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TMI Blog2014 (12) TMI 435X X X X Extracts X X X X X X X X Extracts X X X X ..... ority has no power, jurisdiction or discretion to go beyond the statutory provisions - no power can be assumed in the absence of any specific provision – relying upon The Commissioner of Income Tax-I, Madurai. Versus Sarvodaya Ilakkiya Pannai [2012 (2) TMI 160 - Madras High Court] - It is only on 07.08.2009 that a notice was issued by the Commissioner u/s 12AA(3) of the Act pointing out that assessee was promoting sport activity on a commercial basis by holding various tournaments of BCCI viz. Ranji Trophy Matches, World Cup Trial Matches, Twenty-Twenty Tournaments, etc. for which BCCI was making payments to assessee. According to the Commissioner, the aforesaid was a commercial activity so as to be hit by the proviso to section 2(15) of the Act as inserted by the Finance Act, 2008. As per the Commissioner, the activities of the assessee do not qualify to fall within the meaning of charitable purpose as per proviso to section 2(15) inserted with effect from 1.4.2009 - such an objection cannot be the basis of invoke section 12AA(3) so as to cancel the registration already granted to the assessee u/s 12A - registration already granted to the assessee could not have been re-visited by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment : Mrs. M.S. Verma ORDER PER G. S. PANNU, AM The captioned two appeals are directed against two separate orders of even date passed by Commissioner of Income Tax-I, Pune (in short "the Commissioner") under sections 12AA(3) and section 263 of the Income Tax Act, 1961 (in short "the Act") relating to the same assessee, therefore they have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity. 2. ITA No.1856/PN/2012 is an appeal directed against the order of the Commissioner dated 30.07.2012 passed u/s 12AA(3) of the Act cancelling from assessment year 2009-10 onwards the registration allowed to the assessee u/s 12A(a) of the Act. In this appeal, appellant has assailed the action of the Commissioner in cancelling the registration granted u/s 12A of the Act. The primary grievance of the assessee is that the Commissioner erred in exercising his jurisdiction u/s 12AA(3) of the Act in the absence of any factual or legal justification. 3. In brief, the relevant facts can be summarized as follows. The assessee is constituted by a Memorandum of Association and registered under the Societies Registration Act, 1860 on 30th Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or and/or to subscribe to funds for the benefit of cricketers or their families." In sum and substance, the activities of the assessee revolve around promotion and development of the game of cricket in the specified areas of Maharashtra. 4. On 07.08.2009, the Commissioner issued a notice, copy of which has been placed in the Paper Book at page 1, requiring the assessee to showcause as to why the registration granted to it u/s 12A(a) of the Act on 09.12.1991 be not withdrawn. As per the Commissioner, assessee was promoting sports activity on a commercial basis by holding various tournaments of BCCI, viz., Ranji Trophy Matches, World Cup Trial Matches, Twenty-Twenty Tournaments, etc. for which BCCI was making payments to assessee, and therefore, assessee was hit by the amendment to section 2(15) of the Act by the Finance Act, 2008 w.e.f. assessment year 2009-10, whereby a proviso was inserted, which implied that a 'charitable purpose' in the nature of "advancement of any other object of general public utility" shall no longer be considered as a 'charitable purpose' if it involves carrying on of any activity in the nature of trade, commerce or business or any activity of rendering a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. The rival submissions have been heard and the relevant material and record perused. 7. A preliminary challenge to the impugned order raised by the assessee is to the effect that the conditions precedent for invoking the power of cancellation contained in section 12AA(3) of the Act are not fulfilled in the present case. According to the appellant, the provisions of section 12AA(3) of the Act can be invoked only on fulfillment of two conditions, namely, firstly, that the activities of the trust or institution are not genuine; and, secondly, that the activities are not being carried out in accordance with the objects of the trust or institution, as the case may be. The stand of the learned Representative is that on both the aforesaid points there is no adverse finding by the Commissioner and therefore the impugned order is lacking in jurisdiction. It is also canvassed that the Commissioner does not have unfettered powers to cancel the registration and that the cancellation can be effected only on the grounds specified in section 12AA(3) of the Act. In support of this proposition, reliance has been placed on the following decisions : (i) CIT vs. Sarvodaya Ilakkiya Pannai, (2012) 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t though addition to the objects clause, without intimation to the Department cannot be a ground for cancellation; but notwithstanding the same, it could be taken