Ashwini Sahakari Rugnalaya Ani]Sanshodhan Kendra Niyamit.](Ashwini Sahakari Rugnalaya And]Research Centre), Solapur.]… v. Deputy Commissioner Of Income Tax](Exemption) (Hq), Pune & Anr.]…

1 10-WP 1885-19 @ Others.odt IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO.1885 OF 2019 ALONG WITH WRIT PETITION NO.1887 OF 2019 ALONG WITH WRIT PETITION NO.1888 OF 2019 ALONG WITH WRIT PETITION NO.1889 OF 2019 ALONG WITH WRIT PETITION NO.1890 OF 2019ALONG WITH WRIT PETITION NO.1891 OF 2019 Ashwini Sahakari Rugnalaya Ani]Sanshodhan Kendra Niyamit.](Ashwini Sahakari Rugnalaya and]Research Centre), Solapur.]… Appellant Versus Deputy Commissioner of Income Tax](Exemption) (HQ), Pune & Anr.]… Respondent Mr. Rohan Deshpande a/w Ms. Alisha Pinto for Appellant.Mr. Sham Walve for Respondent. CORAM:- AKIL KURESHI &SARANG V. KOTWAL, JJ.DATE :- 04 APRIL, 2019 URS 1 of 10 2 10-WP 1885-19 @ Others.odt P. C.:- 1.These Petitions arise in the common background. Theyhave been heard together and would be finally disposed of by thiscommon order. For convenience, we may record facts from WritPetition No.1885 of 2019. 2.The Petitioner is a cooperative society and runs a hospital.The Petitioner had applied for registration under Section 12AA of theIncome Tax Act, 1961 ('the Act', for short) in which the question ofdeemed registration on the ground that the application, after its filing,was not decided for a period of six months, arose. The Income TaxAppellate Tribunal ('ITAT', for short), by an order dated 15/03/2017,held that the Petitioner was entitled to a declaration of deemedregistration. In that background, the question of the assessment of thePetitioner's return of income for the Assessment Year 2009-2010 cameup for consideration. The Assessing Officer ignored such deemedregistration of the Petitioner and rejected the request for exemption ofits income. This issue reached the Tribunal. The Tribunal, by anorder dated 30/11/2017, allowed the Appeal of the Assessee. URS 2 of 10 3 10-WP 1885-19 @ Others.odt Relevant portion of the Tribunal's Judgment reads as under : “11. ........ in other words, the claim of the assessee ofbeing registered under section 12AA of the Act has beenaccepted and adopted for giving relief to the assessee byway of exemption under section 11 and 12 of the Act. Thesecond aspect which is related to a Trust is its entitlementto claim recognition under section 80G of the Act. Theassessee had been granted the said recognition undersection 80G of the Act by the Commissioner vide itsorder dated 30-03-2017, copy of which is placed onrecord. In view of these subsequent events, we hold thatthe assessee after receiving the deemed registration undersection 12AA of the Act, is entitled to claim the exemptionunder section 11 and 12 of the Act. The same cannot bedenied to the assessee on the aspect of the assessee havingreceived deemed registration or the assessee not beingregistered under the Bombay Public Trust Act or anyother issue in this regard. Accordingly, we direct theAssessing Officer to allow the exemption under section 11and 12 of the Act to the assessee in the years underappeal. 12.The Ld. