Late Kamlabai Nivrutti Gite Sarvajanik Vachnalay, Nashik V. Commissioner of Income-Tax, (Exemption), Pune

ITA 818/PUN/2022

AI Insights

The case involves the Late Kamlabai Nivrutti Gite Sarvajanik Vachanalaya, a trust that applied for registration under section 12AB of the Income Tax Act, 1961. The CIT (Exemption), Pune, rejected the application on the grounds that the trust had derived a substantial surplus from its activities, which led to the presumption that the activities were not charitable in nature. The Tribunal found that the CIT (Exemption) had not conducted a proper investigation or provided adequate reasoning for the decision, leading to the setting aside of the order and remanding the case for further examination.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 124365 (ITAT-PUNE)
• Duration Of Justice: 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 12-02-2023
• Assessment Year: misc
• Appeal Filed On: 13-11-2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, PUNE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA No. 818/PUN/2022 Late Kamlabai Nivrutti Gite Sarvajanik Vachanalaya 1, Kaut Ghat Road, Dr. Homi Bhabha Nagar, Nasik PAN: AAATL 8611 L Appellant Vs. The C.I.T. (Exemption) Pune. Respondent Appellant by : Shri Sanket M. Joshi Respondent by : Shri Mrityunjoy Barnwal Date of Hearing :13-02-2023 Date of Pronouncement : 14-2-2023 ORDER PER SHRI PARTHA SARATHI CHAUDHURY, J.M. This appeal preferred by the assessee emanates from order of the ld. CIT, Exemption, Pune, dated 30-09-2022 on the following grounds: 1. The ld. CIT Exemption Pune, erred in denying the registration u/s 12AB by rejecting application filed by the assessee trust u/s 12A(1)(aciii) of the Act without appreciating that the said action was not justified on facts and in law. 2. The ld. CIT-E Pune erred in holding that the assessee trust had derived substantial surplus from its activities in the past three years and hence, it could not be said that the activities carried out by assessee trust were „charitable‟ in nature and thereby rejecting registration u/s 12AB of the Act. 3. The ld. CIT-E Pune failed to appreciate that the assessee trust was engaged in the charitable activity of providing library/reading room facility to needy students for promoting education at a very nominal fee of less than Rs. 5/- per day and therefore, merely because the said activity resulted into generation of surplus does not convert the above activity into a „non-charitable‟ one and hence denial of registration u/s 12AB on the above ground was not justified in law and on facts. 4. The ld. CIT-E ought to have appreciated that he had not brought any material on record to prove that the surplus generated out of the charitable activity was utilised for objects other than objects of the trust and hence, in the absence of any such finding, the denial of registration u/s 12AB was not justified especially when the library run by the assessee trust had been accredited with „Best Library Award‟ by Govt. of Maharashtra and had helped hundreds of needy students achieve academic success in various competitive and oh re-examinations. 2 ITA No. 818 of 2022 Late Kamlabai N. Gite 2. The grievance of the assessee is the rejection of application filed by the assessee u/s 12A(1)(ac)(iii) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) and denying registration u/s 12AB of the Act. In this regard, we would extract the order by the ld. CIT Exemption for completeness which is as follows:- “The assessee has filed application No. CIT EXEMPTION, PUNE/2022- 23/12AN10391 in Form No.10AB under clause (iii) of section 12A(1)(ac) of the Income Tax Act, 1961 on 31/03/2022. 2. The application was carefully perused and considered along with its annexures. With a view to verify the genuineness of activities of the assessee, a notice was issued through ITBA portal on 18/07/2022 requesting him to upload certain other information/clarification by 02/08/2022. Another opportunity was given to the assessee vide notice dated 04/08/2022 requesting him to submit his compliance by 15/08/2022. The assessee was specifically informed that in the event of failure to comply by the due date, the matter will be decided based on material available on record. Both these notices were duly served on the assessee through e-portal 1 email. 3. The assessee was specifically requested vide the initial notice to furnish the details of activities carried out during the last 3 years or since inception whichever is later along with supporting credible evidence. In response, the assessee submitted its reply on 16.08.2022. On verification of the details submitted, prima facie it is observed that for the last 3 years, the assessee trust has a surplus of around 60% of the total receipts. From this, it can be presumed that the assessee trust is hardly carrying any activity of charitable nature as per its objects. 3.1 The assessee was given opportunity of being heard vide notice dated 16.09.2022. In the absence of any credible evidence, the undersigned is unable to draw any satisfactory conclusion about genuineness of activities of the assessee. 4. In view of the above, the application filed by the assessee is hereby rejected” 3. At para 3 it is mentioned by the ld. CIT Exemption that on verification of the details submitted by the assessee, prima facie, he is observing that for the last three years, the assessee trust has a surplus of around 60% of the total receipts and from this, he is presuming that the assessee trust is hardly carrying on any activities of charitable nature as per its objects. The word used is “prima facie” which means what appears to be true at first, even though it may be proved to be false later. Prima facie case means it needs serious investigation and determination of facts. In this case proper enquiry and investigation has not been done by the ld. CIT Exemption. Nowhere in his order he has brought out the reasons for his decision and what are the 3 ITA No. 818 of 2022 Late Kamlabai N. Gite verifications of facts that he has conducted for coming to this conclusion. He simply says that it is presumed the assessee trust is hardly carrying out any activities of charitable nature. Here also, the ld. CIT Exemption is not sure about his decision and if the assessee is doing any charitable activities then what are those charitable activities and if not then what are those activities which are not falling within the category of charitable nature. Nothing has been brought on record. The order therefore, lacks on reasoning and judicial analyses. Further, at para 3.1, it is observed that the assessee was given an opportunity vide notice dated 16-09-2022 and the assessee has not submitted any credible evidence regarding genuineness of the activities of the assessee. Section 12AB(1)(i) provides that Principle CIT or CIT on receipt of an application from the assessee regarding registration under the said provision may call for such documents or information to satisfy himself regarding (i) genuineness of activities of the trust or institution; and (ii) the compliances of such requirement of any other law for the time being in force by the trust or institution. The registration can only be granted once these conditions are complied with. We have already examined in the preceding paras that the CIT Exemption‟s order suffers from the defect that it is not a speaking order. Rationality of arriving at the decision is not coming out from the said order of the ld. CIT Exemption. The assessee was given an opportunity also but there was no credible evidences submitted for which the ld. CIT Exemption was unable to satisfy himself regarding genuineness of the activities of the assessee. Considering the totality of the facts and circumstances, in the interest of justice, therefore, we set aside the order of the ld. CIT Exemption and remand the matter back to his file for re-adjudication as per law while complying with the principles of natural justice and at the same time, we direct the assessee to provide all relevant documents/evidences and represent their case on merits. The grounds are allowed for statistical purposes. 4 ITA No. 818 of 2022 Late Kamlabai N. Gite 4. In the result, appeal of the assessee is allowed for statistical purposes. Order pronounced in the open Court on this 14 TH day of February 2023. SD/- SD/- (INTURI RAMA RAO) (PARTHA SARATHI CHAUDHURY) ACCOUNTANT MEMBER JUDICIAL MEMBER Pune; Dated, the 14 th day of February 2023 Ankam Copy of the Order forwarded to : 1. The Appellant. 2. The Respondent. 4. Pr. CIT concerned 3. D.R. ITAT „A‟ Bench 4. Guard File BY ORDER, Sr. Private Secretary ITAT, Pune. /// TRUE COPY /// 5 ITA No. 818 of 2022 Late Kamlabai N. Gite 1 Draft dictated on 13-02-2023 Sr.PS/PS 2 Draft placed before author 13-02-2023 Sr.PS/PS 3 Draft proposed and placed before the second Member JM/AM 4 Draft discussed/approved by second Member AM/JM 5 Approved draft comes to the Sr. PS/PS Sr.PS/PS 6 Kept for pronouncement on 14-02-2023 Sr.PS/PS 7 Date of uploading of order 14-02-2023 Sr.PS/PS 8 File sent to Bench Clerk 14-02-2023 Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order