Kal Shri. Mahadevrao Naykude Dnyanvikas Prabhodhini Trust, Kolhapur V. Commissioner of Income-tax, (Exemption), Pune

ITA 943/PUN/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 6245 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 26-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KESANG Y SHERPA
• Keywords: Charitable institution; Principle of natural justice; Benefit of exemption; Set aside
• Section: 80G; 12A; 12AA; 12; 10; 11

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE ( THROUGH VIRTUAL COURT) BEFORE SHRI P.M. JAGTAP, VICE PRESIDENT (KZ) AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER . / ITA NOS.943 & 944/PUN/2019 KAI SHRI MAHADEVRAO NAYKUDE, DNYANVIKAS PRABHODHINI TRUST, ABDUL LAT, TAL- SHIROL DIST., KOLHAPUR, MAHARASHTRA 416143. PAN : AADTK0727H. . / APPELLANT. V/S THE COMMISSIONER OF INCOME TAX (EXEMPTION), PUNE. . / RESPONDENT ASSESSEE BY : SHRI PRAMOD SHINGTE. REVENUE BY : SMT. KESANG Y. SHERPA. / ORDER PER SHRI PARTHA SARATHI CHAUDHURY, THESE APPEALS PREFERRED BY THE ASSESSEE EMANATES FROM THE RESPECTIVE ORDERS OF THE LD. CIT(EXEMPTION), PUNE DATED 30.05.2019 AND 29.05.2019, RELATING TO ASSESSEES APPLICATION FOR REGISTRA TION U/S 12AA OF THE ACT AND ALSO CORRESPONDING APPLICATION FOR GRANT OF EX EMPTION U/S 80G OF THE ACT AS PER THE GROUNDS OF APPEAL ON RECORD : ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT ERRED IN NOT GRANTING REGISTRATION U/S 12AA ON THE GROUND OF NOT HAVING BEEN SATISFIED ABOUT THE CHARITABLE NATURE OF ACTIVITIES OF THE TR UST OR GENUINENESS OF ITS ACTIVITIES IN SPITE OF THE FACT THAT : / DATE OF HEARING : 17.09. 2020 / DATE OF PRONOUNCEMENT : 21 .0 9 .2020 2 A. THE APPELLANT TRUST IS EXCLUSIVELY ENGAGED IN THE ACTIVITY OF EDUCATION WHICH IS QUITE EVIDENT FROM THE AUDITED ACCOUNTS AS SUBMITTED TO THE LD. CIT AND B. THE APPELLANT HAVING SUBMITTED ALL DOCUMENTS AS CAL LED FOR BY THE LD. CIT IN THIS RESPECT. 2. THAT IN RESPECT OF THE APPLICATION FOR REGISTRATION U/S 12AA OF TH E ACT, THE OBJECTS OF THE ASSESSEE TRUST AS ANNEXED AT PAGE 21 OF THE PAPER BOOK IS TO PROMOTE AND PROVIDE EDUCATION AND EVEN TO CONDUCT SCHOOL FOR BLIND, HANDICAPPED, ORTHOPEDIC DISABLED, MENTALLY RETARDED, ACTIVITY WORKSHOPS, HOSTELS AND TO HELP THE HANDICAPPED STUDENTS IN THEIR DE VELOPMENT. THE OBJECTS ALSO INCLUDE TO GIVE EDUCATION IN THE FIELDS OF SCIEN CE, TECHNICAL, MILITARY, AGRICULTURE, MEDICAL, MANAGEMENT ETC., AND TO MAKE AV AILABLE NECESSARY PREMISES REQUIRED FOR SCHOOL, BUILDINGS, ETC. THE LD. CIT(EXEMPTION) IN HIS ORDER HAS OBSERVED THAT THE ASSESS EE TRUST WAS REQUIRED TO FILE RETURN OF INCOME AS PER SEC.139(4A) OF THE A CT SINCE THE ASSESSEE TRUST HAS SHOWN RECEIPTS EXCEEDING THE MAXIMU M AMOUNT WHICH IS NOT CHARGEABLE TO INCOME TAX. THE LD. CIT(EXEMPTION) WAS OF THE OPINION THAT THESE FACTS RAISE SERIOUS CONCERN ON THE GENUINENE SS OF THE ACTIVITIES OF THE TRUST TO BE CARRIED OUT. HOWEVER, AT PARA 3 OF HIS ORDER, LD. CIT(EXEMPTION) NOTED AT THE SAME TIME THAT WHATEVER QUERIES WERE ASKED TO THE ASSESSEE TRUST, THEY HAVE UPLOADED THE SAME O N ITBA PORTAL ON 05.01.2019. THEREFORE, IT IS EVIDENT FROM THE FACTS THAT WHAT EVER THE DETAILS WERE CALLED FOR FROM THE ASSESSEE TRUST, THEY HAVE ALL BEE N FURNISHED BY THE ASSESSEE TO THE DEPARTMENT. THAT AT THE TIME OF GRANT ING REGISTRATION U/S 12AA OF THE ACT, IT IS A SETTLED NORM THAT THE LD. CIT(EXEMPTION) SHOULD LOO K INTO TWO AREAS I.E., (1) OBJECTS OF THE TRUST; AND (2) GENUIN ENESS OF THE ACTIVITIES CARRIED OUT BY THE TRUST. THE OBJECTS OF THE TRUST WERE NOT DISPUTED BY THE DEPARTMENT NOR THEY HAVE DISPUTED THE GENUINENESS OF THE 3 ACTIVITIES CONDUCTED BY THE ASSESSEE TRUST. THE ONLY RE ASON FOR NOT GRANTING EXEMPTION U/S 12AA OF THE ACT WAS THAT THE RETURN UND ER SEC.139(4A) OF THE ACT WAS NOT FILED BY THE ASSESSEE AND IN OUR CONSIDE RED VIEW, MERELY NON-FILING OF RETURN UNDER THE SAID PROVISION CANNOT BE TH E GROUND TO DENY REGISTRATION U/S 12AA OF THE ACT TO THE ASSESSEE WHEN THE GENUINENESS OF THE ACTIVITIES IS NOT DISPUTED BY THE DEPARTMENT AND WHE N THE OBJECTS ARE CLEARLY LAID OUT AND ALL THE DETAILS WERE UPLOADED BY THE A SSESSEE TRUST IN THE ITBA PORTAL. THAT AT THE TIME OF HEARING, THE LEARNED DEPARTMENTAL REPRESENTATIVE COULD NOT REFUTE THESE FACTS ON RECORD. IT IS WELL SETTLED LAW THAT AT THE TIME OF GRANTING REGISTRATION OF THE TRUST U/ S 12AA OF THE ACT, THE LD. CIT(EXEMPTION) IS REQUIRED TO LOOK INTO THE OBJECTS OF THE TRUST AND THE ACTIVITIES CARRIED OUT BY THE TRUST WHETHER GENUINE OR NOT AND NOTHING ELSE. 3. WE FIND THAT OUR VIEW IS FORTIFIED BY THE JUDGMENT OF TH E HONBLE ALLAHABAD HIGH COURT REPORTED IN (1990) 185 ITR 634 WHERE IN IT WAS HELD THAT '3. IT IS EVIDENT THAT AT THIS STAGE, THE COMMISSIO NER IS NOT TO EXAMINE THE APPLICATION OF INCOME. ALL THAT HE MAY EXAMINE IS W HETHER THE APPLICATION IS MADE IN ACCORDANCE WITH THE REQUIREMENTS OF SECTION 12A READ WITH RULE 17A AND WHETHER FORM 10A HAS BEEN PROPERLY FILLED UP. H E MAY ALSO SEE WHETHER THE OBJECTS OF THE TRUST ARE CHARITABLE OR NOT AT T HIS STAGE, IT IS NOT PROPER TO EXAMINE THE APPLICATION OF INCOME. 