PARMESHWAR PARAM SEVA FOUNDATION,NASHIK V. COMMISSIONER OF INCOME TAX (EXEMPTION), PUNE, PUNE

ITA 1507/PUN/2024

AI Insights

The case involves the Parmeshwar Param Seva Foundation, which appealed against the decision of the CIT(Exemption), Pune, rejecting their application for registration under section 80G of the Income Tax Act, 1961. The initial rejection was based on the perceived lack of genuineness and transparency in the foundation's charitable activities, specifically in food distribution and educational aid. The foundation argued that the delay in filing the appeal was unintentional and due to a misunderstanding about the need to separately appeal the 80G rejection after filing for 12AB. The Tribunal found merit in the foundation's arguments, particularly in light of its earlier decision to grant 12AB registration, and thus set aside the CIT(E)'s decision, remanding the case for a fresh evaluation.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 28971 (ITAT-PUNE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2024-2025
• Other Referred Cases: Collector, Land Acquisition v. Mst. Katiji & Ors. [167 ITR 471], Lubricare Pvt. Ltd. v. DCIT [ITA No. 01/PUNE/2023], Parmeshwar Param Seva Foundation Vs. CIT(Exemption) in ITA No. 1358/PUN/2023
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY KUMAR KESHARI
• Assessee Lawyers: SANKET JOSHI
• Keywords: Condonation of delay; Set aside; Opportunity of being heard; Reasonable cause; Corroborative evidences
• Section: 11; 12AA; 12A; 12; 10; 10(23C); 80G

Judgement Text

" आयकर अपीलीय अधिकरण “बी” न्यायपीठ पुणे में । IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, PUNE BEFORE SHRI R.K. PANDA, VICE PRESIDENT AND MS. ASTHA CHANDRA, JUDICIAL MEMBER आयकर अपील सं. / ITA No.1507/PUN/2024 Parmeshwar Param Seva Foundation, Plot No. 483A, Shop No. F-1, SK Open Mall Complex, College Road, Nashik-422002 PAN : AAMCP9983A Vs. CIT(Exemption), Pune अपीलार्थी / Appellant प्रत्यर्थी / Respondent Assessee by : Shri Sanket Joshi Department by : Shri Ajay Kumar Keshari Date of hearing : 21-01-2025 Date of Pronouncement : 29-01-2025 आदेश / ORDER PER ASTHA CHANDRA, JM : The appeal filed by the assessee is directed against the order dated 12.10.2023 of the Ld. Commissioner of Income Tax (Exemption), Pune [“CIT(E)”] whereby he rejected the application of the assessee filed before him in Form No. 10AB under clause (iii) of first proviso to sub-section (5) of section 80G of the Income Tax Act, 1961 (the “Act”) on 21.04.2023. 2. The assessee has filed this appeal with a delay of 218 days. The assessee has filed an application along with a sworn affidavit seeking condonation of delay in filing of the appeal stating therein the reasons for delay as under : “1. The order u's 80G(5) passed by CIT(E), Pune was received on 12.10.2023. Thus, the due date for filing the appeal was 11.12.2023. The appeal is being filed on 05.07.2024. Thus, there is a delay of 218 days in filing the present appeal before Hon'ble ITAT. The appellant submits that the delay of 218 days in filing the appeal was on account of reasonable cause. 2. The appellant would like to submit that in the present case the application in Form 10AB for registration u/s 12AB and registration u/s 80G was simultaneously filed on 21.04.2023. It is to be noted that the application filed for the registration u/s 12AB as well as 80G was rejected by CIT(E), Pune vide order dated 12.10.2023. The appeal in respect of order rejecting the registration u/s 12AB of the act was filed before the Hon'ble ITAT on 2 ITA No.1507/PUN/2024 11.12.2023. The director of the appellant was under impression that filing of appeal in respect of order rejecting the registration u/s 12AB dated 12.10.2023 will also cover the issue of 80G and hence, appeal against the order rejecting the 80G was not filed. The fact that the assessee foundation had applied for registration u/s 80G which came to be rejected vide order dated 12.10.2023, came to the notice of the A.R. of the appellant appearing in the appeal filed against Order rejecting registration u/s 12A only around 18th June 2024 when the AR was preparing for the 12A hearing fixed before Hon'ble ITAT fixed for hearing on 20.06.2024. At that time upon being asked by the AR, the director informed the AR that no appeal was filed against order rejecting registration u/s 80G. It is at this time, the appellant stated that the 80G application was also rejected by the CIT(E), Pune vide order 12.10.2023. The director also stated that he was under impression that once the issue of 12AB is decided by the Hon'ble ITAT, Pune then the registration u/s 80G will also be granted by the CIT(E), Pune in due course and there is no need to file separate appeal against the order rejecting the 80G registration. Thereafter, the counsel informed the appellant that 12AB and 80G are two separate proceedings and even if the registration u/s 12AB is granted by the Hon'ble ITAT, it will not lead to automatic