EMMANUEL BIBLEW INSTITUTE SAMITI,KOTA vs. CIT, KOTA

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR Jh fot; ikWy jko] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA. No. 143/JP/2013 fu/kZkj.k o"kZ@Assessment Years : .... cuke Emmanuel Bible Institute Commissioner of Income Vs. Samiti, Kota Tax, Kota LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAATCO245R vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Rajeev Sogani (CA) jktLo dh vksj ls@ Revenue by: Shri Varindar Mehta (CIT) lquokbZ dh rkjh[k@ Date of Hearing : 12/04/2018 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 24/04/2018 vkns'k@ ORDER

PER: VIKRAM SINGH YADAV, A.M. This is an appeal filed by the assessee against the order of Ld. CIT, Kota dated 28.12.2012 passed u/s 12AA(3) of the Act wherein the registration granted u/s 12AA has been withdrawn and cancelled. In its appeal against the said order, the assessee is in appeal before us.

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dated 21.10.2011 has set aside the matter to the file of ld. CIT with the following directions: “..24. The assessee is saying that report of AO has not been provided. The Ld. CIT is using that report and hence natural justice demands that copy of such report to be provided to assessee. On the ground, the order is required to be set aside to be made again.”

“27. The Hon’ble Jurisdictional High Court has left open the authorities to take actions under the provisions of law in case there are irregularities or any illegal Act by the Society. The Registrar has referred to Police case and has also referred that the Society is indulging in anti- national activities. Therefore the Ld CIT will have to ascertain the nature of the cases, if any, filed against the Society and if these cases have impact on cancellation of registration then such factors are to be considered. We, therefore, feel that the order of Ld.CIT u/s 12AA(3) of the Act is required to be set aside to be made again after considering our observations given in the order. The assessee will be given an opportunity of hearing before passing the fresh order…”

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respondent on account of irregularities found, police case and illegal activities carried on by the Society.”

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2.7 Report of ld. AO was not at all provided even in the second round. Ld. CIT, in Para 5, has only mentioned that the said report of AO was based on his findings made during the course of assessment proceedings for A.Y. 2007-08 which reads as under :

“5. Before the Hon’ble ITAT, the assessee pleaded that the report of the AO was not provided it on the basis of which the registration u/s 12A (a) of the Society was withdrawal and cancelled vide order dated 26.11.2010. The AO’s report was on the basis of his findings made during the course of assessment proceedings for A.Y.2007-08, the order of which had already been served to the assessee. During the proceedings following the decision of the Hon’ble ITAT dated 21.10.2011, Shri Rajiv Mathur, CA attended and the case was discussed with him. Further, show cause notices issued to the assessee by this office were self explanatory in this regard. The issues on the basis of which registration of the Society was withdrawn and cancelled, were discussed with the A/R of the assessee before order dated 26.11.2010.”

Thus, not making available the ld. AO report to the appellant Society renders the order without any basis and also violative of principles of natural justice.

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2.8 The directions for examining the cases against the Society are dealt with by the ld. CIT at para 7, 8 and 9. Before the ld. CIT, following was submitted:

“There are no cases pending against the Society. Affidavit in this regard from the office bearer of the Society is finding place at Paper Book page No. 41” The nature of cases pending against the office bearers of the Society, duly explained by the advocate Shri Mohammad Akram is placed at paper book Page No. 42-45.”

2.9 Ld. CIT at para 7 has equated the FIR as a case against the Society. It is undisputed that unless FIR culminates into filing of Challan before the court of appropriate jurisdiction, there cannot be said to be any case against the appellant Society.

2.10 Similarly, ld. CIT at para 7 has misdirected himself in equating the cases filed against the office bearers of the Society as case against the Society. Since, Society and its office bearers are separate and independent, Society cannot be penalized for any cases, if any, against the office bearers of the Society.

2.11 Reliance is placed on the judgment of Hon’ble Jurisdictional Rajasthan High Court in the case of Cosmopolitan Education Society vs Deputy Commissioner of Income-tax [2000] 244 ITR 494 (RAJ.), the relevant extract of which have been set out for the sake of ready reference:

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“The Commissioner (Appeals) had recorded a finding of fact: it was not known that any part of the income of the assessee-Society was misutilised. For so saying, the appellate authority referred that the assessee was a registered Society under the Rajasthan Societies Act and that it was also recognized by the CBSE; if there was any misutilisation or mismanagement, action could be taken against the members of the Society, but, from the records and facts, it was not possible to say that any amount of funds of the Society was not utilised for educational purposes. The Tribunal concurred with this finding of fact. Having regard to the finding of fact so recorded, it was not possible to say that any substantial question of law arose for consideration”.

2.12 Ld. CIT erred in holding that the FIR against the writer of the book named ‘Hakikat’, had bearing on the Society for the reason that the book was written by the office-bearer of the Society and the book was sold from the premises of Emmanuel School, Kota. In this regard, without agreeing, it is submitted that merely because the book was sold from the premise of school, it cannot be held that the Society was involved in its distribution. It is not the case of ld. CIT that the sale proceeds from books and the relevant expenditure of the same, are finding place in the books of account of the Society.