4. AGAIN, THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF C IT VS RED ROSE SCHOOL (2007) 163 TAXMAN 19 (ALLAHABAD) HELD THAT: 'SECTION 12AA, WHICH LAYS DOWN THE PROCEDURE FOR RE GISTRATION, DOES NOT SPEAK ANYWHERE THAT THE COMMISSIONER, WHILE CONSIDE RING THE APPLICATION FOR REGISTRATION, SHALL ALSO SEE THAT THE INCOME DERIVE D BY THE TRUST OR THE INSTITUTION IS EITHER NOT BEING SPENT FOR CHARITABL E PURPOSE OR SUCH INSTITUTION IS EARNING PROFIT. THE LANGUAGE USED IN THE SECTION ONLY REQUIRES THAT ACTIVITIES OF THE TRUST OR THE INSTITUTION MUST BE GENUINE, WH ICH ACCORDINGLY WOULD MEAN THAT THEY ARE IN CONSONANCE WITH THE OBJECTS OF THE TRUST/INSTITUTION, AND ARE NOT MERE CAMOUFLAGE BUT ARE REAL, PURE AND SINCERE AND NOT AGAINST THE PROPOSED OBJECTS. THE PROFIT EARNING OR MISUSE OF T HE INCOME DERIVED BY CHARITABLE INSTITUTION FROM ITS CHARITABLE ACTIVITI ES MAY BE A GROUND FOR REFUSING EXEMPTION ONLY WITH RESPECT TO THAT PART O F THE INCOME BUT CANNOT BE 4 TAKEN TO BE A SYNONYM TO THE GENUINENESS OF THE ACT IVITIES OF THE TRUST OR THE INSTITUTION. [PARA 34] 5. SIMILAR VIEW WAS REITERATED IN THE CASE OF CIT VS BABU RAM EDUCATION SOCIETY REPORTED IN (2018) 96 TAXMANN.COM 606 W HEREIN THE HON'BLE ALLAHABAD HIGH COURT HELD AS UNDER: SECTION 12A OF THE INCOME-TAX ACT, 1961 - CHARITABLE OR RELIGI OUS TRUST - REGISTRATION OF (GENERAL) - WHETHER REGISTRATION OF TRUST DOES NOT INVOLVE ENQUIRY INTO ACTUAL ACTIVITIES OR APPLICATION OF FU NDS, ETC. AND AT THAT STAGE, ONLY ENQUIRY REQUIRED TO BE CONDUCTED IS WITH RESPE CT TO OBJECT OF TRUST ALONE AND IF ASSESSEE IS FOUND TO HAVE BEEN ACTUALLY ENGA GED IN ANY NON-CHARITABLE ACTIVITY, BENEFIT OF EXEMPTION MAY BE DENIED IN MAN NER PROVIDED BY ACT - HELD, YES - [PARA 7] [IN FAVOUR OF ASSESSEE] (HEAD NOTE) 12. THE HON'BLE HIGH COURT, IN THE ABOVE REFERRED C ASE HELD THAT REGISTRATION OF THE TRUST DOES NOT INVOLVE ENQUIRY INTO THE ACTU AL ACTIVITIES OR APPLICATION OF FUNDS, ETC. THE TRIBUNAL HAS COMMITTED NO ERROR IN FOLLOWING THE EARLIER ORDER. AT THAT STAGE, THE ONLY ENQUIRY REQUIRED TO BE COND UCTED WAS WITH RESPECT TO THE OBJECT OF THE TRUST ALONE. THE OBJECTIONS RAISE D BY THE COMMISSIONER PERTAIN TO MATTERS THAT MAY BE EXAMINED AT THE STAG E OF ASSESSMENT. AT THAT STAGE, IF