restoration the 80G registration. It was also informed that since these two are separate proceedings, the appeal need to be filed against order rejecting the 80G. 3. Thereafter, compilation of the relevant documents and forwarding the same to the Counsel for preparing the appeal took some time since the Director was not well during the relevant period. After collection of all the relevant documents and generating the Digital Signature Certificate, the appeal was filed on 16.07.2024. In view of the above facts, there was a delay of 218 days in filing the present appeal and it is prayed that the said delay in filing the appeal may please be condoned in the interest of justice. It is to be noted that when the assessee foundation had filed appeal against Order dated 12.10.2023 rejecting registration u/s 12A, then there was no reason why the assessee foundation would have taken a conscious decision of not preferring appeal against the order rejecting registration u/s 80G passed on the same day by PCIT by rejecting registration on same grounds. Accordingly, it is submitted that the delay in filing appeal against the order u/s 80G was due to bona fide reasons and not intentional. 4. In this respect, the appellant places reliance on the ratio laid down in the decision of Hon'ble Supreme Court in the case of Collector, Land Acquisition v. Mst. Katiji& Ors. [167 ITR 471] wherein it has been held that \"When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred\". 5. Reliance is also placed on the decision of Hon'ble ITAT, Pune in case of Lubricare Pvt. Ltd. v. DCIT [ITA No. 01/PUNE/2023] & Others, dated 23.01.2023 wherein substantial delay of 997 days to 2197 days in different cases, has been condoned by holding that none should be deprived of adjudication on merits unless it is found that the litigant deliberately delayed filing of appeal.” 2.1 After hearing both the sides and considering the factual and legal submissions made by the assessee, we are of the view that the delay is not intentional or deliberate but attributable to the sufficient cause. We, therefore, condone the delay in filing of the appeal and proceed to decide the appeal. 3 ITA No.1507/PUN/2024 3. Briefly stated, the facts of the case are that the assessee filed an application for registration in Form No. 10AB u/s 80G(5)(iii) of the Act on 21.04.2023 along with annexures. The Ld. CIT(E) pursuant to the said application called for certain information/clarification under the provisions of section 80G(5)(ii)(a) of the Act in order to verify the genuineness and activities of the assessee and fulfillment of conditions laid down in clauses (i) to (v) of Section 80G(5) of the Act. On verification of the reply submitted by the assessee, the Ld. CIT(E) noticed certain discrepancies which were intimated to the assessee vide show cause notice dated 03.10.2023. The assessee furnished its reply to the said show notice on 09.10.2023 contending that the food distribution activity was being conducted at Jalalpur village (Nashik Dist.) where construction labourers are served food. Regarding education aid given, the assessee stated that it sent letters to various schools to identify underprivileged students. Recommendations were received from schools stating names of deserving students. Also, application were received from parents of students recommended by school for help to pay school fees and on the basis of the same, the assessee gave financial aid to these students. However, the above contentions of the assessee were not accepted by the Ld. CIT(E) who proceeded to reject the application filed by the assessee and also cancelling the provisional approval granted on 14.03.2023 being not satisfied about the charitable nature and the genuineness of the activities of the assessee and fulfillment of conditions laid down in clauses (i) to (v) of section 80G(5) of the Act. The relevant findings and observations of the Ld. CIT(E) are as under : “5.1 The contention is duly considered. However, the same is not found to be acceptable. The evidences regarding food distribution submitted does not substantiate the claim that this was a charitable activity. The photographs provided depict the distribution of food at a construction site. However, the assessee has not furnished sufficient details on how beneficiaries are identified for this food distribution activity. Charitable organizations are expected to have transparent and documented processes for beneficiary selection to ensure that aid is directed to those genuinely in need. This issue carries weightage since in submission, the assessee itself has stated that nearby villagers also take benefit of the programme. Further, it is seen that most of the grocery bills are in the form of estimates which do not bear even the name of the seller/shop or signature of the seller. Therefore, genuineness of the same remained questionable. Except for grocery and bills for gas cylinders, no other details and supporting evidences with respect to the persons who cook food, serve food, bills of other incidental expenditure etc are furnished. Even in financial statements, no item-wise details of expenditure are given. As such the evidences furnished do not demonstrate the charitable nature and the genuineness of the activity. 