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TMI Blog2022 (4) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... ary and illegal action' of the Assessing officer ITO (exemption) Rohtak, in initiating the reassessment proceedings u/s 147 against the appellant deemed exempted public charitable society in order to hold the same being non exempted/unregistered entity and as such the same is liable to be quashed being, arbitrary, illegal, without jurisdiction and any justification / reasons. 3. That the Learned CIT (A) was not justified in brushing aside the contention of the appellant that the A.O. does not have jurisdiction over the appellant to issue notice u/s 148 after four years and initiating the reassessment proceedings u/s 147 of the Act, without any basis, reasons or material or record, specifically when all material facts and informations were on record as adduced by the appellant assessee at the time of processing/assessment. In as much as, the action of reopening/reassessment was initiated at the instant of Audit to the action law may not permit for that reason also the orders requires to be Quashed. 4. That the Ld. CIT (A) erred in holding that the A.O. ITO (exemption) is vested with relevant jurisdiction under the provisions of Income Tax Act 1961 to reassess the appellant d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not fulfill the conditions for claiming deduction u/s 11 of the IT Act 1961 without appreciating that all the conditions for the purpose stand fulfilled as mandate under the provisions of the Act. As such the orders require to be quashed. 9. That the Ld. CIT (A) as well as A.O. ITO exemption also misdirected themselves in not following the law laid down by the Allahabad High Court in the case "Society for The Promotion of Education V/S CIT(2015)372 ITR 222 A11 and the Honourable Apex Court in the case "CIT V/S Kanpur society for the promotion of Education( 2016) 67 Taxman.com264 S.C. and denied the status of deemed charitable society, by narrating wrong facts action being bad in law and void ab- initio requires to be annulled. 10. That the authorities below were also wrong and misdirected themselves by holding that activities of the society were not charitable and was that of commercial nature, contrary to the facts, assuming the donations of paltry sums received as voluntarily donations against use of Dharamshala hall for Condolence, Meetings like Rasam Pagrees, Shok Sabhas and other ceremonial social functions and gatherings etc. and assuming notional ly that the donations r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer issued a notice u/s 148 of the Income-tax Act, 1961, hereinafter referred to as the "Act" on 30.3.2015. In response to the notice, the counsel for the assessee sought reasons for issuance of notice. The assessee stated before the Assessing Officer that the return of income filed on 30.9.2008 vide acknowledgement no. 09454 may be treated as return filed in response to notice u/s 148 of the Act. Thereafter, the Assessing Officer proceeded to make assessment. The Assessing Officer noticed that a perusal of income expenditure account and ledger of rent receipts revealed that during the year under appeal the assessee had earned income from rent receipts at Rs. 8,59,018/-, interest at Rs. 2,44,601/- and donation at Rs. 3,71,963/-. After debiting various expenses the net surplus was arrived at Rs. 6,54,889/-. The Assessing Officer observed that the assessee society was not registered u/s 12AA of the Act and, therefore, he was of the view that the assessee was not entitled for exemption u/s 11 & 12 of the Act. The Assessing Officer proceeded to assess the assessee as association of persons, by making an addition of Rs. 6,54,889/-. 4. Aggrieved against this, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the section 12A. The appellant, complied with the aforesaid condition and mandate of section 12A by making an application for registration u/s 12A on 03.11.1989 to the then jurisdictional authority, Commissioner of Income Tax, Rohtak which is duly acknowledged vide letter dated 08.06.1999 and 06.07.1999 from the department (refer pg. no. 29-30 of paper book). The assessee has complied with the letters/notices of the concerned authority(s) for evaluation of the application (refer pg. no. 31-39 of paper book). The assessee has filed multiple request letters/reminders times with the concerned authority for grant of registration document in physical form (refer pg. no. 31-39 of paper book). The department has perused and examined the application on multiple occasions and even thereafter, has consciously taken the decision to not reject the application of the assessee (refer pg. no. 29-39 of paper book). The letter from the office of JCIT, Hisar through the ITO specially requested the CIT, Panchkula to intimate in writing the outcome of application u/s 12A/12AA made by the assessee. The letter also acknowledged the receipt of application on 03.11.1989, examination of the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hs is to be strictly followed by the Commissioner of Income Tax (Exemptions) while passing order under section 12AA and in case of any laxity suitable administrative action may be initiated by the CCIT(Exemptions). There is no alternative available with the department once the limitation period of six months has been