Shri Mahavir Jain Society (Regd), Ludhiana V. CIT I, Ludhiana

ITA 910/CHANDI/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95562 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 20-08-2015
• Assessment Year: misc
• Appeal Filed On: 19-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI SARANGA L
• Assessee Lawyers: S K MUKHI
• Keywords: Capital asset; Charitable institution; Principle of natural justice
• Section: 12; 12A; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MRS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NO.910/CHD/2013 U/S: 12AA(1)(B)(II) SHRI MAHAVIR JAIN SOCIETY(REGD), VS. THE CIT- I DARESI ROAD LUDHIANA LUDHIANA PAN NO. AACAM5708Q (APPELLANT) (RESPONDENT) APPELLANT BY : SH. S.K. MUKHI RESPONDENT BY : SH. RAVI SARANGAL DATE OF HEARING : 20/08/2015 DATE OF PRONOUNCEMENT :30/09/2015 ORDER PER ANNAPURNA MEHROTRA, A.M THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT-I, LUDHIANA DT. 27/08/2013. 2. THE ONLY ISSUE IN THE PRESENT APPEAL IS AGAINST THE REFUSAL OF THE LD. CIT, TO GRANT REGISTRATION U/S 12AA OF THE INCO ME TAX ACT, 1961. BRIEFLY STATED THE ASSESSEE SOCIETY HAD FILED AN AP PLICATION ON 26/02/2013 FOR GRANT OF REGISTRATION U/S 12A(A) OF THE INCOME TAX ACT, 1961. DURING PROCEEDINGS BEFORE THE LD. CIT, VARIOUS DETAILS AND INFORMATION WERE CALLED FOR, IN RESPONSE TO WHICH REPLIES WERE FILED BY THE ASSESSEE. THE RELEV ANT NOTICES AND REPLIES OF THE ASSESSEE ARE DULY REPRODUCED IN THE ORDER OF THE LD . CIT. AFTER CONSIDERING THE SAME THE LD. CIT VIDE HIS ORDER DATED 27/08/2013 RE FUSED THE GRANT OF REGISTRATION TO THE TRUST FOR THE REASONS STATED IN PARA 4 AND 5 OF HIS ORDER REPRODUCED HERE UNDER: 2 4. CASE PARTLY DISCUSSED, AND ON REQUEST CASE ADJ OURNED TO 23-08-2013. AGAIN ON REQUEST, CASE ADJOURNED TO 26/08/2013. ON 26/08/2013 THE COUNSEL OF THE ASSESSEE PRESENT AND CASE DISCUSSED IN DETAIL AND ASSESSEE SOCIETY IS FOUND INELIGIBLE FOR GRANT OF REGISTRATI ON DUE TO THE FOLLOWING REASONS;- I. THE ASSESSEE SOCIETY HAS NOT SUBMITTED AUDITED FINA NCIAL STATEMENTS. RATHER INCOME & EXPENDITURE ACCOUNT AND BALANCE SHEET SUBMITTED BY THE ASSESSEE TRUST ARE SIGNED BY THREE PERSONS ONLY. II. THE ASSESSEE SOCIETY HAS OFFERED NO EXPLANATION REG ARDING REGISTRATION OF THE SOCIETY TWICE I.E. VIDE NO. 141 OF 1974-75 DATED 12/09/1974 AND AGAIN VIDE NO. 052 OF 2009-10 DATED 30/04/2009 WITH ADDL. REGISTRAR OF FIRM AND SOCIETIES CUM-GEN ERAL MANAGER, LUDHIANA. III. THE AIMS AND OBJECTS OF THE SOCIETY AS PER MEMORAND UM OF ASSOCIATION ARE:- 1. TO PROPAGATE THE PREACHINGS OF LORD MAHAVIR JI SE RVICE TO HUMANITY IS SERVICE TO LORD AND TO ACHIEVE THIS; 2. TO PROVIDE ASSISTANCE AND HELP TO THE NEEDY, SICK, SUFFERERS AND DOWN TRODDEN AND TO HELP THEM FOR GETTING EDUCATION AND TO OPEN SCHOOLS AND COLLEGES WITHOUT CASTE AND CREED. 3. TO PROVIDE HELP TO POOR FAMILIES IN PERFORMING THE MARRIAGES OF HIS/THEIR DAUGHTERS AFTER ATTAINING MARRIAGEABLE AG E. 4. TO OPEN ASYLUM FOR THE OLD, INFIRM, DESTITUTE AND S ICK PERSONS. 5. TO PROVIDE ASSISTANCE, AIDS, AND WORK TO THE POOR A ND WIDOWS TO ENABLE THEM TO EARN THEIR OWN LIVELIHOOD AND/OR TO MAINTAIN THEM AND/OR THEIR FAMILIES. 6. TO PROVIDE FREE MEDICAL AID, BY OPENING HOSPITALS D IAGNOSTIC CENTERS, MATERNITY HOME AND BY ORGANIZING SPECIAL M EDICAL CAMPS. 7. TO START PUBLIC LIBRARIES, BOOK CENTERS, RESEARCH C ENTERS AND READING ROOMS. 8. TO AVOID AND REMOVE THE MAL-PRACTICES AND BAD CUSTO MS PREVAILING IN THE SOCIETY IN DIFFERENT FORMS BY WAY OF SELF- IMPOSED LIMITATIONS AND BY A DRIVE TO UPROOT THEM. 9. TO PROPAGATE VEGETARIANISM AND FOR THIS TO HOLD SEM INAR, PUBLISH BOOKS AND HOLD CLASSES. 