TMI Blog2021 (10) TMI 1012X X X X Extracts X X X X X X X X Extracts X X X X ..... on u/s 12A got vested exclusively with Settlement Commission. The assessee filed the application before Settlement Commission on 05/01/2017 which had been accepted by the Settlement Commission on 17/01/2017. The learned CIT (Exemptions) has passed the order on 26/03/2019 which is after the date on which the Settlement Commission had admitted the application filed by the assessee The important findings in this case law are contained in para C D wherein their Lordships have held that powers of Settlement Commission under section 245D(4) also extend to examining such further evidence as may be placed before it or may be obtained by it and then the Hon'ble court held that since Settlement Commission was still seized of the matter, it would be within its rights to deal with the aspect of violation of Section 269ST of the Act. The Hon'ble court further held in para D that the issue of section 271DA and that of section 153A both had their origin in the search and therefore, held that both are part of the same. In the case before us also we have observed that the instance of going to Settlement Commission regarding settlement of dues as well as cancellation of registration by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeal became time barred by 216 days. It was submitted that since the delay had occurred due to legal process adopted by the assessee on the advice of a professional and therefore, there is no fault on the part of the assessee and it was prayed that the delay in filing the appeal may be condoned and the appeal be heard on merits. 3. Learned CIT, D.R., did not have any objection to the condonation application filed by the assessee and finding the explanation by the assessee plausible, we condoned the delay in filing the appeal and Learned counsel for the assessee was directed to proceed with his arguments. 4. Learned counsel for the assessee, at the outset, invited our attention to a petition for admission of additional ground of appeal and submitted that he will not be pressing the same and will be resting his arguments only on ground No. 2 3 of the original grounds of appeal. Explaining the facts of the case, Learned counsel for the assessee submitted that the assessee is a public Charitable Trust, registered with Sub-registrar, Bareilly by a written Deed of trust in 1998 with the main object of imparting education. It was submitted that it is an irrevocable trust en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reopened in view of incriminating material found at the premises of another person which Hon'ble High Court dismissed by holding that since assessee was before Settlement Commission therefore, it should get its issues resolved from there only. The assessee filed appeal before Hon'ble Supreme Court against the findings of Hon'ble High Court and Hon'ble Supreme Court, vide order dated 03/04/2017, remitted back the issue to Hon'ble High Court with a direction to decide the issue of jurisdiction as challenged by the assessee. In this respect our attention was invited to the order passed by Hon'ble High Court placed at pages 164 165 and that of Hon'ble Supreme Court placed at pages 161 to 163 of the paper book. Learned counsel for the assessee submitted that the precise question to be decided by this Bench is as to when the assessee filed application before the Settlement Commission and which was accepted also, whether CIT (Exemptions) can pass order cancelling the registration of the assessee. Our attention was invited to the provisions of section 245F of the Act where it has been mentioned that where application filed before the Settlement Commission is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t where assessee-trust was running posh school for children of non-resident Indians on commercial lines under guise of charitable purpose, application made for registration under section 12A was to be rejected. 2. Navodava Education Trust Vs Union of India 2018-TIOL- 261-HC-KAR-IT where Hon'ble Karnataka High Court held an institution having the cloak of educational trust , whose trustees appear to be the members of same family and who thoroughly abused the benefit u/s 10(23C) for purposes other than pure educational purposes, is disentitled to such exemption benefit. Huge Capitation Fees collected by Medical Institutions to provide seats to the intending students, cannot be treated as voluntary contribution for charitable purposes by the parents. 