expired, the concerned authority becomes Functus Officio as regards the application under consideration before him. If the worthy Commissioner does not pass an order either granting or refusing the registration within the prescribed six months period u/s 12AA, then the application is deemed to have been granted. The aforesaid view has been upheld by the hon'ble Supreme Court, various High Courts and the Special bench of ITAT Delhi. Reliance in this regard is placed on the following case laws: Commissioner of Income-tax v. Society for Promotion of Education, Adventure Sport & Conservation of Environment [2016] 382 ITR 6 (SC) Society for the Promotion of Education, Adventure Sport & Conservation of Environment v. CIT [2015] 372 ITR 222 (Allahabad High Court) Director of Income-tax, (Exemptions) v. ST. Ann's Education Society [2020] 425 ITR 642 (Karnataka) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istency but also to the members of the society whose personal reputation in the society would take a setback if the society is termed non charitable. Reliance in this regard is placed on the decision of the hon'ble Supreme Court in the case of Radhasoami Satsang v. CIT [1992] 193 ITR 321 (SC) and in the case of Godrej & Boyce Manufacturing Company Ltd. v. DCIT [2017] 394 ITR 449 (SC). In regard thereof, the Id. CIT(A) erred in law and on facts of the case to upheld the assessment order deeming the appellant society as non-registered u/s 12A of the Act and thereby, denying the benefit of exemption u/s 11 and 12 of the Act. Accordingly, it is respectfully submitted that the CIT(A)'s order being contrary to the provisions of law and against the intent of the legislature ought to be set aside. Ground of Appeal no. 10-11: Holding the society as non charitable on the basis of surmises and conjectures The CIT(A) has further upheld the view of the AO that the dharamshala was run on commercial basis by wrongly relating the voluntary donation receipts of nominal amounts varying amount between Rs. 100 to Rs. 1100 with the booking charges for marriages, ring ceremonies, Rasam pagdi, con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... la provided free of cost to the general public can be said to fit into these two specific references. Further the first proviso to section 2(15) provides that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business. The expression business is of wide scope and has been held, by the hon'ble Supreme Court in multiple cases, to denote an activity carried on with the intention of earning profit. Reliance in this regard is placed on the decision of the hon'ble Supreme Court in the case of Senairam Doongarmall v. CIT [1961] 42 ITR 392 (SC) wherein it has been held that: "The word "business" is not defined exhaustively in the Income-tax Act, but it has been held both by this court and the Judicial Committee to denote an activity with the object of earning profit. To say that a business is being carried on, means no more than that profit is to be earned by a process of production. " Reliance in this regard is further placed on the decision of the hon'ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Without prejudice to the above, the second proviso to section 2(15) provides that first proviso will not be applicable in case the aggregate value of the receipts from such activities referred to therein is twenty-five lakh rupees or less in the previous year. The amount alleged to be linked towards booking, electricity and cleaning charges by the AO in aggregate is much less than this prescribed limit as stated below: Assessment year Donation alleged towards booking and maintenance 2008-09 Rs. 3,64,202 2009-10 Rs. 6,56,711 2010-11 Rs. 4,63,144 2012-13 Rs. 4,40,146 2014-15 Not dealt by the AO. Denied exemption only on the basis of absence of registration certificate in physical form. In regard thereof it is respectfully prayed that the Id. CIT(A) erred in holding the assessee to be a commercial venture and the order of the CIT(A) ought to be set aside. Ground of Appeal no. 3 : Notice issued u/s 148 and the reassessment proceedings u/s 147 for the AY 2008-09 and 2009-10 are without jurisdiction, void and bad in law Without prejudice to the above, for the AY 2008-09 and AY 2009-10, reassessment proceedings have been initiated u/s 147 which provides for reope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 90 and Rs. 7,67,320 respectively. For the remaining assessment years, that is, 2010- 11, 2012-13 and 2014-15, the case of the Appellant was selected for scrutiny and assessed under section 143(3) of the Act at an income of Rs. 11,27,795 for AY 2010-11, Rs. 10,99,430 for AY 2012-13 and Rs. 12,49,170 for AY 2014-15. The above additions in the relevant assessment years have been made by disallowing the exemption under section 11 of the Act by deeming the assessee as a nonregistered charitable society u/s 12A of the Act and by wrongly assuming the society as being run on a commercial venture by linking the scanty sum of Rs. 100 to Rs. 1000 donated voluntarily as a charge taken for booking of dharamshala for marriages, condolence meetings, rasam pagdi, shok sabhas, etc. The Id. CIT(A)'s orders under section 250(6) upholding the assessment order(s) and the consequent additions/disallowances in the aforesaid orders have been challenged in appeal before your Honour. Our submissions in relation