10. TO DO ALL SUCH LAWFUL ACTS, DEEDS AND THINGS WHICH ARE NECESSARY AND CONDUCTIVE TO THE ATTAINMENT OF THE G ENERAL OBJECTS OF THE SOCIETY AND CREATION OF THE SPIRIT O F THRIFT, MUTUAL HELP AMONGST ITS MEMBERS. TO SUPPORT THE ABOVE AIMS & OBJECTS THE ASSESSEE HA S FILED NO DOCUMENTARY EVIDENCE THAT THESE ARE ACTUALLY BEING DONE BY THE SOCIETY. 5. IN VIEW OF THE ABOVE IT IS CLEAR THAT THE RESPON SIBILITY OF PROVING THE GENUINENESS OF ITS CLAIM OF CARRYING OUT THE CHARIT ABLE ACTIVITIES WITHIN THE MEANING OF SECTION 12AA(1)(B)(III) OF THE INCOME TA X ACT, LAY ON THE APPLICANT SOCIETY, WHICH IT HAS FAILED TO DISCHARGE. HENCE, I REFUSE TO REGISTER THE SOCIETY U/S 12AA(1)(B)(II) OF THE INCOME TAX ACT, 1961. 3. AGGRIEVED BY THE SAME, THE ASSESSEE HAS FILED TH IS APPEAL BEFORE US AND TAKEN THE FOLLOWING GROUNDS: 1. THAT THE ORDERS OF THE LD. COMMISSIONER OF INCOM E TAX-I, LUDHIANA U/S 12AA OF INCOME TAX ACT, 1961 IS ARBITRARY BASED ON EXTRANEO US CONSIDERATIONS, DEVOID OF FACTS ON RECORD, AGAINST PRINCIPLES OF NATURAL JUSTICE THERE FORE ILLEGAL, ERRONEOUS, PERVERSE AND THUS UNCALLED FOR. 3 2. THAT THE LD. COMMISSIONER OF INCOME TAX-I, LUDHI ANA IS NOT JUSTIFIED IN PASSING THE IMPUGNED ORDER U/S 12AA(1)(B)(I) OF INCOME TAX ACT, 1961 WITHOUT GIVING OPPORTUNITY OF PRODUCING RELEVANT DOCUMENTS WHICH NEED DUE CONSIDE RATION BY THE HONBLE TRIBUNAL. 3. THAT THE LD. COMMISSIONER OF INCOME TAX-I , LUDH IANA IS NOT JUSTIFIED IN REJECTING APPLICATION WITHOUT APPRECIATING THAT THE OBJECTS A RE CHARITABLE IN NATURE AND IT FULFILLS ALL THE REQUISITE CONDITIONS AS PER THE PROVISIONS OF I NCOME TAX ACT, 1961 WHICH NEEDS DUE CONSIDERATION BY THE HONBLE TRIBUNAL. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR DELETE ANY OF THE GROUNDS OF APPEAL ON OR BEFORE THE DISPOSAL OF THE PRESENT APP EAL. 4. BEFORE US THE LD. AR ARGUED THAT THE APPLICATION FOR REGISTRATION UNDER SECTION 12A WAS WRONGLY REJECTED BY THE LD. CIT. HE STATED THAT THE LD. CIT REFUSED TO GRANT REGISTRATION TO THE ASSESSEE SOCIE TY FOR THE REASON THAT IT HAD NOT SUBMITTED AUDITED FINANCIAL STATEMENTS AND HAD INFA CT SUBMITTED INCOME AND EXPENDITURE ACCOUNT AND BALANCE SHEET SIGNED BY THR EE PERSONS ONLY. THE LD. AR ARGUED THAT AS PER THE PROVISIONS OF SECTION 12A (1)(B) OF THE INCOME TAX ACT, THE ASSESSEE SOCIETY WAS NOT REQUIRED TO GET ITS AC COUNT AUDITED SINCE THERE WAS NO EXCESS OF INCOME OVER EXPENDITURE IN THE PRECEDI NG THREE YEARS I.E; FINANCIAL YEAR ENDED ON 31/03/2012, 31/03/2011, & 31/03/2010 AND HENCE THERE WAS NO INCOME CHARGEABLE TO TAX IN ANY OF THE PREVIOUS THR EE YEARS. THE LD. AR FURTHER ARGUED THAT AUDITED FINANCIAL STATEMENTS WERE NOT A VAILABLE FOR THE REASON, THAT THOUGH THE ASSESSEE SOCIETY HAD APPOINTED M/S SHAMM I GARG & CO. AS AUDITORS FOR THE RELEVANT YEARS BUT SINCE THE PREVIOUS AUDIT ORS I.E; M/S S.S. PERIWAL & CO. HAD NOT GIVEN NOC FOR THE SAME WHICH WAS A NECESSAR Y CONDITION TO BE FULFILLED, THE NEW AUDITORS COULD NOT ASSUME CHARGE TO UNDERTAKE AUDIT IN THE ASSESSEE SOCIETY. THE LD. AR STATED THAT THE ASSESS EE SOCIETY HAD LODGED A COMPLAINT, REGARDING THE ONGOING DISPUTE BETWEEN TH E TWO AUDIT FIRMS TO THE PRESIDENT OF THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA, THE PARENT BODY GOVERNING THE PROFESSION OF CHARTERED ACCOUNTANTS A ND THE LD. AR STATED THAT THE DISPUTE HAD NOT BEEN RESOLVED TO DATE. AS A RES ULT THEREOF THE SOCIETY HAD NOT BEEN ABLE TO GET ITS ACCOUNTS AUDITED. 