IMPROVMENT TRUST, KHANNA V. INCOME TAX OFFICER, WARD- IV, Khanna

ITA 939/CHANDI/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 2672 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 22-06-2021
• Assessment Year: 2011-2012
• Appeal Filed On: 18-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MEENAKSHI VOHRA CIT
• Assessee Lawyers: Y K SUD
• Keywords: Cancellation of registration; Set aside
• Section: 12A; 12AA; 147; 12; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BE NCH A, CHANDIGARH ( VIRTUAL COURT) .., ! '# $ %', ! BEFORE: SHRI. N.K.SAINI, VP & SHRI , RAJPAL YADAV, VP ITA NOS. 938 & 939/CHD/2019 ASSESSMENT YEARS : 2009-10 & 2011-12 IMPROVEMENT TRUST KHANNA G.T. ROAD, KHANNA THE ITO WARD-IV, KHANNA PAN NO: AAALI0030N APPELLANT RESPONDENT !' ASSESSEE BY : SHRI Y.K. SUD, CA #!' REVENUE BY : SMT. MEENAKSHI VOHRA, ADDL. CIT $ %! & DATE OF HEARING : 22/06/2021 '()*! & DATE OF PRONOUNCEMENT : 23/06/2021 %&/ ORDER PER RAJ PAL YADAV, VICE PRESIDENT THESE TWO APPEALS ARE DIRECTED AT THE INSTANCE OF ASSE SSEE AGAINST THE SEPARATE ORDERS OF THE LD. CIT(A) DT. 27/03/2019 PASSED FOR T HE A.Y. 2009-10 AND 2011-12. 2. WITH THE ASSISTANCE OF LD. REPRESENTATIVE WE HAVE GO NE THROUGH THE RECORDS CAREFULLY. WE FIND THAT THERE IS CHEQUERED HISTORY OF THE LITIGATION BETWEEN THE ASSESSEE AND THE REVENUE IN THESE ASSESSMENT YEARS, THESE ARE THE S ECOND ROUND OF LITIGATION UPTO THE TRIBUNAL. LD. COUNSEL FOR THE ASSESSEE HAS PREP ARED THE LIST OF EVENTS DEMONSTRATING THE INCIDENT HAPPENED IN THE ASSESSMENT PROCE EDINGS OF THE ASSESSEE TRUST IN THESE ASSESSMENT YEARS. HE PLACED ON RECORD T HE EVENT IN SERIATIM, THE LETTER PRODUCED BEFORE US EXHIBITING THE VARIOUS STAGES OF LI TIGATION, READ AS UNDER: MOST RESPECTFULLY SUBMITTED AS UNDER AT THE TIME OF LAST HEARING ON 19.05.2021 THE UNDER SIGNED COUNSEL WAS DIRECTED BY THE HON'BLE BENCH TO MAKE THE SUBMISSIONS IN WRI TING REGARDING THE HISTORY AND EVENTS IN THE ABOVESAID APPEAL. IN COMPLIANCE TO TH E SAME THE UNDERSIGNED COUNSEL SUBMITS AS FOLLOWING: 2 1. THAT THE REGISTRATION U/S 12A APPLIED BY THE IMPROV EMENT TRUST WAS DECLINED BY CIT LUDHIANA VIDE ORDER DATED 25.04.2006. 2. THAT ON APPEAL BEFORE THE ITAT IN ITA NO. 530/CHAND I/2006 THE SAME WAS ALLOWED BY THE ITAT VIDE ORDER DATED 31.01.2008. 3. THAT AFTER THE AMENDMENTS IN SECTION 2(15) W.E.F. 0 1.04.2009 THE CIT LUDHIANA VIDE ORDER DATED 07.02.2013 CANCELLED THE REGISTRAT ION GRANTED U/S 12A W.E.F 1-4- 2009. 4. THAT THE ORDER OF THE CIT OF CANCELLATION OF REGIST RATION WAS CONFIRMED BY THE ITAT IN ITA NO. 406/CHD/2013 DATED 26.11.2014 BY DI SMISSING THE APPEAL OF THE ASSESSEE. 5. THAT THE ITO SUBSEQUENTLY REOPENED THE ASSESSMENT U/ S 147 OF ASST. YEAR 2009- 10 TO DISALLOW THE EXEMPTION U/S 11 AND PASSED AN O RDER MAKING ASSESSMENT AT INCOME OF RS. 13680572/- AND GAVE A FINDING IN PARA 4.3 AT PAGE 4 OF HIS ORDER THAT EXEMPTION CLAIMED U/S 11 IS DISALLOWED ON THE BASIS OF THE CANCELLATION OF REGISTRATION GRANTED BY CIT-2 LUDHIANA W.E.F. 01.04 .2009. 6 THAT THE ASSESSEE CHALLENGED THE ORDER BEFORE T HE CIT(A) AND IN APPEAL CIT(A) VIDE HIS ORDER DATED 07.07.2016 DISMISSED THE APPEA L OF THE ASSESSEE. 7. THAT THEREAFTER THE ASSESSEE FILED THE APPEAL BE FORE THE ITAT CHALLENGING THE DISALLOWANCE OF EXEMPTION U/S 11 AND ALSO THE O THER ADDITIONS OF RS. 515000/- SUSTAINED BY THE CIT(A). 8. THAT THE ITAT PASSED AN ORDER DATED 27.03.2019 REMANDING THE MATTER BEFORE THE CIT(A) WITH DIRECTIONS WHICH HAVE BEEN REPRODUC ED BY THE CIT(A) IN PARA 2 OF HIS ORDER. 9. THAT ONE OF THE FINDING GIVEN BY ITAT WAS AS UND ER: REGARDING THE ISSUE OF WITHDRAWAL OF REGISTRATION UNDER SECTION 12AA, THE ORDER OF THE LD.CIT(A) WAS CONFIRMED BY THE ITAT IN ITA NO.406/CHD/2013 DATED 26.11.2014. SINCE THERE IS NO MATERIAL DIFFERENCE I N THE FACTS AND CIRCUMSTANCES OF THE CASE FOR THE YEAR UNDER CONSIDERATION, WE HEREB Y CONFIRM THE REVOCATION OF REGISTRATION UNDER SECTION 12AA.' 10. THAT IN THE MEAN WHILE THE ORDER OF THE ITAT FOR CO NFIRMING THE WITHDRAWAL OF EXEMPTION WAS CHALLENGED BEFORE THE P&H HIGH COURT AND THE HON'BLE HIGH COURT RESTORED THE MATTER BACK TO THE FILE OF ITAT WITH DIRECTIONS AND THE HON'BLE ITAT IN ITA NO. 406/CHD/2013 IN THE SECOND ROUND AL LOWED THE APPEAL OF THE ASSESSEE SETTING ASIDE THE REVOCATION OF THE REGIST RATION U/S 12A BY CIT LUDHIANA. AS A RESULT THE TRUST WAS DULY REGISTERED U/S 12A A S PER THE ORIGINAL REGISTRATION GRANTED BY CIT(E). 11. THAT WHILE THE APPEAL WAS BEING DECIDED BY CIT( A) IN THE SECOND ROUND SHE HAS NOTICED THIS FACT IN PARA 3.3 OF HER ORDER THAT ITAT HAS RESTORED THE RE GISTRATION U/S 12AA IN ITA NO. 406/CHD/2013 DATED 21.02.2019 B UT FAILED TO PASS A SPEAKING ORDER AGAIN FOR ALLOWING THE EXEMPTION U/S 11 OF TH E INCOME TAX ACT 1961. 3 ALTHOUGH THE ADDITION OF RS. 515000/- WAS DELETED B Y HER. HENCE THE ACTION OF CTT(A) FOR NOT ALLOWING THE EXEMPTION U/S 11 IS NOW CHALLENGED BEFORE THE ITAT. 3. A PERUSAL OF THE ABOVE WOULD INDICATE THAT ORIGINALL Y THE ASSESSEE APPLIED FOR GRANT OF REGISTRATION UNDER SECTION 12A OF THE INCOME T AX ACT, 1961 THIS REGISTRATION WAS DENIED TO THE ASSESSEE. THEREAFTER THE ASSESSEE WENT IN A PPEAL BEFORE THE TRIBUNAL IN ITA NO. 530/CHD/2006 AND THE TRIBUNAL HAS ALLOWED THIS AP PEAL VIDE ORDER DT. 31/01/2008. THE TRIBUNAL HAS GRANTED THE REGISTRATION TO THE ASSESSEE HOWEVER AFTER AMENDMENT IN SECTION 2(15) W.E.F 01/04/2009 THE REVENUE HAS HARBOURED A BELIEF THAT THE ACTIVITIES OF THE ASSESSEE ARE NOT CHARITABLE IN NAT URE, AND THEREFORE THE LD. COMMISSIONER INITIATED THE PROCEEDING OF CANCELLATION OF REGISTRATION GRANTED UNDER SECTION 12A OF THE INCOME TAX ACT, 1961, ULTIMATELY TH AT REGISTRATION WAS CANCELLED AND APPEAL TO THE TRIBUNAL AGAINST THE ORDER OF THE LD. COM MISSIONER DT. 07/02/2013 WAS DISMISSED VIDE ITA NO. 406/CHD/2013 DT. 26/11/2014. MEANWHILE THE ASSESSMENT FOR A.Y. 2009-10 WAS REOPENED BY TREATING THE STATUS OF THE ASSE SSEE AS NON- CHARITABLE ENTITY AND ACCORDINGLY THE ASSESSMENT ORDER WAS FRAMED. 4. THE ORDER OF THE ITAT WAS CHALLENGED BEFORE THE HON' BLE HIGH COURT AND THE HON'BLE HIGH COURT HAS REMITTED THE ISSUE BACK TO THE T RIBUNAL. THEREAFTER THE TRIBUNAL VIDE ORDER DT. 21/02/2019 ALLOWED THE APPEAL OF THE A SSESSEE I.E; ITA NO. 406/CHD/2013 WHICH WAS REMANDED BACK BY THE HON'BLE HIGH COURT VIDE ORDER DT. 22/10/2018, THE TRIBUNAL HAS ALLOWED THE APPEAL OF THE ASSESSEE AND THE R ELEVANT PART OF THE ORDER OF THE TRIBUNAL READ AS UNDER: 4. BOTH THE PARTIES HAVE FAIRLY AGREED THAT THE ISS UE IS NOW COVERED BY THE DECISION OF THE HIGHER COURTS INCLUDING OF THE HON' BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. MOGA IMPROVEMENT TRUST, (2017 ) 390 ITR 547 AND OF THE HON'BLE BOMBAY HIGH COURT IN DIT (EXEMPTIONS) VS. M/S KHAR GHYKHANA, ITA NO. 2349 OF 2013 ORDER DATED 6.6.2016 WHEREIN, IT HAS B EEN HELD THAT THE DEVELOPMENT ACTIVITY CARRIED OUT BY IMPROVEMENT TRU ST FALLS WITHIN THE DEFINITION OF OBJECTS OF GENERAL PUBLIC UTILITY, HOWEVER, TAKING INTO CONSIDERATION THE SUBSEQUENT AMENDMENTS IN THE RELEVANT PROVISIONS OF THE ACT, THE ALLOWABILITY OF QUANTUM INCOME FROM THE ACTIVITY OF THE ASSESSEE IS A QUESTION OF ASSESSMENT OF INCOME WHICH CAN BE CONSIDERED WHILE FRAMING ASSESS MENT U/S 11 OF THE ACT. SO FAR AS THE ISSUE RELATING TO REGISTRATION OF THE AS SESSEE IMPROVEMENT TRUST IS CONCERNED, THE ISSUE IS NOW SETTLED THAT THE REGIST RATION CANNOT BE CANCELLED ON THIS ACCOUNT. WE, THEREFORE, SET ASIDE THE ORDER OF THE LOWER AUTHORITIES IN CANCELLING THE REGISTRATION AND ORDER TO RESTORE RE GISTRATION TO THE ASSESSEE IMPROVEMENT TRUST. HOWEVER, OUR FINDINGS GIVEN AB OVE ARE RESTRICTED TO THE 4 RESTORATION OF REGISTRATION OF THE ASSESSEE TRUST U /S 12A OF THE INCOME TAX ACT. HOWEVER, THE ASSESSMENT OF INCOME SHALL BE SUBJECT TO APPLICATION OF THE RELEVANT STATUTORY PROVISIONS/LAW. NO OTHER GROUND HAS BEEN RAISED OR PRESSED BY THE COUNSEL. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATE D AS ALLOWED 5. ON THE STRENGTH OF THIS ORDER, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD. CIT(A) HAS DECIDED THE APPEAL AFTER THIS ORDER OF THE TRIBUNAL IN BOTH THE YEARS, THE MOMENT REGISTRATION UNDER SECTION 12A HAS BEEN RESTORED T O THE ASSESSEE THEN APART FROM OTHER DETAILS, THE LD. CIT(A) OUGHT TO HAVE CONSIDE RED ALLOWANCE OF REVOCATION OF REGISTRATION TO THE ASSESSEE. THIS ASPECT HAS NOT BEEN GONE THROUGH BY THE FIRST APPELLATE AUTHORITY AND THEREFORE THE ORDER OF THE LD. CIT(A) ARE NOT SUSTAINABLE. 6. ON THE OTHER HAND LD. DR RELIED UPON THE ORDERS OF THE LD. REVENUE AUTHORITIES. 7. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AND GON E THROUGH THE RECORDS CAREFULLY THE ASSESSMENT ORDERS WERE FRAMED IN BOTH THE YEARS WHEN THE ISSUE REGARDING THE STATUS OF THE ASSESSEE BEING CHARITABLE OR NON CHARIT ABLE WAS PENDING FOR ADJUDICATION. THE A.O. ON THE STRENGTH OF THE ITAT ORDER T OOK A VIEW THAT SINCE THE ASSESSEE IS NOT ENJOYING THE BENEFIT OF REGISTRATION U NDER SECTION 12A THEREFORE IT IS NOT ENTITLED FOR BENEFITS OF SECTION 11 & 12 WHILE ASSESS ING ITS INCOME. THE ORDER OF THE ITAT WAS SET ASIDE BY THE HON'BLE HIGH COURT AND THE ISSUE WAS REMITTED BY THE HON'BLE HIGH COURT TO ITAT. THE TRIBUNAL HAS ALLOWED THE APPEAL OF THE ASSESSEE. THE REGISTRATION EARLIER GRANTED TO THE ASSESSEE AND CANCELLED BY THE LD. CIT(A) WAS RESTORED, THUS THE INCOME OF THE ASSESSEE REQUIRED TO BE REASSESSED BY TREATING ITS STATUS AS REGISTERED TRUST UNDER SECTION 12AA, THEREFORE, IN THE INTEREST OF JUSTICE WE DEEM IT APPROPRIATE TO SET ASIDE ALL THE IMPUGNED ORDERS IN BOTH THE ASSESSMENT YEAR S AND REMIT THE ISSUE BACK TO THE FILE OF THE A.O. FOR REDETERMINATION OF INCOME OF THE ASSESSEE AFTER TREATING THE ASSESSEE AS A REGISTERED TRUST UNDER SECTION 12AA OF THE ACT. NO DOUBT WHEN THERE IS AN IRREGULARITY CREPT IN THE PROC EEDINGS THEN THE PROCEEDINGS SHOULD BE RESTORED AT THAT LEVEL. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ISSUE BE RESTORED TO THE FILE OF THE CIT(A) BECAUSE AFTER THE O RDER OF THE ITAT DT. 21/02/2019, THE LD. CIT(A) HAS DECIDED BOTH THE APPEALS THOUGH TOOK NOTE OF THE FACT THAT THE REGISTRATION HAS BEEN GRANTED, BUT FAILED TO GIVE LOGI CAL END TO THE ASSESSMENT 5 PROCEEDINGS. IN OTHER WORDS, SHE FAILED TO GIVE CONSE QUENTIAL BENEFIT OF SECTION 11 AND 12. IF WE REMIT THIS ISSUE TO THE FILE OF CIT(A) THEN TO OUR MIND THAT WILL ONLY ENHANCE MULTIPLICITY OF LITIGATION AT DIFFERENT PLATFORM. LD . CIT(A) WOULD CALL FOR THE REPORT FROM THE A.O. AND ONLY THEREAFTER WILL BE IN A POSITION TO ADJUDI CATE THE ISSUE. CONSIDERING THIS ASPECT WE DEEM IT APPROPRIATE TO SET ASIDE THIS ISS UE TO THE FILE OF THE A.O. THE OBSERVATION MADE BY US WILL NOT IMPAIR OR INJURE THE C ASE OF THE A.O. AND WILL NOT CAUSE ANY PREJUDICE TO THE INTEREST OF THE ASSESSEE WHILE REA SSESSING THE TAXABLE INCOME OF THE ASSESSEE IN BOTH THESE YEARS. THE ASSESSEE WILL BE A T LIBERTY TO SUBMIT ANY OTHER DETAILS OR EXPLANATION BEFORE THE A.O. 8. IN THE RESULT BOTH THE APPEALS OF THE ASSESSEE ARE AL LOWED FOR STATISTICAL PURPOSES. (ORDER PRONOUNCED IN THE OPEN COURT ON 23/06/2021) SD/ SD/- .., $ %' ( N.K. SAINI) (RAJ PAL YADAV ) ! / VICE PRESIDENT ! / VICE PRESIDENT AG DATE: 23/06/2021 (+! ,-.- COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. $ / CIT 4. $ / 01 THE CIT(A) 5. -2 45&456789 DR, ITAT, CHANDIGARH 6. 8:% GUARD FILE