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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR
Before: DR. M. L. MEENA & SH. ANIKESH BANERJEE
Per Dr. M. L. Meena, AM:
The present appeal has been filed by the assessee against the order
dated 31.03.2016 passed by the ld. Commissioner of Income Tax (Exemption), Chandigarh, rejecting the assessee’s application for registration u/s 12A of the Income Tax Act, 1961.
2 ITA No.122 /Asr/2020 Improvement Trust Fazilka v. CIT(E) 2. The assessee has raised the following grounds of appeal:
“1. That the learned Commissioner of Income Tax (CIT), Exemption has erred on facts and in law by again rejecting the application of registration under section 12AA(1)(b)(ii) of the Act whereas as per facts on record the assessee appellant duly entitle for registration under section 12AA of the Act. As such, rejection made is illegal and unjustified. Hence, liable to be cancelled.
That the learned CIT, Exemption has erred on facts and in law by again rejecting the application under section 12AA of the Act whereas as Hon’ble Punjab and Haryana High Court vide appeal No. ITA-37-2017 has decided the appeal in favour of the assessee appellant. As such, rejection order passed by ignoring the Hon’ble High Court’s order is illegal and void. The same be cancelled.
Without prejudice to the above, the learned CIT, Exemption has erred on facts and in law by rejecting the application under section 12AA without considering the assessee’s reply submitted against the show cause notice of CIT, Exemption whereas as this Hon’ble Bench has specifically directed to the CIT, Exemption for considering the reply before disposal of application. As such, order passed is unjustified and illegal. The same be cancelled.
That the learned CIT, Exemption has erred on facts and in law by again rejecting the application under section 12AA without providing any reasonable or proper opportunity of being heard against the principles of natural justice and also against the first proviso of section 12AA(1) of the Act. As such, order passed is illegal and void. The same be cancelled.
That the appellant craves leave to add or amend any grounds of appeal before the appeal is finally heard or disposed of.”
The short delay of 77 days in filing appeal on account of National
lockdown is condoned. Appeal admitted on merits.
3 ITA No.122 /Asr/2020 Improvement Trust Fazilka v. CIT(E) 4. None appeared for the assessee, however, an application dated
08.11.2022 is filed by the ld. counsel of Sh. Parshotam K. Singla, Adv.
stating therein that the department has filed an appeal before Hon’ble
Supreme Court vide CA No. 10598/2018 and the Hon’ble Supreme Court
has rejected the appeal of the department as per the Para-254, Sub Para-1
of the judgment in Civil Appeal No. 21762 of 2017 dated 19.10.2022.
Accordingly, he requested that the appeal of the assessee may be allowed
with the direction to the ld. Commissioner of Income Tax (Exemptions) to
grant the registration to the assessee trust.
Per contra, the ld. CIT-DR vehemently supported the impugned
order, he raised strong objection to the request of the assessee in
interpretation of the judgment of the Hon’ble Supreme Court in favour of
assessee. The ld. CIT-DR has contended that the Hon’ble Apex Court in
the case of ACIT v. Ahmedabad Urban Development Authority dated
19.10.2020 vide para 4 clause H on pg. no. 146 has observed as under:
“H. At the cost of repetition, it may be noted that the conclusions arrived at by way of this judgment, neither precludes any of the assessees (whether statutory, or non-statutorv) advancing objects of general public utility, from claiming exemption, nor the taxing authorities from denying exemption, in the future, if the receipts of the relevant year exceed the quantitative limit. The assessing authorities must on a yearly basis, scrutinize the record to discern whether the nature of the assessee’s activities amount to “trade, commerce or business” based on its receipts and income (i.e., whether the amounts charged are on cost- basis, or significantly higher). If it is found that they are in the nature of “trade,
4 ITA No.122 /Asr/2020 Improvement Trust Fazilka v. CIT(E) commerce or business”, then it must be examined whether the quantified limit (as amended from time to time) in proviso to Section 2(15), has been breached, thus disentitling them to exemption.”
The ld. CIT-DR prayed that the case may be remanded back to the
ld. CIT(Exemption) with a direction to examine the issue of grant of
registration to the assessee trust in the light of the observation of the
Hon’ble Apex Court as above.
After hearing the Ld. DR, perusal of records, written submission of
the assessee and the impugned order, it is noted that the Hon’ble Apex
Court in the case of ‘ACIT v. Ahmedabad Urban Development Authority’,
given observation that the assessing authorities must on a yearly basis,
scrutinize the record to discern whether the nature of the assessee’s
activities amount to “trade, commerce or business” based on its receipts
and income (i.e., whether the amounts charged are on cost-basis, or
significantly higher). If it is found that they are in the nature of “trade,
commerce or business”, then it must be examined whether the quantified
limit (as amended from time to time) in proviso to Section 2(15), has been
breached, in order to disentitle the assesse trust to exemption. Accordingly,
the request of the appellant that since, the department appeal has been
rejected as per the Para-254, Sub Para-1 of the judgment in Civil Appeal
5 ITA No.122 /Asr/2020 Improvement Trust Fazilka v. CIT(E) No. 21762 of 2017 dated 19.10.2022 by the Apex Court is not acceptable in
view of the specific observation given on proviso to section 2(15) as above.
In view of the matter, we consider it deem fit to restore back the matter to
the Ld. CIT(A) with the direction to examine the issue of grant of
registration to the assessee trust in the light of the observation of the
Hon’ble Apex Court as above, after considering the written submission and
evidences filed on record before him and to be filed in fresh proceedings
after granting sufficient opportunity of being heard to the assessee. No
doubt, the assessee shall cooperate in the fresh proceedings.
In the result, the appeal of the assessee is allowed for statistical
purpose.
Order pronounced in the open court on 16.11.2022
Sd/- Sd/- (Anikesh Banerjee) (Dr. M. L. Meena) Judicial Member Accountant Member *GP/Sr/PS* Copy of the order forwarded to: (1) The Appellant: (2) The Respondent: (3) The CIT(Appeals) (4) The CIT concerned (5) The Sr. DR, I.T.A.T. True Copy By Order