TMI Blog2010 (10) TMI 302X X X X Extracts X X X X X X X X Extracts X X X X ..... educational purposes, therefore, the payments made to Shri Rajan Yadav for construction of the building which is to be utilised for imparting the education i.e. the main object of the assessee, cannot be a ground to cancel the registration already granted u/s 12A of the IT. Act. - the contractor was filing the return of income and TDS u/s 194C was deducted on the payments made to him through cheques on the basis of bills submitted which contained all the details of the work executed by him has not been rebutted. - Registration to be allowed. - ITA NOS. 179 and 180 (ALL.) OF 2009 - - - Dated:- 6-10-2010 - H.L. KARWA, VICE-PRESIDENT J. AND N.K. SAINI, ACCOUNTANT MEMBER J. S.K. Garg and Ashish Bansal for the Appellant. Smt. Mridula Bajpai for the Respondent. ORDER Per N.K. Saini. These two appeals by the assessees relate to the cancellation of registration u/s 12A of the Act and were heard together, so these are being disposed of by this consolidated order for the sake of convenience. 2. First we will deal with ITANo.180/Alld/09 relating to the Sunbeam Academy Educational Society,Varanasi. This appeal is directed against the order dated 11/06/2009 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. 6. BECAUSE the CIT has further erred in law and on facts in taking an adverse view in the proceedings for cancellation of registration under section 12A by referring to the withdrawals from his bank account as made by Sri Rajan Yadav, from time to time. 7. BECAUSE the CIT on a due consideration of the facts of the case, particularly that: (a) Sri Rajan Yadav, having filed his return for the assessment year 2008-09 in due course and even prior to the initiation of proceedings related to continuance of earlier notification dated 20.12.2007 under section 10(23C)(vi) himself is assessed to tax; (b) the payments made to him were supported by the bills raised by him from time to time, which contained all the details of the works executed by him; (c) the payee Sri Rajan Yadav was examined by the Assessing Officer having jurisdiction in his case, by issue of summons under section 131(1) of the Act and during the course of such proceedings he had duly placed on record the details of works as executed by him for the Appellant Society and the payment received by him in lieu thereof; (d) as far as the execution of works related to the Appellant So ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the result that the order dated 08/11.06.2009 stands wholly vitiated. 13. BECAUSE the pre-requisites for invoking the provisions of sub-section (3) of section 12AA neither existed nor the CIT can be held to have expressed his satisfaction about the existence of such pre-requisites, after due application of mind, and the order dated 08/11.06,2009 is wholly vitiated. 14. BECAUSE the case of the Appellant Society suffers from pre-judgment and bias as is evident from this fact alone that the order cancelling the registration had already been made on 05.06.2009, whereas the Appellant Society was allowed to make submissions on 10.06.2009 and on that date submissions running into 155 pages had duly been made. 15. BECAUSE the order appealed against is based on % irrelevant and extraneous material/consideration and the same is not sustainable either on facts or in law. 16. BECAUSE the order appealed against is contrary to the facts, law and principles of natural justice. 3. From the above grounds, it would be clear that the only grievance of the assessee, relates to the cancellation of registration u/s 12A of the IT. Act, 1961. 4. The facts of the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of the society are not solely for educational purposes, as envisaged in sec. 10(23C)(vi). The basic dictum of Equity, enshrined in Common Law tradition is he who seeks equity must come with clean hands . The conduct of the application right from the start of the proceedings has been one of evasion as he is not interested in the Department going beneath the apparent to the real, Therefore; the application received on 25.3.2008 for grant of exemption u/s 10(23C)(vi) for A.Yrs. 2008-09, 2009-10 2010-11 is hereby rejected. 4.2 The learned CIT further pointed out that a detailed enquiry was got conducted through the Assessing Officer as regards the transactions of the assessee with Sri Rajan Yadav, prop. M/s Rajan Company, a civil contractor, who was stated to be carrying out the work for the assessee and in his return for A.Y. 2008-09, Sri Yadav had shown a gross receipt of Rs.32,80,000/- as claimed to have been received from the assessee. However, the assessee had reflected such payments to the extent of Rs.33,93,070/- to M/s Rajan Company, for building construction at the school premises at Samneghat and Durgakund. The learned CIT observed that the AO in this regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fixed assets like furniture buildings are the properties of the society and may be connected with the imparting of education, but the same were constructed and purchased out of income from imparting the education, with a view to expand the institution and to earn more income. The learned CIT keeping in view the aforesaid referred to judgment was of the opinion that the activities of the society were not entirely charitable in nature and also, the same were not being carried out in accordance with the aims and objects of the society. He, therefore, cancelled the registration of the society u/s 12AA(3) of f the IT. Act, 1961. Now the assessee is in appeal. 