Income Tax Appellate Tribunal - Delhi
Maa Bhagwati Siksha Prasar Samiti, ... vs Assessee on 19 December, 2008
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH `E' : NEW DELHI
BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER
AND SHRI B.P. JAIN, ACCOUNTANT MEMBER
I.T.A. No.241/Del/2009
Assessment Year : 2006-07
Maa Bhagwati Siksha Prasar Samiti, Commissioner of Income-tax,
Meerut. Vs. Meerut.
(Appellant) (Respondent)
Appellant by : Shri V.K. Goel, Advocate.
Respondent by : Ms. Banita Devi Raorem, Sr. DR.
ORDER
PER B.P. JAIN, ACCOUNTANT MEMBER.
This appeal by the assessee is directed against the order of the learned Commissioner of Income-tax, Meerut, dated 19.12.2008.
2. All the grounds raised by the assessee are taken together since the issue involved is identical. Ground Nos.1 to 4 in appeal are as under:
"1. That Ld. CIT, Meerut has not followed the direction of I.T.A.T. to decide the issue of registration U/s 12A of I.T. Act refresh. Ld. CIT withdraw the registration u/s 12A on the basis of his earlier order only.
2. That Income-tax act does not permit to withdrawal the registration granted by CIT, Meerut on 29-07-2005 with effect from 19-08-2004 therefore, withdrawal of registration is against the provision of I.T. Act.2
3. That the purpose of the creation of the society was to established an educational institute for which it obtained the permission from the Registrar of Mahatma Jyoti Pholay Roohelkhand University Bareilly on 12-12-2006 therefore, non- production of creditors does not effect the nature of activity (charitable activity) of the society therefore, withdrawal of registration U/s 12A granted to charitable institution cannot be said justified. Hence, withdrawal of registration is not justified as provision of section 12AA of the I.T. Act.
4. That Ld. A.O. ignored the evidence in the form of Affidavit & other evidence which justify the genuineness of the loan therefore, withdraw of registration U/s 12A cannot be justified."
3. Brief facts of the case as per order of the learned Commissioner of Income-tax are as under:-
"The assessee society was granted registration u/s 12AA vide order dated 29.7.2005. During the proceedings u/s 12AA, it was seen that the assessee's balance sheet showed unsecured loans aggregating to Rs.10,21,300/-. The then CIT directed the A.O. to verify the genuineness of these loans. The A.O. found that of the 44 creditors, 33 had advanced loans in cash. The assessee was unable to prove the creditworthiness and genuineness of these creditors. The A.O. after examination of these creditors held that the promoters of the society had introduced their unexplained money in the garb of loans. The A.O. also found that the assessee had not carried out any charitable activity in pursuance of its objectives. The A.O. also found that at the relevant date the assessee was not affiliated to any educational Board.
2. In view of the above findings, proceedings u/s 12AA(3) were initiated by the then CIT, Meerut on 16.3.2006. A number of opportunities were granted to the assessee over a period of seven months but the issues raised could not be clarified. Consequently, an order u/s 12AA(3) withdrawing registration granted on 29.7.2005 was passed on 30.10.2006.3
3. The assessee filed an appeal before the ITAT, which by an order dated 7.4.2008 set aside the Commissioner's order withdrawing registration.
4. In response to notice, Shri V.K. Goel, Advocate, attended and filed submissions on various dates.
5. It was contended that approval to the institute for running a B. Ed. Course was granted on 18.10.2004, 24.1.2007 and 5.3.2006. However, on examination of the attached documents it is seen that the letter dated 18.10.2004 of MJPR University, Bareilly is only a letter addressed to the Secretary, Higher Education, U.P. recommending grant of approval and the letter claimed to be dated 5.3.2006 is actually dated 5.3.2008. In fact, by submissions dated 9.1.2007 the assessee itself has stated that the society was granted approval of the Governor, U.P. by letter ES2582/65 dated 12.12.2006. Thus, on the date of cancellation of registration (30.10.2006) the assessee society was not approved for running any college.
6. The assessee has brought on record the case of CIT vs. Kailasha Nand Mission Trust decided by U.K. High Court to the effect that registration granted u/s 12A cannot be withdrawn, I may point out that in the case cited by the assessee registration was withdrawn prior to the enactment of section 12AA(3). After enactment of section 12AA(3), registration can be cancelled if the reasons enumerated therein are satisfied.
7. In the instant case, after carrying out the enquiry ordered by the CIT, the Addl. CIT initiated action u/s 147 against the assessee society. After examining the alleged depositors, the addl. CIT found that deposits amounting to Rs.4,03,500/- could not be proved to be genuine. It is the assesee's contention that
(a) it was able to prove genuineness of the rest of the loans (b) this order has been appealed against. I would like to observe that Rs.4 lakhs is a substantial sum and till the Assessing Officer's order holds it has to be taken as fully operative. If a society is brought into existence only to absorb the unexplained wealth of its promoters then it's activities cannot be said to be 4 genuine. Also pointed out earlier in para 5 (above), the society was not affiliated to any educational Board/University on the date of cancellation. Thus, the conclusions recorded in the order u/s 12AA(3 still hold good.
8. Registration granted to the society by order dated 29.7.2005 is, therefore, withdrawn."
4. We have heard the rival contentions and perused the facts and material available on record. The main dispute before us is two folds i.e. the letter for approval by the Governor of UP was not available on the date of cancellation of registration and secondly, the deposits of Rs.4,03,500/- out of total deposits of Rs.10,21,300/- were not proved as genuine by the Addl. CIT during the assessment proceedings, which were added back to the income of the assessee as per Assessing Officer's order available at Paper Book Pages 17 to 21 and accordingly the learned CIT held that the assessee society had been brought into existence only to absorb the unexplained wealth of its promoter and therefore, the activities cannot be said to be genuine.