to the common grounds of appeal(s) raised are as hereunder: Ground of Appeal No. 1, 2, 4-9: Deeming the assessee as non-registered u/s 12A contrary to the provisions of the Act The primary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erately, on account of inordinate delays taken by the department in deciding the application u/s 12A. Therefore, unless the said application was specifically rejected, the trust/institution ought to be considered compliant with the section 12A. The aforesaid claim of the assessee is further strengthened by the amendment made by the Finance (No. 2) Act, 1996 which substituted the words "whichever is later" with the words "whichever is later and such trust or institution is registered under section 12AA " The relevant extract of the said section 12A after the aforesaid amendment read as under: "12A. The provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely:- (a) the person in receipt of the income has made an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the [Chief Commissioner or Commissioner] before the 1st day of July, 1973, or before the expiry of a period of one year from the date of the creation of the trust or the establishment of the institution, [ whichever is later and such trust or institutio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . no. 29-39 of paper book). It is also relevant to mention here that the intention of the Legislature is to give the persons engaged in charitable activities relief in the matter of payment of tax on the income applied for charitable purposes. If a person applies for registration and does everything, on its part, in compliance with the requirements of the Act, then the Legislature does not want it to be burdened with tax on its income and therefore, relief has been provided to him in respect of paying income tax u/s 11 and 12 of the Act. Reliance in this regard is placed on the decision of hon'ble Supreme Court in the case of Sanjeev Lai vs. CIT [2014] 365 ITR 389 wherein the court in addition to the afore stated made the following observation: ''In the case of Oxford University Press v. CIT [2001] 247 ITR 658/115 Taxman 69 this Court has observed that a purposive interpretation of the provisions of the Act should be given while considering a claim for exemption from tax. It has also been said that harmonious construction of the provisions which subserve the object and purpose should also be made while construing any of the provisions of the Act and more particularly when one i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the part of the department. It is respectfully submitted that the case of the assessee is one in which the application has been examined multiple times and the concerned authority based on the examination has consciously not rejected the application of the assessee. Therefore, it would not be wrong to say that in actuality the application of the assessee has been accepted and there is a lapse on the part of the concerned authority in merely issuing the registration certificate in physical form. In regard thereof, the Id. CIT(A) erred in law and on facts of the case to upheld the assessment order deeming the appellant society as non-registered u/s 12A of the Act and thereby, denying the benefit of exemption u/s 11 and 12 of the Act. Accordingly, it is respectfully submitted that the CIT(A)'s order being contrary to the provisions of law and against the intent of the legislature ought to be set aside. Without prejudice to the above, as stated supra that vide Finance (No. 2) Act, 1996 section 12A was amended to provide that the provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the person in receipt of the inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder in writing registering the trust or institution; (ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant: Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard. [(1A) All applications, pending before the Chief Commissioner on which no order has been passed under clause (b) of sub-section (1) before the 1st day of June, 1999, shall stand transferred on that day to the Commissioner and the Commissioner may proceed with such applications under that subsection from the stage at which they were on that day.] (2) Every order granting or refusing registration under clause (b ) of subsection (1) shall be passed before the expiry of six months from the end of the month in which the application was received under clause (a) of section 12A.]" Section 12AA(2) unambiguously states that the order granting or refusing the registration shall be passed in writing before the expiry of six months from the end of month in which application is received. The expression used is shall as against ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at in the case of the respondent, since the date of application was of 24.02.2003, at the worst, the same would operate only after six months from the date of the application. 