9911796707
TMI Blog2023 (8) TMI 1521X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant does not have clean hands, it does not deserve liberal consideration of the appellate forum. The appellant only gets the relief on the basis of strict and liberal interpretation of law in the light of facts and circumstances. We have already held in foregoing paragraph that the activities of the assessee are not genuine within the meaning of section 12AA(3) of the IT Act. We have further held that the assessee is hit by section 12AA(4)(a) read with section 13(1)(c)(ii) of IT Act, and by section 12AA(4)(b) of IT Act. - SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER For the Appellant : Shri Rakesh Garg, Advocate For the Respondent : Smt. Sheela Chopra, CIT (D.R.) ORDER PER ANADEE NATH MISSHRA:A.M. (A) This appeal has been filed by the assessee against order dated 21/01/2021 of learned Commissioner of Income Tax (Exemptions), Lucknow [learned CIT(E) for short] whereby the learned CIT(E) cancelled the assessee s registration under section 12AA of the Income Tax Act, 1961 ( IT Act for short). Grounds of appeal are as under: 1. Because the learned C.I.T (Exemption) Lucknow erred in invoking the provision of Section 12AA(3) and cancel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax on the following reasons mentioned in brief: 1. The assessee society is not filing its return. 2. That the demand of Rs. 19,92,860/- has been of during the course of the assessment proceedings. 3. That the bank account was opened in the name of the member of the society. 4. That the return of income filed for assessment years are incomplete and do not properly state about the section under which the exemption is claimed i.e. u/s. 11 or u/s 10(23C)(ad) of the Income Tax Act, 1961. On the basis of the recommendation of the JCIT(E). Lucknow a show cause notice dated 08-08-2016 was issued stating that : 1. It has come to notice of this office that though the society is registered u/s 12AA of the income Tax Act, but the society is not regularly filing its return of income and the return of income for the AY 2010-11, 2011-12 and 2012-13 were filed by the society in response to notice u/s 148 of the IT. Act. These returns are incomplete and do not properly state about the section under which the exemption is claimed i.e. whether u/s 11 or u/s 10(23C)(mad) of the IT. Act 2. The bank account of the society were opened in the name of Shri Alok Anchal and others the member of the society ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25-11-2020 fixing the date of hearing on 08-12-2020. In response, no proper adjournment was sought. Looking at the facts and circumstances of the case, it is noticed that the assessee itself submitted that the bank account of the society was attached by the Income Tax Department so they opened another bank account and funds have been shifted to another account which is in the name of the member of the society, Shri Alok Anchal. This clearly proves that the society willfully violated the provisions of IT Act by doing such act. (A.2) In the course of appellate proceedings in Income Tax Appellate Tribunal ( ITAT for short), following documents were filed from the side of the appellant assessee: (I) Paper book of case laws, containing copies of the following decisions: S. No. Particulars 1. M/s. Shine Educational and Social Welfare Trust, Aadhavan Arts and Science College Campur vs. CIT-I, ITAT Chennai, ITA No. 2778/Mds/2014 Order dated 27.02.2015 2. CIT(E) vs. Shri Sai Darbar Charitable Trust (Dharamsala) 395 ITR 576 (PH) 3. Bhartiya Kishan Sangh Sewa Niketan vs. CIT(E) ITA No. 6721/Del/2015, Order dt. 25.08.2017 4. Sahid Munshi Ram Memorial Education Society vs CIT, 59 ITR (Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide a demand of Rs. 19,92,860/- raised during the course of assessment proceedings u/s 144 of the Income Tax Act, 1961 for the A.Y. 2009-10 by the Dy. CIT Circle-1, Bareilly and subsequently the accounts of the society were attached u/s 226(3) of the income Tax Act, 1961 for the recovery of the said demands and demands of earlier years as evident from the report of the Income Tax Officer (Exemption), Bareilly vide F.No. ITO-[Exemp.]/BLY/Regd. u/s 12A/2016-17/227. 3. On perusal of the Receipts and Payments Accounts for the F.Y. 2015-16, it is found that the applicant has not even initiated any act of charity as none of the debit heads correspond to any act of charity for the F.Y. 2015-16. It Is important to note here that a report of the Income Tax Officer (Exemption), Bareilly vide F.No. ITO- [Exemp.]/BLY/Regd. u/s 12A/2016-17/227 forwarded by the Addl. CIT(Exemption), Lucknow through F. No. Addl CIT(Ex.)