M/S SNATAN DHARAM SABHA (SDSES) SD SARVHITKARI VIDYA MANDIR,HOSHIARPUR vs. COMMISSIONER OF INCOME TAX(EXAMPTION), CHANDIGARH

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR

BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N.K.CHOUDHRY, JUDICIAL MEMBER

ITA No.693(Asr)/2017 Assessment Year: 2018-19

M/s. Snatan Dharam Sabha Vs. Commissioner of Income Tax (SDSES), SD Sarvhitkari Vidya (Exemptions), Chandigarh. Mandir, Talvara Mukeria, Dist:- Hoshiarpur.

[PAN:AANAS 3147A]

(Appellant) (Respondent)

Appellant by: Sh. Tej Mohan Singh (Ld. Adv.)

Respondent by: Sh. Pawan K. Kumar (Ld. CIT-DR)

Date of hearing: 24.04.2019 Date of pronouncement: 14.06.2019

ORDER PER N.K.CHOUDHRY, JM: The assessee society has filed this appeal challenging the order dated 26/09/2017 impugned herein passed by the Ld. CIT(Exemption), Chandigarh whereby the application for registration u/s 12A of the Income Tax Act, 1961 (hereinafter called as the ‘Act’) has been rejected.

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Act which was taken into consideration by the Ld. CIT(Exemption) by fixing the date for of hearing on 02/08/2017 and the appellant was requested to file certain details and clarification on or before 16/08/2017 as mentioned in para No.5 of the order. The said queries have been replied by the Appellant vide letters dated 22/09/2017 and 26/09/2017. Thereafter on consideration of the replies, the application filed by the assessee society was rejected basically on the following grounds: (i) No proof of affiliation of the school has been provided either.

(ii) No financial statement has been submitted in respect of appellant society.

(ii) No details related to expenditure incurred for consideration of the structure for the school has been provided by the applicant society.

(iv) Details of land and building has not been provided by the applicant society. The generation and the subsequent introduction as cash deposits remains to be in doubt.

The Aims and objects of the society remains only ostensible in absence of any financial statement since its creation and the claimed activities of the society cannot be termed to fall under the category of “charitable purpose” but purely on commercial principles having profit motives (having Receipt of Rs.2,83,60,283/- & 44% of excess of income over Expenditure during the first year of operation of the school.)

The application has not disclosed the expenditure incurred in setting up the school and creating the building coupled of the fact of introduction of large amounts of cash in the beginning both lead to a safe conclusion that the genuineness of activities are not corroborated.

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Section 12AA

(1) The Chief Commissioner or 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; and (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.

From the provisions, it is clear that before deciding the application u/s 12A of the Act, the commissioner is at liberty to call for such documents or information from the society or institution as he thinks necessary in order to satisfy himself about the genuineness of the activities of the society or institution and may also made such enquiries as he may

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deem necessary in this behalf. Further before passing an order, the Ld. CIT(E) is empowered to satisfy himself about the aims and objects of the society or institution and the genuineness of its activities.

4.1 In the instant case, the Ld. AR of the assessee society specifically submitted that no enquiry was ever raised qua proof of affiliation of the school and in respect of land and building. The Ld. AR also drawn our attention to the affiliation certification (page no.33 of the PB) wherein the affiliation has been given by the CBSC, Delhi vide affiliation no. 1630813/EX-02324-1617/2016.

4.2 With regard to the objection qua land and building of the school the assessee has drawn our attention to the lease deed executed by Bharkra Byaas Management Board, Chandigarh for a period of 99 years wherein Annexure-II which is a schedule in which the area of land has been specified as 1,13,233 sq. ft. and rate has been specified @ 8.00 Rs. Per 100 sq. ft and total amount of lease money for the year 01/04/2010 to 31/03/2011= Rs.9,059/- security equally to four years lease money=36,236/- (Already deposited), arrear, if any Rs.2,09,867/- (Already deposited). It was contended by the assessee that in clause-IV it clearly reflects that the amount of Rs.2,09,867/- is treated on account of rent against Luxmi Narayan Mandir to religious body/institution (School) sector-02, Talwara (being leased out).

We have independently perused the lease deed wherein clause- 2, the details of the land measuring 1,13,233 sq. ft in sector-02, Talwara has been particularly described and the schedule/ plan of the site attached as Annexure-1 to the deed, however the same is not

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attached herewith in PB by the assessee/society. Therefore, we are unable to give a definite finding qua land and building.

4.3 With regard to the non-providing the financial statements of the society it was contended that society has not been maintained any financial statements qua society till date since its creation i.e., 19th Dec. 2012. It was also contended that the Assessee society is running only one school and is maintaining financial accounts since it operations which have duly been submitted before the Ld. CIT(A).

4.4 No doubt the Ld. CIT(Exemption) is at liberty to examine the aims and objects and genuineness of activity of the society or trust , which are paramount consideration for adjudicating the application u/s 12A of the Act, which in the instant case the Ld. CIT(E) has not raised any doubt qua aims and objects of the society.

4.5 From the order it also reflects that the Ld. CIT(E) sought certain explanations/documents, which have been specifically clarified and replied by the Applicant by filling the relevant information and documents. Thereafter, no opportunity was provided to the applicant trust either for corroboration/confrontation and/or for establishing its case for grant of registration on the basis of the reply itself, the registration application was rejected.

4.6 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 Alteram Partem” 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 Alteram Partem

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is the basic concept of the principle of natural justice and has not evolved from the constitution but 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.

4.7 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; and (b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities,

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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.

4.8 Coming to the instant case, admittedly before declining the registration u/s 12 of the Act, no reasonable opportunity was provided to the Applicant, which is mandatory, hence on this ground as well, the order under challenge is liable to be set aside.

4.9 In cumulative effect, to meet the substantial justice, in our considered view, appropriate course would be to set aside the order impugned and remand back the case to the file of the Ld. CIT(E) for decision afresh. The Applicant society shall be under obligation to demonstrate the relevant details/documents to the satisfaction of the LD. CIT(E) qua land and building being used for running the school by the society and also to submit the affiliation with the CBSE, Delhi, failing which the Ld. CIT(Exemptions) shall be at liberty to draw the adverse interference if any. The Ld. CIT(E) shall be at liberty to consider all issues already raised or to be raised further and otherwise feel, fit and appropriate for consideration for proper adjudication of application for registration u/s 12AA of the Act.

Order pronounced in the open Court on 14.06.2019.

Sd/- Sd/- (SANJAY ARORA) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated:14.06.2019 /PK/ Ps.

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Copy of the order forwarded to: (1) M/s. Snatan Dharam Sabha (SDSES), SD Sarvhitkari Vidya Mandir, Talvara Mukeria, Dist:- Hoshiarpur (2) The Commissioner of Income Tax (Exemption), Chandigarh (3) The SR DR, I.T.A.T., Amritsar True copy By order