as a ground for cancellation only in case the additional objects result in activities, which contravene the 'charitable purpose' defined in section 2(15) of the Act. According to him, in the instant case, the additional objects do not violate the charitable nature of assessee's activities. The learned counsel also pointed out that the Commissioner erred in relying on the decision of the Mumbai Bench of the Tribunal in the case of Board of Control for Cricket in India vs. ITO, (2012) 22 taxmann.com 29 (Mum). According to the assessee, the said decision of the Tribunal is distinguishable on facts. On the aforesaid basis, it is sought to be made out that the Commissioner has wrongly invoked section 12AA(3) of the Act in the present case. 10. On the other hand, the learned CIT-DR has justified the action of the Commissioner to cancel the registration originally granted to the assessee on 09.12.1991 u/s 12A of the Act. According to her, over a period of time the object of promoting and developing the game of cricket has yield ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to cancel the registration already granted, the Commissioner ought to be satisfied on two counts - firstly, that the activities of the trust or institution are not genuine; and, secondly, that the activities are not being carried out in accordance with the objects of the trust or the institution, as the case may be. It is quite clear that power of the Commissioner to cancel the registration u/s 12AA(3) of the Act is not without fetters, and is rather circumscribed by the conditions prescribed therein. Notably, the phraseology of section 12AA(3) of the Act does not permit the Commissioner to undertake a wholesale review of the ingredients which were considered by him while granting registration u/s 12A of the Act. For the instance, at the time of registration one of the factors to be considered by the Commissioner is as to whether the objects of the applicant fall within the meaning of 'charitable purpose' as per section 2(15) of the Act. In contrast, at the time of cancelling of registration u/s 12AA(3) of the Act, the Commissioner has to satisfy himself only about the two conditions prescribed therein, namely, that the activities are not genuine or that the activities are not bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cified areas of Maharashtra. The objects also include sponsoring and/or to subscribe to funds for the benefit of cricketers or their families. It is also empowered to collect funds and to utilize such funds in the manner as the Managing Committee may consider desirable for the fulfillment of the objects of the Association. It is also empowered to implement the Laws of the game of Cricket and Rules and Regulations formulated by the Board of Control for Cricket in India. We are only pointing out the aforesaid for the reason that the activities and objects of the assessee revolve around promoting, developing and controlling the game of cricket in the areas specified. 15. After considering the genuineness of such objects and the same being in compliant with the definition of 'charitable purpose' contained in section 2(15) of the Act, assessee was granted registration as a 'charitable institution' u/s 12A of the Act on 09.12.1991. It is only on 07.08.2009 that a notice was issued by the Commissioner u/s 12AA(3) of the Act pointing out that assessee was promoting sport activity on a commercial basis by holding various tournaments of BCCI viz. Ranji Trophy Matches, World Cup Trial Matche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r such perception of the Commissioner falls within the scope and ambit of the power available with him u/s 12AA(3) of the Act. On this aspect, we find that a somewhat similar situation was considered by the Nagpur Bench of the Tribunal in the case of Vidarbha Cricket Association vs. CIT vide ITA No.3/Nag/2010 dated 30.05.2011. In the said case, registration granted to the assessee was sought to be cancelled u/s.12AA(3) of the Act on the basis of amended provisions of section 2(15) of the Act, an objection which is similar to that raised by the Commissioner in the present case. The Tribunal held that the ground for cancellation invoked by the Commissioner was not permissible in view of the limited powers available to him u/s.12AA(3) of the Act. In this context, the following discussion by the Tribunal is relevant:- "7. In this view of the matter, we may now examine the reasons put-forth by the Commissioner in this case to cancel registration already granted to the assessee under section 12A of the Act. In this direction, we have carefully perused the impugned order, wherein the Commissioner has primarily examined the application of revised definition of charitable purpose unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee fall within the meaning of expression charitable purpose per section 2(15) as amended with effect from 1.4.2009. The only point decided in the appeal is to the effect that it was not within the scope and ambit of section 12AA(3) for the Commissioner to have examined the applicability of the amended section 2(15) of the purposes of invoking his powers of cancellation provided in section 12AA(3) of the Act. At this stage, we may also state that the issues raised by the Commissioner in the impugned order are not beyond the powers of the revenue to examine, so however, the same can only be examined in the appropriate proceedings, such as assessment proceedings in the present case. Our decision is resting only on the foundation that the impugned order p[assed by the Commissioner is not permissible in view of the limited powers available to him under section 12AA(3) of the Act. However it would be open for the A.O. to consider the issues raised in the impugned order, if so advised, in the course of the relevant assessment proceedings." 