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TMI Blog2022 (10) TMI 411X X X X Extracts X X X X X X X X Extracts X X X X ..... it is not clear from the record as to whether such enquiry was made from parents or minor students. No statements were recorded in writing of any of the witnesses and no opportunity of cross examination was provided. In this regard, we rely upon the decision in the case of Kishinchand Chellaram [ 1980 (9) TMI 3 - SUPREME COURT] wherein the Hon'ble Supreme Court has held that any material not confronted to assessee would not constitute as 'admissible evidence'. An institute though registered u/s 12AA, would still be taxed on the income which has not been applied in accordance with section 11 or in respect of which section 13 comes into play. Thus, the registration U/s 12AA is only fait accompli to the objects of the institution. The activities of an institution though genuine at the time of grant of registration may not remain so during its life span and the registration granted to it cannot be life time guarantee that it would remain so, that is why the law prescribes procedure for withdrawal of registration once granted. Considering the totality of the facts, circumstances and legal position, we are of the view that the application submitted by the assessee-so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19 Pandemic. 3. The brief facts of the case are that the assessee filed application online on 01/03/2019 for seeking registration U/s 12AA of the Act. Statutory notices were issued to the assessee to submit certain documents/explanations and also produce original RC/MOA for verification. The assessee submitted reply alongwith documents before the ld. CIT(E) but the ld. CIT(E) had not satisfied with the explanation offered by the assessee and the application for seeking registration U/s 12AA of the Act was rejected. 4. Against the said order of rejection for registration U/s 12AA of the Act, the assessee has preferred the present appeal before the ITAT on the grounds mentioned above. 5. All the grounds raised by the assessee are interlinked and interrelated and mainly relates to challenging the order of the ld. CIT(E) in rejecting the application for seeking registration U/s 12AA of the Act. In this regard, the ld. AR appearing on behalf of the assessee has reiterated the same arguments as were raised before the ld. CIT(E) and also relied on the written submissions filed before the Bench and the contents of the same are as under: (i) It is respectfully submitted that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the appellant-society is fully charitable and its aim is to provide education to village children whose parents are very financially week and mainly poor farmers, villagers and does not exists for profit. All the receipts of tuition fee/bus fee are properly accounted for in the books of account and nothing is concealed. No documentary evidence of field enquiry was provided to the appellantsociety. Even it is not clear whether such enquiry was made from parents or minor students. No statements were recorded in writing of any of the witnesses and no opportunity of cross examination was provided. In Kishinchand Chellaram 125 ITR 713 SC, the Hon'ble Supreme Court has held that any material not confronted to assessee would not constitute as 'admissible evidence'. It is a settled proposition of law that as per the principles of natural justice, the CIT (E) should have provided complete evidence to the assessee grant opportunity of cross-examination. Secondary evidences cannot be relied on as if neither the person who prepared the documents nor the witnesses were produced. The Department cannot be given a second chance as held by the Hon'ble Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 aaainst the proposed objects. The profit earning or misuse of the income derived by charitable institution from its charitable activities may be a ground for refusing exemption only with respect to that part of the income but cannot be taken to be a synonym to the genuineness of the activities of the trust or the institution. [Para 34] (vii) Similar view was reiterated by the Allahabad High Court in the case of CIT vs. Babu Ram Education Society (2018) 96 taxmann.com 606 (Allahabad) wherein at the instance of the Department order passed by the Agra Bench of the ITAT was put up for judicial scrutiny before the Honble Allahabad High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is misappropriation of funds and it is hit by section 13 of the Act, certainly, they can deny the benefit of exemption. But that is not a ground to deny the registration in the instant case under Section 12AA, when admittedly the trust has been established to run schools and colleges for imparting education, which is a charitable purpose. In that view of the matter, we do not see any merit in this appeal. The substantial question of law framed in this appeal is answered in favour of the assessee and against the revenue. Accordingly, the appeal is dismissed. (ix) The Hon'ble Madhya Pradesh High Court in the case of CIT vs. D.P.R. Charitable Trust reported in (2011) 61 DTR 410, held in the said decision that while considering the application u/s 12A, the ld. CIT is not required to examine whether the income derived by the trust is being spent for charitable purposes or the trust is earning profit while granting registration. Since the assessee trust was established for educational purposes it was held that the trust is entitled to registration. (x) The Hon'ble Kerala High Court in the case of Sree Anjaneya Medical Trust vs. CIT reported in (2016) 382 ITR 399 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the powers of the Commissioner as to whether while granting registration u/s 12A he is required to examine the books of account etc. or he is only to satisfy himself regarding the objects of the trust and genuineness of the activities of the trust, we find various courts have held that while granting registration u/s 12A the ld. CIT is required to see only the objects of the assessee trust/society and not to examine the application of income. He is not required to examine whether the income derived by the trust is being spent for charitable purposes or the trust is earning profit while granting registration. He is only required to examine the objects of the trust. We find identical issue had come up before the Tribunal in the case of Bhartiya Kisan Sangh Sewa Niketan (supra). In the said case also the assessee trust did not produce the books of account, bills and vouchers etc. for verification of the ld. CIT for which the ld. CIT held that the assessee society is not carrying out any charitable activities. Due to noncompliance of assessee society, the genuineness of the activities could not be verified. The ld. CIT, therefore, relying on various decisions including the decisions wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. An institute though registered under section 12AA, would still be taxed on the income which has not been applied in accordance with section 11 or in respect of which section 13 comes into play. Thus, the registration under section 12AA is only fait