Income Tax Appellate Tribunal - Delhi
Manav Sewa Gram Udyog Sangh, New Delhi vs Assessee on 19 October, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH "E" NEW DELHI)
BEFORE G.D. AGRAWAL, HON'BLE VICE-PRESIDENT AND SHRI
RAJPAL YADAV: HON'BLE JUDICIAL MEMBER
ITA No.3535/Del/2011
Assessment Year: - -
Manav Sewa Gram Udyog Sangh, Vs. Commissioner of Income-tax,
C/o Kapil Goel Adv. A-1/25, Sector New Delhi.
15 Rohini, New Delhi-110085
(PAN: AAATM9613P)
(Appellant) (Respondent)
Appellant by: Shri Kapil Goel, Adv.
Assessee by: Shri RS Negi, Sr.DR
Date of hearing : 19.10.2011
Date of pronouncement : 25.11.2011
ORDER
PER RAJPAL YADAV:JUDICIAL MEMBER The assessee is in appeal before us against the order of Learned Commissioner of Income-tax, Rohtak dated 26.05.2011 passed under section 12AA(1)(b)(ii) of the Income-tax Act, 1961. The grievance of the assessee is that Learned Commissioner has erred in refusing the registration to the assessee under sec. 12A of the Act.
2. The brief facts of the case are that the assessee Manav Sewa Gram Udyog Sangh was established in 1994 and it was registered under the Societies Registration Act, 1860. In clause (2) of its Memorandum, the assessee society has assigned a large number of aims and objects for 2 upliftment of poor and needy, women, promotion of education, welfare of the aged etc. It has filed an application under sec. 12A(1)(2a) of the Act in form No.10A with the CIT, Hissar on 10.11.2010. Since the jurisdiction over the assessee lies with CIT, Rohtak, its application was transferred by the CIT, Hissar to CIT Rohtak. Learned Commissioner conducted an inquiry under clause (a) of sec. 12AA and thereafter rejected the application of the assessee. The operative part of the order passed by the Learned Commissioner reads as under:
"3. As per Rule 17A(a) of the Income-tax Rules, 1962, the applicant was required to submit the original instrument of its establishment together with a copy thereof; but the applicant submitted only a photocopy of the instrument. The applicant did not turn up to produce the original copy of the instrument of its establishment. The application was, therefore, incomplete and not competent for the consideration of registration u/s. 12AA of the Income-tax Act.
4. A report was called for from the Assessing Officer as well as Joint CIT Rohtak as to whether the applicant fulfilled the conditions for the eligibility for registration u/s.12AA of the Income-tax Act. As per Joint CIT, Rohtak reported that "vide point (i) of the letter of Assessing Officer dated 19.05.2011, the Assessing Officer had called for following details:-
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"Certified copy of Memorandum of Association/trust deed alongwith aims and objects of the trust/society, name and address of the members/trustees of the society/trust, their occupation and sources of income and their PAN".
However, in regard to above no details of the sources of income and PAN of members and trustees are mentioned."
Further Joint Commissioner of Income-tax, Rohtak has also reported that "vide point (vii) and (Viii) of the letter of the Assessing Officer dated 19.05.2011, the Assessing Officer had also called for following details-
'Details of payments made by the society/trust to any member of the society/trust or their family members on any account of salary, wages, honorarium, commission, contract payments etc., as well as, Details of receipts of (i) donation in kind (ii) Donation towards corpus and (iii) General donation alongwith names and address of the donors and confirmation from those who made donation of Rs.5000 or more for the last three years and also during the current year.' The Joint Commissioner of Income-tax, Rohtak vide her report dated 35.05.2011 did not recommend the registration of the society u/s. 12AA by clearly stating in 'para 4.2' of the report that: 4
"In this regard, reliance has been placed on photographs and newspaper clippings. The photographs generally exhibit a group of people seated together over shacks or in a few instances walking with the porters/banners. Also the news paper clippings are mostly undated and in few cases are as old as relating to the year 2005, the details of work done at the ground level, wherein, material difference has been made to the lives of people and in the environmental preservation including watershed development etc. is not brought on record".