5. We see no basis for such an apprehension since that is the only logical sense in which the Judgment could be understood. Therefore, in order to disabuse any apprehension, we make it clear that the registration of the application under Section 12AA of the Income Tax Act in the case of the respondent shall take effect from 24.08.2003." The Hon'ble Supreme Court in the case of Society for the Promotion of Education case {supra) in a Civil Appeal, upheld the judgment of the Allahabad High Court in the case of Society for the Promotion of Education, Adventure Sport & Conservation of Environment v. CIT [2015] 372 ITR 222 where it was held that the purpose of providing six months' time-limit to the CIT would become meaningless if there is no cause of action or outcome at the end of six months. Therefore, after the expiry of six months the registration will be deemed to have been granted. The judgment of the High Court merges in the judgment of the Hon'ble Supreme Court and the declaration by the High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax, (Exemptions) v. ST. Ann's Education Society [2020] 425ITR 642 (Karnataka) wherein the application of assessee for registration u/s 12A was rejected after a period of six months and the question before Hon'ble court was whether the application for registration u/s 12A could have been decided after a period of six months from the date of presentation of application. The hon'ble High Court while deciding this issue held that given the mandatory provision requiring order to be passed on application under section 12A within six months has not been complied with and therefore, registration under section 12A should be deemed to have taken effect after six months from date of presentation of application. The relevant extract of the decision is as under: "7. We have considered the submissions made on both the sides and have perused the record. Admittedly, an application under Section 12A of the Act on 17.09.1999 and order on the aforesaid application has been passed beyond a period of six months i.e., on30.10.2001. Therefore, in view of law laid down by Supreme Court, the registration under Section 12A of the Act shall be deemed to have taken effect after six months from the dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e adjournments later and eventually the order impugned before the Tribunal dated 29.11.2007 was passed. We cannot but notice that there was unreasonable delay insofar as complying with the mandatory provision under Section 12AA(2). 6. In this context, we have to notice the directions of the CBDT issued as Instruction No. 16/2015(F.No. 197/38/2015-ita-l) DATED 06.11.2015 which we extract hereunder:- "Sub-section (2) of Section 12AA of the Income-Tax Act, 1961 prescribes that every order granting or refusing registration under clause (b) ofsub-section (1) of that section shall be passed before the expiry of six months from the end of the month in which the application was received under clause(a) or clause(aa) of the sub-section (1) thereof. Thus while processing the application under Section 12 AA of the Act, the time limit of six months has to be adhered to by the Commissioner of Income Tax (Exemptions). However, it has been brought to the notice of the Board that the said time limit has not been observed in some cases. 2. The undersigned is directed to convey that the aforesaid time limit of six months is to be strictly followed by the Commissioner of Income Tax (Exemptions) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... habad. When the matter was considered by the Hon 'ble Supreme Court, the Full Bench decision of the Allahabad High Court cited, herein above, by the Revenue was passed and we do not see the said decision having been placed before the Hon 'ble Supreme Court. Rather than a concession, the learned Additional Solicitor General specifically informed the Hon'ble Supreme Court that the only apprehension of the Department was regarding the date on which the said deemed registration, would be effected; whether it is on the date of application or on the expiry of six months. The Civil Appeal before the Hon'ble Supreme Court was disposed of expressing the apprehension to be unfounded, but all the same clarifying that the registration of the application under Section 12AA would only take effect from the date of expiry of six months from the date of application. The effect of disposal of a Civil Appeal as has been laid down in Kunhayammed v. State of Kerala [2000] 113 Taxman 470/245 ITR 360 (SC) hence assumes significance. The Hon'ble Supreme Court in Society for the Promotion of Education case (supra) in a Civil Appeal, approved the judgment of the Allahabad High Court allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justified such an action as the rights of the department would still be protected even after such deemed registration by invoking subsection (3) of section 12AA which permits the CIT to cancel the registration by an order in writing. To the same effect is the decision of the IT AT, Delhi bench in the case of: Sardari Lai Oberai Memorial Charitable Trust v. ITO [2005] 3 SOT 229 Sambandh Organisation v. CIT [2006] 156 Taxman 183 (Delhi) (Mag.) In regard thereof, it is respectfully submitted that on account of law laid down by the hon'ble Supreme Court, various High Courts, and the special bench IT AT Delhi, the applicant society ought to be deemed registered with effect from expiry of six months from the introduction of section 12AA, that is from 30.09.1999 and in the worst case with effect from 30.11.1999, the date on which period of six months expired from the insertion of subsection (1A) to section 12AA. Accordingly, it is respectfully submitted that appeal of the assessee may kindly be allowed and the CIT(A)'s order