3. Rajah Sir Annamalai Chettiar Foundation Vs PIT [2011] 15 taxmann.com 313 (Chennai)/r20in 10 ITR(T) 424 (Chennai)/r20in 48 SOT 502 (Chennai) Where Hon'ble ITAT Chennai held as follows: The principle that the institutions run by the charitable societies may collect fees and service charges does not mean that the institutions can charge fees, etc., at commercial rates from all the people without giving any element ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble activity as interpreted by the Apex Court in Municipal Corpn. of Delhi v. Children Book Trust [1992] 3 SCC 390. In the expression 'charitable purpose', charity is soul of the expression. Mere trade and commerce in education cannot be said to be a charitable purpose 5. Self Employers Service Society Vs CIT [20001 113 Taxman 703 (Kerala)/r200n 247 ITR 18 (Kerala)/r20001164 CTR 449 (Kerala) Where Hon'ble Kerala High Court held that since petitioner-society had not done any charitable work during relevant period and its activities were only for purpose of generating income for its members, rejection of application could hardly be termed as illegal or arbitrary 6. UP Distillers Association Vs CIT (2018-TIOL-138-SC-IT) Where Hon'ble Supreme Court dismissed SLP of the assessee holding that registration granted to a trust can be cancelled u/s 12AA(3), by relying upon the statement of concerned person recorded u/s 132(4) 7. Kirti Chand Tarawati Ch. Trust Vs PIT M9991 105 Taxman 686 (Delhi)/M9981 232 ITR 11 (Delhi)/ri9991 152 CTR 322 (Delhi) where Hon'ble Delhi High Court held that authority conferred with power to grant approval under section 80G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee by various students. In view of the search, the assessee as well as the trustees were required to file their income tax returns u/s 153A of the Act which the assessee as well as trustees duly complied. In the meantime, with a view to make settlement with the Department, the assessee filed application with Settlement Commission on 05/01/2017 and which was admitted by Settlement Commission on 17/01/2017. However, no order by Settlement Commission has been passed. In the meantime, the assessee also challenged the issuance of notice u/s 153A before Lucknow Bench of Hon'ble Allahabad High Court with a request that the notice u/s 153A was not in accordance with law as nothing incriminating was found from the premises of the assessee and the incriminating documents being used against the assessee were found at the premises of other person and therefore, the assessee should have been required to file their income tax returns u/s 153C of the Act. The Hon'ble High Court dismissed such writ of the assessee by holding that the matter was pending before Settlement Commission and therefore, the assessee should get all his grievances resolved at the Settlement Commission level. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cash was out of cash gifts from students was prima facie accepted by ITSC when it passed the order u/s 245D(2) while admitting the application u/s 245C(1) based on SOF filed by trust and hence the assessee cannot rescind the admitted facts for any reason whatsoever. Once the facts of receiving cash gifts from students have been admitted before ITSC, which has been verified by assessee to be correct, the same can be used for any other proceedings also, as there cannot be two different facts on same issue for two different purposes/proceedings. From the SOF as well as order of ITSC u/s 245D(2B), the issue of validity of registration u/s 12AA was neither raised by trust nor considered by ITSC. The ITSC can only settle the income and has no jurisdiction to grant or withdraw the registration u/s 12AA. The scope of proceeding before settlement commission is only to settle the income based on seized material and therefore, they are independent of proceedings initiated to cancel the registration based on violation of conditions of section 11 r/w 12AA. The settlement commission would be giving the finding on the taxable income and not on the issue whether there was any violation of 12AA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an be presumed at this stage, whereas on the other hand the assessee itself challenged the validity of proceedings before Settlement Commission before High Court and on being unsuccessful has filed an SLP. Therefore, once the assessee itself is contesting the validity of the proceedings before settlement commission, how can it then take immunity on grounds that proceedings are pending before settlement commission to seek the abeyance of the independent proceedings for cancellation of registration u/s 12AA? 6.1(a) As such, the CIT (Exemptions) held that the contention raised by assessee was meaning less and cancelled the registration. 6.1(b) The above findings of learned CIT (Exemptions) are based on his assumption that the Settlement Commission was empowered only to decide on the quantification of tax demand and the issue of cancellation of registration was not before the Settlement Commission and therefore, he was entitled to pass the order cancelling the registration granted to the assessee. Before us the limited issue is as to whether when an application is pending before Settlement Commission for disposal, whether all powers of income tax authorities get exclusively ves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... express direction by the Settlement Commission to the contrary, nothing in this Chapter shall affect the operation of the provisions of this Act in so far as they relate to any matters other than those before the Settlement Commission. 