Babu Ram Education Society, Mainpuri V. C.I.T., Aligarh

ITA 79/AGR/2013

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0692 (ITAT-AGRA)
• Duration Of Justice: 6 year(s) 1 month(s) 21 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 16-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 22-07-2013
• Assessment Year: misc
• Appeal Filed On: 25-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L MAURYA
• Assessee Lawyers: R C TOMAR I T P
• Keywords: Charitable institution; Opportunity of being heard; Set aside
• Section: 80G; 12A; 12AA; 10B; 131; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 78 & 79/AGRA/2013 BABU RAM EDUCATION SOCIETY, VS. COMMISSIONER OF VILL.- PARAM KUTI, INCOME-TAX, ALIGARH. POST PAROKH, DISTT.- MAINPURI. (PAN: AABAB 6687 L) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.C. TOMAR, ITP RESPONDENT BY : SHRI S.L. MAURYA, SR. DR DATE OF HEARING : 22.07.2013 DATE OF PRONOUNCEMENT OF ORDER : 26.07.2013 ORDER PER BHAVNESH SAINI, J.M.: BOTH THE APPEALS BY THE ASSESSEE ARE DIRECTED AGAI NST THE COMMON ORDER OF LD. CIT, ALIGARH DATED 15.01.2013 REJECTING THE APP LICATION FOR REGISTRATION U/S. 12AA AND RECOGNITION U/S. 80G(5)(VI) OF THE IT ACT. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE FILED APPLICATION FOR GRANT OF REGISTRATION U/S. 12AA AND APPROVAL FOR EXEMPTIO N U/S. 80G(5)(VI) OF THE IT ACT IN THE PRESCRIBED FORM. THE LD. CIT ISSUED SUMMONS TO VARIOUS DONORS OF THE SOCIETY FOR VERIFICATION OF THE DONATIONS ABOVE RS. 20,000/-, IN WHICH 10 SUMMONS ITA NO. 78 & 79/AGRA/2013 2 WERE RETURNED UN-SERVED. THE LD. CIT AFTER AFFORDIN G OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND CONSIDERING THE MATERIAL ON RECORD NOTICED FOLLOWING SHORTCOMINGS, IRREGULARITIES AND EFFECTS : (I). THE ASSESSEE HAS NOT FILED AUDIT REPORT IN PR OPER FORMAT IN FORM NO. 10B FOR F.Y. 2011-12. (II). IN RESPONSE TO SUMMONS TO THE DONORS, REPLIE S HAVE BEEN RECEIVED IN 17 CASES, WHICH ARE NOT ACCOMPANIED BY ANY DOCUMENT ARY EVIDENCE IN RESPECT OF IDENTITY OF THE DONORS WHICH WAS FOUND ESSENTIAL FO R ESTABLISHING GENUINENESS OF THE PERSONS WHO HAVE DONATED THE MONEY. (III). THE ASSESSEE SUBMITTED TWO SEPARATE LISTS O F THE DONORS AND BOTH WERE NOT IN PROPER FORM. (IV). ON PERUSAL OF THE BALANCE SHEET, IT WAS SEEN THAT PREVIOUS BALANCE OF RS.40,252/- IS MENTIONED. THIS FACT PROVES THAT THE BALANCE SHEET IS NOT GENUINE BECAUSE THE SOCIETY CAME INTO EXISTENCE ONLY ON 26. 