being bad in law ought to be set aside. Without prejudice to the above, the assessee has been regularly filing its return of income declaring total incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a different stand by the revenue even when the facts and circumstances continue to remain the same. There is no change in the facts and circumstances justifying the revenue to take a different view of the matter. This not only is unjust to the assessee being against the principles of consistency but also to the members of the society whose personal reputation in the society would take a setback if the society is termed non charitable. Reliance in this regard is placed on the decision of the hon'ble Supreme Court in the case of Radhasoami Satsang v. CIT [1992] 193 ITR 321 (SC) and in the case of Godrej & Boyce Manufacturing Company Ltd. v. DCIT [2017] 394 ITR 449 (SC). Therefore, on account of being against the Principle of consistency and the principles of natural justice also the CIT(A)'s order ought to be quashed and the assessee ought to be granted the status of registered charitable society u/s 12A of the Act. Without prejudice to the above, when despite several reminders/request letters being filed with the concerned authority, the assessee was not given a registration certificate in physical form and simultaneously the assessee was being assessed as non registered insti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant to reproduce the explanatory note to the provisions of the Finance (No.,2) Act 2014 as given in CBDT Circular No. 1/15 dated 21.1.2015: "8.2 Non-application of registration for the period prior to the year of registration caused genuine hardship to charitable organisations. Due to absence of registration, tax liability is fastened even though they may otherwise be eligible for exemption and fulfil other substantive conditions. However, the power of condonation of delay in seeking registration was not available. 8.3 In order to provide relief to such trusts and remove hardship in genuine cases, section 12A of the Income-tax Act has been amended to provide that in a case where a trust or institution has been granted registration under section 12AA of the Income-tax Act, the benefit of sections 11 and 12 of the said Act shall be available in respect of any income derived from property held under trust in any assessment proceeding for an earlier assessment year which is pending before the Assessing Officer as on the date of such registration, if the objects and activities of such trust or institution in the relevant earlier assessment year are the same as those on the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deemed to be 'assessment proceedings pending before the assessing officer' within the meaning of that term as envisaged under the proviso. It follows there-from that the assessee which obtained registration u/s 12AA of the Act during the pendency of appeal was entitled for exemption claimed u/s 1 lof the Act. [Reliance in this regard is placed upon: CIT v. Mayur Foundation [2005] 274 ITR 562 (Gujarat High Court) SNDP Yogam vs ADIT(Exemptions) [2016] 161 ITD l(Cochin - Trib.)/[2017] 186 TTJ 277 (Cochin - Trib.)] Therefore, in regard to the provisions of proviso(s) to section 12A(2), the deemed registration u/s 12A has to be given effect to retrospectively for all the AYs in appeal before the tribunal and the benefit of section 11 and 12 shall be eligible to the assessee for the relevant AYs. Ground of Appeal no. 10-11: Holding the society as non charitable on the basis of surmises and conjectures The CIT(A) has further upheld the view of the AO that the dharamshala was run on commercial basis by wrongly relating the voluntary donation receipts of nominal amounts varying amount between Rs. 100 to Rs. 1100 with the booking charges for marriages, ring ceremonies, Ras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will pass the donation for the booking of Ram Lila and Dharamshala and daily electricity charges and cleaning charges will be extra. 18. There will be no charges for the meeting which will be held for short time. 19. There will be no charges for the booking of condolence meeting. From the above, it is clear that no charges will be taken for meeting which are held for short time and booking of condolence meeting which naturally means that the society will be charging the sum for other type of functions/ceremonies. It is not a case that the assessee will not charge anything for every type of functions and will receive only the donations. It is explicitly clear that charges will be applicable for all the bookings except for the above two purposes as per point 18 & 19 above. Thus, from the Rules & Regulations itself it is clear that the assessee was running a commercial venture. Under the facts and the circumstances of the case, the action of the AO in disallowing the benefit of section 11 & 12 of the Act in the absence of any certificate issued under section 12A to the assessee, is found as per law and hence upheld. Accordingly, these grounds of appeal are dismissed. It is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility: Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity: Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is twentyfive lakh rupees or less in the previous year;" Section 2(15) provides an inclusive definition of the word charitable