/Lko/2016-17 1961 in the case of Shri Ram Murti Anchal Memorial Educational Society (Don Dona Convent School) Shahjahanpur dated 31.05.2016 regarding cancellation of the registration u/s 12AA of the income Tax Act, questions the very formation of the said applicant trust. As per th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying to the notice of demand of Rs. 19,92,860/- that was generated during the course of assessment proceeding u/s 144 of the Income Tax Act, 1961 for the A.Y. 2009-10 by the Dy. CIT. Circle-1, Bareilly for Shri Ram Murti Anchal Memorial Educational Society, instead it has grossly digressed from the fundamentals of charity and has indecorously converted its assets so as to form a new trust by the name Shri Ram Murti Anchal Memorial Educational Trust and is trying to fraudulently secure benefits under the garb of the same. It is true that while considering an application for the said registration the object and genuineness of the activities of the applicant need to be looked at, however in the instant case the said applicant trust and it's application for registration is nothing but a mere subterfuge by which a set of committee members constituting a distinguished set of individuals are trying to evade tax liability and are transferring assets with a view to escape the law of the land and in the process have failed to pay the tax that could have engineered the infrastructure our country for the betterment of all. In light of the above facts not only the object and the activities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the applicant society have to be charitable and genuineness of charitable activities should be established for registration of application u/s 12A. Mere recital of objects or activities without cogent or corroborative evidence is not sufficient by themselves to enable a registering authority to arrive at the satisfaction mandated by law. In the instant case, the documents on record do not suffice to establish the genuineness of activities. As such the findings of fact regarding its charitable activities or rather the lack thereof arrived at on the basis of the evidence filed and arguments addressed stand uncontroverted. This is fatal to the claim of the applicant. 9. It is clear, that applicant has failed to provide sufficient material to corroborate the charitable nature of the objects and genuineness of the activities. Despite being provided timely opportunity the applicant has not been able to substantiate its claim. 10. In view of the facts and above decisions, I am unable to accept the applicant's claim in absence of sufficient material required for formation of satisfaction. Therefore, I do not find the case fit for grant of registration u/s 12A(1) of the Income-tax Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax officer Shahjahanpur. Further Notice u/s 142(1) was issued and served upon the assessee by the ITO-1(5), Shahjahanpur. Due to change of incumbent on accounts of change of jurisdiction, notices u/s 142(1) were issued on 17.11.2015, 22.12.2015, 11.01.2016 and 29.01.2016 fixing the date of compliance on 26.11.2015, 05.01.2016, 21.01.2016 and 19.02.2016 respectively which were returned back with postal remark R . The notice u/s 142(1) of the I.T. Act, 1961 dated 29.01.2016 was also served through ITI of this office on 30.01.2016. In compliance of this notice, assessee filed its return of income on 17.02.2016 declaring total income at Nil. Accordingly, notice u/s 143(2) was issued on 18.02.2016 fixing the date of compliance on 29.02.2016.In response to the notice Shri Sanjay Saxena, CA, attended from time to time and submitted written submission along with necessary details/documents. Books of accounts along with bills/ vouchers etc. were produced and test checked. The society is running an educational institution in the name style Don Dona Convent. 2. The society had not filed any income tax return u/s 139(1), for the year under reference. 3. In the return filed, in respons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 81,01,965/-. Where has the gross receipt during the year amounted the Rs. 76,31,150/- only. This shows that the affairs of the society are not being managed in a prudent manner as no person of sound mind would carry this much of cash and also not depositing any Penny in the bank account. It also cannot be ruled out about misutilization of society fund by the managing persons by showing such large cash balances. 7. The aforesaid act, of the assessee clearly established that it is not compliant with the Law. 8. As per the audited consolidated balance sheet the gross receipt of the assessee society amounted Rs. 99,94,915/- and the society has applied an amount of Rs. 70,30,135/- for the charitable purposes during the year as per the audit report submitted on 14.03.2016. The application for charitable purposes thus, works out to 70.34% which is less than the 85% as required under the provision of the under income tax act, 1961. Accordingly the short fall in application of income for charitable purposes is considered as income of the society for the year under reference. It is also seen that out of total expenses of Rs. 70,30,135/-, Rs. 26,33,097/- is on account of depreciation and Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench B, Lucknow while sending back the matter to CIT(A), Bareilly for fresh adjudication vide order no. ITA/426/LKW/2013 dated 07.02.2014. The inspector of income tax Shri Mukesh Kumar has mentioned in his reported dated 28.03.2014 that during field enquiry of assessee society and school, total income of the assessee school is approx 54.50 lakh during the year. In view of the aforesaid facts and report and applicability of section 139/10(23C)(iiiad), I have reason to believe and satisfaction to record that income of Rs. 54.50 lakh of