18. Similar situation also arose before the Rajkot Bench of the Tribunal in the case of Saurashtra Cricket Association vs. CIT, (2013) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ket Association (supra) for canceling registration u/s 12AA(3) of the Act. In the said case, the Commissioner noted that the receipts of the assessee included earnings from subscription; rent for hiring cricket ground, rooms and premises; fees for providing services to IPL; income from advertisement; subsidy from BCCI; sale of tickets for conducting of matches; restaurant and catering income; etc.. The aforesaid receipts in the hands of Tamil Nadu Cricket Association were held by the Commissioner to be in the nature of trade, commerce or business and thus hit by the proviso to section 2(15) of the Act and therefore he proceeded to withdraw the registration granted to the assessee by invoking section 12AA(3) of the Act. The said action of the Commissioner has been found to be untenable by the Hon'ble High Court of the Madras, and the following discussion of the Hon'ble High Court is worthy of notice in this regard :- "32. Thus in contrast to Section 12AA(1)(b) of the Income Tax Act, 1961, where the grant of registration requires satisfaction about the objects of the trust as well as genuineness of the activities, for the cancellation of the registration under Section 12AA(3), all t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted exemption under Section 11 of the Act." 20. On the basis of the aforesaid judicial rulings, it has to be concluded that the registration u/s 12A of the Act granted to the assessee on 09.12.1991 cannot be cancelled by the Commissioner in terms of section 12AA(3) of the Act on the basis of the amendment made to section 2(15) of the Act by way of insertion of the first proviso by Finance Act, 2008. 21. Further, we hasten to add here that we are not in the process of adjudicating the merits of the dispute as to whether or not the impugned activities of the assessee qualify for exemption under sections 11 / 12 of the Act by being a 'charitable purpose' in view of the newly amended section 2(15) of the Act. Pertinently, the only point to be decided presently by us is whether the ground taken by the Commissioner to cancel registration is within the scope and ambit of section 12AA(3) of the Act. It is only in this context, we have observed that the Commissioner is not empowered to examine the applicability of amended section 2(15) of the Act for the purposes of invoking his power of cancellation enshrined in section 12AA(3) of the Act. Our observation has to be understood in the cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c and that the relevant changes were required to be put through necessary enquiries to establish that it violated the ingredients necessary to grant registration, and only thereafter, the Commissioner could cancel registration after passing a speaking order. Therefore, matter was ultimately set-aside to the file of the Commissioner to be decided afresh. 23. In the present case, we find that the Commissioner has merely noted that there is an addition in objects clause, which has not been intimated to the Department and therefore the registration is required to be cancelled. Ostensibly, in the absence of any finding that how the additional objects vitiate the registration earlier granted u/s 12A of the Act, the cancellation cannot be effectuated. In-fact, in the case of BCCI (supra), the Tribunal observed that the amendments in the Memorandum of Association were "substantial and material changes" and therefore it opined that such changes were required to be examined by the Revenue authorities so as to enable the assessee to continue availing the benefits under sections 11, 12, and 13 of the Act. 24. In our considered opinion, it would be appropriate to deduce that merely because of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 56 as a "Company limited by guarantee without Share Capital" in the name of " Maharashtra Cricket" or "Maharashtra Cricket and Sports" or "Maharashtra Cricket and Leisure" or such other name as may be approved by the Registrar Of Companies, Maharashtra establish to promote, develop and encourage the sport of cricket and other sports by providing world class playing facilities, stadiums and playing environment providing coaching facilities and club house in Maharashtra; and to issue guarantee or guarantees time to time to such company in connection with its formation or establishment. Insertion in the Clause 7 "Object Clause" Point No - G:- To purchase, obtain or procure appropriate lands for construction, of an ultra-modern state of art stadium for cricket and other games in Maharashtra, and to offer such lands on lease or other arrangement to the section 25 company to be founded and promoted by the association to build, construct, operate and maintain the said stadium and other facilities." 