9911796707
TMI Blog2024 (2) TMI 661X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 10(23C). Ground No. 2: That the CIT(E) erred legally and factually in treating various consistently followed accounting entries as gross irregularities for the following reasons: (i) The income of the appellant is a part of the consolidated fund of India and it is unconditional exempt under section 10(23C) (iiiab) and under any view of the matter the income of the appellant is not subject to tax therefore the question of irregularity does not arise. (ii) That the appellant has been consistently following the impugned accounting treatment and the appellant had applied more than 85% of its income. (iii) There is a mistake in treating the advances for a period 2007 where the correct fact is that out of total Advance 16.05 Crores, Rs. 13.76 Crores is paid 31.03.2022. (iv) That the appellant earned Rs. 5,20,11,467/- as interest on corpus and incurred more than 85% even if such interest is treated as part of income. (v) The appellant temporarily used corpus for specific expenses which is permissible under the law. (vi) There is a gross error of understanding with regard to Provision on Retirement Benefits as University is Funded by UGC & to comply Format of Annual Acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the law. (vi) There is a gross error of understanding with regard to Provision on Retirement Benefits as University is Funded by UGC & to comply Format of Annual Accounts prescribed by Ministry of Education such provision is made which is appropriate transferred from Income & Expenditure Account to Receivable A/c, as per Balance Sheet Total Provision Amount in Liability is Equal to Total Receivable Asset Side. Thus, there is no impact on the income of the Organisations remains a compensating entry on both side of the balance sheet. Ground No. 3: That the Ld. CIT erred in law and facts by applying the ratio of the Supreme Court decision in New Noble Educational Society v. CCIT [2022] 143 taxmann.com 276 as the genuineness of the appellant is not under dispute being a Central Government owned/controlled University exempt under section 10(23C). Ground No. 4: That the Appellant craves leave to add, amend, alter or delete all or any of the grounds of appeal at the time of hearing of the appeal. 4. As the aforesaid two appeals are filed by the same assessee and are interconnected having similar issues, therefore, the same are taken together for adjudication under this common or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he deficiencies pointed out have been accepted by the assessee at the S.No. 2(l &ii) of Part B(General) of the reply. Reply of the Assessee:- The observations as per SAR Part B (General) Sr.No.2 are as follows:- (i) Advances of Rs 1,39,69,458/- were given to employees (Non-Interest Bearing) during the period 2014 to 03/2022 is outstanding. (ii) Advances and other amount of Rs 16,05,41 ,586 / of the period 2007 to 03 / 2022 Recoverable in cash or in kind of other is outstanding. Amount of 16,05,41,586/- are advances to various Suppliers for Construction, Equipment Material etc. in which the major amount 13.76 Crore is paid to CPWD for Building Construction work on 31.03.2022. The advances are routine part of work of university & in the CAG Report the values of advances are mentioned in general just to inform & this point is included in every year's report, here we are agreeing with the observation of the audit, and we are continuously pursuing to recover/adjust above advances and letter also issued in this regard. Hopefully maximum amount of advance will be recovered / adjusted at the earliest. Remarks by the undersigned-The assessee has accepted the said observation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alary grant is not correct. The salary grant received by the assessee is part of income and cannot be transferred to Corpus Fund. (iv) lssue raised in show cause Notice- The interest income has been earned on the Designated fund during FY 2021-22, which has not been offered as income. Reply of the Assessee: Some designated fund likes Student welfare fund & Teachers benefit fund are specific/Endowment/ earmarked fund the interest earned on the designated fund is added to that particular fund. (Sch.2 of Annual Account Attached Page No. 12) Remarks by the undersigned- The assessee has accepted that the interest amounts of various designated funds have not been offered as income of current year. Explanation offered by the assessee is also not acceptable. The assessee was required to offer the interest amount as income of the year. (v) lssue raised in show cause Notice- Income from consultancy has been shown at Rs. 4,00,000/- which has been received after T DS from NHAI. No GST has been charged on this income. Reply of the Assessee:- GST in Income from consultancy charges if any shall be deposit. Remarks by the undersigned- The