6.2 The bare reading of the provision of section 245F leads us to hold that once an application is filed before the Settlement Commission and is accepted by the Settlement Commission, all the powers vested in income tax authorities under this Act get vested exclusively in the Settlement Commission unless the application filed by the assessee is disposed of. Sub Section (4) of the above section says that nothing in this chapter shall affect the provisions of this Act so far as they relate to any matters other than those before the Settlement Commission. It is this provision which has been taken recourse to by the learned CIT (Exemptions) while rejecting the contention of assessee. However, the Hon'ble Delhi High Court in the case of Tahilini Design (P) Ltd. has clearly held that though assessee had brought the issue of section 153A before the Settlement Commission but the notice issued u/s 271DA for violation of provisions of sections 269 SS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning various paramedical courses and it also started MD/PG course in addition to paramedical courses. 2. From the perusal of records it is noted that a search and seizure operation u/s 132 of the Income-tax Act, 1961, (hereinafter referred to as the 'Act') was carried out in this case on 18.09.2014 in this case along with other cases of Rohilkhand group at Administrative Block of Rohilkhand Medical College Campus, Pilibhit Bypass Road, Navada, Bareilly. The rohiikhand group is being managed and controlled by Shri Keshav Kumar Agarwal. The applicant trust is registered in u/s 12A of the I.T. Act and had been claiming exemption of income on the strength of its registration u/s 12A of the I.T. Act in its regular returns. After the search, in response to notices issued u/s 153A and for the search year the assessee has again filed its returns of income for the assessment year 2009-10 to 2015-16 claiming exemption u/s 11 and 12 of the I.T. Act. 2.1 The trust runs Rohilkhand Medical College and Hospital (Medical College). During the course of search proceedings in the Rohilkhand group, total cash of ₹ 20,47,91,660/- was found from different searched premises put of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2009-10 to 2015-16 before the settlement commission, which inter alia also included the income on account of cash of 20.80 Cr found during the search. 2.2 As regards, source of additional income, it was stated by the applicant trust in para 3.3 of page no. 27 of the Settlement Application that the additional income offered by it in Settlement Application has arisen to it out of cash Gifts received from students which are found recorded in the seized documents: - i. Loose papers as per Annexure A-7 to A-51 seized from the residence of Shri Krishan Kumar Agarwal ii. Detailed Note Books marked A-61 and A-63 seized from the residence of Shri Krishan Kumar Agarwal iii. Small Note Books marked Annexure A-52, A-55, A-68 seized from the residence of Shri Krishan Kumar Agarwal It is stated by the applicant trust in para 4 page 29 of the Settlement Application that amount of entire seized cash of ₹ 20.18 Crore belongs to the trust. Before ITSC, it was also stated that after considering the cash payments made to certain persons out of amounts of cash gift received from the students, the net-amount received by way of cash gift is being offered as additional inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s donations received by M/s Rohilkhand Educational Charitable Trust as mentioned in report submitted to settlement commission under rule 9. In some of the cases the donor was not found on the address while in certain cases no such concern was found existing on the address. During the assessment proceedings as well, the verification of corpus donation was undertaken by issuing statutory notices to the donors, most of which are Delhi based but all the notices have been returned unserved by the postal authorities with remarks Left , Refused and No such person on the address and insufficient address . Apparently, the alleged donors were apparently non- genuine in nature. This leads to my conclusion that the trust accepted capitation fee from its students in cash and part of it was routed it through banks introducing the same cash into its books by receiving donations in cheques from various entities all over the country through the operators who gives accommodation entries in various forms after taking cash from the assessee trust. Thus the trust accepted capitation fees from students as per the list found during the search and then attempted to plough it back into books from, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itation fee /gifts /donations do