TaxTMI 
TaxTMI 
2023 (8) TMI 1521
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....sing a Single Order for the three AY 2010-1 1, 2011-12, 2012-13, when all the three years are distinct and separate, that the assessee has filed appeal before CIT ( Appeals ) Bareilly, for which part hearing was done and each appeal was submitted separately. 3. Because the learned C.I.T (Exemption) Lucknow erred that Orders for three years Order passed u/s 143(3) / 147 Dated 30.03.2016 AY 2010-11 29,64,780-/ AY 2011-12 16,53,625/- AY 2012-13 16,18,916/- passed by ITO (Exemption) Bareilly (Sahtosh Kr Pandey) has not been taken into consideration and no Remark is passed in her Order. The addition is baseless and bad in eyes of Law, treating the Educational Society as AOP by Assessing Officer. 4. Because the learned C.I.T (Exemption) Lucknow has mentioned in her Order on p 3 Para 5 that no Proper Adjournment was sought. Whereas due to clerical mistake the PDF file of previous Application was attached in email for seeking adjournment as against the Adjournment Application made for 08.12.2020. Where Mr Alok Anchal had a Surgery and was unable to move due to medical directions. 5. Because the learned C.I.T ( Exemption) Lucknow erred in law in ....
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....n to the provisions of the section 13 of the IT. Act, 1961. Thus, there is clear-cut violation of the charitable objects of the society. 3. The Income Tax Officer (Exemptions) Bareilly and the Joint Commissioner of Income Tax (Exemptions). Lucknow on the basis of details submitted during the course of assessment proceedings for the A.Y. 2010-11, 2011-12 and 2012-13 have recommended for cancellation of registration u/s 12AA of the IT Act granted by the Commissioner of Income Tax, Bareilly on 22-02-2001. The assessee was requested to furnish its reply on date 01/09/2016 at 11:00 AM On 30-08-2016 Shri Sanjay Saxena CA/AR of the assessee society appeared and sought adjournment for 13-09-2016 On 14-09-2016 Shri Sanjay Saxena, CA/AR of the applicant society again sought the adjournment for 13-10-2016. However, nobody attended on the given date nor any request seeking adjournment was filed. On 27-10-2016, the assessee was accorded another opportunity fixing the date of compliance on 16-11-2016. In response, the applicant vide letter dated nil submitted as under: 1. The day to day operations in the bank accounts in the name of Sri Ram Murti Anchal Memori....
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....rial Education Society vs CIT, 59 ITR (Tribunal) 40 Delhi 5. Shri Anjaneya Medical Trust V/S CIT 382 ITR 399 (Kerala) 6. Institute Management Committee of industries Training Institute V/S CIT, 393 ITR 161 7. Kalinga Institute of industrial Technology vs. CIT, Orissa High Court, Order dated 01.10.2010. (II) Amended Form No. 31 along with certified copy of order dated 15/11/2016 of learned CIT(E), Lucknow in the case of Sri Ram Murti Anchal Memorial Educational Trust. (III) Paper book containing following particulars: (i) Certificate of registration u/s 12A(a) dated 22/02/2001 granting registration w.e.f. 01/07/1996 (ii) Certificate of renewal of society as issued by Registrar of Societies dated 24/03/2011 (iii) Memorandum of Society (iv) Copy of assessment order for assessment year 2010-11, 2011-12 and 2012-13. (v) Copy of audited accounts with report for assessment year 2010-11, 2011-12 and 2012-13. (A.2.1) Earlier in the case of Sri Ram Murti Anchal Memorial Educational Trust ("SRMAMET" for short), the learned CIT(E) had passed a separate order dated 15/11/2016 rejecting the application of SRMAMET....
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....anpur 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 the report, a demand of Rs. 13,92,680/- has been rested 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 the accounts of the society named Shri Ram Murti Anchal Memorial Educational Society (Don & Dona Convent School) Shahjahanpur opened in the name of members of the management committee comprising Mr. Alok Anchal and others for the utilisation of the society's funds which is admitted by them in the affidavit dated 13.03.2014 sworn in before the ITO Ward-2, Shahjahanpur during the course of assessment proceedings in the personal case of Mr. Alok Anchal, Member of society. From the above facts, it is quite clear that the funds of the aforementioned society were channelized directly/indirectly for the benefit of the members of the management committee and thus the applicant society clearly stands in direct violation of the Section 13(1)(c) of the Income Tax Act, 1961. It is worth noting here that the bank accounts in the name of Sr....
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....d 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 of the applicant trust but the very basis of formation of the said applicant trust is clouded by malafide intentions. The objects and the activities of the trust are ingenuine as the primary motive of formation of the said applicant trust was not charity but a carefully planned move to bypass law and evade tax liabilities. The above arguments render the application deficient and this deficiency is not curable. This is fatal to the claim of the applicant. 4. In the case of CIT vs National Institute of Aeronautical Engineering Education Society 2009, 181 Taxman 205 (Uttarakhand) it was held that Clause (a) of sub-section (1) of section 12AA empowers the CIT to call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of the activities of the trust or institution and may also make such inquiries, as he may deem necessary in this behalf. Said provision in section 12AA makes it clear that CIT is not supposed to allow registration....