5.2 Regarding financial assistance for education activity, the assessee has stated that it identified underprivileged students through letters sent to several schools. These schools, in turn, provided recommendations, and parents submitted applications seeking financial aid for their children's school fees. However, an analysis of these claims raised certain 4 ITA No.1507/PUN/2024 discrepancies. Apparently, the assessee sought recommendations exclusively from three schools viz Daffodils English Medium School, Gurukul English School, and Shree Chaitanya School. Each school recommended only one student, despite acknowledging that numerous financially overburdened parents had been approached. It is also noticed that all letters received from the aforementioned schools to the assessee and from the parents to the assessee are consistently formatted, raising questions about the authenticity of these recommendations. Letters of all schools are almost similar which considering that these are three different organisations appears to be highly improbable. While each parent applying for financial aid attested to an annual income of less than Rs. 2 Lakhs, no documentary evidence has been furnished either by the parents or not been verified by the assessee to substantiate their financial status. The school letters also do not specify whether the recommended students belong to the Economically Backward Class (EBC), nor do they mention if the parents have EBC certificates issued by a government authority. A notable detail is that all students benefiting from financial aid are in UKG/Sr.KG grades which is an informal pattern of education. It is pertinent to mention here that fees being charged by the above schools are also very high. For e.g., in case of a child Rajveer Jadhav studying in Jr.KG in Shree Chaitanya Techno School, annual fees is Rs. 85000/- which after offering some discount is charged at Rs. 54000/-. It is difficult to acknowledge that a parent having annual income of less than Rs. 2 Lakhs would go for such school where fees of pre-primary grades are so high. In other cases also, the fees ranges from Rs. 20000/- to 30000/-. Moreover, it is seen that in case of a child Supriya Thapa studying in Daffodils English Medium School, fees of Rs. 20900/- has been paid in 'Cash' as mentioned in the receipt of payment of fees. It is also observed that the assessee has disbursed payments to parents rather than making payments directly to the schools through cheques. Taking into consideration the inconsistencies and irregularities as discussed, the genuineness of the activities remained questionable. 6. Further, as per the condition vide clause (i) of section 80G(5) of the Income Tax Act, 1961, the approval under section 80G(5)(vi) is available only if the income of the institution or fund is not be liable to inclusion in its total income under the provisions of section 11 and 12 or clause (23AA) / clause (23C) of section 10 of the Income Tax Act, 1961. Exclusions for the said condition are detailed in clause (a), (b) and (c) of proviso to clause (i) of section 80G(5) of the Act. Therefore, the institution / fund is required to be regularly registered / approved either under section 12AB or 10(23AA) or 10(23C) of the Income Tax Act, 1961 or the institution / fund shall be a Regimental Fund or Non- Public Fund established by the armed forces of the Union for the welfare of the past and present members of such forces or their dependants. 6.1 In the instant case it is noticed that the assessee has neither furnished a copy of regular registration u/s 12AB read with section 12A(1)(ac)(i)/12A(1) (ac) (iii) nor any copy of regular approval under section 10(23C) read with clause (i) / (iii) of first proviso to the said section and the case is not covered under the exclusions provided vide proviso to clause (i) of section 80G(5) of the Act. The copy of order furnished by the assessee is actually an order of provisional approval under section 12AB read with section 12A(1)(ac) (vi) of the Income Tax Act, 1961. The assessee is not approved under section 10(23AA) of the Act. The assessee is also not a Regimental Fund or Non- Public Fund established by the armed forces of the Union for the welfare of the past and present members of such forces or their dependants. In fact, the application of the assessee in form No.10AB for registration u/s 12AB filed under the provisions of section 12A(1)(ac) (iii) of the Act has been rejected vide order dated 12/10/2023. Therefore, the condition (i) of section 80G(5) of the Income Tax Act, 1961 is also not fulfilled in this case.” 4. The Ld. AR submitted that the assessee had also challenged the rejection of registration u/s 12AB of the Act by the Ld. CIT(E) before this 5 ITA No.1507/PUN/2024 Tribunal. The Tribunal allowed the appeal of the assessee vide its order dated 20.06.2024 in the case of Parmeshwar Param Seva Foundation Vs. CIT(Exemption) in ITA No. 1358/PUN/2023 and directed the Ld. CIT(E) to grant the registration u/s 12AB of the Act to the assessee. He, therefore, prayed that the impugned order of the Ld. CIT(E) in the present appeal may be set aside to the file of Ld. CIT(E) for de-novo consideration of its application u/s 80G in light of the decision of this Tribunal (supra). 