Keeping in view the aforesaid facts and circumstances, it is clear that the applicant failed to substantite his claim that society's aims/objects and terms of memorandum are of the charitable nature and also could not produce any concrete evidence to prove the genuineness of the activities of the society in spite of repeated opportunities accorded. Consequently, the request of the applicant society for registration u/s. 12AA of the Income-tax Act cannot be acceded to and the application in form 10A is, therefore, rejected accordingly u/s. 12AA(1)(b)(ii) of the Income-tax Act, 1961".
3. The learned counsel for the assessee while impugning the order of Learned Commissioner submitted that Learned Commissioner failed to appreciate the controversy in a true prospective. He pointed out that in paragraph 3 of the impugned order, Learned Commissioner has observed 5 that application submitted by the assessee is incomplete and not competent for the consideration of registration under sec. 12AA of the Act. The objections raised by the Learned Commissioner is that assessee failed to submit the original instrument of its establishment. He submitted that the assessee has filed true photocopy of the original memorandum which was duly attested by the Notary as well as by the President of the Society. The observations of the Learned Commissioner are incorrect. In order to verify this aspect, the ITAT has called for the original record and found that certified copy of the Memorandum of the Society is available on the record. Thus, after taking into consideration this aspect, we do not find any merit in this objection of the Learned Commissioner. He failed to appreciate the fact that a true photostat copy duly certified of the instrument of establishment is sufficient to comply with the conditions of Rule 17A(a) of the Income-tax Rules. If there is any doubt to the authorities about the authenticity of such document then they could insist for production of the original deed and a comparison can be made. But it is not adviseable to reject the application of an applicant on flimsy grounds. The quasi-judicial authorities are being respected not on account of their powers to legalize the injustice on technical grounds but for their capabilities of removing injustice and is expected to do so.
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4. The learned counsel for the assessee further submitted that a detailed show-cause notice was issued to the assessee under the signature of Shri Naresh Kumar Sharma, ITO(Hq.) in the Office of CIT, Rohtak on 11.5.2011. In this show-cause notice, learned ITO had asked for details on 26 points. The assessee has submitted its reply to the letter. Learned Commissioner has observed in the impugned order that certified copy of Memorandum of Association/trust deed along with aims and objects, names and addresses of the members and trustees etc. were called for but the assessee failed to give the source of income and PAN of members and trustees as mentioned. He pointed out that assessee failed to understand for what purpose the PAN of the members and trustees were required. It is an application for grant of registration under sec. 12AA. It is not an assessment proceedings. The assessee has filed certified copy of Memorandum. It has also given the details of its members and the management. It has given their addresses also. Learned Commissioner has nowhere expressed how these details would be instrumental in rejecting or accepting the application of the assessee. Learned Commissioner further made a reference to the report of the Joint Commissioner and observed that in this report, assessee has just produced photograph exhibiting a group of people sat together over shacks or in a few 7 instance walking with banners. The assessee failed to give any concrete evidence exhibiting any change has been effected by its activity at the grass root level in the lives of the people. The learned counsel for the assessee drew our attention towards page No. 60 where a certificate issued by the Additional Deputy Commissioner-cum-Chief Executive Officer of District Rural Dev. Agency, Rohtak. The assessee had carried out a survey under Total Sanitation Campaign Scheme of the State Government for BPL and APL families in the Distt. Rohtak. The survey conducted by the assessee was found to be satisfactory and a certificate to this effect was issued. Copy of the certificate has been made available on this page. Similarly, he referred page 61 where certificate issued by the District Education Officer demonstrating satisfaction on the survey conducted by the assessee under Sarve Sikhsha Abhiyan is available. He made references to the various newspapers cuttings placed on the paper book and submitted that at this stage Learned Commissioner has to see whether prima facie activities mentioned in the aims and objects are of charitable nature or not. Their actual implementation would be a future course of action. It is not the requirement of the law that first the assessee carried out the activities in full swing and only thereafter the registration would be granted. For buttressing his contentions, he relied upon the order of the ITAT in the case of Gems 8 Education Society passed in ITA No. 5308/Del/2010 wherein the ITAT after putting reliance upon the decision of Hon'ble Karnataka High Court in the case of Director of Income-tax Vs. Garden City Educational Trust reported in 191 Taxman 238 has observed that registration under sec. 12A is one of the procedural aspect for claiming benefit under sec. 11 and 12 of the Income-tax Act, 1961. The issues whether the assessee would earn income, it will apply its income for the purpose of its activities or not are relevant while assessing the income of the assessee. For granting registration under sec. 12A, Learned Commissioner is required to look into prima facie about the genuineness of the activities of the assessee. The activities incorporated in the aims and objects should be in accordance with law. They should not for the purpose of carrying out any illegal activity etc., meaning thereby, that registration under sec. 12A may not be given to an assessee for certain activities which are not in consonance with the expression "charitable purposes" provided in sec. 2(15) but in the garb of charitable objects, the assessee is trying to include such other activities which are basically not for charitable purposes. He prayed that appeal of the assessee be allowed and Learned Commissioner be directed to issue registration under sec. 12A of the Act.