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....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, 1961. 11. Accordingly, the registration sought by the applicant u/s 12A(1) of the Income-tax Act, 1961 is hereby rejected." (B) Separately assessment orders were passed by the Assessing Officer in the case of the assessee for assessment years 2010-11, 2011-12 and 2012- 13 each dated 30/03/2016, taking the view that the assessee was neither entitled for exemption u/s 10(23C)(iiiad) nor u/s 11 of the IT Act. The relevant portions of the aforesaid assessment orders are reproduced below for ease of reference: ASSESSMENT YEAR 2010-11 In the instant case re-assessment proceedings was initiated u/s 147 of the I.T. Act, 1961 by the then ITO-II, Shahjahanpur after recording reasons as under : "It has been gathered from records and report of ITI of this office Shri Mukesh Kumar that the assessee society has not filed return of income for the year under consideration A.Y. 2010-11. The filing of income is mandatory according to section 139 of I.T. Ac....
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....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 response to notice u/s 148 it has been found that the assessee neither claimed exemption u/s 10(23C)(iiiad), nor u/s 11 of the income tax act, 1961 in ITR-7 for A.Y. 2010-11. On perusal of the reply filed by the assessee it is seen that exemption u/s 10(23C)(iiiad), of the income tax act, 1961 is sought. However the assessee society is also registered u/s 12A of the Income Tax Act,1961 vide order dated 22.02.2001 effective from 01.07.1996. Also in the computation of income submitted, the society has claimed exemption u/s 11 of the income tax act, 1961, the assessee society has also obtained audit report in form 10B dated 30.09.2010 in respect of financial year ending on 31.03.2010 from M/S S.K. Saxena & company which is submitted to this office on 14.03.2016. 4. This office has received a letter F.No. AEFPA3638F/ITO1(4)/ SPN/2015-16/1115 dated 11.03.2016 from ITO S....
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....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. 36,47,000/- on salary of staff, the aggregating Rs. 62,80,097/-. In view of there of no disallowance an another expenses is being made. 9. As regard claim of assessee for exemption u/s 10(23C)(iiiad) of the income tax act, 1961 as claimed under cover letter dated 18.02.2016, the society is not existing solely for the purposes of education. It has enured benefit to the member of the management committee as they have utilized the funds of the society for their personal benefit which is evident from the affidavit dated 08.03.2016 placed on file and deposed by the Manager of the Society Shri Alok Anchal before the ITO-1(4), Shahjahanpur. Moreover, in any case the provisions of section 10(23C) also require application of income to the extent of 85% of the gross receipts for the educational purposes. From the discus....
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.... 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 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 submit 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....
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....count 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 the law. 8. As per the audited consolidated balance sheet the gross receipt of the assessee society amounted Rs. 99,70,602/- and the society has applied an amount of Rs. 83,16,977/- 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 83.41% which is less than the S5% as required under the provision of the under income tax act, 1961. It is also seen that out of total expenses of Rs. 83,16,977/-, Rs. 26,76,063/- is on account of depreciation and Rs. 46,27,152/- on salary of staff, the aggregating Rs. 73,03,215/-. In view there of no disallowance of other expenses....
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....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 assessment as stipulated under section 147 of Income Tax Act, 1961." Notice u/s 148 of the I.T, Act, 1961 was issued on 30.03.2014 through registered the then Income Tax officer Shahjahanpur, Notices u/s 142(1) dated 12. 05.2014 was issued by the then A.O. which was 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, 05.01.2016, respectively which were returned back with postal remark "R". The notice u/s 142(1) of the I.T. Act, 1961 dated....
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.... 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 advance to Mr. Rs. 1,94,69,964/-. The assessee society had given advance to Shri Alok Anchal Rs. 1,63,08,933/- up to 31.03.2011, the balance amount of Rs. 31,61,031/-has been paid further during the year. 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....
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....d 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 granted earlier u/s 12AA of the IT Act. Relevant provisions regarding cancellation of registration are contained in section 12AA(3) and 12AA(4) of the IT Act read with section 13(1) and section 13(3) of the IT Act; which is reproduced below for the ease of ready reference: Section-12AA (3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A [as it st....
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....ncome 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 institution; (d) any relative of any such author, founder, person, member, trustee or manager as aforesaid; (e) any concern in which any of the persons referred to in clauses (a), (b), (c), (cc) and (d) has a substantial interest. (D.1) Some facts that emerge from perusal of aforesaid orde....
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....ntly 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 Act; and u/s 142(1) of IT Act. (v) (B.2) On perusal of aforesaid assessment orders for assessment year 2010-11, 2011-12 and 2012-13, it is also evident that numerous notices sent by the Assessing Officer through post were refused by the....
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....ispute 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 of using the bank account of an individual (Mr. Alok Anchal). This collusive arrangement is devised by the assessee and the aforesaid individual; to defeat the lawful process of recovery of tax dues of the assessee. The assessee ....
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....n 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 separate order for separate assessment year. She was not only at liberty to pass a consolidated order for three assessment years, but in the present appeals before us, it was prudent for her to do so as similar/interlinked i....