purposes which includes relief of the poor and advancement of any other object of general public utility. The purpose of assessee to manage and run dharamshala provided free of cost to the general public can be said to fit into these two specific references. Further the first proviso provides that the advancement of any other object of general public utility s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned. Nor does the expression cover a mere desire to make some monetary gain out of a transaction or even a series of transactions. It predicates a motive which pervades the whole series of transactions effected by the person in the course of his activity. ...... . The difficult question, however, still remains: What is the meaning of "charitable purpose" which is only indicated but not defined by section 2(15) of the Act? It seems to me that a common concept or element of "charity " is shared by each of the four different categories of charity. It is true that charity does not necessarily exclude carrying on an activity which yields profit, provided that profit has to be used up for what is recognized as charity. The very concept of charity denotes altruistic thought and action. Its object must necessarily be to benefit others rather than one's self. Its essence is selflessness. In a truly charitable activity any possible benefit to the person who does the charitable act is merely incidental or even accidental and immaterial. The action which flows from charitable thinking is not directed towards benefiting one's self. It is always directed at benefiting others. It is thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ical relief and anyother object of general public utility. These activities are tax exempt, as they should be. However, some entities carrying on regular trade, commerce or business or providing services in relation to any trade, commerce or business and earning incomes have sought to claim that their purposes would also fall under "charitable purpose". Obviously, this was not the intention of Parliament and, hence, I propose to amend the law to exclude the aforesaid cases. Genuine charitable organizations will not in any way be affected.' The expressions "business", "trade" or "commerce" as used in the first proviso must, thus, be interpreted restrictively and where the dominant object of an organisation is charitable any incidental activity for furtherance of the object would not fall within the expressions "business", "trade" or "commerce". ....... . 70. Although in that case the statutory provisions being considered by the Supreme Court were different and the utilisation of income earned is, now, not a relevant consideration in view of the express words of the first proviso to section 2(15) of the Act, nonetheless the test of dominant object of an entity would be rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred in holding the assessee to be a commercial venture and the order of the CIT(A) ought to be set aside. Ground of Appeal no. 3 : Notice issued u/s 148 and the reassessment proceedings u/s 147 for the AY 2008-09 and 2009-10 are without jurisdiction, void and bad in law Without prejudice to the above, for the AY 2008-09 and AY 2009-10, reassessment proceedings have been initiated u/s 147 which provides for reopening of assessment as per procedure prescribed where the Assessing Officer has reason to believe that income has escaped assessment. In the present case, the reasons to believe furnished by the AO are that the assessee has not produced any physical registration document u/s 12A/12AA and therefore it is not registered the aforesaid section. In this regard, it is submitted that the accepted position of the department, as demonstrated supra, had been that the assessee is deemed registered u/s 12A/12AA and therefore, the reasons to believe supplied by the AO are nothing but mere change of opinion. The hon'ble Supreme Court in the case of CIT v. Kelvinator of India Ltd [2010] 320 ITR 561 (SC) has held that mere change of opinion cannot per se be reason to reopen assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this point in the impugned order. He submitted that it is incorrect to state that the case laws as relied by the assessee are not applicable on the facts of the present case. He further contended that return of the assessee was processed and the claim of exemption was accepted by the Revenue itself from assessment year 2000-01 to 2009-10. He further contended that vide letter dated 26.02.2015 the assessee yet again approached the learned CIT(Exemption) requesting him to supply copy of registration as sought vide application dated 3.11.1989, but of no avail. He contended that once application is made and it is not rejected by the Competent Authority, it would be presumed that necessary approval was granted. He contended that law did not envisage at the relevant time that the Competent Authority would issue a certificate of registration. Therefore, making of an application under the prescribed rules, was sufficient for claiming exemption u/s 10 of the Income-tax Act. 9. I have heard rival submissions and perused the material available on record. The contention of the assessee that it had filed an application seeking registration u/s 12A of the Act on 3.11.1989 appears to be true. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions of section11 and section 12 exceeds twenty-five thousand rupees in any previous year, the account of the trust or institution for that year have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the person in receipt of the income furnishes along with the return of income for the relevant assessment year the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed.]" 10. It is noticed that the law on this issue further undergone change vide Finance (No. 2) Act, 1996, thereby a new provision was inserted. Section 12AA that prescribed the procedure for registration u/s 12A of the Act. For the sake of clarity section 12AA of the Act is reproduced below. "Procedure for registration. 12AA. (1) The [***] Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) of section 12A, shall- (a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of CIT Vs. Society for Promotion of Education Adventure Sports and Conservation of Environment (2016) 382 ITR 6 (SC). Reliance was made on the judgment of Hon'ble Allahabad High Court in the case of Society for Promotion of Education Adventure Sports and Conservation of Environment Vs. CIT (2015) 372 ITR 222. 14. Further, learned counsel for the assessee placed reliance on the following case laws: a) Director of Income Tax (Exemptions) Vs. St. Ann's Education Society (2020) 425 ITR 642 (Kar.) b) CIT Vs. TBI Education Trust (2018) 257 Taxman 355 (Ker.) c) CIT Vs. Sahitya Sadawart Samiti Jaipur (2017) 396 iTR 46 (Raj.) d) Bhagwad Swarup Shri Shri Devraha Baba Memorial Shri Hari Parmarth Dham Trust Vs. CIT (2007) 111 TTJ (Delhi) (SB) 424/17 SOT 281 (Delhi)(SB) e) Sardari Lal Oberai Memorial Charitable Trust v. ITO (2005) 3 SOT 229 f) Sambandh Organisation v. CIT (2006) 156 Taxman 183 (Delhi) (Mag.) 15. Admittedly Revenue has not placed any formal order by the Competent Authority regarding refusal of registration. The Revenue has also not rebutted the fact that assessee was allowed claim of exemption up to assessment year 2009-10. In the light of the undisputed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation Adventure Sports and Conservation of Environment (2016) 382 ITR 6 (supra) approved the decision of the Division Bench of the Hon'ble Allahabad High Court in the case of Society for Promotion of Education Adventure Sports and Conservation of Environment (supra), by observing as under: "There is no appearance on behalf of the sole respondent despite service of notice and adjournment sought for on a couple of occasions earlier. The short issue is with regard to the deemed registration of an application under section 12AA of the Income-tax Act, 1961. The High Court has taken the view that once an application is made under the said provision and in case the same is not responded to within six months, it would be taken that the application is registered under the provision. The learned Additional Solicitor General appearing for the appellants, has raised an apprehension that in the case of the respondent, since the date of application was of February 24,2003, at the worst, the same would operate only after six months from the date of the application." We see no basis for such an apprehension since that is the only logical sense in which the judgment could be understood. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and take necessary action as prescribed under the law. The grounds raised in the appeal are allowed. 20. Hence, the appeal of the assessee is allowed in the terms indicated hereinabove. ITA No. 5274/Del/2019 (A.Y. 2009-10): 21. In ITA no. 5274/Del/2019 for A.Y. 2009-10, the assessee has taken following grounds of appeal: "1. That the orders of the Authorities below CIT(A)Hisar and that of the Assessing officer ITO(Exemption) Rohtak are liable to be quashed, being arbitrary, illegal, without jurisdiction and justification so far as impugned and additions as being sustained are concerned. 2. That the Ld. CIT (A) appeal was wrong in sustaining an arbitrary and illegal action' of the Assessing officer ITO (exemption) Rohtak, in initiating the reassessment proceedings u/s 147 against the appellant deemed exempted public charitable society in order to hold the same being non exempted/unregistered entity and as such the same is liable to be quashed being, arbitrary, illegal, without jurisdiction and any justification / reasons. 3. That the Learned CIT (A) was not justified in brushing aside the contention of the appellant that the A.O. does not have jurisdiction over the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received till date, nor any order of rejection of the application was ever communicated or sent to the appellant assessee, though the same is mandatory to be sent/served on the appellant assessee within six months from the date of application and not thereafter under the provisions of section 12AA of the Act. Accordingly, as such, the appellant society deserves to be assessed as deemed exempted entity as before since( AY 2000-01 till AY 2009-10) and consistency requires not to be disturbed. 8. That as such the authority below CIT (A) Hisar/ LDH was wrong in sustaining the finding of the A.O. ITO (exemption) Rohtak, that the appellant charitable society do not fulfill the conditions for claiming deduction u/s 11 of the IT Act 1961 without appreciating that all the conditions for the purpose stand fulfilled as mandate under the provisions of the Act. As such the orders require to be quashed. 