C I T JAIPUR vs. SHREE MAIDH KSHTRIYA SABHA SIKAR

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ITA/16/2013HC RajasthanRJHC02063170201308 October 2014Author: JAINENDRA KUMAR RANKA,AJAY RASTOGI7 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no substantial question of law arises from the Tribunal's order. The Tribunal, in its finding, noted that the Commissioner had not provided specific evidence of embezzlement or misutilization of funds by the society or its members. The Tribunal observed that allegations and counter-allegations between rival groups were not proven, and no funds were shown to have been misappropriated or misutilized. The Tribunal reasoned that if there were mismanagement by office bearers, action could be taken against them individually, but cancellation of the society's registration was not warranted without concrete proof of fund misutilization for non-charitable objects. The Tribunal relied on previous judgments of the High Court and Apex Court regarding an overall view in granting exemptions. Consequently, the appeal was dismissed in limine.

What were the facts?

The assessee, Shree Maidh Kshtriya Sabha, a registered society, had its registration under Section 12AA and approval under Section 80G granted. Upon application for renewal of 80G exemption, a show cause notice was issued regarding withdrawal of 12AA registration and non-renewal of 80G, citing complaints that the society's activities were limited to a particular community. The assessee provided an explanation and affidavits, leading to the renewal of 80G. Subsequently, further complaints alleged financial irregularities, embezzlement of funds by office bearers, and illegal continuation of the secretary's role. The Commissioner, concluding that the society's activities were not genuine and charitable due to disputes and allegations of misappropriation, cancelled the 12AA registration and rendered the 80G exemption infructuous.

What were the issues?

1. Whether the Tribunal erred in holding that no substantial question of law arises from its order, which cancelled the registration under Section 12AA and withdrawal of exemption under Section 80G? Assessee's Arguments: The Tribunal's order was perverse and bad in law. The Commissioner was justified in cancelling the registration and exemption due to serious allegations of infighting and deviation from charitable activities. The society's activities could not be considered genuine in light of these allegations. Revenue's Arguments: No arguments were recorded for the revenue in the provided text.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 12AA,Section 80G,Section 10(22)

AI-generated summary — verify with the full judgment below

1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN JAIPUR BENCH, JAIPUR Judgment D.B. Income Tax Appeal No.16/2013 Commissioner of Income Tax, Jaipur-III, Jaipur Vs. Shree Maidh Kshtriya Sabha Date of Judgment: 08/10/2014 HON'BLE MR. JUSTICE AJAY RASTOGI HON'BLE MR. JUSTICE J.K. RANKA Mr. Sameer Jain Adv., Ms. Mahi Yadav Adv., for the appellant. BY THE COURT (Per Hon'ble Ranka, J.)

1.

Instant appeal u/S 260-A of the Income Tax Act, 1961 (for short, “IT Act”) is directed against the order of the Income Tax Appellate Tribunal, Jaipur Bench, Jaipur (for short, “ITAT”) dt.23/01/2013 passed in ITA No.731-732/JP/2012. 2. The brief facts, which came to be noticed on perusal of the impugned order, are that the respondent-assessee, a registered society, was registered u/s 12 AA by the then CIT-Bikaner vide order dt.09/12/1998 and was also accorded approval u/s 80G till 31/03/2008 by the same authority vide order dt.01/12/2005. The registration u/s 12AA as well as u/s 80G continued to be in force, however, when an application for renewal of its exemption u/s 80G was filed by the respondent-assessee, a show cause was issued by the Commissioner of Income

2 Tax to explain why its registration u/s 12AA be not withdrawn and exemption u/s 80G be not renewed as it was found that the activities of the assessee society is for a particular community only and several complaints were received.

3.