26. In the background of the above changes in the objects clause, the plea of the assessee was that there is no change in the objects in the real sens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in para 4 of this order. 31. Therefore, having regard to the fact situation, the import of the newly inserted clauses is not in contravention of assessee's primary object of promoting, developing and controlling the game of cricket in the specified territory of Maharashtra. In this context, we also find force in the plea of the assessee, based on the judgement of the Hon'ble Bombay High Court in the case of Deccan Gymkhana (Oldest Trust) (supra) to the effect that it would be inappropriate to construe the aforesaid insertions as new objects of the assessee Association. Clearly, the aforesaid three insertions in the objects clause, only seek to provide enabling powers to the managing committee of the Association to accomplish its objects. Therefore, even if, one is to consider the additional objects, it does not signify that the registration granted to the assessee originally u/s 12A of the Act on 09.12.1991 is rendered nugatory. 32. At the time of hearing, assessee also contended that the facts in the present case are quite distinct from those in the case of BCCI (supra) and therefore the observations of the Mumbai Bench of the Tribunal have to be understood in that context. Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der dated 30.12.2011 (supra) be not considered erroneous in so far as it was prejudicial to the interests of the Revenue within the meaning of section 263 of the Act. In the said show-cause, the Commissioner stated that the following issues remained to be considered by the Assessing Officer while passing the assessment order:- "(i) The Assessing Officer has accepted your claim of subsidy of ₹ 21,04,23,032/- received on account of share in T.V. rights, claimed to have been received from BCCI, as voluntary contributions by treating it as indirect receipts, outside the purview of the amended provisions of section 2(15) of the Income-tax Act, 1961. Before accepting such a claim, the Assessing Officer has not enquired into with the BCCI, as to the purpose and basis on which the share of T.V. rights was given. (ii) The Assessing Officer has accepted the above mentioned claim without examining the nature of such receipts, as to whether these receipts constituted an element of trade, commerce or business etc. (iii) In your case during the course of assessment proceedings you have submitted objects of the society constituted on 29.10.2004, whereas the registration u/s 12A was grant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issues sought to be raised by the Commissioner in the impugned order. Before the Commissioner, it was contended that as regards the applicability of the amended provisions of section 2(15) of the Act vis-à-vis the subsidy received from BCCI, assessee had furnished an explanation in the course of assessment proceedings and based on such explanation the Assessing Officer had finalized the assessment. Secondly, with regard to the change in objects, the position canvassed by the assessee was that in the course of assessment proceedings, all the objects (including the so-called change objects) were before the Assessing Officer and he had duly applied his mind on the same. In-fact, the assessee took the stand that the so-called changes in the objects clause were not really a 'change in objects' but such changes merely facilitated granting of certain powers in furtherance of the earlier objects existing at the time of registration in 1991. Assessee also denied any change in its structure and it was submitted that the so-called changes were only a tool to achieve the originally approved objects. Before the Commissioner as well as before us, it has been submitted that the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment made without active and conscious examination of the relevant facts even in debatable issues would render an assessment erroneous within the meaning of section 263 of the Act. Reliance has been placed on the following decisions in this context :- (i) Ninestar Enterprises (P.) Ltd. vs. ACIT, (2013) 30 taxmann.com 57 (Hyd); (ii) Smt. Seema Hemant Shirali vs. ITO, (2012) 141 TTJ 351 (Pune); (iii) Ranka Jewellers vs. Addl.CIT, (2010) 36 SOT 11 (Pune); (iv) Ambika Agro Suppliers vs. ITO, (2005) 95 ITD 326 (Pune). 