GOPSAI AVIANDAN SANGHA,PASCHIM MEDINIPUR vs. C.I.T.(EXEMPTION), KOLKATA

We first take up the ITA No. 232/KOL/2020. The assessee is a Society engaged in imparting education as educational Institution through different units i.e. Institute of Science & Technology (IST), Primary Teachers’ Training Institute (PTTI) and Bengal College of Teachers’ Education (BCTE) under the aegis of Gopsai Avinandan Sangha (GAS), which is the head office. Application for registration under section 12AA was rejected vide orders dated 03.07.2013 by the ld. CIT, Kolkata-XIX. Appeal was filed before the ITAT, ‘B’ Bench, Kolkata in ITA No. 2244/KOL/2013. Further application for registration under section 12AA was rejected vide orders dated 31.10.2014 by Ld. CIT, Kolkata-XIX. The assessee filed appeal before the ITAT, ‘B’ Bench, Kolkata in ITA No. 2156/KOL/2014. ITAT, ‘B’ Bench, Kolkata passed a consolidated order dated 03.01.2018 adjudicating that, the eligibility of the assessee for registration under section 12AA and approval u/s 80G(5)(vi) of the Act has to be decided on merits rather than on the basis of default by the assessee setting aside the orders of the ld. CIT, Kolkata-XIX. Consequent upon the order of the ITAT, ‘B’ Bench, Kolkata, ld. CIT (Exemptions), Kolkata issued a show cause notice dated 30.08.2019 requisitioning either queries which are all regarding application of income and not relating to the matter of registration. Detailed compliances have been made against the show cause notice. The assessee submitted that the queries raised by the ld. CIT (Exemptions) were outside the ambit for considering the grant of registration, since all the queries were relating to ‘application of income’ which were a subject matter of assessment and not of registration. The ld. CIT (Exemptions), Kolkata while rejecting the application for grant of registration u/s 12AA of the Act, has taken the basis for such rejection, from the rejection order of the ld. CCIT-X, who rejected the application for exemption under section 10(23C)(vi) of the Act to the assessee vide order dated 22.07.2013. Ld. CIT (Exemption), Kolkata in his rejection order dated 18.12.2019. The observations so made by the ld. CCIT-X, Kolkata in his order rejecting application under section 10(23C)(vi) of the Act did not bear any significance in the regular

The ld. CIT(Exemptions), Kolkata rejected the application of the assessee for grant of registration under section 12AA of the Act on the following grounds:- A perusal of the records reveals that the assessee was registered under section 10(23C)(vi) of the Income Tax Act and the ld. Chief CIT-X, Kolkata vide his order dated 22.07.2013 cancelled the registration of the assessee on the following grounds:- (i) Shri Pradip Ghosh and Shri Pravash Ghosh withdrew of Trust money in cash for personal purposes in the name of miscellaneous and fuel expenses. (ii) Large amount was spent on personal charities out of the Trust funds. Thus the funds of the assessee were not utilized for applying solely educational purposes. (iii) Cash was withdrawn from the Trust and no entry was found in the cash book. (iv) Trust paid commission on account of admission. (v) Cash was withdrawn for personal purposes in the name of payments to AICTE, WBUT, Plantation, Bricks, etc. (vi) Income/fund/property of the Trust was utilized for construction of personal residences of Shri Pradip Ghosh. (vii) Fund of the Trust was utilized for personal travel purposes, which could not be correlated with education activities. (viii) Several instances were there in which Trust fund was not utilized for education purposes.

The assessee submitted as follows on each of the above objections to CIT(Exemptions) point-wise:- “A letter No. 3961 dated 13.03.20 \3 was issued making requisition to furnish some details specified therein fixing the hearing on 09.04.2013. The said requisition did not require production of books of accounts with supporting evidence(s). Your assessee on the specified date of hearing appeared and filed an adjourned petition describing the reason as to why it was not possible for us to comply the furnishing of requisitioned details. Pertinent to mention here that all the books alongwith related documents had been kept impounded by the Ld. CClT-X, Kolkata for verification in the proceedings u/s. 10(23C)(vi) of the I.T. Act, 1961. This fact was disclosed through such adjournment petition (copies enclosed and marked as page - 21 to 32). It would not be irrelevant mentioning that we are yet to receive our entire books of accounts, bills, vouchers, bank statements and other documents from 01.04.2008 to 31.03.2013 so impounded and kept by Ld. CCIT-X, Kolkata (refer page - 33). In between, we had been provided some photocopies of the impounded documents as per Hon 'ble High Court's Order so required for the assessment proceedings for the assessment years 2009-2010, 2010-2011, 2011- 2012 and 2012-20:13. This fact of inability to produce books of accounts was missing in the order: of the Ld. CIT-XIX rejecting grant of registration u/s. 12AA of the Act particularly when all the books of accounts alongwith related documents are lying with the Income Tax Department only. ii) The point-wise requisitioned details as specified in the letter No. 3961 dated 13.03.2013 had been provided alongwith 4

