Maharaja Aggarsein Charitable Hospital Society, Sonepat V. CIT(Exemption), Chandigarh

ITA 6843/DEL/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1703 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: misc
• Appeal Filed On: 30-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARAMITA M BISWAS
• Assessee Lawyers: K SAMPATH SHRI V RAJA KUMAR
• Keywords: Charitable institution; Opportunity of being heard; Set aside
• Section: 80G; 12AA; 12; 10; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E : NEW DELHI) BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.6843/DEL./2018 MAHARAJA AGGARSEIN CHARITABLE VS. CIT (EXEMPTIONS ), HOSPITAL SOCIETY, CHANDIGARH. OPP. POLICE STATION, RAILWAY ROAD, GANAUR, DISTT. SONEPAT (HARYANA). (PAN : AABTM4328G) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K. SAMPATH, ADVOCATE SHRI V. RAJA KUMAR, ADVOCATE REVENUE BY : MS. PARAMITA M. BISWAS, CIT DR DATE OF HEARING : 04.06.2019 DATE OF ORDER : 13.06.2019 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, MAHARAJA AGGARSEIN CHARITABLE HOSPITAL SOCIETY (HEREINAFTER REFERRED TO AS THE APPLICANT SOCIETY ) BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 30.08.2018 PASSED BY THE COMMISSIONER OF INCOME-TAX (EXEMPTION S), CHANDIGARH ON THE GROUNDS INTER ALIA THAT :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (E) ERRED IN REJECTING THE APPLICAT ION SEEKING APPROVAL FOR EXEMPTION U/S80G OF THE INCOME -TAX ACT, 1961. THE ORDER BEING ARBITRARY, MISCONCEIVED , ERRONEOUS AND UNJUST MUST BE QUASHED WITH DIRECTION S TO GRANT APPROVAL AS SOUGHT. ITA NO.6843/DEL./2018 2 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : APPLICATION MOVED BY THE APPLICANT SOCIETY IN FORM 10G FOR SEEKING APPROVAL UNDER SECTION 80G OF THE INCOME- TAX ACT, 1961 (FOR SHORT THE ACT) HAS BEEN REJECT ED BY THE LD. CIT (E) ON THE GROUNDS INTER ALIA THAT THE APPLICANT HA S FAILED TO PROVIDE COGENT REASONS FOR SEEKING DONATIONS TO SUBSTANTIAT E THE NEED FOR DONATION AND IN THE ABSENCE OF WHICH REAL PURPOSE O F APPLICANT SOCIETY IS NOT ESTABLISHED; THAT THE APPLICANT SOCI ETY HAS FAILED TO AVOID QUERIES RAISED BY THE DEPARTMENT; THAT THE APPLICAN T SOCIETY INDULGED IN CASH TRANSACTION WHICH SHOWS THAT ITS ACTIVITIES ARE NOT WHOLLY TRANSPARENT; THAT APPLICANT SOCIETYS INDULGENCE IN CASH TRANSACTION DOES NOT MAKE THE ACTIVITIES AMENABLE TO THE PROPER VERIFICATION; THAT THE REAL PURPOSE OF APPLICANT SOCIETY FOR WHICH THE APPROVAL U/S 80G IS BEING SOUGHT IS MERELY TO SEEK DONATION AND TO A DD IT TO ITS SURPLUSES. 3. FEELING AGGRIEVED, THE ASSESSEE HAS COME UP BEFO RE THE TRIBUNAL BY CHALLENGING THE IMPUGNED ORDER PASSED B Y THE LD. CIT (E) BY WAY OF FILING THE PRESENT APPEAL. 