THE ASSESSEE WERE TO BE FOUND TO HAVE ACT UALLY ENGAGED IN ANY NON- CHARITABLE ACTIVITY, THE BENEFIT OF EXEMPTION MAY B E DENIED AT THAT STAGE IN THE MANNER PROVIDED BY THE ACT. 6. OUR VIEW IS ALSO SUPPORTED BY THE JUDGMENT OF HON`B LE SUPREME COURT IN THE CASE OF CIT V. BABU RAM EDUCATION SOCIETY REPORTED AT [2018] 96 TAXMANN.COM 606 (ALL) IN WHICH SLP HAS BEEN DISMISSED BY THE HON`BLE SUPREME COURT BY OBSERVING AS UNDER: '4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R IN APPEAL BEFORE THE TRIBUNAL. THE TRIBUNAL VIDE IT'S ORDER DATED 26.07. 2013 HAS ALLOWED THE ASSESSEE'S APPEAL BY FOLLOWING THE JUDGMENT OF A DI VISION BENCH OF THIS COURT IN THE CASE OF HARDAYAL CHARITABLE AND EDUCATIONAL TRUST V. CIT [2013] 32 TAXMANN.COM 341/214 TAXMAN MAHAVIR FOUNDATION V. PR . CIT (E) AHMEDABAD /I.T.A.NO. 2831&2832/2017 6 655/355 ITR 5 34. IN THAT JUDGMENT THAT IS QUOTED BY THE TRIBUNAL IN ITS ORDE R, THIS COURT HAD HELD AS BELOW: 'THE PREPONDERANCE OF THE JUDICIAL OPINION OF ALL T HE HIGH COURT INCLUDING THIS COURT IS THAT AT THE TIME OF REGISTR ATION UNDER SECTION 12AA OF THE INCOME-TAX ACT, WHICH IS NECESSARY FOR CLAI MING EXEMPTION UNDER SECTIONS 11 & 12 OF THE ACT, THE COMMISSIONER OF INCOME TAX IS NOT REQUIRED TO LOOK INTO THE ACTIVITIES, WHERE SUC H ACTIVITIES HAVE NOT OR ARE IN THE PROCESS OF ITS INITIATION. WHERE A TR UST SET UP TO ACHIEVE ITS OBJECTS OF ESTABLISHING EDUCATIONAL INSTITUTION, IS IN THE PROCESS OF ESTABLISHING SUCH INSTITUTIONS, AND RECEIVES DONATI ONS, THE REGISTRATION 5 UNDER SECTION 12AA CANNOT BE REFUSED, ON THE GROUND THAT THE TRUST HAS NOT YET COMMENCED THE CHARITABLE OR RELIGIOUS A CTIVITY. ANY ENQUIRY OF THE NATURE WOULD AMOUNT TO PUTTING THE CART BEFO RE THE HORSE. AT A STAGE ONLY THE GENUINENESS OF THE OBJECTS HAS TO BE TASTED AND NOT THE ACTIVITIES, WHICH HAVE NOT COMMENCED. THE ENQUIRY O F THE COMMISSIONER OF INCOME TAX AT SUCH PRELIMINARY STAGE SHOULD BE RESTRICTED TO GENUINENESS OF THE OBJECTS AND NOT TH E ACTIVITIES UNLESS SUCH ACTIVITIES HAVE COMMENCED. THE TRUST OR SOCIET Y CANNOT CLAIM EXEMPTION, UNLESS IT IS REGISTERED UNDER SECTION 12AA OF THE ACT AND THUS AT THAT SUCH INITIAL STAGE THE TEST OF THE GEN UINENESS OF THE ACTIVITY CANNOT BE A GROUND ON WHICH THE REGISTRATI ON MAY BE REFUSED. 