Thereafter the assessee relied on a number of case laws on the proposition that the scope of enquiry for registration under section 12AA of the Act is to examine whether the objects of the Society are charitable in nature and whether the Trust of the Society is genuine. He further submitted as follows:- “It is pertinent that consequent upon the order of Ld. CCIT-X. Kolkata dated 22.07.2013. regular assessment of the Society either u/s. 147 or u/s. 143(3) have been made continuously from Assessment Year 2009-20 onwards i.e., from Assessment Years 2009-2010, 2010-2011, 2011-2012, 2012-2013, 2014- 2015, 2015-16 & 2016 - 17. In all such regular assessments, the Assessing Officer categorically found and mentioned that the Applicant - Society has been engaged in the field of 'Educational Activity' only. Copies of all such assessment orders are enclosed herein for your kind perusal and marked as page - 87 to 117. The relevant portion of each order (page nos. 87, 91, 98,104,109 & 114) is marked in fluorescent colour to prove the genuineness of our activities in the field of imparting education

Ld. CIT(Exemptions), Kolkata considered this explanation of the assessee and thereafter rejected the claim of the assessee for grant of registration under section 12AA of the Act. Being aggrieved, the assessee is in appeal before us.

The ld. Counsel for the assessee submits that the ld. CIT(Exemptions), Kolkata raised certain issue based on the observations in the order passed by the ld. Chief CIT while revoking registration granted under section 10(23)(v),(vi) of the Act and has not considered the finding of the Assessing Officer on those very issues which attained during the course of scrutiny proceedings for all the impugned assessment years. He filed copies of the assessment orders passed for the A.Ys. 2009-10, 2012-13 as well as the orders of the ld. CIT(A) for the AY 2012-13, 2011-12, 2010-11 and 2009-10 and submitted that a perusal of these orders of assessment by the Assessing Officer and appellate orders of the ld. CIT(Appeals) for all the assessment years demonstrated that the allegations made by the ld. Chief CIT while revoking registration granted under section 10(23C) of the Act is factually incorrect. He submitted that no addition or adverse action has been taken by the Assessing Officer in the assessment order passed, on so-called material relied upon by the ld. Chief CIT which was found during survey. Thus he submits that all the points raised by the ld. CIT (Exemptions) for rejecting the application of the assessee for registration under section 12AA of the Act were factually incorrect, in view of the finding in the assessment order as well the appellate order. He thus submits that the grounds on which the claim of the assessee for registration under section 12AA of the Act were rejected are no more inexistence and that the assessee should be granted registration under section 12AA of the Act.

On the scope and ambit of enquiry for the granting registration to the assessee under section 12AA of the Act, the assessee relied on a number of decisions and submitted that it has to be seen as to whether the objects of the assessee are charitable in nature and whether the activities of the assessee are genuineness or not. The assessee pointed out that there is no dispute that the objects of the assessee are for educational purposes and there is no dispute of the fact that the assessee runs educational institution. He disputed each and every finding of the ld. CIT(Exemptions) in the impugned order and supported his arguments with the findings of the Assessing Officer.

The ld. CIT(DR), on the other hand, opposed the contention of the assessee and submitted that the Revenue collected numerous evidences during the course of survey and basing on these evidences came to a conclusion that the assessee has not applied its income, wholly for educational purposes. The ld. D.R. pointed out that the claim of the assessee for granting registration under section 10(23C) was also rejected by the ld. PCCIT, Kolkata. He relied on the pages 1 & 2 of his impugned order dated 26.12.2019. He relied on the points raised by the ld. CIT(Exemptions) towards the end of his order and submitted that the activities of the assessee are not genuine. The ld. DR supported the order of the ld. CIT(Exemptions) and submitted that registration under section 12AA of the Act cannot be granted to the assessee.

Both parties agreed that ITA 233/KOL/2020 is consequential to the finding of the ITAT in the appeal ITA 232/KOL/2020 for granting registration.