4 LD. AR FURTHER STATED, THAT THE ASSESSEE SOCIETY WA S ALSO REFUSED REGISTRATION FOR THE REASON THAT IT HAD OFFERED NO EXPLANATION REGAR DING REGISTRATION OF THE SOCIETY TWICE I.E. VIDE NO. 141 OF 1974-75 DTED 12/ 09/1974 AND AGAIN VIDE NO. 052 OF 2009-10 DATED 30/04/2009 WITH ADDL. REGISTRA R OF FIRM AND SOCIETIES-CUM- GENERAL MANAGER, LUDHIANA. THE LD. AR ARGUED THAT T HE ASSESSEE SOCIETY WAS WORKING UNDER THE CERTIFICATE ISSUED ON 17/09/1974 AND ALL SOCIETY DOCUMENTS I.E; GOVERNING BODY LIST ETC. WERE BEING SUBMITTED TO THE REGISTRAR OF FIRMS & SOCIETY, CHANDIGARH FOR THE SOCIETY REGISTERED ON 1 7/09/1974. THE LD. AR FURTHER STATED THAT THE SOCIETY FORMED ON 30/04/2009 WAS FO RMED BY THE EX. PRESIDENT & FINANCE SECRETARY, BUT THE SAME HAD NO RELEVANCE ON DATE, SINCE THE SOCIETY DOCUMENTS WERE BEING SUBMITTED TO THE REGISTRAR OF SOCIETIES FOR THE SOCIETY REGISTERED ON 17/09/1974. 5. LD. AR STATED THAT THE ASSESSEE SOCIETY HAD ALSO BEEN DENIED REGISTRATION FOR THE REASON THAT NO DOCUMENTARY EVIDENCES HAD BE EN FILED TO SUPPORT THAT THE AIMS AND OBJECTS WERE ACTUALLY BEING DONE BY TH E SOCIETY. LD. AR ARGUED THAT THE INCOME & EXPENDITURE ACCOUNT AND BALANCE S HEET OF THE ASSESSEE SOCIETY HAD BEEN DULY SUBMITTED BEFORE THE LD. CIT, SHOWING RECEIPT FROM THE ACTIVITIES LISTED IN ITS AIMS & OBJECTIVES. MOREOVE R, THE LD. AR STATED, THAT VOUCHERS AND BILLS WERE ALSO SUBMITTED BEFORE THE L D.CIT. HE FURTHER STATED THAT DETAILS OF DONATION WERE ALSO SUBMITTED BEFORE THE LD. CIT AS EVIDENCE OF THE FACT THAT THE CHARITABLE ACTIVITIES LISTED IN ITS A IMS AND OBJECTIVES, WERE ACTUALLY BEING CARRIED OUT BY THE ASSESSEE SOCIETY. 6. THE LD. AR FURTHER STATED THAT FOR THE PURPOSE O F GRANTING APPROVAL UNDER SECTION 12AA, THE ONLY CONDITION TO BE FULFILLED WA S THAT THE COMMISSIONER HAD TO LOOK INTO THE OBJECTS OF THE ASSESSEE SOCIETY AND I F THEY WERE FOUND CHARITABLE, THE REGISTRATION HAD TO BE GRANTED. THE LD. AR SUBM ITTED THAT ALL THE OBJECTS OF 5 THE ASSESSEE SOCIETY WERE CHARITABLE AND NO INFIRMI TY HAD BEEN FOUND IN THE SAME BY THE LD. CIT. 7. THE LD. AR THEREFORE ARGUED THAT THE LD. CIT HAD INCORRECTLY REFUSED TO GRANT REGISTRATION TO THE ASSESSEE SOCIETY U/S 12AA OF THE INCOME TAX ACT, 1961. 8. LD. DR ON THE OTHER HAND RELIED ON THE ORDER OF LD. CIT AND FURTHER REFERRED TO PAPER BOOK PAGE NO. 50, BEING LETTER ISSUED BY T HE ITO TO THE ASSESSEE SOCIETY DURING PROCEEDINGS U/S 12AA OF THE ACT WHEREIN AT P OINT NO. 3 IT WAS POINTED OUT BY THE CONCERNED ITO THAT : THE UNDERSIGNED HAS INFORMATION IN POSSESSION THA T THERE IS A DISPUTE BETWEEN SH. GULSHAN JAIN, FINANCE SECRETARY WHO INTIMATED T HAT THE DISPUTE IS ALSO GOING ON IN THE CIVIL COURTS AND THE CIVIL PROCEEDINGS AS WELL AS CRIMINAL PROCEEDINGS ARE PENDING IN THE COURT. EVEN THE ACCOUNTS OF THE SOCIETY ARE NOT AUDITED AND NO BILLS ARE AVAILABLE FOR CONSTRUCTION. THE CONCE RNED PERSONS HAVE NOT GIVEN THE ACCOUNTS FOR RS. 40 LACS WHICH IS EVIDENT FROM THE RECORDS. THE BALANCE SHEET PREPARED AND SUBMITTED TO YOUR OFFICE DOES NOT DEPI CT THE CORRECT STATE OF AFFAIRS SINCE THE SAME WAS PREPARED BY THREE PERSONS. THE D ONATIONS HAVE BEEN DERIVED TO FUND ACCOUNT. PLEASE FURNISH YOUR EXPLAN ATION ON THIS MATTER. THE LD. DR PLEADED THAT THE ABOVE MENTIONED INFORMA TION PROVED THAT THE ACTIVITIES OF THE SOCIETY WERE NOT GENUINE AND THER EFORE THE SOCIETY WAS NOT ELIGIBLE FOR REGISTRATION UNDER SECTION 12AA. IN RE SPONSE TO THIS THE LD. AR SUBMITTED THAT THE SUM OF RS. 40 LACS REFER TO BY T HE ITO IN THE LETTER STATED ABOVE HAD BEEN DULY RECORDED IN THE BOOKS OF THE AS SESSEE SOCIETY. REFERRING TO PAGE NO. 23, 32 AND PAGE NO. 40 OF THE PAPER BOO K WHICH SHOWED THE CAPITAL FUND OF THE ASSESSEE SOCIETY AS REFLECTED I N ITS FINANCIAL STATEMENTS FOR THE YEAR ENDED 31/03/2012, 31/03/2011, AND 31/03/20 10 RESPECTIVELY, THE LD. AR STATED THAT THE