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. ITA NO.6843/DEL./2018 3 5. UNDISPUTEDLY, APPLICANT SOCIETY HAS BEEN ACCORDE D REGISTRATION U/S 12AA OF THE ACT BY CIT, ROHTAK VIDE ORDER DATED 01.04.1997. IT IS ALSO NOT IN DISPUTE THAT REGISTRATION U/S 12AA O F THE ACT IS ONLY A PREREQUISITE TO MOVE AN APPLICATION U/S 80G OF THE ACT BUT NOT A SUFFICIENT CONDITION FOR APPROVING EXEMPTION TO THE DONATION U/S 80G OF THE ACT. 6. TO PROCEED FURTHER, WE WOULD LIKE TO EXTRACT THE PROVISIONS OF SECTION 80G(5)(I) TO (VII) FOR READY PERUSAL AS UND ER :- 80G(5) THIS SECTION APPLIES TO DONATIONS TO ANY IN STITUTION OR FUND REFERRED TO IN SUB-CLAUSE (IV) OF CLAUSE (A) OF SUB -SECTION (2), ONLY IF IT IS ESTABLISHED IN INDIA FOR A CHARITABLE PURPOSE AND IF IT FULFILLS THE FOLLOWING CONDITIONS, NAMELY : (I) WHERE THE INSTITUTION OR FUND DERIVES ANY INC OME, SUCH INCOME WOULD NOT BE LIABLE TO INCLUSION IN ITS TOTA L INCOME UNDER THE PROVISIONS OF SECTIONS 11 AND 12 OR CLAUS E (23AA) OR CLAUSE (23C) OF SECTION 10 : PROVIDED THAT WHERE AN INSTITUTION OR FUND DERIVES ANY INCOME, BEING PROFITS AND GAINS OF BUSINESS, THE CONDITION THAT SUCH INCOME WOULD NOT BE LIABLE TO INCLUSION IN ITS TOTAL INCOM E UNDER THE PROVISIONS OF SECTION 11 SHALL NOT APPLY IN RELATIO N TO SUCH INCOME, IF (A) THE INSTITUTION OR FUND MAINTAINS SEPARATE BOOK S OF ACCOUNT IN RESPECT OF SUCH BUSINESS; (B) THE DONATIONS MADE TO THE INSTITUTION OR FUND A RE NOT USED BY IT, DIRECTLY OR INDIRECTLY, FOR THE PURPOSE S OF SUCH BUSINESS; AND (C) THE INSTITUTION OR FUND ISSUES TO A PERSON MAKI NG THE DONATION A CERTIFICATE TO THE EFFECT THAT IT MAINTA INS SEPARATE BOOKS OF ACCOUNT IN RESPECT OF SUCH BUSINESS AND THAT THE DONATIONS RECEIVED BY IT WILL NOT BE USED, DIRECTLY OR INDIRECTLY, FOR THE PURPOS ES OF SUCH BUSINESS; (II) THE INSTRUMENT UNDER WHICH THE INSTITUTION OR FUND IS CONSTITUTED DOES NOT, OR THE RULES GOVERNING THE IN STITUTION OR FUND DO NOT, CONTAIN ANY PROVISION FOR THE TRANSFER OR APPLICATION AT ANY TIME OF THE WHOLE OR ANY PART OF THE ITA NO.6843/DEL./2018 4 INCOME OR ASSETS OF THE INSTITUTION OR FUND FOR ANY PURPOSE OTHER THAN A CHARITABLE PURPOSE; (III) THE INSTITUTION OR FUND IS NOT EXPRESSED TO B E FOR THE BENEFIT OF ANY PARTICULAR RELIGIOUS COMMUNITY OR CASTE; (IV) THE INSTITUTION OR FUND MAINTAINS REGULAR ACCO UNTS OF ITS RECEIPTS AND EXPENDITURE; (V) THE INSTITUTION OR FUND IS EITHER CONSTITUTED AS A PUBLIC CHARITABLE TRUST OR IS REGISTERED UNDER THE SOCIETI ES REGISTRATION ACT, 1860 (21 OF 1860), OR UNDER ANY L AW CORRESPONDING TO THAT ACT IN FORCE IN ANY PART OF I NDIA OR UNDER SECTION 25 OF THE COMPANIES ACT, 1956 (1 OF 1 956), OR IS A UNIVERSITY ESTABLISHED BY LAW, OR IS ANY OTHER EDUCATIONAL