9. That the Ld. CIT (A) as well as A.O. ITO exemption also misdirected themselves in not following the law laid down by the Allahabad High Court in the case "Society for The Promotion of Education V/S CIT(2015)372 ITR 222 A11 and the Honourable Apex Court in the case "CIT V/S Kanpur society f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of the Act. 14. That the authorities below were also grossly erred in opining and directing for initiation of penal proceedings u/s 271 (1)(c) of the Act against the appellant, action being bad in law requires to be set aside. 15. The order of the authorities below are also liable to be quashed being conjectural and not being a speaking order." 22. There is no dispute that the facts of the case and the grounds of appeal taken by the assessee in ITA no. 5274/Del/2019 for A.Y. 2009-10 are similar to ITA no. 5273/Del/2019 for A.Y. 2008-09, excepting figure of addition. The learned representatives of the parties have also taken the same arguments as were raised in ITA no. 5273/Del/2019 (A.Y. 2008-09). In ITA no. 5273/Del/2019, I have directed the Assessing Officer to give benefit available u/s 11 and 12 of the Act to the assessee. Facts and circumstances of the case being identical in both the assessment years, the finding given in ITA no. 5273/Del/2019 would also apply mutatis mutandis in the present appeal as well. Accordingly, for the very same reasons as given for A.Y. 2008-09, herein also I hold that the Assessing Officer was not justified in not treating the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emption) Chandigarh as prescribed and as directed from time to time and also by sending repeated reminders to procure the exemption certificate in physical form, but surprisingly the same was not received till date, nor any order of rejection of the application was ever communicated or sent to the appellant assessee, though the same is mandatory to be sent/served on the appellant assessee within six months from the date of application and not thereafter under the provisions of section 12AA of the Act. Accordingly, as such, the appellant society deserves to be assessed as deemed exempted entity as before since( AY 2000-01 till AY 2009-10) and consistency requires not to be disturbed. 6. That as such the authority below CIT (A) Hisar/ LDH was wrong in sustaining the finding of the A.O. ITO (exemption) Rohtak, that the appellant charitable society do not fulfill the conditions for claiming deduction u/s 11 of the IT Act 1961 without appreciating that all the conditions for the purpose stand fulfilled as mandate under the provisions of the Act. As such the orders require to be quashed. 7. That the Ld. CIT (A) as well as A.O. ITO exemption also misdirected themselves in not followin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate as an AOP without appreciating that excess receipt over expenses were never distributed among the members and was always used for charitable purposes of the society as prescribed under the provisions of the Act. 12. That the authorities below were also grossly erred in opining and directing for initiation of penal proceedings u/s 271 (1)(c) of the Act against the appellant, action being bad in law requires to be set aside. 13. The order of the authorities below are also liable to be quashed being conjectural and not being a speaking order." 22. Identical grounds as raised in ITA no. 5275/Del/2019 (reproduced above), have been taken in ITA no. 5276/Del/2019 (A.Y. 2012-13) and 5277/Del/2019 (A.Y. 2014-15), excepting difference in figure of addition. In A.Y. 2012-13 the addition made is Rs. 10,99,430/- as against the nil returned income; whereas in A.Y. 2014-15 the addition made is Rs. 12,49,170/- as against the nil returned income. Therefore, it is not necessary to reproduce grounds of appeal for these assessment years. ITA No. 291/Del/2020 ( A.Y. 2016-17): 23. In ITA no. 291/Del/2020 for A.Y. 2016-17, the assessee has taken following grounds of appeal: "1. That the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onths from the date of application and not thereafter under the provisions of section 12AA of the Act. Accordingly, as such, the appellant society deserves to be assessed as deemed exempted entity as before since( AY 2000-01 till AY 2009-10) and subsequently and consistency requires not to be disturbed. 6. That as such the authority below CIT (A) Hisar/ LDH was wrong in sustaining the finding of the A.O. ITO (exemption) Rohtak, that the appellant charitable society do not fulfill the conditions for claiming deduction u/s 11 of the IT Act 1961 without appreciating that all the conditions for the purpose stand fulfilled as mandate under the provisions of the Act. As such the orders require to be quashed. 7. That the Ld. CIT (A) as well as A.O. ITO exemption also misdirected themselves in not following the law laid down by the Allahabad High Court in the case "Society for The Promotion of Education V/S CIT(2015)372 ITR 222 A11 and the Honourable Apex Court in the case "CIT V/S Kanpur society for the prom. of Education( 2016) 382 ITR SC 6 and denied the status of deemed charitable society, by narrating wrong facts, action being bad in law and void ab- initio requires to be annulled ..... X X X X Extracts X X X X X X X X Extracts X X X X
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