2.13 The observation of ld. CIT at para 8, about Emmanuel Orphanage, Kota are not conclusive. Further, Emmanuel Orphanage Society is not related to the appellant Society as it is a separate Society which is having separate PAN AAATE0453F.

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2.14 Hon’ble ITAT while setting aside the case had directed the ld. CIT to ascertain the nature of cases, if any, filed against the Society and if these cases have impact on cancellation of registration, then such factors are to be considered. In gross violation of this specific direction, ld. CIT has at para 9 of his order considered all those issues which have no bearing on the cancellation of registration. Details are as under:

S. Irregularities observed Effect on 12A No.

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children residing in orphanages of the Society.

2.15 Without prejudice to above, it is submitted that as per Section 12AA(3), ld. CIT before cancelling the registration granted to trust or institution has to be satisfied that the activities are not genuine or are not carried out in accordance with objects of trust or institution. As per the provisions of section, ld. CIT, being a quasi-judicial authority, is expected to discharge his obligation with due diligence after conducting proper and independent enquiry.

2.16 Various High Courts have held that while discharging duty the satisfaction has to be of the individual person and should not be based on some third party information or report. Reliance is placed on the following judgments of Hon’ble High Courts:

• P.CIT v. Meenakshi Overseas (P.) Ltd. [2017] 82 taxmann.com 300 (Delhi) wherein Hon’ble Delhi High Court held that the report of

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the Investigation Wing might have constituted material on the basis of which the Assessing Officer formed the reasons to believe, the process of arriving at such satisfaction could not be a mere repetition of the report of investigation. In the assessee's case, the crucial link between the information made available to the Assessing Officer and the formation of belief was absent. The "reasons to believe" recorded were not reasons but only conclusions and a reproduction of the conclusion in the investigation report received from the Director (Investigation). It was a "borrowed satisfaction".

It was further held by the court that “There is no independent application of mind by the AO to the tangible material which forms the basis of the reasons to believe that income has escaped assessment. The conclusions of the AO are at best a reproduction of the conclusion in the investigation report. Indeed it is a 'borrowed satisfaction'. The reasons fail to demonstrate the link between the tangible material and the formation of the reason to believe that income has escaped assessment.”

• Shree Chalthan Vibhag Khand v. Deputy Commissioner of Income-tax [2015] 60 taxmann.com 450 (Gujarat) wherein Hon’ble High Court of Gujrat held:

“At this stage it is required to be noted that in some of the cases the Assessing Officer has formed an opinion on the basis of the order passed by the learned CIT (Appeals) which were pursuant to

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the order of Hon'ble Supreme Court in the case of Shri Satpuda Tapi Parisar SSK Ltd. (supra). However, it is required to be noted that on the basis of the order passed by the learned CIT(Appeals) in the case of some other assessee the satisfaction of the Assessing Officer and formation of opinion in the case of present assessee cannot be sustained and the same can be said to be a borrowed satisfaction from another officer. Such borrowed satisfaction in absence of any application of mind and any real finding in the case of the assessee do not constitute valid reason to believe that the income has escaped assessment. Under the circumstances on the aforesaid ground also the impugned reassessment proceedings within 4 years and beyond 4 years deserves to be quashed and set aside.”

2.17 Ld. CIT has erred in law in observing that for grant of registration u/s 12AA, samiti must be registered with Registrar of Societies. It is submitted that the order of sub-registrar societies is stayed by the Division Bench of Hon’ble Rajasthan High Court and, therefore, the cancellation is not in operation meaning thereby that the Society is registered with Registrar of Societies.

2.18 Without prejudice to above, it is submitted that section 12AA, nowhere mandates that the Society must be registered with Registrar of Societies. Provisions of section 11, 12 and 12AA are applicable on trust or institution. Institution will imply unregistered body also. Reliance is placed on the ratio laid down by Hon’ble ITAT in the below mentioned

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cases, the extracts have also been set-out hereunder for the sake of convenience:- • Sengunthar Matriculation Higher Secondary School vs. CCIT (ITA No. 2008/Mds./2015) (Chennai Bench)

“….The primary condition u/s.10(23C)(vi), the assessee shall exist solely for educational purposes and not for purposes of profit. The Chief Commissioner of Income Tax without observing that the assessee not solely existing for educational purpose, he went on proposition that the assessee is not having Memorandum of Association or Trust deed so as to carry on the function of the assessee. But the fact brought on record suggests that the assessee is an “AOP”, managed by Sengunther Education Board which is a registered body under the Society Registration Act in the year 1946 vide Registration No.S/8/1946. The above education board is managing the assessee school with the committee Members of the said Education Board and constituted the office Bearers of the institution and duly filing the return of income. It is to be observed that there is no expressed definition for “Institution” under the Income Tax Act. Hence, we have to consider the General meaning defined in the Webster’s New Dictionary, the word “Institution” means an established or organized Society or Corporation, an establishment, especially one of Public Character, or one effecting a community; a Foundation. Further, this Tribunal, Delhi Bench ‘G’ Bench in I.T.A.NO:3360(DEL) of 2008 dated 30.04.20 10 in deciding the Appeal in the case St. Thomas Girls Senior Secondary School, New Delhi Vs. Director of Income Tax(Exemption), New Delhi have held that the word Institution is wide enough to include a school, which has been established for imparting Education. Merely because the Assessee