INSTITUTION RECOGNISED BY THE GOVERNMEN T OR BY A UNIVERSITY ESTABLISHED BY LAW, OR AFFILIATED TO A NY UNIVERSITY ESTABLISHED BY LAW, OR IS AN INSTITUTION FINANCED WHOLLY OR IN PART BY THE GOVERNMENT OR A LOCAL AUTH ORITY; (VI) IN RELATION TO DONATIONS MADE AFTER THE 31ST D AY OF MARCH, 1992, THE INSTITUTION OR FUND IS FOR THE TIME BEING APPROVED BY THE COMMISSIONER IN ACCORDANCE WITH THE RULES MA DE IN THIS BEHALF; AND (VII) WHERE ANY INSTITUTION OR FUND HAD BEEN APPROV ED UNDER CLAUSE (VI) FOR THE PREVIOUS YEAR BEGINNING ON THE 1ST DAY OF APRIL, 2007 AND ENDING ON THE 31ST DAY OF MARCH, 20 08, SUCH INSTITUTION OR FUND SHALL, FOR THE PURPOSES OF THIS SECTION AND NOTWITHSTANDING ANYTHING CONTAINED IN THE PROVISO T O CLAUSE (15) OF SECTION 2, BE DEEMED TO HAVE BEEN, (A) ESTABLISHED FOR CHARITABLE PURPOSES FOR THE PRE VIOUS YEAR BEGINNING ON THE 1ST DAY OF APRIL, 2008 AND ENDING ON THE 31ST DAY OF MARCH, 2009; AND (B) APPROVED UNDER THE SAID CLAUSE (VI) FOR THE PRE VIOUS YEAR BEGINNING ON THE 1ST DAY OF APRIL, 2008 AND ENDING ON THE 31ST DAY OF MARCH, 2009. 7. BARE PERUSAL OF THE PROVISIONS CONTAINED U/S 80G , EXTRACTED ABOVE, GOES TO PROVE THAT BEFORE ACCORDING APPROVAL U/S 80G OF THE ACT, THE LD. CIT (E) IS REQUIRED TO SATISFY HIMSELF THAT THE APPLICANT SOCIETY HAS BEEN ESTABLISHED WITH REAL CHARITABLE P URPOSE AND IN ORDER TO SATISFY HIMSELF, HE IS EMPOWERED TO SUMMON NUMER OUS DOCUMENTS ITA NO.6843/DEL./2018 5 VIZ. SEPARATE BOOKS OF ACCOUNTS, BANKS STATEMENTS, REGULAR ACCOUNTS OF RECEIPTS OF FUNDS AND EXPENDITURE, ETC.. TO SATISF Y HIMSELF, THE LD. CIT (E) HAS ISSUED A DETAILED QUESTIONNAIRE TO THE ASSE SSEE TO PROVIDE THE DOCUMENTS/CLARIFICATIONS DETAILED IN PARA 3 OF THE IMPUGNED ORDER. LD. CIT (E) FURTHER CALLED FOR THE DETAIL/CLARIFICA TION BY ISSUING ANOTHER QUESTIONNAIRE REFERRED IN PARA 4 OF THE IMP UGNED ORDER. 8. FROM THE INCOME & EXPENDITURE ACCOUNT, LD. CIT ( E) NOTICED THAT OUT OF TOTAL EXPENDITURE OF RS.1.59 CRORES, AP PLICANT SOCIETY HAS INCURRED RS.90.40 LAKHS ON SALARY AND PROFESSIONAL CHARGES IN FY 2016-17 BUT FAILED TO BRING ON RECORD THE DETAIL OF SALARY PAID TO DOCTORS AND STAFF. SO, THE PAYMENT OF SALARY AND O THER EXPENDITURE ARE UNVERIFIABLE. APPLICANT SOCIETY HAS ALSO NOT P ROVIDED FINANCIAL STATEMENT FOR FY 2017-18 DESPITE REQUISITION. APPL ICANT SOCIETY STATED BEFORE THE LD. CIT (E) THAT FINANCIAL STATEM ENTS ARE UNDER- COMPILATION AND HAS NOT YET BEEN FINALIZED AS DUE D ATE OF FILING OF AUDITED FINANCIALS FOR SUCH FINANCIAL YEAR FOR CHAR ITABLE TRUST IS 30.09.2018. 