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TMI Blog2008 (4) TMI 420X X X X Extracts X X X X X X X X Extracts X X X X ..... In the present case also, it is seen that there is no finding recorded by the learned Commissioner of Income-tax that the amount has been utilised by the members of the assessee-Society for their personal use and that withdrawal from the bank accounts have not been credited in the accounts of the assessee-Society. Thus, the cancellation of the registration granted to the assessee-Society has been erroneously ordered. Therefore, we do not find any force in the order cancelling the registration already granted to the assessee-Society. The CIT's order is thus liable to be set aside and cancelled on merit. Ordered accordingly. Assessee has raised an alternative contention that the provision in the Act regarding cancellation of registration, i.e., section 12AA was introduced with effect from 1-10-2004 and that this provision cannot be invoked retrospectively. On specific query, the learned counsel for the assessee stated at the bar that this ground has been raised only in the alternative, in the event of the merits of the case going against the assessee. Since the merits of the case have been dealt with and decided in favour of the assessee as above, this ground raised by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 12AA of the Act were not fulfilled. 4. The learned Departmental representative, on the other hand, strongly relying on the impugned order has stated that the cancellation of the registration of the assessee-society is very much in accordance with law. It has been contended that the learned Commissioner of Income-tax has recorded elaborate findings to hold that the assessee-society is not existing for charitable purposes but has been formed for profit and that the Commissioner of Income-tax was dissatisfied with the activities of the society which are not genuine and are not carried out in accordance with its objects. 5. The learned Departmental representative has also, at the time of the hearing of the case filed prayer for allowing additional ground . This is as follows : It is respectfully submitted that the following additional ground may kindly be allowed to be raised in this case : That the activities of the society are not genuine and the assessee is existing for making profit as the bank account have been opened in the name of the minors under the natural guardianship of their respective mothers which clearly proves that the society is AOP for making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... personal names of the members of the society, as they were not conversant with the provisions of law and that moreover, this issue stood decided in favour of the assessee by the Commissioner of Income-tax (Appeals), Bhatinda, and the Tribunal, Amritsar Bench. The learned Commissioner of Income-tax did not accept such explanation. 11. We find from the record that for the assessment year 1997-98, this issue stands decided in favour of the assessee by the Tribunal (SMC) vide its orders dated February 3, 2006 (copy at pages 41 to 48 of the assessee's paper book, APB for short). This was followed by the Division Bench of the Tribunal for the assessment year 1997-98 in the case of the assessee- society vide order dated April 30, 2007 (copy at the assessee's paper book pages 34 to 40). It has been held by the Tribunal as follows in the case of the assessee-society : 9. We have heard the parties and have perused the material on record. The question here is as to whether the learned Commissioner of Income-tax (Appeals) has rightly deleted the disallowance made by the Assessing Officer by disallowing exemption under section 10(22) of the Act. The matter, it is seen, is dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... funds went to the personal use of the president and the secretary of the assessee-society. Therefore, following the aforesaid Tribunal order, the grievance raised by the Department is rejected. 12. In the present case also, it is seen that there is no finding recorded by the learned Commissioner of Income-tax that the amount has been utilised by the members of the assessee-society for their personal use and that withdrawals from the bank accounts have not been credited in the accounts of the assessee-society. 13. Further, it is not shown as to how the amount in the accounts in question is the concealed income of the society. The mere allegation of the learned Commissioner of Income-tax that these accounts were opened in the names of the members of the society with the motive of transferring concealed business income of the assessee from its books to the bank accounts of the members and the cash withdrawals made from the bank accounts could be utilised for their personal benefits, does not lead to a circumstance disentitling the assessee-society from the registration granted to it way back on January 14, 1999. Mere conjectures and surmises would not entitle the authority belo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he lapse having been pointed out. This was also not accepted by the learned Commissioner of Income-tax. 19. As to how this issue is relevant for cancelling the registration already granted to the assessee has not been shown. Therefore, the learned Commissioner of Income-tax's order on this score also is not maintainable. 20. The next issue was that of sale of property to Mata Sodhan Devi Educational Society, Muktsar, by the members of the assessee-society, donation to Mata Sodhan Devi Educational Society, Muktsar, and dispute amongst the members of the assessee-society regarding the management of the society. The stand of the assessee in this regard was that the sale of building and the donation to Mata Sodhan Devi Educational Society, Muktsar, was on account of a settlement reached between the members of the assessee-society; that the assessee-society and Mata Sodhan Devi Educational Society, Muktsar, were two independent registered societies having members other than Dr. Amarjit Singh Pasricha and Dr. Naresh Pruthi and that the Department had not been able to show that these societies were being used for the personal benefits of the said persons. It was also stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, proving the case of the assessee that the activity was carried on in the normal course. Further, the assessee produced before the Assessing Officer a list of the donees with complete addresses and details, a copy of which is at the assessee's paper book pages 91 to 94. The Assessing Officer is not shown to have made any addition and in fact, he has not doubted such donees. Therefore, this issue raised by the learned Commissioner of Income-tax cannot lead to cancellation of the registration granted. Pertinently, under section 12AA(3) of the Act, the learned Commissioner of Income-tax is entitled only to look into the activities and objects of the trust, and no further. 24. The next issue raised by the learned Commissioner of Income-tax was that a sum of Rs. 49 lakhs had been debited to the society's books of account during the financial year 2003-04 as advance for land, for which, complete particulars of the advance or information had not been furnished and Shri Vijay Kumar and Shri Ajit Lal, from whom, recovery of an amount of Rs. 10 lakhs had been made, had not been produced for examination before the Assessing Officer, despite repeated opportunities. In this regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned Commissioner of Income-tax did not accept this. In this regard, pages 91 to 94 of the assessee's paper book contain the list of the donations. This list had been produced before the Assessing Officer. Therefore, again, no case is made out against the assessee prompting cancellation of the registration. 30. As such, on none of the points raised by the Commissioner of Income- tax, any case whatsoever stands made out against the assessee which could lead to the cancellation of the registration already granted to the assessee. Even otherwise, for any irregularity or illegality committed by its members, a society, which is a juridical entity having independent existence, cannot be held liable. Further, when there is no finding recorded that the income of the society has flowed to its members, irregularities committed by members in their individual capacity cannot be held against the society for the purpose of cancellation of registration. Hence, we do not agree with the observations of the Commissioner of Income-tax that the activities of the assessee-society are not genuine or that the society has earned profit, or that it has clandestinely transferred its profits to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut the charitable purpose and not to earn profit, the society would not lose its charitable character merely because some profit arises from the activity; and that where the Commissioner of Income-tax failed to specify as to how profit making was the predominent activity of the society instead of carrying out charitable purpose, he was not justified in cancelling the registration. 36. Herein, as discussed, the Department has not been able to discharge its onus of showing as to how the conditions for grant of registration have been breached by the assessee. The assessee remained enjoying the registration granted to it for the last number of years under the same unchanged facts and circumstances. It has also not been demonstrated by the Department as to how the approach of the assessee has turned to a commercial one. The predominent object of the assessee is and remains to carry out the charitable purpose of advancement of education in a rural area, and not to earn profit. In fact, no profit has been established to have been earned by the assessee. The Commissioner of Income-tax has failed to specify as to how profit earning is the predominant activity of the assessee instead of c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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