7. PLACING RELIANCE ON THE DECISIONS OF HONBLE APEX COURT A ND HONBLE HIGH COURT CITED SUPRA AND REVERTING TO THE FACTS OF THE ASSESSEES CASE, WE FIND THAT NON-FILING OF RETURN UNDER SEC.139(4A) OF THE ACT, CA NNOT BE THE GROUND TO DEMONSTRATE THAT THE ACTIVITIES OF THE TRUST WERE NOT GENUINE. THAT EVEN FROM THE ORDER OF THE LD. CIT(EXEMPTION), IT IS EVID ENT THAT HE HAS NOT CONDUCTED ANY SPECIFIC ENQUIRY OR VERIFICATION ON FACTS BEFORE COMING TO CONCLUSION OF REJECTING THE APPLICATION OF THE ASSESSEE TRUST. 8. FURTHERMORE, THE PURPOSE OF RETURN UNDER SEC.139(4A) OF THE ACT, IS THAT THE ASSESSEE HAS SHOWN RECEIPTS EXCEEDING THE M AXIMUM AMOUNT WHICH IS EXEMPT FROM TAX. NOW THIS RETURN IS TO BE FILED IN RELATION TO THE CLAIMING OF THE BENEFITS OF SECTIONS 10 & 11 OF THE ACT. SIN CE THE ASSESSEE HAS NOT FILED ANY RETURN THEREFORE THERE IS NO QUESTION O F GETTING ANY EXEMPTION UNDER SEC.10 AND 11 OF THE ACT AND HENCE, THE RE IS NO JEOPARDY CAUSED TO THE REVENUE. HOWEVER, THE LEARNED ASSESSING OFFICER AT THE TIME OF ASSESSMENT PROCEEDINGS, CAN TAKE APPROPRIATE STEPS A S PER LAW REGARDING THE NON-FILING OF RETURN UNDER SEC.139(4A) OF THE ACT. CONS IDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES IN THIS CASE AND FO LLOWING THE JUDICIAL PRONOUNCEMENTS CITED SUPRA, WE ARE OF THE CONSIDE RED VIEW THAT REGISTRATION UNDER SEC.12AA OF THE ACT SHOULD BE GRANTED TO THE ASSESSEE 6 TRUST. ACCORDINGLY, WE REVERSE THE ORDER OF THE LD. CIT(E XEMPTION) AND DIRECT HIM TO GRANT REGISTRATION U/S 12AA OF THE ACT TO THE ASSESSEE . 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.94 3/PUN/2019 IS ALLOWED. 10. WITH REGARD TO ITA NO.944/PUN/2019, IN RESPECT OF A PPLICATION FOR EXEMPTION U/S 80G(5)(VI) OF THE ACT, IT IS EVIDENT AT PARA 4 OF THE LD. CIT(EXEMPTION) IN HIS ORDER THAT AS BEING ASKED TO UPLOAD VARIOUS DETA ILS IN ITBA PORTAL, THE ASSESSEE TRUST HAS NOT UPLOADED / SU BMITTED ANY EVIDENCE I.E., SCHOOL PERMISSION LETTER, FEES, SALARY STRUCTURE, DETAILS OF EXPENDITURE INCURRED TO RUN PRIMARY AND SECONDARY SCHOOLS AND UTILIZ ATION OF INCOME FROM PROPERTY HELD UNDER TRUST TOWARDS CHARITABLE OBJEC TS OF THE TRUST. THAT FURTHER AT PARA 5 OF THE ORDER OF LD. CIT(EXEMPTIO N) OBSERVES THAT THE APPLICATION OF THE ASSESSEE TRUST CANNOT BE PROCESSED A S NO VERIFIABLE DETAILS / PROOF HAVE BEEN FURNISHED TO SUBSTANTIATE THE G ENUINENESS OF THE CHARITABLE ACTIVITIES OF THE TRUST. THUS, THE ASSESSEE HA S FAILED TO PROVE NECESSARY DOCUMENTS REQUIRED BY RULE 11AA(2)(II) OF THE INCO ME TAX RULES 1962, AND HENCE, THE EXEMPTION UNDER SEC.80G(5)(VI) OF THE AC T WAS REJECTED. 