5. There is no dispute to the fact that the assessee had been granted registration under section 12A of the Act vide order of the Commissioner of Income-tax dated 29.7.2005 with effect from 19.8.2004. The Registration under section 12A is granted after following the procedure for Registration under section 12AA of the Act where the Commissioner on receipt of 5 application for registration of a trust or institution calls for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of the activities of the trust or institution and may also make such enquiries as he deems in this behalf about the objects of the trust and institution and genuineness of its activities he shall pass an order in writing registering the trust or institution and if he is not satisfied, shall pass an order in writing refusing registration of a trust or institution. In the present case as mentioned hereinbefore the assessee had been granted registration by the learned Commissioner of Income-tax vide order dated 29.7.2005 with effect from 19.4.2004 and therefore, the learned Commissioner of Income-tax was satisfied about the objects of the trust/institution and genuineness of its activities. With regard to the withdrawal/cancellation of registration of the trust/institution, under section 12AA(3) of the Act, the registration can be cancelled where the trust or institution has been granted registration under section 12AA(1)(b) of the Act and subsequently the Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution. In the present case the learned counsel for the assessee has invited our attention to the main objects of the trust at Pages 24 & 25 of the Paper Book. None of the said objects has been 6 said to be non-charitable and there is no finding to that effect in the order of the learned Commissioner of Income-tax for cancellation of registration and no pleadings have been advanced in this regard by the learned DR. As regards the genuineness of the activities the observation of the learned CIT that unsecured loan/deposits of Rs.4,03,500/- out of total unsecured loan or deposit of Rs.10,21,300/- could not be proved to be genuine as held by the Addl. CIT in the assessment proceedings. The copy of the order of the Addl. CIT/Assessing Officer at Page 17 to 21 of the Paper Book was brought to our notice by the learned counsel for the assessee and he has submitted that the assessee has submitted all the required documents before the Assessing Officer during the assessment proceedings but the additions have been made by the Addl. Commissioner of income-tax/Assessing Officer since the source of deposit of Rs.4,03,500/- could not be proved genuine. There is no finding of the Assessing Officer that the said source of deposit is from the members of the society. We are convinced with the arguments of the learned counsel for the assessee that there is no finding to this effect in the order of the Assessing Officer that the amount has been contributed by the members of the society but as observed by the learned CIT that the society has been brought into existence only to absorb the unexplained wealth of its promoters. In this regard, if there is unexplained wealth of the promoters, 7 what are the materials available with the Assessing Officer in this regard has not been brought on record. Even if the income is from the unexplained sources, the society cannot be termed as non-charitable. The authorities have to satisfy themselves about the genuineness of the activities of the trust or the institution and how the income derived from the trust/institutional property is applied to the charitable purposes and not the nature of activity by which the income has been derived by the trust/institution. These views are fortified by the judgment of Hon'ble Karnataka High Court in the case of Sanjeevamma Hanumanthe Gowda Charitable Trust vs. Director of Income- tax (Exemption) (2006) 285 ITR 327. Hon'ble Supreme Court in the case of Sole Trustee, Loka Shikshana Trust vs. CIT (1975) 101 ITR 234 has observed that if the profits must necessarily feed a charitable purpose under the terms of the trust, the mere fact that the activities of the trust yield profit will not alter the charitable character of the trust. The Hon'ble Supreme Court in the case of Delhi Stock Exchange Association Ltd. vs. CIT (1997) 225 ITR 235 at Page 240 has held that what is therefore required is that there must be an obligation created to spend the money exclusively and essentially on charity. Reliance has also been placed on the decision of coordinated Bench of ITAT in the cases of Shri Krishna Education & Welfare Trust vs. CIT (2009) 27 SOT 321 (Del); Bharti Vidyapeeth vs. ITO (2009) 28 SOT 32 8 (Pune); & Anand Charitable Trust vs. CIT (2009) 33 SOT 21 (Del). Similar are the facts of the present case where the cancellation of registration by the Commissioner of Income-tax had been held to be invalid. Therefore, in the circumstances and facts of the case and the decisions relied upon hereinabove of various authorities, the learned Commissioner of Income-tax has to satisfy about the genuineness of the activities of the trust/institution and not about the income derived from such trust/institution and none of the activities or application of income has been held to be for non-charitable purpose by the learned Commissioner of Income-tax, the addition of Rs.4,03,500/- by the Assessing Officer in the assessment proceedings for which the appeal is pending before the learned CIT(A) cannot be said to be an activity for non-charitable purpose and therefore, the society/institution in the present case cannot be held to be for non-charitable purpose on this ground. As regards approval from the Governor of UP, our attention was invited to the said approval at PB Page 23 where the Governor of UP has granted registration from 1.7.2006 for 3 years in Para 2 vide letter dated 12.12.2006. Nothing has been brought on record by the Commissioner of Income-tax and the learned DR to establish that the said letter pertains to have been issued in the year 2008 and therefore, the observations of the learned Commissioner of Income-tax are without any basis and material on 9 record. In the circumstances and facts of the case the learned CIT is not justified in cancelling the registration of the assessee granted under section 12AA(1)(b) of the Act. The order of the learned Commissioner of Income- tax cancelling the registration is directed to be quashed and registration of the assessee society/institution is directed to be restored. Thus all the grounds raised by the assessee in this appeal are allowed.
6. In the result, the appeal is allowed.
Pronounced in the open court on 10th February, 2010.
Sd/- Sd/-
(A.D. JAIN) (B.P. JAIN)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 10h February, 2010.
Copy of the order forwarded to:-
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
By Order
*mg Deputy Registrar, ITAT.