NOT AMOUNT TO VIOLATIO N OF PROVISIONS OF SECTION 13(2) AND 13(3) OF THE ACT OR SECTION 13(1) (C) OF THE ACT. WHAT SECTION 13(1) PROVIDES IS THAT TO THE EXTENT OF INC OME WHICH IS NOT APPLIED FOR THE CHARITABLE PURPOSES OF THE INSTITUT ION OR SOCIETY THE SAME WOULD NOT GET THE BENEFIT OF SECTION 11 OF THE ACT. THEREFORE, TO ARRIVE AT THE CONCLUSION WHETHER AN INSTITUTION OR TRUST H AS APPLIED ANY PART OR ANY PROPERTY OF THE TRUST OR INSTITUTION DIRECTLY O R INDIRECTLY FOR THE BENEFIT OF THE PERSONS REFERRED IN SECTION 13(3) OF THE ACT, A PROPER INVESTIGATION AND ENQUIRY IS REQUIRED WHEN IT IS NO T A MERE CASE OF DIVERSION OF INCOME BUT THE PAYMENT IS AGAINST THE CONSIDERATION OR AGAINST THE SERVICES. THEREFORE, SUBJECT TO THE PR OVISIONS OF SECTION 13(2) OF THE ACT AND WITHOUT CONDUCTING A PROPER EN QUIRY ABOUT THE FAIR MARKET RENT OF THE BUILDING IN QUESTION IT IS NOT P OSSIBLE TO COME TO THE CONCLUSION THAT THE PAYMENT OF RENT OF RS. 50,000/- PER MONTH BY THE ASSESSEE SOCIETY IN RESPECT OF THE HOSPITAL BUILDIN G OF SUCH A BIG SIZE OR AREA IS IN VIOLATION OF THE PROVISIONS OF SECTION 1 3 OF THE ACT. EVEN OTHERWISE, THE TRIBUNAL WHILE REMANDING THE MATTER TO THE RECORD OF THE LD. CIT (E) HAS EXPRESSED ITS INABILITY TO DETERMIN E THE ISSUE FOR WANT OF RELEVANT RECORD. HOWEVER, ONCE THE MATTER WAS REMA NDED TO THE LD. CIT (E), IT OUGHT TO HAVE FIRST ASCERTAINED THE FAIR MA RKET RENT OF THE HOSPITAL BUILDING IN QUESTION WHEN THE CONSTRUCTED AREA OF H OSPITAL IS NOT IN DISPUTE. THUS WHEN THE LD. CIT (E) HAS NOT GIVEN A FINDING ABOUT THE FAIR MARKET RENT OF THE BUILDING IN QUESTION THEN GIVING A FINDING IN THE ITA 638/JP/2018_ GETWELL HEALTH & EDUCATION SAMITI VS CIT(E) 13 IMPUGNED ORDER THAT THE PAYMENT OF RENT IS IN VIOLA TION OF PROVISIONS OF SECTION 13(3) READ WITH SECTION 13(1)(C) IS BASED P URELY ON ASSUMPTION AND CONJECTURES AND NOT BASED ON THE FACTS WHICH CA N SHOW THAT THE RENT PAID BY THE ASSESSEE IS EXCESSIVE OR UNREASONA BLE IN COMPARISON TO THE FAIR MARKET RENT OF THE BUILDING IN QUESTION. H ENCE WE DO NOT APPROVE THE APPROACH APPLIED BY THE LD. CIT (E) IN RESPECT OF THE ISSUE OF PAYMENT OF RENT IN QUESTION. 7. IT IS PERTINENT TO NOTE THAT THE AO FOR THE ASSE SSMENT YEARS 2010-11 TO 14-15 WHILE PASSING THE SCRUTINY ASSESSMENT UNDER S ECTION 143(3) READ WITH SECTION 147 AND 143(3) RESPECTIVELY HAS NOT QU ESTIONED OR DOUBTED THE REASONABLENESS OF RENT PAID BY THE ASSESSEE TO THE RELATED PARTIES. THOUGH THE AO WAS NOT REQUIRED TO EXAMINE THE ISSUE IN THE LIGHT OF THE PROVISIONS OF SECTIONS 11 TO 13 OF THE ACT, HOWEVER , EVEN IN THE NORMAL ASSESSMENT PROCEEDINGS IF THE RENT IS PAID TO THE R ELATED PARTIES THEN IT IS ALWAYS SUBJECT MATTER OF SCRUTINY OF THE AO TO A SCERTAIN WHETHER THE PAYMENT MADE BY THE ASSESSEE WAS REASONABLE OR EXCE SSIVE IN COMPARISON TO THE FAIR MARKET PRICE OR RENT. HENCE WHEN THE AO WHILE PASSING THE SCRUTINY ASSESSMENT IN ALL THE ASSESSME NT YEARS REPEATEDLY HAS NOT DOUBTED THE REASONABLENESS OF THE RENT PAID BY THE ASSESSEE SOCIETY, THEN THE FINDING OF THE LD. CIT (E) WITHOU T CONDUCTING ANY ENQUIRY IS BASED PURELY ON ASSUMPTION AND CONJECTUR ES AND NOT ON THE CORRECT FACTS. 