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Income Tax Appellate Tribunal, DELHI BENCH ‘C’ NEW DLEHI
Before: DR. B.R.R. KUMAR & SHRI N.K. CHOUDHRY
This appeal has been preferred by the Applicant Society (hereinafter referred to as ‘the Appellant’) against the order dated 30.07.2019, impugned herein, passed by the learned Commissioner of Income-tax (Exemptions), Chandigarh (in short “Ld. Commissioner”), u/s. 12AA(1)(b)(ii) of the Income-tax Act, 1961 (in short ‘the Act’).
Brief facts, relevant for adjudication of the instant appeal are that the appellant by filing an application in Form No. 10A on dated 24.01.2019 before the ld. Commissioner, sought registration u/s. 12A of the Act.
2.1 The ld. Commissioner while considering the said application, observed that the applicant society is in operation since 26th February, 2008 and the stated aims and objects of the society are to manage the affairs of the ITI, Barwala according to the terms and conditions set out in a Memorandum of Agreement to be signed among the Central Government, State Government and Industry partner.
2.2 The ld. Commissioner afforded an opportunity of personal hearing vide notice dated 15.02.2019 by fixing the case for 20.03.2019. However, on the said date, no one appeared on behalf of the appellant nor filed any application for adjournment. Thereafter another opportunity was accorded vide notice dated 03.04.2019 by which certain documents/clarifications, as mentioned in para No. 5 of the impugned order were sought by 22.04.2019. On 26.03.2019, the appellant sent the response through DAK to the ld. Commissioner and in the meanwhile on 04.04.2019, the representative of the appellant attended the office and filed the written submissions in response to the documents/queries sought by the ld. Commissioner. Thereafter, considering the submissions of the Assessee, the application filed for the registration u/s. 12AA of the Act was rejected by holding as under:
On 26.03.2019, response from the applicant was received through dak. In the meanwhile, on 04.04.2019, Sh. Rajesh Kumar, ITP attended this office and filed written submission in response to aforementioned letter. After perusal of submissions, following issues emerge- (i) In the present case applicant society has been established with the aim of up graduation of the Government Industrial Training Institute (Women). The applicant society has contended that its activities fall under the limb ‘education’ of section 2(15) of the Act. It is pertinent to mention here that it is an entity which has received large scale of grants from Government as reimbursement of expenses or fee for the activities undertaken by them in the field of skill development/vocational training. In that light, the applicant has claimed that its activities fall under ‘education’. However, the sense in which the word “education” has been used in section 2(15) as interpreted by the Apex Court in the case of Sole trustee, LokaSikshanSansthan (101 ITR 234) is systematic instruction, schooling or training given to the young is preparation for the work of life. It also connotes the whole course of scholastic instruction which a person has received. The word “education” has not been used in that wide and extended sense, according to which every acquisition of further knowledge constitutes education. To that extent, the contention of the applicant of pursuing ‘education’ limb of section 2(15) is not acceptable. Moreover, conducting skill development training laid down by the NCVT and co-ordinating the vocational training programmes do not partake the character of “Charitable Purposes”.
(ii) It is further clear that applicant is merely an implementing agency of the government and is being reimbursed for activities that have been held non-charitable. The said receipts don’t partake the character of voluntary donations and neither are income from property vested in the trust for charitable purposes as envisaged in section 11 & 12 of the Act. To that extent it is held that there is no income for which the exemption is being sought are not covered by Section 11 &12.
In the instant case, given the above, it is evident that claimed activities of the society does not partake the character of ‘education’ as established by the Apex Court in the case of LokShikshanSansthan. Therefore it is held that its activities are not charitable as envisaged in section 2(15). In light of the above, I have no option but to deny the registration to the applicant u/s 12AA of Income Tax Act, 1961.”
Against the rejection of application u/s 12 of the Act, the appellant has preferred the instant appeal.
We have heard the parties and perused the material available on record. It is trite to say that every person has the right to speak and be heard,when allegations are being put towards him or her. If no opportunity has been given to the party effected, then it shall amount to violations of the principles of natural justice, which embedded in latin words “Audi AlteramPartem” which means ‘hear the other side’, or ‘no man should be condemned un-heard’ or ‘both the sides must be heard before passing any order’. The principle of Audi AlteramPartem is the basic concept of the principle of natural justice has evolved through civilization and mankind and is the concept of common law, which implies fairness, reasonableness, equality and equity.
In India, the principles of natural justice are the grounds of Article 14 and 21 of the Constitution. Article 14 enshrines that every person should be treated equally. In the landmark case of ‘Maneka Gandhi vs. The Union of India’ (1978 AIR 597), it has been held by Constitution Bench of the Apex Court that the law and procedure must be of a fair, just and reasonable kind. The doctrine ensures a fair hearing and fair justice to both the parties. Under this doctrine, both the parties have the right to speak. The aim of this principle is to give an opportunity to the parties to defend themselves. Before the court, both the parties are equal and are entitlement of equal opportunity to represent them. If the order is passed by the authority without providing the reasonable opportunity of being heard to the person affected by it adversely, will be invalid and shall be liable to be set aside.
4.1 As per the provisions of section 12AA of the ACT, before passing the order for refusing to register the trust or institution, a reasonable opportunity of being heard is required to be given. For the sake of brevity and ready reference the provisions are reproduced herein below:
Section 12AA of the Income Tax Act reads as follows: "12AA. Procedure for registration.--(1) The Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) or clause (aa) of sub-section (1)of section 12A, shall— (a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf; (b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he – (i) shall pass an order in writing registering the trust or institution; (ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant:
Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard.(emphasis by us ).
4.2 Coming to the instant case, on dated 26.03.2019, the appellant sent the response through DAK and on dated 04.04.2019, through its representative attended the office and filed the written submissions in response to the documents/queries sought by the ld. Commissioner. Thereafter, Ld. Commissioner by considering the submissions of the Assessee rejected the application filed for the registration u/s. 12AA of the Act. Admittedly before declining the registration u/s 12 of the Act, no reasonable opportunity of being heard was provided to the Appellant, which is mandatory, hence on this ground itself, the order under challenge is liable to be set aside.
4.3 In our considered view, to meet the substantial justice, appropriate course would be to set aside the order impugned and remand back the case to the file of the Ld. Commissioner for decision afresh. Consequently, the case is remanded to the file of the Ld. Commissioner for decision afresh, suffice to say by affording reasonably opportunity of being heard to the Appellant.
4.4 As we have set aside the impugned order and remanded the case to the file of the Ld. Commissioner, hence not dwelling into the merits of the case. The Ld. Commissionershall be at liberty to re- consider all issues already raised or to be raised further and otherwise feel, fit and appropriate for proper adjudication of application for registration u/s 12AA of the Act.
4.5 The Assessee is also directed to cooperate with the proceedings and to appear as and when would be required by the Ld. Commissioner and to file the relevant documents as would be required for proper adjudication of the application, in case of default the Assessee shall not be entitled for any kind of leniency and the Ld. Commissioner would be at liberty to pass the order as per facts and circumstances of the case and in accordance with law.
In the result, the appeal filed by the Appellant stands allowed for statistical purposes.
Order pronounced in the open court on 29/08/2022.