5. We have perused the order of the Tribunal in ITA No. 1358/PUN/2023 (supra). The relevant observations and findings of the Tribunal are reproduced below : “3. We heard the rival submissions and perused the relevant material on record. We find the ld. CIT (Exemption) after examining the evidences regarding the Food distribution concluded that the appellant had failed to furnish sufficient details as to how the beneficiaries were identified for the food distribution. Similarly, the ld. CIT (Exemption) observed that most of the grocery bills were in the form of estimates which did not contain even the seller/shop name, signature etc. Regarding the rendition of financial assistance for education activity, the ld. CIT (Exemption) observed that the appellant had only disbursed the aid to the parents instead of the schools directly. In our opinion, the above observations made by the ld. CIT (Exemption) does not lead to conclusion that either the objects are not charitable or the activities of the appellant are non-genuine. They are irrelevant and cannot be looked into at the time of granting the registration. The ld CIT(Exemption) had dealt with the issue of assessment. It is trite law that at the time of grant of registration, the Commissioner of Income Tax is only expected to examine and satisfy himself that the objects of the trust are charitable and its activities are in furtherance of the charitable in nature i.e. satisfy himself about the genuineness of the activities carried on by the assessee as held by the Hon’ble Supreme Court in the case of Ananda Social and Educational Trust Vs. CIT [2020] 114 taxmann.com 693/272 Taxman 7/426 ITR 340/[2020] 17 SCC 254. The relevant para of the judgment is reproduced below : \"Since section 12AA pertains to the registration of the Trust and not to assess of what a trust has actually done, we are of the view that the term 'activities' in the provision includes 'proposed activities'. That is to say, a Commissioner is bound to consider whether the objects of the Trust are genuinely charitable in nature and whether the activities which the Trust proposed to carry on are genuine in the sense that they are in line with the objects of the Trust. In contrast, the position would be different where the Commissioner proposes to cancel the registration of a Trust under sub-section (3) of section 12AA of the Act. There the Commissioner would be bound to record the finding that an activity or activities actually carried on by the Trust are not genuine being not in accordance with the objects of the Trust. Similarly, the situation would be different where the trust has before applying for registration found to have undertaken activities contrary to the objects of the Trust.\" 4. In the light of this judgment, we are of the considered opinion that the ld. CIT(Exemption) ought not to have denied the grant of registration. Accordingly, we direct the CIT(Exemption) to grant the registration u/s.12AB to the appellant.” 6 ITA No.1507/PUN/2024 6. On the facts and in the circumstances of the case enumerated above, we deem it fit, in the interest of justice and fair play, to set aside the order of Ld. CIT(E) and restore the matter back to his file for adjudication afresh in light of the decision of this Tribunal (supra), after allowing reasonable opportunity of being heard to the assessee who shall provide the requisite support in terms of submitting the relevant documents/evidence as may be required/called upon on the appointed date without seeking any adjournment under any pretext, failing which the Ld. CIT(E) shall be at liberty to pass appropriate order as per fact and law. We order accordingly. 7. In the result, the appeal of assessee is allowed for statistical purposes. Order pronounced in the open court on 29th January, 2025. Sd/- Sd/- (R.K. Panda) (Astha Chandra) VICE PRESIDENT JUDICIAL MEMBER पुणे / Pune; दिन ांक / Dated : 29th January, 2025. रदि आदेश की प्रधिधलधप अग्रेधिि / Copy of the Order forwarded to : 1. अपील र्थी / The Appellant. 2. प्रत्यर्थी / The Respondent. 3. The Pr. CIT concerned. 4. दिभ गीय प्रदिदनदि, आयकर अपीलीय अदिकरण, “बी” बेंच, पुणे / DR, ITAT, “B” Bench, Pune. 5. ग र्ड फ़ इल / Guard File. //सत्य दपि प्रदि// True Copy// आिेश नुस र / BY ORDER, िररष्ठ दनजी सदचि / Sr. Private Secretary आयकर अपीलीय अदिकरण ,पुणे / ITAT, Pune "