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School does not have power to purchase, acquire, or sell the property, does not mean that the school will cease to exist as an Institution. Thus the ‘STATUS’ of the Assessee could be A.O.P. in the absence of any Memorandum of Association or Trust Deed. Considering the above decision of the I.T.A.T. Delhi Bench, in the present case also the above Matriculation School which is managed by Education Board and granted permission by the Director of School Education as early as 07.10.1997 is an “Institution” qualifying for exemption U/s. 10(23C)(vi)of the I.T.Act. Hence the exemption sough for the above “Institution”is to be granted….” [CLC 44-46]

• St. Thomas Girls Senior Secondary School vs. DIT (ITA No.3360/Del./2008) (Delhi Bench)

“….We have heard both the parties and gone through the material available on record. The ld. DIT (E) has rejected the contention of the assessee being an institution on the ground that the school does not have power to acquire or dispose of the properties. The expression ‘institution’ has not been defined under the Income-tax Act. As per Oxford Dictionary the expression ‘institution’ means : “an establishment, organization or association, instituted for the promotion of some object especially one of public or general utility, religious, charitable, educational etc.” According to Webster’s New Dictionary, the word ‘institution’ means “an established or organized Society or corporation; an establishment, especially one of a public character, or one effecting a community; a foundation.” Hon’ble Supreme Court in the case of Venkata Krishna Vs. Sub Collector AIR 1969 SC 563 has held that a tank is a charitable institution when there is a dedication in favour of that

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tank. Hon’ble Allahabad High Court in the case of CIT Vs. Radha Swami Satsang Sabha has held that Dayal Bagh Satsang Sabha of Agra is an institution. A ‘madarsah’ is an institution as held by Privy Council in Masjid Sahid Ganj Vs. Shiromani Gurudwara Prabandhak Committee AIR 1940 PC 116. From the above it appears that the word ‘institution’ is wide enough to include a school, which has been established for imparting education. Merely because the assessee-school does not have power to purchase, acquire or sell the property, does not mean that the school will cease to exist as an institution. The status of the assessee could be AOP in the absence of any memorandum of association or trust deed. Therefore, in our considered opinion, the ld. DIT (Exemption) has not examined the status of the assessee-school right perspective…”

In view of above, it was submitted by the ld AR that the action of ld. CIT in withdrawing the registration u/s 12AA is bad in law and, therefore, relief may please be provided by cancelling the action of ld. CIT.

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High Court (in matter relating to cancellation of registration by the Registrar of Societies), the observations made by the Tribunal are just and proper and registration u/s 12AA could not have been given on the basis which is stayed by the High Court. Now, if we look at the observations of the Co-ordinate Bench, the same reads as under:

“27. The Hon’ble Jurisdictional High Court has left open the authorities to take actions under the provisions of law in case there are irregularities or any illegal Act by the Society. The Registrar has referred to Police case and has also referred that the Society is indulging in anti- national activities. Therefore the Ld CIT will have to ascertain the nature of the cases, if any, filed against the Society and if these cases have impact on cancellation of registration then such factors are to be considered. We, therefore, feel that the order of Ld.CIT u/s 12AA(3) of the Act is required to be set aside to be made again after considering our observations given in the order. The assessee will be given an opportunity of hearing before passing the fresh order…”

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decision dated 22.11.2017, the Hon’ble High Court has also upheld the directions of the Coordinate Bench and has held that the registration could not have been given on the basis which is stayed by the High Court. In light of the same, we are left with no option but to set-aside the matter again to the file of the ld CIT(E). And we therefore donot deem it fit to refer to the various contentions so advanced before us and the assessee is at liberty to raise the same before the ld CIT(E) and the latter shall consider the same and shall ascertain the present status of all these cases relating to the society and impact thereof on the cancellation of the registration granted to the society. The ld CIT(E) shall also take into consideration the latest order of the Hon’ble Rajasthan High Court in Appeal No. 387/2011 dated 22.11.2017 pertaining to AY 2007-08 and will also provide a copy of report of the AO so requested by the assessee. Needless to say, it is in interest of the assessee that it shall provide all necessary information/documentation as may be desired by the ld CIT(E) for timely completion of the proceedings.

In the result, the appeal of the assessee is allowed for statistical purposes.

Order pronounced in the open Court on 24/04/2018.

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16 ITA No. 143/JP/2013 Emmanuel Bible Institute Samiti, Kota vs. CIT, Kota Tk;iqj@Jaipur fnukad@Dated:- 24/04/2018. *Ganesh Kr. आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- Emmanuel Bible Institute Samiti, Kota 2. izR;FkhZ@ The Respondent- CIT, Kota 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 6. xkMZ QkbZy@ Guard File { ITA No. 143/JP/2013} vkns'kkuqlkj@ By order, सहायक पंजीकार@Aेेज. त्महपेजतंत