In response thereto, the respondent- assessee furnished explanation vide letter dt. 29/03/2011, accompanied by 10 affidavits of the stated donors and Commissioner was satisfied and accorded renewal of certificate u/s 80G vide order dt.13/04/2011. 4. Subsequent to grant of the said renewal, complaints/information appears to have been received in the office of the Commissioner that the trustee/secretary Sh. Shankar Lal Soni was an employee of the Forest Department of the State Government and though he had been directed to resign from the membership of the society by the Dy. Conservator of Forest, Sikar but he did not resign despite of repeated direction. It was also alleged that the Ex-President Sh. Shiv Bhagwan had been removed from the primary membership for his anti social/society activities, against which Sh. Shiv Bhagwan filed a writ petition No.15687/2010 before this Court and it was alleged that Ex- president Sh. Shiv Bhawan had embezzled funds of the society, however, it was claimed by the present

3 office bearers that society was engaged in the activities charitable in nature and was involved in the activities of improvement of facilities and had spent Rs.55 Lac. It was also alleged that the continuation of Sh. Shankar Lal as secretary of the society was illegal and that he had mis- appropriated funds by inflating expenses and a complaint also has been lodged before the police. Consequent to this information/complaint, the Commissioner was of the view that the activities of the society can no longer be considered as genuine and solely for the purpose of the objectives of the society and that in view of the facts on record, serious charges of mis-appropriation of funds having been levelled on the society and therefore, issued show cause notice about cancellation of registration u/s 12AA as also cancellation of exemption certificate u/s 80G.

5.

Explanation

was filed,

however, dissatisfied with the explanation so furnished, the Commissioner cancelled the registration u/s 12 AA(3) of the Act and also held that the exemption u/s 80G is rendered infructuous and was withdrawn with immediate effect. While coming to the aforesaid finding, recorded that the functioning of the society is affected by the dispute between the Ex-president of the society and the present office bearers and the matters are pending before the 4 Courts and sub-judice and thus came to the conclusion that both sides/rival groups had indulged in the embezzlement of funds on a wide scale over a long period of time and it was also observed that the funds received by the society by way of stated donations/interest etc. have not been utilized for the objectives of the society and activities no more remained charitable in nature and thus cancelled both the certificate u/s 12 AA and 80G of the Act.

6.

Dissatisfied with the cancellation of registration u/s 12 AA and withdrawal of approval of certificate u/s 80G(5) of the Act, respondent- assessee approached the Tribunal and the Tribunal vide impugned order, allowed the claim of the respondent-assessee and held that the order of the Commissioner is not proper on the facts and circumstances of the case and the Commissioner in its order has not brought any material on record as to the claim of embezzlement or mis-appropriation of funds by the rival factions. In fact it was held that the Commissioner has not at all uttered as to how and what extent embezzlement was done or how mis-appropriation of funds took place and accordingly cancelled the order of the CIT. Hence this appeal.

7.

Shri Sameer Jain, ld. counsel for the 5 appellant submitted that impugned order of the Tribunal is perverse and is bad in law, he contended that serious allegations were levelled by both the rival groups against each other and the Commissioner was well justified in cancelling the registration u/s12 AA as also withdrawing exemption u/s 80G as the activities of the respondent- assessee, in view of the serious allegation could not be said to be genuine and when there was in fighting

between

both

the groups,

the activities/objects of the society had got effected. He further contended that the activities of the society did not remain charitable at all and the society deviated from its activities, for which it was formed and registered and contended that substantial questions of law arise out of the order of the Tribunal.

8.

Having heard ld. counsel for the Revenue and having perused the impugned order of the Tribunal as well as the order of the Commissioner, in our view, no substantial question of law can be said to arise out of the order of the Tribunal as it is a finding of fact recorded by the Tribunal on appreciation of evidence.

09.

It would be appropriate to quote the finding recorded by the Tribunal:-

6 “In the present case in appeal, the Ld. CIT-III, Jaipur has not set out as to which activity of the society is not genuine or is not being carried out in accordance with the objects of the society. He has rested his decision for canceling the registration under section 12AA granted to assessee on 09/12/1998 on the basis of allegations and counter allegations against some of the officials commanding position in the Management of the Society. The allegations are not shown to have been proved. Any of the funds belonging to the Trust is not shown to have been misappropriated or mis-utilized by the appellant. If there was any misappropriation or mis-management by the office bearers, action can be taken against erring members of the society. From records and facts, when it was not possible to say with circumspection as to which amount or fund of the society was not utilized for purpose of meeting the objects of the society or was mis- utilized, the registration under section 12AA of the Act could not be cancelled.” 10. the Hon'ble Apex Court in the case of Aditnar S.Kumawat-53 Certificate- All corrections made in the judgment/order have been incorporated in the judgment/order being e-mailed. S.Kumawat Jr. P.A

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