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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR
Before: SH. N.S.SAINI & SH. N.K.CHOUDHRY
PER N.K.CHOUDHRY, JM:
The instant appeal has been preferred by the Appellant against the order dated 30.06.2017 passed by the Ld. CIT(Exemptions), Chandigarh u/s 12AA(1)(b)(ii) of the Income Tax Act, 1961 (hereinafter called as ‘the Act’).
An application u/s 12A of the Act was filed by the appellant society on dated 21.12.2016 before the Ld. CIT(E), Chandigarh by disclosing the fact that the society is an ongoing entity and is in operation since 18.11.1997. The appellant also disclosed its aims and objects to establish, takeover and
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run authorized study centre from various recognized Universities of India and Abroad with an object to provide sound higher education to candidates by seeking recognition/authorization; to provide medical aid, stationery, transportation, libraries, laboratories, reading rooms, hostels, Play grounds and other facilities to the candidates and also to the members of the society; to arrange and organize various kinds of students welfare programmes and activities; to promote educational (vocational technical and otherwise) the diffusion of useful knowledge, medical relief and social welfare projects, irrespective of race, caste, community or creed; the society shall undertake all sorts of eco-friendly activities/ projects aimed at improvement of the environmental health of the region; to establish buildings such as libraries, reading rooms and equip them with the necessary supply of books, papers, periodicals furniture and audio visual aids; to receive any gifts or money or other properties both movable an immovable or any bequests for any one or more objects of the society; to invest lay aside, deposit in banks or post offices or otherwise deal with money for funds of the society not immediately required for the objects of the society; to collect donation, membership fees and other contribution from members and others; to open, maintain bank account or accounts and the same shall be operated under the signatures of chairman or as may mutually be decided by them; to provide means of the promotion and advancement of the above mentioned objects; to affiliate and manage and support the likeminded institutions having similar objects as those of the society.
The application of the appellant was taken into consideration by offering an opportunity of personal hearing on dated 05.06.2017 and thereafter, the appellant was requested to file/furnish certain details/clarifications on dated 14.06.2017 as mentioned in para No.5 of the order. In response to which the reply was filed by the Appellant thereafter certain additional queries were also
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raised which also stands replied by the appellant and finally the Ld. CIT(A) rejected the application of the appellant. Relevant part of the order is reproduced herein below.
“8. During the proceedings, a query was raised to the applicant society on the intention of switching to section 12AA from 10(23C). In response, the society has submitted that the gross receipts of the society have increased and the prescribed limit of Rs. One crore has been crossed for FY 2016-17. In view of this, the society has decided to file an application u/s 12AA. It is further stated by the applicant society that "it is the choice of the society that they want to avail exemption either u/s 12AA or 10(23C)(vi). Here, the main aspect is that the other objects of the society mentioned in its MoA cannot be verified as it has claimed to be involved only in educational institution and any of tire rest of the activities mentioned in its MoA has not been undertaken even once. The applicant society has been claiming exemption under section 10(23C)(iiiad) for past many years and have option of going for exemption u/s 10(23C)(vi) if they are running an educational institution only. In its reply, there is no concrete reason provided by the applicant which can support the rationale for registration u/s 12AA.
During the course of hearing, a query regarding procurement of luxury vehicles by the applicant society was raised, in response, the applicant submitted that "no luxury vehicle has been purchased using the funds of the society, only school buses and vans have been purchased." This reply of the applicant is clearly not borne by the Balance sheet of Financial Year 2016-17 where purchase of 'Innova Car' at Rs.14.91 lacs has been shown and amounts to misrepresentation of facts.
In light of the untenable reasons provided by the applicant society for switching from section 10(23C) to section 12AA and in absence of enough evidences to prove the charitable nature of its activities, it will be safe to conclude that the applicant entity does not qualify for the registration u/s 12AA of the Act. This finding, however, does not impinge on any future claims of the assessee to seek approval u/s 10(23C)(vi) of the I.T. Act, 1961. The application for grant of registration u/s 12AA is accordingly rejected.”
The appellant being aggrieved challenged the impugned order before us.
Having heard the parties at length and perused the order passed by the Ld. CIT(E). The Ld. CIT(E) while declining the registration given three reasons, first relates to the applying u/s 12AA of the Act. It was observed by the Ld. CIT(E) that the applicant society has been claiming exemption u/s
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10(23C) (iiiad) of the I.T. Act for past many years and have option of going for exemption u/s 10(23C)(vi) if they are running an educational institution only. In its reply, there is no concrete reason provided by the applicant which can support the rationale for registration u/s 12AA.
4.1 Before us, the appellant has claimed that the gross receipt during the financial year 2016-17 exceeded the statutory limit of Rs.1 crore therefore the appellant sought registration u/s 12AA of the Act. This Tribunal in various cases, while dealing with identical and similar issue clearly held that under peculiar facts and circumstances there is no bar to apply exemption either of the provisions u/s 12AA and 10(23C) of the Act. In the case of "Bharati Vidyapeeth Medical Foundation vs. ACIT", 155 TTJ 152 (Pune), it was held that choice should be left to the assessee to seek exemption either u/s 10(23C) or u/s 11 of the Act, hence we are of the considered view that this reason of rejection is not sustainable in the eyes of law.
4.2 Now coming to the second ground of rejection whereby the Ld. CIT(E) has observed that during the course of hearing, a query regarding procurement of luxury vehicles by the applicant society was raised, in response, the applicant submitted that "no luxury vehicle has been purchased using the funds of the society, only school buses and vans have been purchased." This reply of the applicant is clearly not borne by the Balance sheet of Financial Year 2016-17 where purchase of 'Innova Car' at Rs.14.91 lacs has been shown and amounts to misrepresentation of facts. In response to this objection the Ld. AR failed to say anything except that the said vehicle is being used for the principal and staff members of the appellant school for carrying them from their houses to school. In our considered opinion although the claim of the appellant seems to be genuine, however it is imperative for
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the litigants to be fair and approach the Court with clean hands, therefore the Asseeee is required to establish need of vehicle i.e. Innova and also to clarify qua wrong submissions made before the Ld. CIT(E) which the appellant failed to do so.
4.3 Third ground relates to the absence of enough evidences to prove the charitable nature and its activities, which the appellant failed to clarify however in the interest of justice as the appellant society claimed to be educational society and carrying certain activities relating to education, however, failed to establish enough evidences before the Ld. CIT (E) at the time of hearing and during the appellant proceedings before us.
According to section 12AA of the Act, the procedure for registration of a trust or institution is as follows:—
12AA. (1) The Principal Commissioner or Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) or clause (aa) 8[or clause (ab)] 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,
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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.
According to proviso of clause (b) of clause (1) of section 12AA of the
act, before passing an order for refusal of registration, it is mandatory to give
a reasonable opportunity of being heard to the applicant. The principle of audi
alterm partem, which mandates that no one shall be condemned unheard is
part of the rules of natural justice. Natural justice is a great humanising
principle intended to invest the law with fairness and to secure justice and
over the years it has grown into a widely pervasive rule affecting large areas
of administrative action. The inquiry must always be done, whether a fair
opportunity to be heard has been given or not to the person affected. In the
instant case, after getting reply/clarification from the appellant, the Ld. CIT(E)
did not provide any opportunity either to substantiate/corroborate its claim
and/or contradict the issue(s) in any posed by the Ld. CIT(E). Non- providing
the opportunity not only amounts to denial of natural justice but also amounts
to violation of rule of 'Audi Alteram Partem', hence considering the peculiar
facts and circumstance and in order to provide reasonable opportunities of
being heard, we feel it appropriate to remand back this case to the file of the
CIT(E) to decide afresh, while affording reasonable opportunity of being
heard, without being influenced by the observations made above.
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In the result, the appeal filed by the assessee stands allowed for statistical purposes. Order pronounced in the open Court on 21.02.2019.
Sd/- Sd/- (N.S.SAINI) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated:21.02.2019 /PK/ Ps. Copy of the order forwarded to: (1) Sh. Guru Ram Dass Educational Society, Gurudwara Guru Ram Dass Puri, Armanpura, Lumbri Wala, Ferozpur, Punjab-152002. (2) The CIT(Exemptions), Chandigarh. (3) The SR DR, I.T.A.T., Amritsar True copy By order
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