8. THE SECOND OBJECTION RAISED BY THE LD. CIT (E) I S REGARDING INCOME FROM MEDICAL SHOP. IT IS NOT IN DISPUTE THAT THE ASSESS EE NEVER INVESTED ANY AMOUNT IN THE MEDICAL SHOP BUT THE SHOP WAS OWNED A ND RUN BY SMT. KAMLA RANWA. FURTHER IT IS ALSO NOT AN ALLEGATION OF THE LD. CIT (E) THAT SMT. KAMLA RANWA HAS CHARGED EXCESSIVE OR UNREASONA BLE PRICE OF THE MEDICINES EITHER FROM THE ASSESSEE SOCIETY OR FROM THE PATIENTS TREATED ITA 638/JP/2018_ GETWELL HEALTH & EDUCATION SAMITI VS CIT(E) 14 IN THE HOSPITAL. THUS MERE RUNNING A MEDICAL SHOP B Y A PERSON SPECIFIED UNDER SECTION 13(3) OF THE ACT WOULD NOT IPSO FACTO TANTAMOUNT TO DIVERSION OF INCOME OF THE ASSESSEE SOCIETY. RATHE R THE MEDICAL SHOP IS ESSENTIAL IN PROVIDING THE SERVICES TO THE PATIENTS AND, THEREFORE, IT CAN BE AN AID TO THE ACTIVITY OF PROVIDING MEDICAL FACI LITY TO THE PATIENTS OF THE ASSESSEE SOCIETY INSTEAD OF CONSIDERING IT AS D IVERSION OF INCOME. THERE IS NO ALLEGATION THAT DURING THE PERIOD WHEN SMT. KAMLA RANWA WAS RUNNING THE SHOP HAS GOT ANY FAVOUR OR BENEFIT IN THE SHAPE OF MONETARY OR OTHERWISE FROM THE ASSESSEE SOCIETY. T HE LD. CIT (E) HAS NOT DISPUTED THIS FACT THAT ON 30.11.2011 THE MEDICINE STOCKS OF MEDICAL SHOP IN QUESTION WAS DONATED TO THE ASSESSEE SOCIET Y AND, THEREFORE, THEREAFTER THERE IS NO QUESTION OF EVEN ALLEGED BEN EFIT OR DIVERSION OF INCOME TO THE SPECIFIED PERSONS. THE ORDER IN QUES TION HAS BEEN PASSED IN THE MONTH OF OCTOBER, 2015 WHEREAS THE SAID SHOP ITSELF WAS DONATED TO THE HOSPITAL ON 30.11.2011. IN VIEW OF THESE FAC TS, WHEN THERE IS NO SPECIFIC INSTANCE OF ANY FAVOUR OR DIVERSION, THEN RUNNING A SHOP BY THE SPECIFIED PERSON ITSELF CANNOT BE REGARDED AS A VIO LATION OF PROVISIONS OF SECTION 13 OF THE ACT UNTIL AND UNLESS ANY BENEFIT IS PROVIDED IN THE SHAPE OF INCOME APPLIED ON SUCH PERSONS. HENCE WE DO NOT FIND ANY MERIT IN THE OBJECTION RAISED BY THE LD. CIT (E) ON THIS ACCOUNT. THUS, IN VIEW OF THE ORDER OF THE TRIBUNAL DATED 28/09 /2018 IN THE APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER PASSED U/S 12AA(1)(B) OF THE ACT, THE IMPUGNED ORDER PASSED BY THE LD. CIT(E) U/S 263 OF THE ACT WOULD NOT SURVIVE. EVEN OTHERWISE ONCE THE REGISTRATION U/ S 12AA OF THE ACT WAS DIRECTED TO BE GRANTED THEN THE ASSESSING OFFICE R HAS TO CONSIDER THE ISSUE OF EXEMPTION U/S 11 AND 12 OF THE ACT WHILE P ASSING THE GIVING ITA 638/JP/2018_ GETWELL HEALTH & EDUCATION SAMITI VS CIT(E) 15 EFFECT ORDER AND THEREFORE, THE IMPUGNED ORDER PASS ED BY THE LD. CIT(E) BECOMES INFRUCTUOUS. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES AS WELL AS DISCUSSION, WE SET ASIDE THE IMPUGNED ORDER P ASSED U/S 263 OF THE ACT. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26/10/2018. SD/- SD/- FOE FLAG ;KNO FOT; IKY JKO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 26 TH OCTOBER, 2018 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- GETWELL HEALTH & EDUCATION SAMITI, SIK AR. 2. IZR;FKHZ @ THE RESPONDENT- THE CIT(EXEMPTIONS), JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 638/JP/2018) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR