TMI Blog2016 (5) TMI 218X X X X Extracts X X X X X X X X Extracts X X X X ..... registration nor a finding that the activities of the assessee were not genuine or not in accordance with the objects. Therefore, these decisions cannot be considered as precedent in the present appeal. Ld CIT-DR rightly distinguished the cases with which we agree. In the given facts, we are of the opinion that assessee cannot apply for re-registration, once the registration granted was cancelled validly, having found that that the trust is not genuine and has not been carrying out its activities in accordance with the objects of the trust. We are of the opinion that the CIT was correct in refusing to entertain the application. - Decided against assessee. - I.T.A. No. 1748/HYD/2014, I.T.A. No. 1749/HYD/2014 - - - Dated:- 29-4-2016 - Shri B. Ramakotaiah, Accountant Member And Shri S. S. Viswanethra Ravi, Judicial Member For the Petitioner : Shri S. Rama Rao, AR For the Respondent : Smt. Vasundhara Sinha, DR ORDER Per B. Ramakotaiah, A. M. These two appeals by different assessees of the same group having common issues were heard together for the sake of convenience. Assessees herein were originally granted registration and consequent to Search and Seizure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount, which is over and above the prescribed fee by the Government, it clearly establishes the intention of the assessee society to earn profit, It was further noted in that order, that the society has directly or indirectly collected substantial amounts which have not been recorded in the books of account of the assessee, It was further noted that the money has been utilized by the persons having interest in the society and therefore, it is a clear case of misuse of funds of the institution. Lastly, stating that the assessee society has violated the provisions of Sec, 11 and 13 of the Act, and has not conducted itself, in accordance with the objects of the society, for which it was established, the CIT (Central) vide that order dated 29-03-2012 passed u/s 12AA(3) of the Act, has cancelled the registration granted earlier to the assessee u/s 12AA of the Act. It may be further mentioned here that, the said order of the CIT(Central) has been confirmed by the Hon'ble Income Tax Appellate Tribunal ( ITAT' in short) vide its order in ITA No.586/Hyd/2012 dated 31-08-2012. 5. It may be mentioned here that registration u/s 12A /12AA of the Act is a one-time certificate, gra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and maintain educational and other institutions, to impart education and training at all stages for the promotion of Catering Hotel, Management Engineering, Medicine, Pharmacy, Agriculture, Commerce, Literate, Arts and Science and Management and other subjects and allied activities for diffusion of useful knowledge and training, specially to instill self-confidence, creative thinking and entrepreneurship in the students and trainees. i) To offer consultancy services in any area directly or through the institutions owned and managed by the Society, without commercial motive; j) To carry on activities for any other charitable purposes and activities of General Public Utility. 3.1. It was further submitted that for the assessment years 2011-12 and 2012-13, 2013-14, 2014-15 and 2015-16 returns of income were filed by the assessee. There is no receipt under the head donation excepting the fees collected by the assessee form the students as fixed by the Government. For the assessment years 2011-12 and 2012-13, the Assessing Officer completed the assessments u/s 143(3) on 10-03-2014. He examined the case and decided that no other income was received by the assessee except ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emption u/s. 11 of the I.T. Act. A reading of Sec. 11 indicates that the provisions of Sec. 11 has to be considered for each of the assessment year separately. The exemption u/s. 11 is dependant on registration u/s. 12AA of the Act. Therefore, it is not correct to mention that registration u/s 12A is one time affair. 3.5. It was further submitted that the Finance Act No.2, 2014 amended the provisions of Sec.12AA of the I.T.Act by introducing 3 provisos to Sec.12AA of the Act. The assessee is extracting the said provisos hereunder: 8. In section 12A of the Income-tax Act, in sub-section (2), the following provisos shall be inserted with effect from the 1st day of October, 2014, namely:- Provided that where registration has been granted to the trust or institution under section 12AA, then, the provisions of sections 11 and 12 shall apply in respect of any income derived from property held under trust of any assessment year preceding the aforesaid assessment year, for which assessment proceedings are pending before the Assessing Officer as on the date of such registration and the objects and activities of such trust or institution remain the same for such preceding asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 147 of the Income-tax Act shall be taken by the Assessing Officer in the case of such trust or institution for any assessment year preceding the first assessment year for which the registration applies, merely for the reason that such trust or institution has not obtained the registration under section 12AA for the said assessment year. 8.5 However, the above benefits would not be available in the case of any trust or institution which at any time had applied for registration and the same was refused under section 12A 3.6. Elaborating the above provisions, it was submitted that the registration granted to an institution u/s 12AA would operate to exempt the income u/s 11 even for the earlier assessment years. The second proviso prohibits initiation of action u/s 147 for any assessment year preceding to the year of registration on the ground that the registration was not available to the institution. The third proviso shows that it would operate only when a trust/institution whose registration was either refused or cancelled in the earlier past can make an application afresh and registration u/s 12AA can be granted. The third proviso restricts that such registration would n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Member and the learned Accountant Member. While the learned Judicial Member has allowed the appeal by directing the Commissioner of Income Tax to grant registration to the respondent assessee under section 12A of the Act for the assessment year 2002-03, the learned Accountant Member has remanded the matter to the Commissioner of Income Tax with a direction to reconsider the request of the respondent assessee for grant of registration with effect from April 1, 2001 and pass necessary order after giving proper opportunity of hearing to the respondent assessee as per law. The appeal was thus referred to the learned Third Member, who vide order dated February 9, 2007, agreed with the final order proposed by the learned Judicial Member and allowed the appeal filed by the respondent assessee. Consequential order dated March 22, 2007, was passed by the learned Appellate Tribunal allowing the appeal by adopting the majority view. Hence the present appeal . From the above judicial pronouncement, it was submitted that there is no prohibition to file a second application for registration u/s 12AA of the I.T.Act. Further, the amendment by Finance Act No.2, 2014 by introducing three provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and its cancellation. Having held as a finding of fact, while cancelling the registration, that the activities of the trust were not genuine or not in accordance with its objects, it would be illogical and self-contradictory for the Commissioner to hold that the activities of the trust were genuine, which is a pre-requisite for granting registration. The refusal to grant registration after it has been cancelled is, therefore, a natural corollary of the cancellation itself. 4.1. It was submitted that in the case of the assessee, the Commissioner, vide his order dated 29-03-2012, held that the activities of the assessee were not in accordance with its objects and cancelled the registration u/s 12AA(3). This order of the Commissioner was upheld by the ITAT vide its order in ITA No.585-586/Hyd/2012, dated 31.08.2012 with the observation that the assessee could not be considered to be engaged in charitable activities. In view of the clear finding, approved by the ITAT, that the activities of the assessee were not in accordance with its objects and not charitable in nature, the assessee cannot now claim that its activities are genuine and charitable and that it is eligible for regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proviso would not apply, meaning that sec. 11 and 12 will not apply for pending assessment proceedings, if any. In the absence of the third proviso, such an assessee would have claimed the benefit of the first proviso on the basis of the original registration. Similarly, in view of the third proviso, the second proviso does not apply to this hypothetical assessee, meaning that the Assessing Officer is permitted to take action u/s 147 for preceding years. The Explanatory Notes to the provisions of the Finance Act (No.2), 2014 also make it clear that the provisos were added to mitigate the hardship caused to genuine charitable institutions, who may otherwise be eligible for exemption, by a prospective application of registration, particularly in the absence of the power of condonation of delay. The third proviso does not permit, either expressly or impliedly, a re-registration once it has been cancelled. The interpretation of the AR, that the third proviso permits such re-registration, is far-fetched. 4.4. It was further submitted that the facts leading to the conclusion that the activities of the assessee were not in accordance with its objects came to light in the course of a se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r AY 2002-03. The assessee then filed another application for AY 2002-03 which was rejected by the CIT as not maintainable. The High Court noted that the reasons for the delay had been held to be good and cogent by the ITAT. It also upheld the directions of the ITAT to grant registration for the AY 2002-03. The issue in appeal in the cited case arose from the refusal of the CIT to condone the delay in filing the application and the subsequent refusal to revise his own order granting registration. There was no cancellation of registration nor a finding that the activities of the assessee were not genuine or not in accordance with the objects. Therefore, this decision cannot be considered as precedent in the present appeal. 4.7. It is submitted that the issue in the present appeal is not whether a second application for registration can be filed but whether an assessee can be granted registration after it has been cancelled u/s 12AA(3). The cited cases are not on this issue. It is, therefore, submitted that the decision of the DIT(E) vide his order dated 29-09-2014 rejecting the assessee's application for registration is to be upheld. 5. After considering the rival contenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... registration was not originally provided for in the Income Tax Act 1961 which was provided by the Finance Act, 2004 w.e.f. 01-10-2004 by incorporating Sub-Section 3 of Section 12AA. Consequent to the difference of opinion whether registration granted earlier before this power of cancellation was granted by the Act can also be cancelled, Sub-Section 4 to Section 12AA was inserted w.e.f. 01-10-2014. Thus, at present, a registration of a trust can be cancelled by the Commissioner when he is satisfied that activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution as the case may be. Thus, the conduct of the trust in performing its activities in accordance with the objects are material for considering the issue either for registration of for cancellation. As already stated above, the activities of the trust are found to be not in accordance with the objects of the trust or institution and accordingly, the registration granted earlier stood cancelled by the DIT(E)/ CIT. 5.2. In our opinion, on the basis of the same trust deed and the activities of the trust, registration cannot be granted by the aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion and the objects and activities of such trust or institution remain the same for such preceding assessment year: Provided further that no action under section 147 shall be taken by the Assessing Officer in case of such trust or institution for any assessment year preceding the aforesaid assessment year only for non-registration of such trust or institution for the said assessment year: Provided also that provisions contained in the first and second proviso shall not apply in case of any trust or institution which was refused registration or the registration granted to it was cancelled at any time under section 12AA.] 6.1. As can be seen from the above, where an application has been made on or after the first day of June, 2007, the provisions of Section 11 12 which shall apply in relation to the income of such trust of any assessment year preceding the aforesaid assessment year, for which assessment proceedings are pending before the Assessing Officer as on the date of such registration and the objects and activities of such trust or institution remain the same for such preceding assessment year. Thus first proviso extends the benefit to the year prior to the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of The Board of Control for Cricket in India Vs. ITO [19 ITR (Trib) 91], Mumbai has considered the effect of change of Memorandum and by-laws of the society in a case where registration was granted: There might be no statutory requirement for intimating the Director of Income-tax of the changes in the memorandum and rules and regulations of a trust does not fulfil its undertaking to furnish the changes, it cannot claim automatic benefits under sections 11 to 13 of the Income-tax Act, 1961, for the altered objects, rules and regulations. Benefits under the Act cannot be claimed unless the changes are vetted by the authorities. The assessee-society was duly registered under the Tamil Nadu Registration Act, 1975. Its main object was to promote the game of cricket. It was registered under section 12A, 1996. During the course of assessment proceedings for the assessment year 2007-08, the Assessing Officer noticed that the assessee- society had amended its memorandum and made amendments in the rules and regulations and that the changes were not intimated to the Income-tax Department. Hence, he held that the registration granted to the under section 12A of the Act, by order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion fees. This aspect as rightly pointed out by the Ld. CIT-DR in her arguments cannot come to light, unless there is again search and seizure operations. It is to be noted that assessee-trust is not genuine and not fulfilling the objects has come to knowledge only after search and seizure operations as any sort of collection of donations or capitation fees would be outside the books of accounts. General enquiry undertaken by the AO does not establish these facts. Moreover, it is already an established law that DIT/CIT(E) cannot make roving enquiries at the time of registration and his role is limited to examining the objects of the trust whether they are charitable in nature and the trust is a genuine one. To that extent, DIT/CIT(E) can only rely on the trust deed. On the very basis of the trust deed that DIT/CIT(E) has come to a conclusion that trust is not genuine and its objects are not fulfilled, at the time of cancellation of registration. Therefore, on the same basis of trust deed, a different opinion cannot be taken for re-registration of the trust. Consequently, we are of the opinion that the trust cannot seek re-registration based on the very same trust deed. 8. The s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irector of Income Tax (Exemptions), Hyderabad ( DIT(E) in short) in F.No. Hqrs. I/28/12A/DIT(E) dated 12-03-2004 w.e.f. 21-01-2004. The said registration granted u/s. 12AA of the Act, however, has been cancelled later by the Commissioner of Income Tax (Central), Hyderabad vide his order dated 29-03-2012, for the detailed reason discussed therein. This cancellation was upheld by the ITAT and in turn was also upheld by the Hon'ble High Court. Assessee vide application dt. 21-03-2014 sought fresh registration which Ld. DIT(E) did not admit the application itself, by stating as under: 4. A search and seizure operation u/s 132 of the Act, was carried out in the case of the assessee society on 10-09-2009, during which various incriminating documents were found and the same have been seized from the assessee society's premises, Such seized material, indicated that the assessee society has collected substantial donations/capitation fees in cash, over and above the fee prescribed by the Government, from students seeking admission under management quota to various professional courses and engineering courses in the colleges run by the society, As noted in that order of the CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of an assessee institution vide an order passed by the Commissioner of Income Tax u/s 12AA(3) of the Act, it is not permissible on the part of the same assessee institution to file application again for registration u/s 12AA of the Act. Therefore, and when in the case of the applicant society, registration granted earlier u/s 12AA of the Act, has been cancelled vide that order of the CIT(Central), Hyderabad, in F.No. CIT(Central)/H/12AA/JBES/2011-12 dated 29-03-2012 and the same has been later confirmed by the Hon'ble ITAT vide their order in ITA No.586/Hyd/2012 dated 31-08-2012, the present application filed by the applicant society in Form No.10A on 21-03-2014, again seeking registration u/s 12A of the Act, is not entertainable. Hence, the same is rejected, without admitting the same . 11. Since the facts are similar and orders are also same, in view of the discussion above in the other appeal, we are of the opinion that the trust is not eligible for re-registration after its cancellation. There is no merit in assessee s grounds. 12. In the result, both the appeals are dismissed. Order pronounced in the open Court on 29th April, 2016. - - TaxTMI - TMITax - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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