accompli to the objects of the institution. The activities of an institution though genuine at the time of grant of registration may not remain so during its life span and the registration granted to it cannot be life time guarantee that it would remain so, that is why the law prescribes procedure for withdrawal of registration once granted. In the backdrop of aforesaid facts, circumstances and legal position, it is respectfully submitted that the application submitted by the appellant-society is in consonance with the procedural requirement prescribed in this regard. From the constitution and other documents of the appellant-society which were filed before the Ld. CIT(E), the objects of the society could be ascertained. From the same and from factual activity of running school, it is evident that the objects of the society are charitable in nature and are in tune with section 2(15) of the Act and, therefore, the order of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee again requested to provide the documents alongwith detailed report of the enquiry conducted by the Departmental Inspector on the basis of which the allegation had been made against the assessee. However, no such material was supplied to the assessee and the ld. CIT (E) adjudicated the matter relying upon the same material without supplying the copy to the assesse. 8. We also observed that the material collected behind the back of assessee could not be utilized against assessee unless the copy of the same was supplied to the assessee and he was given an opportunity to rebut the same. The assessee furnished full explanation to the query raised. No opportunity was provided to the assessee for cross-examination. Such material cannot be used against the assessee unless he is supplied the copy of such material and is allowed an opportunity to rebut the same. Similarly, any statement recorded behind the back of the assessee cannot be used against him unless the assessee is supplied the copy of the statement and is allowed an opportunity to cross-examine. In this regard, we draw strength from the decision of the Hon'ble Apex Court in the case of M/s Andaman Timber Industri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a conclusion could not be drawn that the activities of the society are not being carried out in accordance with the objects of the society or that no genuine activity is being carried out by assessee merely because the accounts of one year is doubted by the Ld. CIT(E). It was stated by the ld. AR that the Ld. CIT(E) went wrong in rejecting the application of the assessee on this ground, when it was duly explained to the Ld. CIT(E) that the school is approved by the Government agencies, school is situated in a village where some concessions are allowed to poor needy students and complete details of such students were furnished. According to the ld. AR, the affairs of the school are monitored by the government agencies and accounts are duly audited and the funds are not available at the discretion of the Society. It was submitted that the allegation of reporting lower fee is based on presumption and surmises and no concrete evidence are on record. It was further submitted that no opportunity of cross-examination was provided to the assessee and no third party statements were recorded. That books of account, bills and vouchers were available for verification by the Ld. CIT(E). 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s - [Para 7] [In favour of assessee] (Head Note) It is an undisputed fact that the Society is running and maintaining a school up to senior secondary school and is affiliated to CBSE, Delhi. The Hon'ble Karnataka High Court in the case of CIT vs. A.S. Kupparaju Brothers Charitable Foundation Trust reported in (2012) 69 DTR 315, has held that once it is admitted that in pursuance of the trust deed and in terms of the objects set out therein, schools and colleges are being run and educational institution are being run, nothing more requires to be established to show that the trust in question is a genuine trust. The Hon'ble High Court held as under: The certificate of registration is only an enabling provision to claim exemption. By merely granting a certificate income is not exempted. That is only a first stage to claim exemption. The Commissioner of Appeals should not have confused these two aspects and seems to think as the trustees and his family members are treating the property as their own and mis-utilising the property it is not a genuine trust. When once it is admitted that in pursuance of the trust deed and in terms of the objects set out therein, scho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g exemption of income, contribution, etc. No examination of the modus of the application of the funds of the Trust or an examination of the ethical background of its settlers is called for while considering an application for registration. The stage for consideration of the relevance of the object of the Trust and the application of its funds arises at the time of the assessment, where benefits arc claimed by assessees in terms of sections 11 and 12, the question as to the nature of such contribution and income can be looked into. At the time of registration of the Trust, going by the binding judgments of the Hon ble Apex Court, what is to be looked into is whether the Trust is a genuine one and whether it is a sham institution floated only to avail the benefits of exemption under the Act. There is no such finding in the impugned order. In this regard, we draw strength from the decision in the case of CIT vs. Spring Dale Educational Society reported as (2011)16 taxmann.com 285 the Hon'ble Punjab Haryana High Court held as under: Section 12AA of the Income-tax Act, 1961 - Charitable or religious trust -Registration procedure - Assessment year 2010-11 - Whether while exa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dertaken by the Assessing Officer on a year to year basis after the assessee files the return of income claiming exemption u/s 11 of the I.T. Act. The said view has also been adopted by the Coordinate Bench of the Agra Tribunal in the case of Rasee Educational Institute vs. CIT(Exemption), Lucknow in ITA No. 462/Agra/2017. We observed that while passing the impugned order, the ld. CIT (E) seems to be under gross misconception that it is his satisfaction and definition of charitable activities de hors requirement of law would only enable an institution to be granted registration u/s 12AA of the Act as once registration is granted, the entire income of the institution would become exempt. The said view, in the light of precedents referred above is wholly opposed to law. The judgments relied upon by the assessee-society are of higher forum than cited by the Ld. CIT (E). The principles enunciated in the judgements referred to by the Ld. CIT (E) were rendered in different context and divergent facts of the case. In the provisions U/s 12AA of the Act, the Ld. CIT (E) is entitled to see that whether the objects are charitable in nature, which term has been well defined in the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X
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