11.2011. ITA NO. 78 & 79/AGRA/2013 3 (V). THE ACCOUNTS OF THE SOCIETY SHOWS THAT THE LA ND WAS ACQUIRED FOR RS.10,90,300/-, BUT IN THE ACCOUNT, THE VALUE OF LA ND WAS SHOWN FOR RS.15,03,200/-. (VI). THE ASSESSEE HAS NOT PRODUCED DOCUMENTARY EV IDENCE REGARDING GETTING THE DONATIONS FOR THE PURPOSE OF CONSTRUCTI ON OF THE COLLEGE OF EDUCATION. (VII). THE ITO, MAINPURI HAS GIVEN PROPER OPPORTUN ITY TO THE ASSESSEE AND THE DONORS. (VIII). THE SOCIETY IS INCORPORATED ON 26.11.2011 BUT NEITHER ANY CHARITABLE WORK HAS BEEN DONE NOR ANY AFFILIATION LETTER HAS B EEN ISSUED TO THE SOCIETY SO FAR. IT WAS, THEREFORE, PROVED THAT THE SOCIETY IS YET TO B E ENGAGED IN CHARITABLE ACTIVITIES. (IX). PERUSAL OF THE BALANCE SHEET SHOW THAT THE A SSESSEE HAS RECEIVED DONATIONS OF RS.57,56,415/- FOR F.Y. 2011-12, BUT I T HAS SPENT ONLY AN AMOUNT OF RS.44,86,450/- FOR THE SAME YEAR, WHICH IS LESS THA N 85%, WHICH IS IN VIOLATION OF SECTION 11(1)(A) OF THE IT ACT. THE LD. CIT, IN VIEW OF THE ABOVE DISCREPANCIES, RE JECTED BOTH THE APPLICATIONS. ITA NO. 78 & 79/AGRA/2013 4 3. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND REFERRED TO VARIOUS DOCUMENTS IN THE PAPER BOOK AND SUBMITTED THAT THE ASSESSEES OBJECTS ARE EDUCATIONAL ONLY. HE PUR CHASED THE LAND FOR THE PURPOSE OF CONSTRUCTION OF EDUCATIONAL INSTITUTION. THE DON ATIONS ARE RECEIVED FOR THE PURPOSE OF CORPUS. THE DONORS HAVE CONFIRMED GIVING OF DONATIONS TO THE ASSESSEE IN THEIR STATEMENT RECORDED U/S. 131 OF THE IT ACT, WHICH IS SUPPORTED BY THEIR PAN OR IDENTITY PROOF. HE HAS SUBMITTED THAT THE ASSESS EE IS AT THE STAGE OF CONSTRUCTION OF EDUCATIONAL BUILDING AND HAS ALSO APPLIED TO DR. BHIM RAO AMBEDKAR UNIVERSITY, AGRA FOR AFFILIATION AND WITH THE OFFIC E OF HIGHER EDUCATION, AGRA, ALIGARH. LETTERS OF THE SAME ARE FILED IN THE PAPER BOOK. THE PHOTOGRAPHS SHOWING CONSTRUCTION ACTIVITIES ARE GOING ON ARE ALSO FILED IN THE PAPER BOOK ALONG WITH LIST OF DONORS. HE HAS ALSO SUBMITTED THAT DCIT(JUDICIAL ) HAS RECOMMENDED FOR GRANT OF REGISTRATION AND APPROVAL UNDER THE ABOVE PROVIS ION AND HIS REPORT IS FILED AT PAGE 90 OF THE PAPER BOOK. HE HAS RELIED UPON THE D ECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF HARDAYAL CHARITABLE AND E DUCATIONAL TRUST VS. CIT IN INCOME TAX APPEAL NO. 107 OF 2012 DATED 15.03.2013. ON THE OTHER HAND, THE LD. DR RELIED UPON THE IMPUGNED ORDER. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE MATERIAL AVAILABLE ON RECORD. SECTION 12AA OF THE IT ACT PROVIDES AS UNDE R : ITA NO. 78 & 79/AGRA/2013 5 PROCEDURE FOR REGISTRATION. 12AA. (1) THE COMMISSIONER, ON RECEIPT OF AN APPLICATION FOR REGISTRATION OF A TRUST OR INSTITUTION MADE UNDER C LAUSE (A) OR CLAUSE (AA) OF SUB-SECTION (1) OF SECTION 12A, SHALL (A) CALL FOR SUCH DOCUMENTS OR INFORMATION FROM TH E TRUST OR INSTITUTION AS HE THINKS NECESSARY IN ORDER TO SATISFY HIMSELF ABOUT THE GENUINENESS OF ACTIVITIES OF THE TRUST OR INSTITUTION AND MAY A LSO MAKE SUCH INQUIRIES AS HE MAY DEEM NECESSARY IN THIS BEHALF; AND (B) AFTER SATISFYING HIMSELF ABOUT THE OBJECTS OF THE TRUST OR INSTITUTION AND THE GENUINENESS OF ITS ACTIVITIES, HE (I) SHALL PASS AN ORDER IN WRITING REGISTERING THE TRUST OR INSTITUTION; (II) SHALL, IF HE IS NOT SO SATISFIED, PASS AN ORDE R IN WRITING REFUSING TO REGISTER THE TRUST OR INSTITUTION, AND A COPY OF SUCH ORDER SHALL BE SENT TO THE APPLI CANT : PROVIDED THAT NO ORDER UNDER SUB-CLAUSE (II) SHALL BE PASSE D UNLESS THE APPLICANT HAS BEEN GIVEN A REASONABLE OPPORTUNITY O F BEING HEARD. (1A) ALL APPLICATIONS, PENDING BEFORE THE CHIEF COM MISSIONER ON WHICH NO ORDER HAS BEEN PASSED UNDER CLAUSE (B) OF SUB-SE CTION (1) BEFORE THE 1ST DAY OF JUNE, 1999, SHALL STAND TRANSFERRED ON T HAT DAY TO THE COMMISSIONER AND THE COMMISSIONER MAY PROCEED WITH SUCH ITA NO. 78 & 79/AGRA/2013 6 APPLICATIONS UNDER THAT SUB-SECTION FROM THE STAGE AT WHICH THEY WERE ON THAT DAY. (2) EVERY ORDER GRANTING OR REFUSING REGISTRATION U NDER CLAUSE (B) OF SUB-SECTION (1) SHALL BE PASSED BEFORE THE EXPIRY O F SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE APPLICATION WAS RECEI VED UNDER CLAUSE (A) OR CLAUSE (AA) OF SUB-SECTION (1) OF SECTION 12 A. (3) WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANT ED REGISTRATION UNDER CLAUSE (B) OF SUB-SECTION (1) OR HAS OBTAINED REGIS TRATION AT ANY TIME UNDER SECTION 12A [AS IT STOOD BEFORE ITS AMENDMENT BY THE FINANCE (NO. 2) ACT, 1996 (33 OF 1996) AND SUBSEQUENTLY THE COMM ISSIONER IS SATISFIED THAT THE ACTIVITIES OF SUCH TRUST OR INSTITUTION AR E NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION, AS THE CASE MAY BE, HE SHALL PASS AN O RDER IN WRITING CANCELLING THE REGISTRATION OF SUCH TRUST OR INSTIT UTION: PROVIDED THAT NO ORDER UNDER THIS SUB-SECTION SHALL BE PASSE D UNLESS SUCH TRUST OR INSTITUTION HAS BEEN GIVEN A REASONAB LE OPPORTUNITY OF BEING HEARD. 5. THE INGREDIENTS OF ABOVE SECTION CLEARLY MAKES O UT THAT BEFORE GRANT OF REGISTRATION U/S. 12AA, THE LD. CIT HAS TO SATISFY HIMSELF ABOUT THE OBJECTS AND GENUINENESS OF THE ACTIVITIES OF THE ASSESSEE TRUST OR INSTITUTION. OTHER CONDITIONS ARE NOT RELEVANT AT THE STAGE OF GRANT OF REGISTRAT ION. THE RECOGNITION U/S. 80G(5) IS CONSEQUENTIAL TO THE GRANT OF REGISTRATION. HONBLE JURISDICTIONAL ALLAHABAD HIGH ITA NO. 78 & 79/AGRA/2013 7 COURT IN THE CASE OF HARDAYAL CHARITABLE AND EDUCAT IONAL TRUST VS. CIT-II, AGRA (SUPRA) HELD AS UNDER : THE PREPONDERANCE OF THE JUDICIAL OPINION OF ALL TH E HIGH COURT INCLUDING THIS COURT IS THAT AT THE TIME OF R EGISTRATION UNDER SECTION 12AA OF THE INCOME TAX ACT, WHICH IS NECESS ARY FOR CLAIMING EXEMPTION UNDER SECTION 11 & 12 OF THE ACT, THE COM MISSIONER OF INCOME TAX IS NOT REQUIRED TO LOOK INTO THE ACTIVIT IES, WHERE SUCH ACTIVITIES HAVE NOT OR ARE IN THE PROCESS OF ITS IN ITIATION. WHERE A TRUST, SET UP TO ACHIEVE ITS OBJECTS OF ESTABLISHING EDUCA TIONAL INSTITUTION, IS IN THE PROCESS OF ESTABLISHING SUCH INSTITUTIONS, A ND RECEIVES DONATIONS, THE REGISTRATION UNDER SECTION 12AA CANN OT BE REFUSED, ON THE GROUND THAT THE TRUST HAS NOT YET COMMENCED THE CHARITABLE OR RELIGIOUS ACTIVITY. ANY ENQUIRY OF THE NATURE WOULD AMOUNT TO PUTTING THE CART BEFORE THE HORSE. AT THIS STAGE ONLY THE G ENUINENESS OF THE OBJECTS HAS TO BE TASTED AND NOT THE ACTIVITIES, WH ICH HAVE NOT COMMENCED. THE ENQUIRY OF THE COMMISSIONER OF INCOM E TAX AT SUCH PRELIMINARY STAGE SHOULD BE RESTRICTED TO GENUINENE SS OF THE OBJECTS AND NOT THE ACTIVITIES UNLESS SUCH ACTIVITIES HAVE COMMENCED. THE TRUST OR SOCIETY CANNOT CLAIM EXEMPTION, UNLESS IT IS REGISTERED UNDER SECTION 12AA OF THE ACT AND THUS AT THAT SUCH INITI AL STAGE THE TEST OF THE GENUINENESS OF THE ACTIVITY CANNOT BE A GROUND ON WHICH THE REGISTRATION MAY BE REFUSED. IT IS NOT DENIED THAT FOR SUBSEQUENT YEAR THE APPE LLANT HAS BEEN GRANTED EXEMPTION UNDER SECTION 12AA AND HAS ALSO B EEN APPROVED UNDER SECTION 80G OF THE ACT, SUBJECT TO CERTAIN CO NDITIONS. IF THE COMMISSIONER OF INCOME TAX WAS SATISFIED WITH THE G ENUINENESS OF THE OBJECTS OF THE TRUST FOR THE SUBSEQUENT ASSESSMENT YEAR, THE REFUSAL OF THE REGISTRATION FOR THE PREVIOUS ASSESSMENT YEAR 2 011-12 WAS NOT JUSTIFIED. THE QUESTION OF EXEMPTION OF THE APPLICATION OF IN COME RECEIVED BY WAY OF DONATION, IS A SEPARATE ISSUE AND WHICH M AY BE REQUIRED TO BE CONSIDERED, WHEN THE RETURN IS FILED BY THE TRUS T AND IS EXAMINED BY THE INCOME TAX OFFICER. THE QUESTION AS TO WHETH ER THE DONATIONS BY THE SOCIETIES WAS THE EXPENDITURE OF THE TRUST F OR CHARITABLE AND RELIGIOUS PURPOSES WILL BE EXAMINED AT THE TIME OF EXAMINING THE RETURN. ITA NO. 78 & 79/AGRA/2013 8 IN THE RESULT THE INCOME TAX APPEAL IS ALLOWED. AL L THE THREE SUBSTANTIAL QUESTIONS OF LAW FORMULATED AS ABOVE AR E DECIDED IN FAVOUR OF THE ASSESSEE, AND AGAINST THE REVENUE WIT H A CLARIFICATION THAT THE REGISTRATION UNDER SECTION 12AA AND APPROV AL UNDER SECTION 80G WOULD NOT BY ITSELF ENTITLE THE TRUST FOR EXEMP TION OF THE INCOME OF ITS DONORS OR OF THE TRUST FOR THE ASSESSMENT YE AR 2011-12. FOR CLAIMING SUCH EXEMPTION THE RETURNS OF THE DONOR AN D THE TRUST WILL BE EXAMINED, FOR ORDERS TO BE MADE IN ACCORDANCE WITH LAW. 6. CONSIDERING THE ABOVE PROVISIONS IN THE LIGHT OF DECISION OF HONBLE ALLAHABAD HIGH COURT, IT IS CLEAR THAT MOST OF THE OBJECTIONS RAISED BY THE LD. CIT IN THE IMPUGNED ORDER ARE NOT RELEVANT FOR THE PURP OSE OF GRANT OF REGISTRATION U/S. 12AA OF THE IT ACT AND APPROVAL OF EXEMPTION U/S. 8 0G(5) OF THE IT ACT. HONBLE ALLAHABAD HIGH COURT IN THIS CASE HELD THAT FOR GRA NT OF REGISTRATION U/S. 12AA, THE COMMISSIONER OF INCOME TAX IS NOT REQUIRED TO LOOK INTO THE ACTIVITIES WHERE SUCH ACTIVITIES HAVE NOT OR IN THE PROCESS OF ITS INITIA TION. THE OBJECTS OF THE INSTITUTION SHALL HAVE TO BE SEEN. THE ISSUE OF RECEIPT OF DONA TIONS IS NOT RELEVANT. THE REGISTRATION COULD NOT HAVE BEEN REFUSED ON THE GRO UND THAT THE TRUST HAS NOT YET COMMENCED THE CHARITABLE OR RELIGIOUS ACTIVITIES. T HE ASSESSEE HAS FILED COPY OF THE AIMS AND OBJECTS OF THE SOCIETY, WHICH SHOWS THAT T HE ASSESSEE EXISTS FOR EDUCATIONAL AND CHARITABLE PURPOSE ONLY, WHICH IS ALSO SUPPORTED BY THE REPORT OF DCIT (JUDICIAL) DATED 11.01.2013 (PB-90), IN WHICH IT WAS REPORTED THAT NATURE OF THE OBJECTS IN BY-LAWS/MOS WAS FOUND TO BE EDUCATIO NAL. INCOME OF THE ASSESSEE WAS FOUND TO HAVE APPLIED WHOLLY FOR CHARITABLE ACT IVITIES. THE ASSESSEE SOCIETY ITA NO. 78 & 79/AGRA/2013 9 WAS FOUND TO EXIST AND REGISTERED UNDER THE SOCIETI ES ACT. LIST OF THE DONORS HAVE BEEN PROVIDED. DCIT(JUDL.), THEREFORE, RECOMMENDED GRANT OF REGISTRATION U/S. 12AA AND APPROVAL OF EXEMPTION U/S. 80G OF THE IT A CT. THE ASSESSEE PURCHASED LAND FOR THE PURPOSE OF CONSTRUCTION OF THE BUILDIN G, DETAILS ARE MENTIONED IN THE AUDITED BALANCE SHEET. PHOTOGRAPH SHOWS THAT THE SO CIETY IS AT THE STAGE OF CONSTRUCTION OF THE EDUCATIONAL BUILDING. LIST OF THE DONORS ARE FILED IN THE PAPER BOOK AND LARGE NUMBER OF DONORS HAVE CONFIRMED GIVI NG OF DONATIONS TO THE ASSESSEE FOR THE PURPOSE OF SOCIETY WHICH IS SUPPOR TED BY THEIR IDENTITY PROOFS. THE ASSESSEE ALSO APPLIED FOR GRANT OF RECOGNITION FOR EDUCATIONAL PURPOSE WITH DR. BHIM RAO AMBEDKAR UNIVERSITY, AGRA AND WITH THE OFF ICE OF HIGHER EDUCATION OFFICER, AGRA, ALIGARH REGION, AGRA. THESE EVIDENCE S ON RECORD CLEARLY PROVE THAT THE OBJECTS OF THE ASSESSEE WERE CHARITABLE & EDUCA TIONAL IN NATURE AND ARE GENUINE. THE ASSESSEE IS AT THE STAGE OF SETTING UP THE EDUC ATIONAL INSTITUTION, THEREFORE, THE ASSESSEE SOCIETY WAS SET UP TO ACHIEVE ITS OBJECTS OF ESTABLISHING EDUCATIONAL INSTITUTION IS IN THE PROCESS OF ESTABLISHING SUCH INSTITUTION AND RECEIVED DONATIONS. AT THIS STAGE AS PER JUDGMENT OF HONBLE ALLAHABAD HIGH COURT, THE GENUINENESS OF THE OBJECTS HAVE TO BE TESTED AND NOT THE ACTIVITIE S WHICH HAVE NOT COMMENCED. THE REASONS GIVEN BY THE LD. CIT IN THE IMPUGNED ORDER FOR REJECTION OF APPLICATIONS ARE THUS NOT RELEVANT AT THIS STAGE WHICH MAY BE A SEPA RATE ISSUE AND ARISE WHENEVER THE RETURN OF INCOME WOULD BE FILED BY THE ASSESSEE AND WOULD BE EXAMINED AT ITA NO. 78 & 79/AGRA/2013 10 ASSESSMENT STAGE. CONSIDERING THE FACTS AND CIRCUMS TANCES AND OVER ALL EVIDENCES, PRODUCED ON RECORD IN THE LIGHT OF PROVISIONS OF SE CTION 12AA OF THE IT ACT, WE ARE OF THE VIEW THAT THE ASSESSEE SOCIETY IS ENTITLED F OR REGISTRATION U/S. 12AA OF THE IT ACT AND APPROVAL U/S. 80G(5) OF THE IT ACT. WE ACCO RDINGLY, SET ASIDE THE ORDERS OF THE LD. CIT AND DIRECT HIM TO GRANT REGISTRATION TO THE ASSESSEE U/S. 12AA OF THE IT ACT AND APPROVAL U/S. 80G(5)(VI) OF THE IT ACT IN A CCORDANCE WITH LAW. 7. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A.L. GEHLOT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE SR. PRIVATE SECRETARY TRUE COPY