Rival contentions heard. On a careful consideration of the facts and circumstances of the case, we hold as follows:- The ld. CIT(Exemption), while rejecting the assessee’s claim for registration under section 12AA of the Act has stated as follows:-

The survey in question was conducted in November, 2010 and the material evidence during the course of survey was considered by the Assessing Officer while passing the scrutiny assessment order for AY 2011-12 passed on 27.03.2015 under section 143(3) of the Act The Assessing Officer has not drawn any adverse inference based on the material found during the course of survey while completing the assessments. The ld. CIT(A) in his order for the AY 2012-13 has also not drawn any adverse inference against the assessee, based on the material found during the course of survey. We note that the ld. CIT(Exemptions) is basing his order as material found during survey, as interpreted by the ld. CCIT in 10(23C)(vi) proceedings and has not personally examined any of the alleged material. Similar findings of the Assessing Officer in assessment orders passed under section 143(3)/153(3)(ii) of the Act for AY 2011-12 dated 28.03.2015, and assessment order passed under

In all the orders passed under section 143(3) of the Act, the Assessing Officer’s categorical finding is that the assessee is engaged in educational activities. The ld. CIT(Exemptions) has also not alleged that the objects of the assessee are not charitable in nature. He was only guided by the findings of ld. Chief CIT by rejecting the grant of registration under section 10(23C) of the Act. The orders of the assessment passed under section 143(3) are the final finding of fact on the material found during the course of search or survey. There is no adverse inference recorded in these orders under section 143(3), on the material found during the course of survey. Hence no adverse inference can be drawn by the ld. CIT(Exemption) on the very same material. It is not a case where the ld. CIT(Exemption) has conducted an enquiry or verification on a case. The ld. CIT(Exemption) has not confronted with the assessee with the material found during the course of survey and adjudicated the issue after receiving the replies/rejoinders of the assessee. In fact, the assessee replied to the allegations made by the ld. CIT(Exemptions). The conclusion and facts can only be drawn by the Assessing Officer during the course of assessment proceedings and as no adverse inference has been drawn in various assessment orders passed,

Hon’ble Punjab & Haryana High Court in the case of CIT-1, Ludhiana –vs.- Spring Dale Educational Society (2011) 16 taxmann.com 285 in ITA No. 166 of 2011 held that, while examining application seeking registration under section 12AA of the Act, the Commissioner should only satisfy himself about genuineness of activities as enumerated in clause (b) of section (1) of section 12AA of the Act. The manner of application of funds does not fall within the purview of Commissioner at this stage.

Similarly the Hon’ble Karnataka High Court in the case of DIT –vs.- Garden City Educational Trust (2010) 191 Taxman 238 held that, the manner of application of funds and as to whether the assessee can claim benefit of exemption in terms of section 11 & 12 are questions which have to be examined by the Assessing Officer at this stage of assessment and not by the Commissioner while granting registration under section 12A of the Act.

The Hon’ble Allahabad High Court in the case of CIT-vs.- Red Rose School (2007) 163 Taxmann 19 (All.) held as follows:- “Section 12AA, which lays down the procedure for registration, does not speak anywhere that the Commissioner, while considering the application for registration, shall also see that the income derived by the Trust or the Institution is either not being spent for charitable purpose or such Institution is earning profit. The language used in the section only requires that activities of the Trust or the Institution must be genuine, which accordingly would mean that they are in consonance with the objects of the Trust/Institution, and are not mere camouflage but are real, pure and sincere and not against the proposed objects. The profit earning or misuse of the income derived by charitable institution

In all these cases, it is laid out that the ld. CIT(Exemption) should examine whether the objects of the Trust or Institution are charitable in nature or not and as to whether the activities of the Trust/Institution are in consonance with these objects. We find that the objects of the Society are charitable in nature. We also find that the activities of the Society are in accordance with the objects. The Assessing Officers in their assessment orders have recognized these facts as is clear from the following findings:- Assessment order dated 27.03.2015 for the assessment year 2012-13 in page 2 at para 1:- “The assessee is a voluntary organization. It is engaged in imparting education through different units, i.e., (i) Institute of Science and Technology (IST), which is approved by AICTE and affiliated to WBUT & WBSCTE, offers post graduate as well as diploma course on different branches of science & technology. (ii) Primary Teachers' Training Institute (PTTI) affiliated to WBBPE, offers diploma in elementary education, (iii) Bengal College of Teachers' Education (BCTE), which is affiliated to Vidyasagar University, offers bachelor's degree in education. The three units are under the aegis of Gopsai Avinandan Sangha (GAS), which is the head Office. Separate income Expenditure A/c., Receipts & Payment A/c. and Balance Sheet are maintained for each unit. The accounts of individual unit are consolidated with the accounts of Gopsai Avinandan Sangha. The date of Incorporation of the organization is 14/08/2003.

In view of the above, we direct the ld. CIT(Exemption) to grant registration to the assessee under section 12AA of the Act. Consequently we also direct the ld. CIT(Exemptions) to consider the approval of registration under section 80G(5) of the Act.

In the result, both the appeals of the assessee are allowed. Order pronounced in the open Court on April 12, 2021.