ENTIRE DONATION OF RS. 40.00 LACS H AD BEEN SHOWN IN THE BALANCE SHEET UNDER THE HEAD CAPITAL FUND. THE LD. AR FURTH ER STATED THAT THE ENTIRE DONATION HAD BEEN SPENT FOR ACQUIRING CAPITAL ASSET S IN THE SOCIETY WHICH HAD BEEN DULY REFLECTED IN THE FIXED ASSETS ACCOUNT OF THE ASSESSEES TRUST. HE THEREFORE STATED THAT ALLEGATION REVEALED BY THE LD . AR THAT THE ACTIVITY OF THE TRUST WERE NOT GENUINE WAS INCORRECT AND NO COGNIZA NCE OUGHT TO BE TAKEN OF THE SAME. 6 9. WE HAVE HEARD THE REPRESENTATIVES OF BOTH THE PA RTIES AND PERUSED THE DOCUMENTS PLACED BEFORE US. 10. A PLAIN READING OF THE PROVISIONS OF SECTION 12 AA SUB CLAUSE (A) AND (B) SHOWS THAT WHILE CONSIDERING THE APPLICATION FOR RE GISTRATION U/S 12A, THE CIT HAS TO SATISFY HIMSELF ABOUT THE OBJECTS OF THE TRUST A ND THE GENUINENESS OF THE ACTIVITIES OF THE TRUST. THE OBJECTS OF THE TRUST/INSTITUTION CAN BE HAD FRO M THE BYE-LAWS OR THE TRUST DEED. THE CIT HAS TO BE SATISFIED THAT THE OBJECTS ARE FOR A CHARITABLE PURPOSE, BEFORE GRANTING REGISTRATION U/S 12AA OF THE ACT. G ENUINENESS OF THE ACTIVITIES OF THE TRUST OR INSTITUTION HAS TO BE SEEN, KEEPING IN MIND THE OBJECTS THEREOF AND THE CIT HAS TO SATISFY HIMSELF THAT THE ACTIVITIES ARE GENUINE AND IN CONSONANCE WITH THE OBJECTS OF THE TRUST. THE CIT CAN CALL FOR SUCH DOCUMENTS OR INFORMATION FROM THE TRUST OR INSTITUTION AS HE THINKS NECESSAR Y AND CAN ALSO MAKE SUCH ENQUIRIES AS HE DEEMS NECESSARY IN THIS BEHALF. THIS VIEW FINDS SUPPORT IN THE DECISION OF THE ALLA HABAD HIGH COURT IN THE CASE OF CIT VS. RED ROSE SCHOOL (2007) 212 CTR (ALL) 394 WH ICH DEFINED THE SCOPE OF SECTION 12AA BY HOLDING: A READING OF PROVISIONS OF SUB-CLS. (A) AND (B) OF S. 12AA MAKES IT CLEAR THAT THE CIT HAS TO SATISFY HIMSELF ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR INSTITUTION AND ALSO ABOUT THE OBJECTS OF THE TRUST OR THE INSTITUTION. ON BEING SATISFIED ABOUT THE GENUINENESS OF THE ACTIVITIES O F THE TRUST OR THE INSTITUTION AND ALSO ABOUT ITS OBJECTS, THE CIT WOULD EITHER GRANT THE CERTIFICATE OR WOULD REJECT THE PRAYER. IN ORDER TO SATISFY HIMSELF ABOUT THE G ENUINENESS OF THE ACTIVITIES OF THE TRUST OR THE INSTITUTION, HE CAN CALL FOR SUCH DOCU MENTS OR INFORMATION FROM THE TRUST OR THE INSTITUTION, AS HE THINKS NECESSARY AND HE I S ALSO EMPOWERED TO MAKE SUCH ENQUIRIES AS HE MAY DEEM NECESSARY IN THIS BEHALF. THE OBJECTS OF THE TRUST CAN BE HAD FROM THE BYE-LAWS OR THE DEED OF TRUST, AS THE CASE MAY BE AND UNLESS, OF COURSE, THE OBJECTS OF THE TRUST APPARENTLY MAKE OU T THAT THEY WERE NOT IN CONSONANCE WITH THE PUBLIC POLICY OR THAT THEY WERE NOT THE OBJECTS OF ANY CHARITABLE PURPOSE, REGISTRATION CANNOT BE REFUSED ACCORDINGLY ON THIS GROUND. IN REGARD TO THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR THE INSTITUTION, WHOSE OBJECTS DO NOT RUN CONTRARY TO PUBLIC POLICY AND AR E, IN FACT, RELATED TO CHARITABLE PURPOSES, THE CIT IS AGAIN EMPOWERED TO MAKE ENQUIR IES AS HE THINKS FIT. IN CASE 7 THE ACTIVITIES ARE NOT GENUINE AND THEY ARE NOT BEI NG CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST/SOCIETY OR THE INSTIT UTION, OF COURSE, THE REGISTRATION CAN AGAIN BE REFUSED. BUT ON MERE PRESUMPTIONS AND ON SURMISES THAT INCOME DERIVED BY THE TRUST OR THE INSTITUTION IS BEING MI SUSED OR THAT THERE IS SOME APPREHENSION THAT THE SAME WOULD NOT BE USED IN THE PROPER MANNER AND FOR THE PURPOSES RELATING TO ANY CHARITABLE PURPOSE, REJECT ION CANNOT BE MADE. SEC. 12AA, WHICH LAYS DOWN THE PROCEDURE FOR REGISTRATIO N, DOES NOT SPEAK ANYWHERE THAT THE CIT, WHILE CONSIDERING THE APPLICATION FOR REGISTRATION, SHALL ALSO SEE THAT THE INCOME DERIVED BY THE TRUST