not form the part of receipts for purposes of computation of income under section 11 also. In the case of the present trust also the so-called cash gifts were not fully recorded (other than those which were recorded in the garb of bogus corpus donations from the parties). In absence of such amounts being completely recorded in books of accounts, such amounts could not be said to be utilised for the purposes and objects of the trust or that the activities of the trust genuine and being carried as per objects of the trust deed. 6.4 Therefore, in view of the above findings, we hold that issue of cancellation of registration u/s 12A arose from the search conducted on the assessee and there was no other reason to initiation of proceedings for cancellation of registration therefore, as per the provisions of section 245D read with order of Hon'ble Delhi High Court in the case of Tahiliani Design Pvt. Ltd. (supra), all the powers of income tax authorities including power to cancel the registration u/s 12A got vested exclusively with Settlement Commission. The assessee filed the application before Settlement Commission on 05/01/2017 which had been a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdiction to pass orders with respect to violation alleged of Section 269ST also. However neither counsel has instructions on the said aspect. C. It is not deemed necessary to adjourn the hearing to enable counsels to take instructions on the aforesaid aspect, because the powers of the Settlement Commission under Section 245D(4) also extend to examining such further evidence as may be placed before it or obtained by it and the Settlement Commission in the present case is still seized of the matter and would be within its rights to, if so deems apposite, also deal with the aspect of violation of Section 269ST of the Act and either to grant exemption from penalty therefore or to pass such other order as it thinks fit in relation thereto as well and it is felt that the said power and jurisdiction of the Settlement Commission should not be permitted to be interdicted by the impugned order. D. In this context we may also notice that the notices under Section 153 A as well as under Section 271DA of violation of Section 269ST, both have their origin in the search, seizure and survey conducted qua the petitioner, as evident from a bare reading of the notice under Section 27I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the origin of undisclosed income. H. Not only so, the words in relation to the case and with respect to the case used in the aforesaid provisions, are words of wide amplitude and which, in our opinion, in the facts of the present case may allow the Settlement Commission to, notwithstanding the petitioner having not expressly referred to the notice dated 30th September, 2019 and proceedings for violation of Section 269ST pending against it in its application, pass such orders as it may thinks fit in relation / with respect thereto and the said powers of the Settlement Commission cannot be permitted to be interdicted by the impugned order. We reiterate that the proceedings of violation of Section 269ST, as per the notice dated 30th September, 2019, are a result of what was found in the search and survey qua the petitioner and are capable of being treated as part and parcel of the case taken by the petitioner by way of application to the Settlement Commission. Supreme Court, in Doypack Systems Pvt. Ltd. Vs. Union of India (1988) 2 SCC 299 held that the expression in relation to has been interpreted to be the words of widest amplitude and is in the nature of a dee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1st November, 2019 when the petitioner admittedly made the application under Section 245C before it, had the exclusive jurisdiction to deal with the matter relating to violation of Section 269ST of the Act also and the respondent, on 4th November, 2019 did not have the jurisdiction to impose penalty for violation of Section 269ST on the petitioner and the impugned order is without jurisdiction and liable to be set aside and is hereby quashed. 15. We are of the view that it should be left to the Settlement Commission to, in exercise of its powers under Section 245D(4), Section 245F and Section 245H, consider whether the matter of penalty for violation of Section 269ST of the Act is to be looked into by the Settlement Commission while deciding the application of the petitioner, or not. 16. We accordingly direct, that without prejudice to the right of the Income Tax Authorities to contend before the Settlement Commission that the petitioner having not disclosed the aforesaid facts before the Settlement Commission, has not made a full and true disclosure within the meaning of Section 245C(1), the proceedings initiated by the respondent against the petitioner for violation of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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