9. LD. CIT (E) SPECIFICALLY RECORDED IN IMPUGNED OR DER THAT APPLICANT SOCIETY FAILED TO PROVIDE EVEN PROVISIONA L FINANCIAL STATEMENT FOR FY 2017-18 IN WHOSE ABSENCE EXPENDITU RE AND RECEIPT OF THE APPLICANT SOCIETY CANNOT BE EXAMINED IN ORDE R TO CORROBORATE THE CLAIM OF THE APPLICANT SOCIETY. ITA NO.6843/DEL./2018 6 10. LD. CIT (E) ALSO NOTICED FROM THE BANK STATEMEN T THAT THE WHOLE RECEIPT HAS NOT BEEN ROUTED THROUGH THE BANK RATHER THE RECEIPT ROUTED THROUGH BANK WAS 64.8% AND 70% IN FY 2015-16 AND 2016-17 WHICH SHOWS THAT THE APPLICANT SOCIETY HAS BEEN IND ULGING INTO CASH TRANSACTIONS WHICH CANNOT BE SUBJECTED TO VERIFICAT ION. 11. LD. CIT (E) IN PARA 8 OF THE IMPUGNED ORDER ALS O MENTIONED THAT, THE APPLICANT SOCIETY HAS NOT EXPLAINED THE TARGET GROUP FROM WHOM THE DONATION WOULD BE SOUGHT/RECEIVED, THE EXA CT CONTOURS OF EXPANSION THEY WISH TO UNDERTAKE AND THE QUANTUM OF FINANCES THAT WOULD BE NECESSARY AND THAT THE LIST OF PEOPLE WHO HAVE BEEN SHOWN THE INCLINATION TO DONATE TO THE APPLICANT SOCIETY. 12. MOREOVER, LD. CIT (E) NOTICED THAT THE APPLICAN T SOCIETY HAS ACCRETED HUGE SURPLUSES AND ACCUMULATED IN THE FORM OF FDRS WHICH REACHED UPTO RS.2.06 CRORES WHICH SHOWS THAT THEY A RE NOT WILLING TO UTILIZE THE SAME FOR EXPANSION. APPLICANT SOCIETY HAS ALSO NOT BROUGHT ON RECORD THE FACTS IF ANY AMOUNT OF DONATI ON HAS BEEN RECEIVED BY THE APPLICANT SOCIETY IN THE PAST SINCE ITS EXISTENCE FROM THE YEAR 1996. 13. THE CONTENTION OF THE LD. AR FOR THE APPLICANT SOCIETY THAT ALL THESE FACTS ARE REQUIRED TO BE TAKEN CARE OF AT THE TIME OF SCRUTINY ASSESSMENT AND IN THE EARLIER YEARS, CLEAN ASSESSME NT HAS BEEN FRAMED, IS NOT TENABLE AS NO SUCH DOCUMENT HAS BEEN PLACED BEFORE ITA NO.6843/DEL./2018 7 THE LD. CIT (A) NOR BEFORE THE TRIBUNAL IN THE FORM OF PAPER BOOK. EVEN THE DOCUMENTS SPECIFICALLY CALLED FOR BY THE L D. CIT (E) DISCUSSED IN THE PRECEDING PARAS HAVE NOT BEEN SUPP LIED SO AS TO SATISFY LD. CIT (E) AS TO THE MANDATORY REQUIREMENT S FOR ACCORDING APPROVAL U/S 80G OF THE ACT. 14. WE ARE OF THE CONSIDERED VIEW THAT BY NOW ALL T HESE DOCUMENTS MUST BE READY WITH THE APPLICANT SOCIETY, SO TO MEE T WITH THE ENDS OF JUSTICE, APPLICANT SOCIETY WHO IS CLAIMING THAT IT IS INTO CHARITABLE ACTIVITIES SINCE 1994 MUST BE GIVEN AN OPPORTUNITY TO PRODUCE ALL DOCUMENTS DISCUSSED IN THE PRECEDING PARAS BEFORE L D. CIT (E). SO, THE CASE IS REMANDED BACK TO LD. CIT (E) TO DECIDE AFRESH AFTER PROVIDING AN OPPORTUNITY OF BEING HEARD TO THE APPL ICANT SOCIETY. CONSEQUENTLY, THE APPEAL FILED BY THE APPLICANT SOC IETY IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THIS 13 TH DAY OF JUNE, 2019. SD/- SD/- (R.K. PANDA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 13 TH DAY OF JUNE, 2019 TS ITA NO.6843/DEL./2018 8 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(E), CHANDIGARH. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.