assessee society for the A.Y. 2011-12 has escaped from assessment as stipulated under section 147 of Income Tax Act, 1961. Notice u/s 148 of the I.T, Act, 1961 was issued post. By the then Income Tax officer Shahjahanpur, Notices u/s 142(1) was issued which were served upon the assessee. Due to change of incumbent on accounts of change of jurisdiction, notice u/s 142(1) were issued on 17.11.2015, 22.12.2015, fixing the date of compliance on 26.11.2015, and 05.01.2016, respectively which were returned back with postal remark लेने से इंकार . The notice u/s 142(1) of the I.T. Act, 1961 dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i on 30.09.2013. However under cover of letter dated 14.03.2016 the assessee has submitted balance sheet signed by Shri S.K. Saxena on 30.09.2011 for the year ending 31.03.2011 (A.Y. 2011-12). Thus the assessee has got two balance sheets signed on two different dates. The contents and other things are, however same. The Ld. Council of the assessee failed to submit the reason for singing of two balance sheet on two different dates. 6. A perusal of the balance sheet submitted under cover of letter dated 14.03.2016 shows that the assessee had a cash balance of Rs. 16,52,267.57/-, and advance to Mr. Alok Anchal Rs. 1,63,08,933.50/-. Since the assessee had not operated any bank account during the year how the amount has been advanced to him, who is a managing trustee of the society, is not under stood. It clearly shows that the transaction have been recorded in the accounts without any basis. This shows that the affairs of the society are not being managed in a prudent manner. It also can not be ruled out about miss utilization of society fund by the managing persons by showing such large advances. 7. The aforesaid act, of the assessee clearly established that it is not compliant with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h school (namely Don Dona Convent at Mohalla Jhanda Kalah, Shahjahanpur) and claimed exemption of income under section 10(23C). The assessee society, as evident from records, has filed return of income up to F.Y. 2007-08 relevant to A.Y. 2009-09 claiming exemption under section 11(4) and 10(23C)(vi) of I.T. Act, The assessee failed to establish the genuineness of exemption claimed under section 10(23C)(iiicd) of I.T. Act during scrutiny assessment proceedings for the A.Y. 2007-08 and the AO accordingly disallowed the claim of exemption. The findings of AO are no still uphold by Hon'ble ITAT Bench B, Lucknow while sending back the matter to CT(A), Bareilly for fresh adjudication vide order no.ITA/426/LKW/2013 dated 07.02.2014. The inspector of income tax Shri Mukesh Kumar has mentioned in his report dated 28.03.2014 that during field enquiry of assessee society and school, total income of the assessee school is approx 54.60 lakh during the year. In view of the aforesaid facts and report and applicability of section 139/10(23C)(iiiad), I have reason to believe and satisfaction to record that income of Rs. 54.60 lakh of assessee society for the A.Y. 2012-13 has escaped from assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the income tax department for recovery of demand for earlier year'. Thus the opening bank account of the society in the personal name of the trustees is clear violation of the provision of the section 13(5) of the income tax act, 1961. Non filing of return suo-moto also is contravention of the provision of section 12AA and section 13 of the income tax act, 1961. 5. The society has compiled balance sheet of the society and school and also consolidated balance sheet. Where as under cover letter dated 18.02.2016 the assessee has submitted balance sheet as on 31.03.2012 which is signed by Mr. P.D.S. Shahni on 30.09.2013. However under cover of letter dated 14.03.2016 the assessee has submitted balance sheet singed by Shri S.K. Saxena on 30.09.2012 for the year ending 31.03.2012 (A.Y. 2012-13). Thus the assessee has got two balance sheets signed two different dates. The contents and other things are, however same. The Ld. Council of the assessee failed to submit the reason for signing of two balance sheet on two different dates. 6. A perusal of the balance sheet submitted under cover of letter dated 14.03.2016 shows that the assessed had a cash balance of Rs. 29,48,387/-, and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 10(23C)(iiiad) of the I.T.Act, 1961. 10. From the aforesaid discussion, it is seen that the assessee society is neither entitled for exemption u/s 10(23C)(iiiad) of the I.T. Act nor u/s 11 of the IT Act, 1961. (B.1) On perusal of the aforesaid assessment orders, it is found that during assessment proceedings for assessment year 2010-11, 2011-12 and assessment year 2012-13; the assessee claimed benefit u/s 10(23C), and not u/s 11 of IT Act. The Assessing Officer held that the assessee was neither entitled for exemption u/s 10(23C) nor u/s 11 of IT Act. (C) At the time of hearing before us, learned Counsel for the assessee submitted that the objects of the assessee continued to be charitable and therefore, according to him, there was no justification for cancellation of registration u/s 12AA of the IT Act. He placed reliance on the case laws which have been referred to in foregoing paragraph (A.2.1) of this order. Learned CIT (DR) for Revenue placed reliance on the impugned order of learned CIT(E). (D) In the present appeal before us, we are not dealing with initial grant of registration u/s 12AA of the IT Act. We are dealing with a situation of cancellation of registration gran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof (i) if such trust or institution has been created or established after the commencement of this Act and under the terms of the trust or the rules governing the institution, any part of such income enures, or (ii) if any part of such income or any property of the trust or the institution (whenever created or established) is during the previous year used or applied, directly or indirectly for the benefit of any person referred to in sub- section (3) 72[, such part of income as referred to in sub-clauses (i) and (ii)] : 13(3) The persons referred to in clause (c) of sub-section (1) and sub- section (2) are the following, namely : (a) the author of the trust or the founder of the institution; (b) any person who has made a substantial contribution to the trust or institution, that is to say, any person whose total contribution up to the end of the relevant previous year exceeds fifty thousand rupees; (c) where such author, founder or person is a Hindu undivided family, a member of the family; (cc) any trustee of the trust or manager (by whatever name called) of the instit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,860/- that was generated during assessment proceedings for assessment year 2009-10; and that SRMAMES had grossly digressed from the fundamentals of charity and had indecorously converted its assets so as to form a new trust (SRMAMET), trying to fraudulently secure benefits under the garb of the same. Still further it was observed by him that SRMAMET was a subterfuge by which evasion of tax liability was tried and assets were transferred with a view to escape the law of the land. It was implied by learned CIT(E) that SRMAMES (the appellant assessee in the present appeal before us) and SRMAMET had entered into a collusive arrangement, by channelizing funds directly/indirectly for the benefit of the members of the management committee; and by transferring assets of SRMAMES (the appellant assessee in the present appeal before us) such as Don and Dona Convent School, Shahjahanpur; from SRMAMES to SRMAMET; in order to avoid payment of lawful tax determined as a result of assessment in the case of SRMAMES. (iv) The assessee did not file return of income for assessment year 2010-11, 2011-12 and 2012-13 on its own. When notices were issued by the Assessing Officer u/s 148 r.w.s. 147 of IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of this order. There are many facts in the present case before us, which distinguish the present case before us from the case of Shine Educational and Social Welfare Trust vs. CIT (supra), which are adverse to the assessee in the dispute before us. We shall return to these facts later in this order. Moreover, in any case, it was held in the aforesaid decision in the case of Shine Educational and Social Welfare Trust vs. CIT (supra) that cancellation of registration can be exercised u/s 12AA(3) by literal interpretation of law and has impliedly held that widening the scope of section 12AA(3) may be possible if there are case laws to permit such widening of scope. (D.1.2) As mentioned in foregoing paragraph (D.1.1) of this order, let us return to the (distinguishing) facts which are adverse to the assessee in the present appeal before us. Let us first look at foregoing paragraph (D.1) of this order. It is evident that assessee has not paid up tax dues amounting to Rs. 19,42,860/-. Further, to defeat recovery of tax dues through attachment of bank accounts (not just existing ones, but any account that might be opened in future) of the assessee; the assessee has employed a subterfuge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng into collusive arrangements to evade recovery of tax dues, but also by not filing returns of income u/s 139 of IT Act, as is evident from perusal of impugned order dated 21/01/2021 of learned CIT(E). Therefore, the assessee, on strict and literal interpretation of Income Tax Act, is hit by section 12AA(4)(b) of the IT Act. (D.2) When the appellant does not have clean hands, it does not deserve liberal consideration of the appellate forum. The appellant only gets the relief on the basis of strict and liberal interpretation of law in the light of facts and circumstances. (D.2.1) We have already held in foregoing paragraph (D.1.2) of this order that the appellant assessee has not approached ITAT with clean hands. Moreover, we have already held in foregoing paragraph (D.1.2) that the activities of the assessee are not genuine within the meaning of section 12AA(3) of the IT Act. We have further held that the assessee is hit by section 12AA(4)(a) read with section 13(1)(c)(ii) of IT Act, and by section 12AA(4)(b) of IT Act. In view of the foregoing, we find no merit in grounds 1 and 3 of appeal. As regards ground 2 of appeal, there is no requirement that the learned CIT(E) must pass s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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