5. The learned counsel for the assessee submitted that the object of the assessee since its very inception is imparting the education which is a charitable activity as per the provisions of section 2(15) of the Act. It was further submitted that for the assessment year 2006-2007, the Assessing Officer has allowed the benefit to the assessee u/s 11(1) of the Act while passing the assessment order u/s 143(3) of the Act on 29/07/2008. A reference was made to page No. 15 of the assessee s compilation which is copy of the afores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reliance on the judgment of Hon ble Uttaranchal High Court in the case of CIT v. CIT, Haldwani , v. M/s. Queens Educational Society 319 ITR 160, however, the said judgment had been dissanted by the Hon ble Punjab Haryana High Court as well as Hon ble Bombay High Court in the aforesaid referred to cases. He further submitted that the profit/surplus could not be a bar for registration u/s 12A of the Act particularly when the assessee fulfilled all the conditions as provided u/s 11 of the Act i.e. more than 85% of the receipts was utilised. He, therefore, submitted that the learned CIT was not justified in cancelling the registration u/s 12A of the Act. 6. In his rival sbmissions the learned D. R. strongly supported the order of the learned CIT and further submitted that the exemption u/s 10(23C)(vi) of the Act has been denied to the assessee by the learned CCIT, Allahabad for the reason that the payments made to Shri Rajan Yadav for construction of building were bogus and not for the educational purposes. Therefore, the learned CIT was justified in cancelling the registration by invoking the provisions of section 12AA(3) of the Act since the funds were not utilised by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. It is noticed that in the present case, the Assessing Officer had allowed the exemption u/s 11 of the Act to the assessee while passing the assessment order u/s 143(3) of the Act for the assessment year 2006-2007, copy of which is placed at page No. 15 of the assessee s compilation. Therefore, it cannot be said that the assessee was not entitled for exemption u/s 11 of the Act. Even the learned CIT, while granting the registration u/s 12A of the Act is only required to see as to whether objects are charitable and the activities are genuine which are carried out in accordance with the objects of the trust or institution. As regards to the exemption u/s 11 of the Act, the Assessing Officer is required to verify the records as to whether the assessee fulfilled the conditions and the income derived from the property held under trust only for charitable or religious purposes is utilised to the extent of 85% and that the income/surplus accumulated, does not exceed 15%. In the present case, the learned CIT mainly relied on the order of CCIT, Allahabad wherein it has been observed that the payments made to Shri Rajan Yadav for construction purposes were bogus and not for charit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he expenses incurred towards imparting the education . A reference was made to the judgment of the Supreme Court in Aditanar Educational Institution Etc. (supra). The judgment of the Supreme Court was, however, distinguished on the ground that the objects clause of the assessee indicated that while there were other objects to be achieved, the assessee had done nothing except to pursue the main object of providing education and earning profit Moreover, with the profit earned, the assessee had strengthened its capacity to earn more, rather than to undertake any other activities to fulfill the other objects for which the trust was constituted. Though the trust had made an investment in fixed assets like furniture and buildings which may be connected with the imparting of education, this the High Court held, was with a view to expanding the institution and to earn more income. 15. If the facts as they appear in the judgment of the Uttarakhand High Court are considered, the case would be entirely distinguishable. The judgment of the High Court would indicate that the assessee in that case was construed to be one which existed with the object of enhancing the income and of earning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of the assessee were in violation to its objects for which registration has already been granted. He simply refused the registration on the basis that the learned CCIT, Allahabad had rejected the application for grant of exemption u/s 10(23C)(vi) of the Act. In the present case, as we have already pointed out that the assessee was engaged in the activities of providing the education since it its inception and the said activity comes under the purview of charitable activities as per the provisions contained in section 2(15) of the Act. Secondly the rejection of application u/s 10(23C)(vi) of the Act cannot be a reason to cancel the registration u/s 12AA(3) of the Act. Furthermore, nothing is brought on record that there is any change in the objects of the assessee for the year under consideration viz-a-viz for the years in which the registration was already granted with effect from 01/04/2004 by issuing certificate of registration u/s 12A on 12/05/2005 which was rectified on 25/08/2005 and that the building constructed by Shri Rajan Yadav for the assessee was not utilised for the educational purposes. In the present case, this contention of the assessee that Shri Rajan Yadav, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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