assessee has accepted the default which is in v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6/- as expenses which have not been actually incurred but only provisions for future expenditure has been made. In this way the assessee has reduced the profit of the year by Rs. 47,15,88,936/-. (4) The discrepancies mentioned above were also pointed out to the assessee during the physical verification by ITO(E), Bilaspur but the assessee failed to provide the relevant details and explanation on above mentioned points. Hence, the accounts of the assessee are not found genuine and correct and the assessee intentionally not making proper entries to reduce the income. The above-mentioned discrepancies have been pointed out for FY 2021-22 only, however, the assessee is making same accounting in various earlier years. The assessee has submitted Audit reports for FY 2019-20 and FY 2020-21 also and the same discrepancies have been noticed therein. (5) - Recently Hon'ble Supreme Court in the case of CIVIL APPEAL NO. 3795 OF 2014 M/S NEW NOBLE EDUCATIONAL SOCIETY APPELLANT(S) VERSUS THE CHIEF COMMISSIONER OF INCOME TAX 1 AND ANR. RESPONDENT(S), Para 62 held that- The second proviso by sub-clause (ii) requires the Commissioner to make such enquiries to specify about the genuineness ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uinely seeks to achieve the objects which it professes. The Commissioner or other authority is not in any manner constrained from examining accounts and other related documents to see the pattern of income and expenditure. " (6) Considering the facts of the case, the application of the assessee filed in Form IOAB for grant of registration u/s 12AB & 80G(5) of the Act is hereby rejected and the provisional registration/approval u/s 12AB in Form 10 AC vide URN No. AAAJG2058GE20221 dated 25.01.2023 & provisional registration/approval u/s 80G(5) in Form 10 AC vide URN No. AAAJG2058GF20225 dated 04.04.2022 granted by CPC is also hereby cancelled as per the provisions of section 12AB(1)(b)(ii)(B) of the Act and as per the second proviso to section 80G(5) of the Act respectively. 7. Against the aforesaid observations of the Ld. CIT(E), Ld. AR argued that the deficiencies reported under the special audit report by the CAG are regarding loans, advances and deposits, interest income not offered as income, temporary utilization of corpus fund for salary on account of shortage of funds which is again reimbursed to the corpus funds on receipt from UGC grant, GST default, provision of future ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd to consider whether the objects of the Trust are genuine charitable in nature and whether the activities which the Trust proposed to carry on are genuine in the sense that they are in line with the objects of the Trust. In contrast, the position would be different where the Commissioner proposes to cancel the registration of a Trust under sub-section (3) of section 12AA the Act. There the Commissioner would be bound to record the finding that an activity or activities actually carried on by the Trust are not genuine being not in accordance with the objects of the Trust. Similarly, the situation would be different where the trust has before applying for registration found have undertaken activities contrary to the objects of the Trust. 13. We therefore find that the view of the Delhi High Court in the impugned judgment is correct at liable to be upheld. CIT v Chhattisgarh Urology Society in TAXC No.159 of 2017 10. The provision contained under Section 12A nowhere empowers the CIT to assess the objects vis-a-vis the books of accounts. Even otherwise, it is not to be seen at this stage as to whether the fulfillment of the charitable trust would eventually benefit the members ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arly project the activities of the trust to be charitable in nature, it is not the stage for lifting the veil and assessing whether those activities are actually carried on at the first year of establishment of the trust. 12. In the matters of Commissioner of Income Tax vs Vijay Vargiya Vani Charitable Trust1 and Fifth Generation Education vs Commissioner Income Tax2, it is held that at the stage of Section 12A, the Commissioner is not to examine the application of income. All that he may examine is whether the application is made in accordance with the requirements of Section 12A read with Rule 17A and whether Form No.10A has been properly filled up. He may also see whether the objects of the trust are charitable or not. At this Stage, it is not proper to examine the application of income. 13. In the present case, the order passed by the Tribunal has discussed the matter in detail and has assigned justifiable reason as to how the CIT has failed to exercise jurisdiction vested in it at the stage of examining the application under Section 12A. As earlier discussed, the list of donations and the list of charitable activities are not to be looked into at this stage. 14. Accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ually done; we are of the view that the term 'activities' in the provision includes 'proposed activities'. That is to say, a commissioner is bound to consider whether the objects of the Trust are genuinely charitable in nature and whether the activities which the Trust proposed to carry on are genuine in the sense that they are in line with the objects of the Trust. In contrast, the position would be different where the Commissioner proposes to cancel the registration of a Trust under sub-section (3) of section 12AA of the Act. There the Commissioner would be bound to record the finding that an activity or activities actually carried on by the Trust are not genuine being not in accordance with the objects of the Trust. Similarly, the situation would be different where the trust has before applied for registration found to have undertaken activities contrary to the objects of the Trust. 10. On perusal of the objects of the society it is apparent that the society has charitable objects and, therefore, the request of the society for grant of registration u/s 12AB cannot be denied on the basis of assessment of the activities, which has actually been carried out by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , perused the material available on record and case laws placed before us for our consideration. Before dealing with the issue in hand and interpreting the facts of the case in terms of provisions u/s 12AB, we find it appropriate to extract hereunder the relevant provisions for the sake of immediate reference: 12AB. (1) The Principal Commissioner or Commissioner, on receipt of an application made under clause (ac) of sub-section (1) of section 12A, shall,- (a) where the application is made under sub-clause (i) of the said clause, pass an order in writing registering the trust or institution for a period of five years; (b) where the application is made under sub-clause (ii) or sub-clause (iii) or sub-clause (iv) or sub-clause (v) 66[or item (B) of sub-clause (vi)] of the said clause,- (i) call for such documents or information from the trust or institution or make such inquiries as he thinks necessary in order to satisfy himself about- (A) the genuineness of activities of the trust or institution; and (B) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to supra while granting the registration as requested can be accepted, but at the same time, we cannot be oblivion of the facts emanating from the observations of the Ld. CIT(E), who was under obligation to look into the and enquire regarding genuineness of the activities of the trust and also the compliance of requirement of any other law for the time being in force, which Ld. CIT(E) have exercised and was came across the details /information culled out from CAG report, establishing deficiencies on the part of assessee for the FY 2021-22 leading to non-compliance of law, which she has further checked and found that same discrepancies are existing in the audit report of the assessee for FY 2019-20 and FY 2021 also. Under such facts and circumstances, the various case laws relied upon by the assessee referred to supra cannot rescue the contention raised by the assessee being the facts and decision in all the referred case laws are distinguishable and are addressing an issue which is not the cause of rejection in the present case. The rejection of application of assessee u/s 12AB was on account of assessee's deficiencies reported by CAG leading to non-compliance and violation of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er or the concerned authority's hands are not tied in any manner whatsoever. "While considering applications for approval, the Commissioner or the concerned authority as the case may be is not bound to examine only the objects of the institution. To ascertain the genuineness of the institution and the manner of its functioning, the Commissioner or other authority is free to call for the audited accounts or other such documents for recording satisfaction where the society, trust or institution genuinely seeks to achieve the objects which it professes. The Commissioner or other authority is not in any manner constrained from examining accounts and other related documents to see the pattern of income and expenditure. " 12. In light of the aforesaid observations, it is the admitted fact that the assessee university was found in default in terms of certain deficiencies and non-compliances as reported by CAG, which were examined by the Ld. CIT(E) and has culminated the order of rejection by recording her dissatisfaction under the provisions of section 12AB(1)(b)(ii)(B), however Ld. CIT(E) have not doubted or commented adverse about the objects, nature of activities and genuineness ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