43. With respect to the aforesaid preliminary point raised by the assessee, it would be appropriate to refer to the scheme of section 263 of the Act. Section 263 of the Act empowers the Commissioner to call for and examine the record of any proceedings under the Act, and if he considers any order passed therein by the Assessing Officer as erroneous in so far as it is prejudicial to the interests of the Revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such enquiries as he may deem necessary, pass such order thereon including an order enhancing or modifying the assessment or cancelling the assessment and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire assessment record is liable to be examined before arriving at a conclusion as to whether or not the Assessing Officer has applied his mind on an issue and a mere perusal of the assessment order would not suffice. A gainful reference in this context can be made to the judgement of the Hon'ble Bombay High Court in the case of CIT vs. Gabriel India Limited, 203 ITR 108 (Bom) which lays down that an assessment order could not be held to be erroneous simply because there is absence of an elaborate discussion in respect of a particular point, if the record otherwise showed that the Assessing Officer had made enquiries with regard to the point raised by the Commissioner and the assessee had made detailed explanations in writing in the course of assessment proceedings. The enquiries made by the Assessing Officer as well as the replies furnished by the assessee were recognized as a part of record of the proceedings under revision, though an elaborate discussion in the assessment order was not present. As per the Hon'ble Bombay High Court, under aforesaid circumstances, assessment order could not be held to be erroneous merely because it did not contain an elaborate discussion on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct and its claim of exemption u/s 11 made in the return of income filed. The Assessing Officer has also made a reference to the objects clause of the assessee. Thereafter in para 4, he has computed the total income enumerating the gross receipts and after reducing the application of income on various heads the resultant surplus of ₹ 43,28,24,332/- has been accepted as exempt. Accordingly, the return of income of Rs.Nil was accepted. 47. Now, if we examine the record of proceedings before the Assessing Officer, namely, order-sheet entries of the assessment folder, a copy of the same has been furnished in the course of hearing, the said record reflects hearings having taken place before the Assessing Officer on various dates starting from 30.06.2011 upto 19.12.2011. We deem it fit and proper to reproduce hereinafter the proceedings recorded 03.10.2011 and 05.12.2011, which are as under :- "03.10.2011 In continuation Shri R.R. Pethe, CA & AR of assessee attended and filed submission dated 03.10.2011. Case discussed. He is requested to furnish following information/documents. - Details of one day test matches, T-20 matches, IPL matches conducted during the year, with amount o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch activities cannot be said to be commercial activities. Be that as it may, at the present stage, we are not examining the merits of the issue but we are only trying to determine as to whether or not the assessment has been framed without application of mind by the Assessing Officer on the issue of application of amended provisions of section 2(15) of the Act vis-à-vis the subsidy by way of share in T.V. rights received from BCCI of ₹ 21,04,23,032/-. The aforesaid material, namely, queries raised by the Assessing Officer during the assessment proceeding and the detailed explanations furnished by the assessee in writing in the course of assessment proceedings clearly point out that the Assessing Officer did make enquiries with regard to the point sought to be raised by the Commissioner and replies were furnished by the assessee before him. Therefore, in this factual background, we are unable to convince ourselves that the assessment order has been made without application of mind with respect to the application of amended provisions of section 2(15) of the Act vis-à-vis subsidy by way of share in T.V. rights received from BCCI of ₹ 21,04,23,032/-. Before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rights received from BCCI of ₹ 21,04,23,032/- even in terms of the amended provisions of section 2(15) of the Act. Therefore, we are unable to acquiesce to the plea of the learned CITDR before us that the assessment has been finalized without active and conscious examination of the issues raised by the Commissioner. In this view of the matter, we are unable to uphold the charge made by the Commissioner that the Assessing Officer accepted the claim of the assessee for exemption u/s 11 of the Act with respect to the subsidy by way of share in T.V. rights received from BCCI without making enquiries. 50. Now, we may take up the second issue raised by the Commissioner. In this context, the Commissioner was of the view that the Assessing Officer failed to take cognizance of the change in the objects of the assessee and also the change in structure so as to examine that such changes had a bearing on the taxability of the income of assessee. On this aspect also, we find that the queries made by the Assessing Officer, which we have reproduced above and the explanations furnished by the assessee thereof copies of which have been placed on record, belie the assertions of the Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X
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