OR THE INSTITUTION IS EITHER NOT BEING SPENT FOR CHARITABLE PURPOSE OR SUCH INSTITUTION IS EARNING P ROFIT. THE LANGUAGE USED IN THE SECTION ONLY REQUIRES THAT ACTIVITIES OF THE TRUST OR THE INSTITUTION MUST BE GENUINE, WHICH ACCORDINGLY WOULD MEAN, THEY ARE IN CONSONANC E WITH THE OBJECTS OF THE TRUST/INSTITUTION, AND ARE NOT MERE CAMOUFLAGE BUT ARE REAL, PURE AND SINCERE, NOR AGAINST THE PROPOSED OBJECTS. THE PROFIT EARNING OR MISUSE OF THE INCOME DERIVED BY CHARITABLE INSTITUTION FROM ITS CHARITABLE ACTIV ITIES, MAY BE A GROUND FOR REFUSING EXEMPTION ONLY WITH RESPECT TO THAT PART OF THE INC OME BUT CANNOT BE TAKEN TO BE A SYNONYM TO THE GENUINENESS OF THE ACTIVITIES O F THE TRUST OR THE INSTITUTION. IT IS SIGNIFICANT TO MENTION THAT REGISTRATION UNDER S. 1 2AA DOES NOT NECESSARILY ENTITLE THE ASSESSEE TO GET THE INCOME EXCLUDED FROM THE IN COME OF THE PREVIOUS YEAR FOR THE PURPOSE OF DETERMINATION OF TAX LIABILITY B UT IT ONLY ENTITLES THE ASSESSEE TO CLAIM SUCH EXEMPTION, WHICH OTHERWISE COULD NOT BE CLAIMED IN THE ABSENCE OF REGISTRATION. THE ENQUIRY BY THE CIT SHALL REMAIN R ESTRICTED TO THE EXAMINATION, AS TO WHETHER THE ASSESSEE, WHO HAS MOVED THE APPLICAT ION FOR REGISTRATION UNDER S. 12A, IS ACTUALLY IN THE ACTIVITIES WHICH ARE GENUIN E. GENUINENESS OF THE ACTIVITIES OF THE TRUST OR THE INSTITUTION HAS TO BE SEEN, KEE PING IN MIND THE OBJECTS THEREOF, WHICH NECESSARILY MEANS THAT THE CIT SHALL SATISFY HIMSELF ABOUT THE FACT THAT THE ACTIVITIES ARE GENUINE AND IN CONSONANCE WITH THE O BJECTS OF THE TRUST OR THE INSTITUTION. IN OTHER WORDS, IF ESTABLISHING AND RU NNING A SCHOOL IS THE OBJECT OF THE SOCIETY, AS GIVEN IN ITS BYE-LAWS, IT HAS TO BE SAT ISFIED THAT THE SOCIETY HAS ESTABLISHED THE SCHOOL, WHERE EDUCATION IS BEING IM PARTED AS PER RULES AND THE FACTUM OF ESTABLISHMENT AND RUNNING SCHOOL IS A GEN UINE ACTIVITY. THE ENQUIRY REGARDING GENUINENESS OF THE ACTIVITIES CANNOT BE S TRETCHED BEYOND THIS. SUFFICIENT SAFEGUARDS HAVING BEEN GIVEN IN SS. 11, 12 AND 13 FOR ASSESSING THE INCOME WHICH HAS NOT BEEN APPLIED TO THE PURPOSE OF THE TRUST OR THE INSTITUTION, THE INTENTION OF THE LAW MAKER AND THE SCOPE AND PU RPORT OF THE PROVISION IS APPARENT WHILE CONSIDERING THE QUESTION OF REGISTRA TION. IN THE CASE OF CIT VS. LUCKNOW EDUCATIONAL & SOCIAL WELFARE SOCIETY (2012) 340 ITR 86(ALL) IT WAS HELD : CHARITABLE TRUSTREGISTRATION UNDER S. 12AAALLOWAB ILITYTESTS FOR REGISTRATION WHICH HAVE TO BE APPLIED ARE(1) WHETHER THE ACTIVI TIES OF THE SOCIETY ARE GENUINE, AND (2) WHETHER THE PURPOSE OF THE SOCIETY IS CHARITABLETRIBUNAL HAVING COME TO THE CONCLUSION THAT THE ASSESSEE HAD SATISFIED THE CONDITIONS FOR REGISTRATION UNDER S. 12AA, NO INTERFERENCE IS CALL ED FOR WITH ITS ORDER DIRECTING CIT TO GRANT REGISTRATION 8 HAVING SAID SO, WHILE APPLYING THE ABOVE PROPOSITIO N, TO THE PRESENT CASE WE FIND THAT AS FAR AS THE OBJECTS OF THE ASSESSEE SO CIETY ARE CONCERNED, THE SAME AS LISTED IN THE BYE LAWS ARE AS FOLLOWS: THE AIMS AND OBJECTS OF THE SOCIETY AS PER MEMORAND UM OF ASSOCIATION ARE:- 1. TO PROPAGATE THE PREACHINGS OF LORD MAHAVIR JI SE RVICE TO HUMANITY IS SERVICE TO LORD AND TO ACHIEVE THIS; 2. TO PROVIDE ASSISTANCE AND HELP TO THE NEEDY, SICK, SUFFERERS AND DOWN TRODDEN AND TO HELP THEM FOR GETTING EDUCATION AND TO OPEN SCHOOLS AND COLLEGES WITHOUT CASTE AND CREED. 3. TO PROVIDE HELP TO POOR FAMILIES IN PERFORMING THE MARRIAGES OF HIS/THEIR DAUGHTERS AFTER ATTAINING MARRIAGEABLE AGE. 4. TO OPEN ASYLUM FOR THE OLD, INFIRM, DESTITUTE AND S ICK PERSONS. 5. TO PROVIDE ASSISTANCE, AIDS, AND WORK TO THE POOR A ND WIDOWS TO ENABLE THEM TO EARN THEIR OWN LIVELIHOOD AND/OR TO MAINTAIN THE M AND/OR THEIR FAMILIES. 