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Income Tax Appellate Tribunal, DELHI BENCH ‘A’, NEW DELHI
Before: SH. R. K. PANDA & SH. K. N. CHARY
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘A’, NEW DELHI
BEFORE SH. R. K. PANDA, ACCOUNTANT MEMBER AND SH. K. N. CHARY, JUDICIAL MEMBER ITA No.7684 & 7685/Del/2019
Action Alliance for Recycling Vs. Commissioner of Income Tax Beverage Cartons (AARC) (Exemption)E-2, Block, A-73 (Basement) Malviya Pratyakshkar Bhawan, Civic Nagar, New Delhi-110017 Centre, PAN No. AAHAA3445P New Delhi-110001 (APPELLANT) (RESPONDENT)
Appellant by Sh. Rohit Jain, CA Sh. Deepesh Jain, CA Respondent by Sh. S. S. Rana, CIT DR Date of hearing: 10/12/2019 Date of Pronouncement: 28/02/2020 ORDER PER R.K PANDA, AM:
The above two appeals filed by the assessee are directed against the order dated 30.07.2019 of the CIT (Exemption), New Delhi refusing registration u/s. 12AA and approval u/s. 80G.
Facts of the case, in brief, are that the assessee is a society and filed an application in form 10A and 10G on 29th January, 2019 seeking registration u/s.12AA and exemption u/s.80G of the Income Tax Act, 1961.
The Ld. CIT(E) issued a questionnaire dated 19.02.2019 requesting it to submit certain documents in support of its claim. The assessee filed part details. Again a letter dated 13.06.2019 was sent to the assessee asking him to file the details on 21.06.2019 as called for earlier. However, since none appeared on that date another show cause notice dated 27.06.2019 was issued to the assessee asking him to furnish the following details by 08.07.2019.
i. Please provide the financial statement i.e. balance sheet and income & expenditure a/c for the F.Y. 2018-19 (01.04.2018 to 31.03.2019) alongwith list of donors, name, address, PAN & mode of receipt. ii. Please also provide the photographs of charitable activities done during the F.Y. 2018-19. iii. Please provide the documentary evidence (receipts etc.) for annual fees of Rs.34,00,000/- and Membership fee of Rs.57,00,000/- received during the F.Y. 2018-19 as shown in the income & expenditure a/c for the period 02.05.2018 to 31.12.2018. iv. Please also provide a copy of 26AS for the F.Y. 2018-19. v. As per the details of expenses, it is seen that an amount of Rs.1,15,394/- has been spent on “engagement with state for environment and waste regulations”. Please provide a copy of contract for the same.
vi. On perusal of the bills placed on file, it is seen that most of the bills are in the name of M/s Consocia Advisory Pvt. Ltd. Please explain. vii. One of the bill dated 16.08.2018 shows that total amount of Rs.26,475/- is being spent on lavish food including amount of Rs.3,750/- spent on Frankie Paneer Tikka, Rs.3,875/- spent on Frankie Chicken Tikka, Rs.3,875/- spent on Club Sandwich etc. Please provide the name of the beneficiaries alongwith telephone No.
From the various details furnished by the assessee the Ld. CIT(E) noted that assessee has received total amount of Rs. 94 lacs as annual fee and membership fee and spent only Rs.4,47,593/-on charitable activity, spent Rs.10,81,202/- on administrative expenses which included consultancy fee of Rs.6,37,083/- and legal and professional expenses of Rs.3,90,277/-. The assessee has shown excess of income over expenditure of Rs.81,04,539/- which is more than 15% of the total income. He noted that assessee has received annual fee of Rs. 35 lacs and membership fee of Rs. 59 lacs both totaling to Rs.94 lacs out of which an amount of Rs.8,00,000/- has been received from M/s. Hazelwood Laboratories Pvt. Ltd.. Further Rs. 8,00,000/-from M/s. Parag Milk Foods and Rs. 8,00,000/- from M/s. United Spirits Ltd. TDS of Rs.16000/- has been deducted u/s. 194 by M/s. Hazelwood Private Limited and TDS of Rs.80,000/- each has been deducted by M/s. Parag Milk Foods Limited and United Spirits Limited. He, therefore, held that the amount of Rs. 24 lacs received from M/s. Parag Milk Foods Page | 3
Private Limited and M/s. Hazelwood Private Limited were not the membership fee or annual fee but an amount received from some contractual services provided by the assessee. There was a difference in the amount received as per bank statement M/s. Coca Cola India Private Limited and the amount shown by the assessee. He, therefore, asked the assessee to submit documentary evidence of engagement with “State for environment and waste regulations” but there was no compliance. According to the CIT(E) for granting approval u/s. 12AA, the assessee has also to substantiate that the object of the society / trust should be charitable in nature and activities of the society/ trust should be genuine. Since the assessee neither filed the requisite details nor submitted any evidence or details of activities and evidence for expenses towards charitable activity, he held that the genuineness of the activities of the company could not be established. He, therefore, rejected the claim of grant of registration u/s. 12A/12AA. Since the registration u/s.12AA was rejected he rejected the claim for grant of approval u/s.80 G of the Income Tax Act.