11. THE PURPOSE OF GETTING EXEMPTION U/S 80G OF THE ACT IS FIRST TO FACILITATE RECEIVING DONATIONS FROM VARIOUS DONORS WHEREBY T HE TRUST HAVING EXEMPTION UNDER SEC.80G CAN ISSUE A CERTIFICATE OF SUCH DO NATIONS TO THE DONOR AND THE DONOR GETS THE BENEFIT OF EXEMPTION WHILE FILIN G HIS RETURN OF INCOME. THE PROVISION OF SEC.80G(5)(VI) READ WITH RULE 11AA IS VERY SPECIFIC AND THE ESSENCE OF THIS PROVISION IS THAT THE CON CERNED AUTHORITY I.E., LD. CIT(E) IN THIS CASE, IN ORDER TO BE SATISFIED ABOUT TH E GENUINENESS 7 OF CHARITABLE ACTIVITIES PERFORMED BY THE ASSESSEE TRUST C AN CALL FOR ANY RELEVANT DOCUMENTS / EVIDENCES FOR FACTUAL VERIFICATION. IN THIS CASE, THE ASSESSEE HAS FAILED TO FURNISH REQUISITE DETAILS AND SUPPORT ING EVIDENCES TO THE REVENUE AUTHORITIES FOR VERIFICATION AND SUBSTANTIATING ITS CHARITABLE ACTIVITIES. THAT AT THE TIME OF HEARING BEFORE US, THE LEARN ED AUTHORISED REPRESENTATIVE PRAYED FOR ONE FINAL OPPORTUNITY SO THAT HE WILL PRODUCE ALL THE RELEVANT DETAILS AS CALLED FOR BEFORE THE LD. CIT(EXEMPTIO N). THAT CONSIDERING OUR DECISION, DIRECTING THE LD. CIT(EXEMPTION) TO G RANT REGISTRATION U/S 12AA OF THE ACT, IN THE TOTALITY OF THE J USTICE, WE FIND IT APPROPRIATE TO PROVIDE ANOTHER OPPORTUNITY TO THE ASS ESSEE AND THEREFORE WE SET ASIDE THE ORDER OF THE LD. CIT(EXEMPTION) DATED 29 .05.2019 AND RESTORE THE MATTER BACK TO HIS FILE TO ADJUDICATE THE ISS UE AND WE DIRECT THE ASSESSEE AT THE SAME TIME TO REPRESENT THE CASE ON M ERITS AND SUBSTANTIATE THE GENUINENESS OF THE CHARITABLE ACTIVITIES BEFORE LD. CIT(EX EMPTION) BY FILING SUPPORTING DOCUMENTS / EVIDENCES / RELEVANT DOCUMEN TS AS AND WHEN CALLED FOR BY HIM. THE LD. CIT(EXEMPTION) SHALL COMPLY W ITH THE PRINCIPLES OF NATURAL JUSTICE WHILE DECIDING THE MATTER. TH IS APPEAL OF THE ASSESSEE IN ITA NO.944/PUN/2019 IS ALLOWED FOR STATISTICAL PURPOSE S. 12. IN THE RESULT, THE APPEAL OF ASSESSEE IN ITA NO.943/P UN/2019 IS ALLOWED AND ITA NO.944/PUN/2019 IS ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED ON 21 ST DAY OF SEPTEMBER, 2020. SD/- SD/- - ( P.M. JAGTAP ) ( PARTHA SARATHI CHAUDHURY ) VICE PRESIDENT JUDICIAL MEMBER PUNE; DATED : 21 ST SEPTEMBER, 2020. YAMINI 8 ' ()*+, -,.* / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5. 6. CIT(EXEMPTION), PUNE. ADDL/JOINT COMMISSIONER OF INCOME TAX, EXEMPTION RANGE, PUNE. '#$ %%&',) &', / DR, ITAT, A PUNE; $*+,/ GUARD FILE. / BY ORDER , // TRUE COPY // -./%0&1 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.