6. TO PROVIDE FREE MEDICAL AID, BY OPENING HOSPITALS D IAGNOSTIC CENTERS, MATERNITY HOME AND BY ORGANIZING SPECIAL MEDICAL CA MPS. 7. TO START PUBLIC LIBRARIES, BOOK CENTERS, RESEARCH C ENTERS AND READING ROOMS. 8. TO AVOID AND REMOVE THE MAL-PRACTICES AND BAD CUSTO MS PREVAILING IN THE SOCIETY IN DIFFERENT FORMS BY WAY OF SELF-IMPOSED L IMITATIONS AND BY A DRIVE TO UPROOT THEM. 9. TO PROPAGATE VEGETARIANISM AND FOR THIS TO HOLD SEM INAR, PUBLISH BOOKS AND HOLD CLASSES. 10. TO DO ALL SUCH LAWFUL ACTS, DEEDS AND THINGS WHICH ARE NECESSARY AND CONDUCTIVE TO THE ATTAINMENT OF THE GENERAL OBJECTS OF THE SOCIETY AND CREATION OF THE SPIRIT OF THRIFT, MUTUAL HELP AMONG ST ITS MEMBERS. 11. WE FIND THAT THE LD. CIT HAS NOT COMMENTED ADVE RSELY ON THE OBJECTS OF THE ASSESSEE SOCIETY. THE LD. CIT HAS ONLY STATED T HAT THE ASSESSEE SOCIETY HAS FILED NO DOCUMENTARY EVIDENCES TO PROVE THAT THE AI MS AND OBJECTS OF THE SOCIETY WERE ACTUALLY BEING DONE BY IT. MOREOVER A PERUSAL OF THE OBJECTS REVEALS THAT THE SAME ARE IN THE NATURE OF RELIEF O F THE POOR, EDUCATION AND MEDICAL RELIEF, AND ARE CLEARLY THEREFORE CHARITABL E IN NATURE, AS PER THE DEFINITION OF CHARITABLE PURPOSE U/S 2(15) OF THE INCOME TAX ACT, 1961. WE THEREFORE FIND THAT THE OBJECTS OF THE ASSESSEE SOC IETY ARE CHARITABLE. AS FOR THE GENUINENESS OF THE ACTIVITIES OF THE TRUST, WE FIND THAT DURING THE COURSE OF PROCEEDINGS U/S 12AA, THE LD. COMMISSIONER HAD VIDE NOTICES, WHICH WERE PRODUCED BEFORE US AT PAPER BOOK PAGE NO. 41,42,45, AND 50-57 ASKED THE ASSESSEE SOCIETY TO FILE VARIOUS DOCUMENTS. LD. CIT HAD, ASKED THE ASSESSEE SOCIETY TO FILE THE ORIGINAL CERTIFICATE OF THE REG ISTRATION OF THE SOCIETY, MOA/ TRUST DEED, NOTE ON ACTIVITIES DONE DURING THE LAST THREE YEARS, MONTH WISE DETAILS OF DONATION RECEIPT, DETAIL OF ASSETS OF THE ASSESSEE SOCIETY, INCOME AND 9 EXPENDITURE ACCOUNT AND BALANCE SHEET OF THE ASSESS EE SOCIETY, FROM THE FINANCIAL YEAR 2009-10 TO FINANCIAL YEAR 2013-14, B OOKS OF ACCOUNT OF THE SOCIETY, BUILDING EXPENSES DETAIL, AND DETAILS OF DONATION R ECEIVED FROM AY 2010-11 TO AY 2012-13. THE ASSESSEE SOCIETY HAD VIDE VARIOUS R EPLIES SUBMITTED DURING THE COURSE OF PROCEEDINGS BEFORE THE LD. CIT, AND PLACE D BEFORE US AT PAPER BOOK PAGE NO. 43-44, 46-49,52-53, 55-56 & 56-60, FURNISH ED ALL THE ABOVE DOCUMENTS AND INFORMATION AND EXPLANATION CALLED FOR BY THE L D. CIT. THE ASSESSEE SOCIETY HAD VIDE ITS LETTER DT. 30/04/2013 PLACED AT PAPER BOOK PAGE NO.43, STATED THAT IT WAS CARRYING ON THE ACTIVITY OF RUNNING OF HOSPITAL . THE ASSESSEE HAD STATED IN THE AFOREMENTIONED REPLY THAT IN THE HOSPITAL, OPD, VARIOUS LAB TEST, DENTAL DEPARTMENT AND EYES DEPARTMENT WERE THERE AND THAT ALL THE ACTIVITIES WERE BEING CARRIED ON, ON CHARITABLE BASIS. THE ASSESSEE SOCIETY HAD FURTHER STATED THAT THE HOSPITAL HAD STARTED ITS OPERATION FROM TH E YEAR 2009-10 BUT THE MAJOR WORK STARTED FROM THE FINANCIAL YEAR 2012-13, WHEN THE BUILDING WAS ALMOST COMPLETED. 12. THE LD. AR FURTHER DEMONSTRATED THE FACT OF CON DUCTING THE AFORESTATED ACTIVITY IN THE RECEIPT AND PAYMENT ACCOUNT AND THE BALANCE SHEET OF THE ASSESSEE FOR THE FY 2009-10 TO FY 2013-14 PLACED AT PAPER BOOK PAGE NO. 16 -40. IT WAS POINTED OUT TO THE BENCH BY THE LD. AR THAT THE RECEIPT AND PAYMENT ACCOUNT FOR THE VARIOUS YEARS SHOWED HOSPITAL RECEI PT AND EXPENSES PERTAINING TO RUNNING THE HOSPITAL, BEING SALARY OF HOSPITAL S TAFF, PURCHASE OF DENTAL EQUIPMENT, LABORATORY EQUIPMENT ETC. 13. WE FIND THAT ONE OF THE OBJECTS OF THE ASSESSEE SOCIETY AS STATED AT POINT NO. 6 IN THE BYE LAWS REPRODUCED ABOVE WAS TO PROVI DE