Aggrieved with such order of the CIT(E), the assessee is in appeal before the Tribunal by raising the following grounds of appeal :- (ITA No.7684/Del/2019) 1. That the Commissioner of Income Tax (Exemption), Delhi [‘CIT(E)’] erred on facts and in law in denying registration to the appellant under section 12AAof the Income Tax Act, 1961 (“the Act”)vide order dated 30.07.2019 (impugned order). Page | 4
1.1 That on the facts and circumstances of the case and in law, the impugned order having been passed without affording reasonable opportunity of being heard to the appellant, is illegal and bad in law. 1.2 That the CIT(E) erred in denying registration under section 12AAof the Act on illegal and untenable grounds, without appreciating that the scope of registration proceedings was limited to examining the objects, more so, without doubting the charitable objects of the appellant. 1.3 That the CIT(E) erred on facts and in law in denying registration under section 12AA of the Act on the ground that the appellant failed to file necessary details/ evidences to establish genuineness of the charitable activities carried on by the appellant. 1.4 That the CIT(E) erred on facts and in law in drawing adverse inference from certain facts/ information/ details (in para 4 to 9 of the impugned order), without providing adequate opportunity of being heard and without considering the replies filed by the appellant. 1.5 That the CIT(E) erred on facts and in law in drawing adverse inference from the fact that the appellant had excess of income over expenditure to the tune of Rs.81,04,539 in financial year 2018-19 without appreciating that - (a) the same was the first year of operation; and (b) the same cannot be the ground to deny registration. 1.6 That the CIT(E) erred on facts and in law in drawing adverse inference from the fact of- (a) deduction of tax at source by some members while paying membership fee; (b)difference in amount of membership fee received from Coca Cola India Pvt. Ltd. reflected as Rs.9,44,000 (inclusive of GST) in bank statement as against Rs.8,00,000 (exclusive of GST) stated by the appellant; (c) reimbursement of expenses paid to Consocia Advisory Pvt. Ltd. (one
of founder members) towards reimbursement of expenses incurred for administration of appellant trust. The appellant craves leave to add, to amend or vary the above grounds of appeal on or before the date of hearing. (ITA No.7685/Del/2019) 1. That the Commissioner of Income Tax (Exemption), Delhi [‘CIT(E)’] erred on facts and in law in denying registration to the appellant under section 80G(5)(vi) of the Act vide order dated 30.07.2019 (impugned order) [consolidated order for denying registration under section 12AA and 80G]. 1.1 That on the facts and circumstances of the case and in law, the impugned order having been passed without affording reasonable opportunity of being heard to the appellant, is illegal and bad in law. 1.2 That the CIT(E) erred in denying registration under section 80G(5)/ 12AAof the Act on illegal and untenable grounds, without appreciating that the scope of registration proceedings was limited to examining the objects, more so, without doubting the charitable objects of the appellant. 1.3 That the CIT(E) erred on facts and in law in denying registration under section 80G(5) of the Act on the ground that the appellant failed to file necessary details/ evidences to establish genuineness of the charitable activities carried on by the appellant. 1.4 That the CIT(E) erred on facts and in law in drawing adverse inference from certain facts/ information/ details (in para 4 to 9 of the impugned order), without providing adequate opportunity of being heard and without considering the replies filed by the appellant. 1.5 That the CIT(E) erred on facts and in law in drawing adverse inference from the fact that the appellant had excess of income over expenditure to the tune of Rs.81,04,539 in financial year 2018-19
without appreciating that - (a) the same was the first year of operation; and (b) the same cannot be the ground to deny registration. 1.6 That the CIT(E) erred on facts and in law in drawing adverse inference from the fact of (a) deduction of tax at source by some members while playing membership fee; (b) difference in amount of membership fee received from Coca Cola India Pvt. Ltd. reflected as Rs.9,44,000 (inclusive of GST) in bank statement as against Rs.8,00,000 (exclusive of GST) stated by the appellant; (c) reimbursement of expenses paid to Consocia Advisory Pvt. Ltd. ( one of founder members) towards reimbursement of expenses incurred for administration of appellant trust. The appellant craves leave to add, to amend or vary the above grounds of appeal on or before the date of hearing. 6. We have heard the rival arguments made by both the sides and perused the orders of the CIT(E). We find the Ld. CIT(E) refused to grant registration 12A/12AA on the ground that the assessee failed to substantiate that the objects of the society / trust are charitable in nature and the activities of the society/ trust are genuine, since the assessee failed to produce the requisite details called for by him. We find the assessee in the grounds of appeal has specifically taken grounds that the CIT(E) has not granted him reasonable opportunity of being heard. Considering the totality of the facts of the case and in the interest of justice we deem it proper to restore the issue to the file of the CIT(E) with a direction to grant one final opportunity to the assessee to substantiate the charitable activity of the society for grant of registration 12AA of the Act. The assessee is also hereby directed to appear before CIT(E) and file the requisite details as Page | 7
called for by him without seeking any adjournment under any pretext. The Ld. CIT(E) shall decide the issue as per fact and law after giving reasonable opportunity of being heard to the assessee. Since we are restoring the issue of registration 12A/ 12AA, which is one of the pre condition for granting of approval u/s. 80 G of the Act, therefore, we also restore the grounds challenging the denial of approval u/s. 80G to the file of the CIT(E) for fresh adjudication. 7. In the result, both the appeals filed by the assessee are accordingly allowed for statistical purpose. Order pronounced in the open court on 28.02.2020.
Sd/- Sd/- (K. NARSIMHA CHARY) (R.K PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER *Neha* Date:-28 .02.2020 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI Date of dictation Date on which the typed draft is placed before the dictating Member Date on which the approved draft comes to the Sr.PS/PS Date on which the fair order is placed before the Dictating 27.02.2020 Member for Pronouncement Date on which the fair order comes back to the Sr. PS/ PS 28.02.2020 Date on which the final order is uploaded 28.02.2020 on the website of ITAT Date on which the file goes to the Bench Clerk Date on which file goes to the Head Clerk. The date on which file goes to the Assistant Registrar for signature on the order Date of dispatch of the Order