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5. On the other hand, Learned DR relied upon the order of the Learned Commissioner and submitted that Joint Commissioner of Income-tax did not recommend the case of the assessee for grant of registration. He further submitted that the assessee failed to supply requisite details which can suggest that its activities were of charitable in nature.
6. We have duly considered the rival contentions and gone through the record carefully. With regard to the first objection raised by the Learned Commissioner for non-maintainability of assessee's application for grant of registration are concerned, we have already adjudicated this issue in the foregoing paragraphs. In paragraph No.4, Learned Commissioner has made reference to the report of Joint CIT. In this report, the first reference made by the Learned Commissioner with regard to the objection of the learned Joint CIT for non-grant of the registration is that assessee failed to give source of income and PAN of members. In our opinion, once the assessee has submitted certified copy of memorandum, list of its members and their addresses, it is not incumbent upon it to give the source of the income or PAN of its members. The members might not be having PAN. Learned Commissioner or the Joint CIT has not assigned any reason exhibiting the purpose for which these details are essential and in absence of such details, 10 the inquiry required to be conducted under sec. 12AA(a)(b) of the Act cannot be conducted. The relevancy of such details has not been highlighted. Similarly, the other objections referred in the report are superficial or irrelevant. Learned revenue authorities have totally failed to look into the aims and objects of the assessee mentioned in the Memorandum of Association. They have also totally overlooked the various certificates issued by the authorities of the Haryana State demonstrating the role played by the assessee for social upliftment, namely, conducting a survey under Total Sanitation Campaign Scheme meant for BPL and APL families and Sarve Sikhsha Abhiyan etc. Hon'ble Karnataka High Court in the case of Garden City Educational Trust (supra), has examined the purpose of inquiry required to be conducted while granting registration under sec. 12A and observed that learned authorities have to look the objects of the society and ascertained whether such objects are prima facie charitable in nature. They have to verify the activities of the assessee whether they are prima facie genuine or not. All other aspects about earning of income and its taxability has to be looked into at the time of assessment proceedings. With the assistance of learned representatives, we have gone through the detailed questionnaire issued from the office of the Learned Commissioner on 11.5.2011 and its reply given by the assessee. The copies of both the letters 11 are available on page Nos. 1 to 4 of the paper book. The assessee has submitted income and expenditure account for the last three years, books of account and vouchers etc., registration certificate issued under Societies Registration Act etc. It has submitted list of office bearers of governing body. It has specifically pointed out that no payment in shape of any remuneration has been made to any members of the society. We have looked into all these aspects. Taking into consideration all these evidence, we allow the appeal of the assessee and direct the Learned Commissioner to grant registration to the assessee under sec. 12A of the Act.
7. In the result, the appeal filed by the assessee is allowed.
Decision pronounced in the open court on 25.11.2011.
Sd/- sd/-
( G.D. AGRAWAL ) ( RAJPAL YADAV )
VICE- PRESIDENT JUDICIAL MEMBER
Dated: 25/11/2011
Mohan Lal
Copy forwarded to:
1) Appellant
2) Respondent
3) CIT
4) CIT(Appeals)
5) DR:ITAT
ASSISTANT REGISTRAR