FREE MEDICAL AID, BY OPENING HOSPITALS, DIAGNOSTIC CENTERS, MATERNITY HO ME AND BY ORGANIZING SPECIAL MEDICAL CAMPS. WE ALSO FIND THAT THE ASSESS EE SOCIETY HAD CLEARLY DEMONSTRATED THE CARRYING ON OF THIS ACTIVITY IN TH E PERVIOUS THREE YEARS THROUGH 10 ITS BALANCE SHEET, INCOME & EXPENDITURE ACCOUNT, RE CEIPT & PAYMENT ACCOUNT, FILED BEFORE THE LD. CIT. THE LD. CIT HAS NOT CONTR OVERTED OR COMMENTED ADVERSELY ON THESE DOCUMENTS PLACED BEFORE IT. THER EFORE WE FIND THAT THE GENUINENESS OF THE ACTIVITIES OF THE ASSESSEE SOCIE TY IS ALSO ESTABLISHED. FURTHER WE FIND THAT THE LD. CIT HAS ERRED IN STATING THAT NO DOCUMENTARY EVIDENCES WERE FILED TO SUBSTANTIATE THE CARRYING ON OF THE O BJECTS OF THE SOCIETY, DESPITE THE VOLUMINOUS DOCUMENTS AND INFORMATION PLACED BEF ORE HIM DURING THE PROCEEDINGS AS STATED ABOVE. 14. WE ALSO FIND THAT THE LD. CIT HAS ERRED IN REJE CTING THE ASSESSES APPLICATION U/S 12A, FOR THE REASON THAT THE ASSESSEE HAD NOT FURNISHED AUDITED STATEMENT AND THAT THE ASSESSEE SOCIETY WAS REGISTERED TWICE. WE FIND THAT AFORESTATED REASONS ARE NOT PERTINENT FOR THE PURPOSE OF ESTABL ISHING WHETHER THE ACTIVITY OF THE ASSESSEE SOCIETY WERE GENUINE OR NOT. AUDITED F INANCIAL STATEMENTS ARE NOT RELEVANT FOR ESTABLISHING THE FACT WHETHER THE ACTI VITIES OF THE TRUST WERE GENUINE OR NOT, WHICH IS CORROBORATED BY THE FACT THAT EVEN THE PROVISIONS OF THE INCOME TAX ACT 1961, DO NOT REQUIRE AUDITED FINANCIAL STAT EMENTS TO BE FURNISHED, WHILE SEEKING REGISTRATION UNDER SECTION 12AA . RULE 17 A OF THE INCOME TAX RULES, 1962, LIST THE DOCUMENTS WHICH SHOULD ACCOMPANY TH E APPLICATION UNDER SECTION 12A FOR REGISTRATION OF CHARITABLE OR RELIG IOUS TRUST OR INSTITUTION. AT POINT NO (B) OF THE RULES IT IS STATED THAT WHERE THE TRU ST OR INSTITUTION HAS BEEN IN EXISTENCE DURING ANY YEAR OR YEARS PRIOR TO THE FIN ANCIAL YEAR IN WHICH THE APPLICATION FOR REGISTRATION IS MADE, TWO COPIES OF THE ACCOUNTS OF THE TRUST OR INSTITUTION RELATING TO SUCH PRIOR YEAR OR YEARS (N OT BEING MORE THAN THREE YEARS IMMEDIATELY PRECEDING THE YEAR IN WHICH THE SAID AP PLICATION IS MADE) FOR WHICH SUCH ACCOUNTS HAVE BEEN MADE UP HAVE TO BE S UBMITTED. CLEARLY AS PER THE RULES, THE REQUIREMENT IS FURNISHING OF ONL Y THE ACCOUNTS OF THE TRUST OR INSTITUTION SEEKING REGISTRATION AND NOWHERE THE WO RD AUDITED ACCOUNTS HAVE 11 BEEN USED. THEREFORE THE NON FURNISHING OF AUDITED FINANCIALS CANNOT BY ITSELF BE A CRITERIA FOR HOLDING THE ACTIVITIES OF A TRUST OF SOCIETY AS NOT BEING GENUINE AND THEREFORE REFUSING GRANT OF REGISTRATION UNDER SECT ION 12AA. MOREOVER, THE LD. AR DEMONSTRATED BEFORE US BY REF ERRING TO ITS PAPER BOOK PAGE NO. 61-65, THAT REASON FOR NON-FURNISHING OF A UDITED RESULTS WAS DULY EXPLAINED TO THE LD. CIT. THE LD. AR STATED THAT TH E ASSESSEE HAD APPOINTED M/S SHAMMI GARG & CO. C.A, LUDHIANA AS ITS AUDITORS FOR THE 2009-10, AND REFERRED TO PAGE NO. 61 OF THE PAPER BOOK, WHICH WAS THE APPOIN TMENT LETTER ISSUED BY THE ASSESSE SOCIETY TO THE CA FIRM. THE LD. AR, THEREAF TER REFERRED TO PAPER BOOK NO. 62, WHICH WAS THE COMMUNICATION OF THE NEW AUDITORS , WITH THE PREVIOUS AUDITORS I.E; M/S S.S. PERIWAL & CO., SEEKING NO OB JECTION TO THEIR APPOINTMENT A AUDITORS OF THE SOCIETY. AT PAPER BOOK NO. 63, THE LD. AR REPRODUCED THE LETTER SENT BY THE PREVIOUS AUDITORS TO THE NEW AUDITORS, OBJECTING TO THEIR APPOINTMENT. AT PAPER BOOK 64, WAS PLACED THE LETTE R SENT BY THE ASSESSEE SOCIETY TO THE PREVIOUS AUDITORS, STRONGLY OBJECTIN G TO THEIR REFUSAL TO GRANT NOC TO THE NEW AUDITORS. THE LD. AR FURTHER DREW OUR AT TENTION TO THE LETTER WRITTEN BY THE ASSESSEE SOCIETY TO THE PRESIDENT OF THE INSTIT UTE OF CHARTERED ACCOUNTANT OF INDIA TO RESOLVE THE DISPUTE OF APPOINTMENT OF AUDI TORS. THE LD. AR ALSO STATED BEFORE US THAT THE DISPUTE HAD NOT BEEN RESOLVED TO DATE. THE LD. AR STATED THAT IN VIEW OF THE SAME THE ASSESSEE WAS PREVENTED FROM GETTING ITS BOOKS AUDITED. WE FIND THAT THE LD. CIT HAS NOT CONTROVERTED THE E XPLANATION OF THE ASSESSEE. IN VIEW OF THE ABOVE FACTS AND DISCUSSION, WE HOLD THA T NON-FURNISHING OF AUDITED FINANCIALS CANNOT BE A PERTINENT CONSIDERATION FOR HOLDING THE ACTIVITIES OF THE ASSESSEE SOCIETY AS INGENUINE. WE THEREFORE HOLD TH AT THE SAME CANNOT BE TREATED AS A CONSIDERATION FOR REFUSING TO GRANT RE GISTRATION TO THE ASSESSEE SOCIETY U/S 12AA. 12 15. WE FURTHER FIND THAT THE REFUSAL OF GRANT OF RE GISTRATION TO THE ASSESSEE SOCIETY FOR OFFERING NO EXPLANATION REGARDING REGIS TRATION OF THE SOCIETY TWICE IS ALSO INCORRECT. THE LD. AR, DURING THE COURSE OF AR GUMENTS DREW OUR ATTENTION TO PAPER BOOK 52, 58 AND 60 WHEREBY THE ASSESSEE SOCIE TY HAD VIDE ITS LETTER DT. 27/05/2013 AND 22/08/2013 EXPLAINED AS FOLLOWS: NO ENCLOSURE OF CERTIFICATES DATED 17/09/1974 AND 30/04/2009 ARE THERE AS NOTED IN YOUR LETTER DATED 21/05/2013. THE SOCIETY IS WORKING UNDER THE CERTIFICATE ISSUED ON 17/09/1974 AND THE PRESENT WORKING IS ALS O UNDER GOING UNDER IT. NO BAD INTENTIONS ARE THERE. THE SOCIETY IN YEAR 2009 WAS FORMED BY THE EX-PRESIDENT AND FINANCE SECRETARY BUT WHICH HAS NO RELEVANCE AS ON DATE AND THE SOCIETY DOCUMENTS I.E. GOVERNING BODY LIST ON YEARLY BASIS IS BEING SUBMITTED TO REGISTRAR OF FIRMS & SOCIETIES, CHANDIGARH FOR SOCIETY REGIST ERED ON 17/09/1974. WE THEREFORE FIND THAT THE CONTENTION OF THE LD. CI T THAT THE ASSESSEE HAD OFFERED NO EXPLANATION ABOUT THE REGISTRATION OF TH E SOCIETY TWICE IS NOT CORRECT. IN ANY CASE REGISTRATION OF A SOCIETY IS NOT A PRE CONDITION FOR GRANTING REGISTRATION UNDER SECTION 12AA. A PERUSAL OF RULE 17A OF THE INCOME TAX RULES 1962, REFERRED TO ABOVE WOULD SHOW THAT THE ONLY RE QUIREMENT IS TO FURNISH THE DOCUMENTS EVIDENCING THE CREATION OF THE TRUST OR E STABLISHMENT OF THE INSTITUTE IN ORIGINAL, WHICH WE FIND, THE ASSESSEE SOCIETY HA S FURNISHED IN THE FORM OF TRUST DEED. 16. IN VIEW OF THE FACTS STATED ABOVE WE HOLD THAT LD. CIT WAS NOT RIGHT IN REFUSING REGISTRATION TO THE ASSESSEE SOCIETY FOR N ON-FURNISHING OF EXPLANATION REGARDING REGISTRATION OF THE ASSESSEE SOCIETY TWIC E. IN CASE OF CIT VS. R.M.S. TRUST (MADRAS) [2010] 326 ITR 310 IT WAS HELD AS UNDER : AT THE STAGE OF CONSIDERING APPLICATION FOR REGISTR ATION UNDER S. 12A, ONLY INQUIRY WHICH COULD POSSIBLY BE MADE WOULD BE WHETHER THE A PPLICANT-TRUST HAS MADE APPLICATION AND WHETHER THE ACCOUNTS ARE MAINTAINED IN THE MANNER AS SUGGESTED IN THE SAID SECTION CIT WAS NOT JUSTIFIED IN REJECTING APPLICATION FOR REGISTRATION FOR WANT OF AMENDED TRUST-DEED SINCE I T IS NOT A PREREQUISITE CONDITION FOR REGISTERING THE APPLICANT AS A TRUST, TRIBUNAL WAS JUSTIFIED IN SETTING ASIDE THE ORDER OF CIT AND REMITTING THE MATTER FOR DECISION AFRESH. WE THEREFORE HOLD THAT THE CIT WAS NOT JUSTIFIED IN REJECTING THE APPLICATION FOR REGISTRATION OF THE ASSESSEE SOCIETY BY INSISTING O N CONDITIONS NOT CONTEMPLATED BY THE STATUTE. 13 17. IN VIEW OF THE ABOVE WE HOLD THAT THE OBJECTS O F THE ASSESSEE SOCIETY ARE CHARITABLE AND ITS ACTIVITIES ARE GENUINE AND THE A SSESSEE IS THEREFORE ENTITLED TO BE GRANTED REGISTRATION U/S 12A OF THE INCOME TAX A CT, 1961. 18. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (BHAVNESH SAINI) (ANNAPURNA MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :30/09/2015 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR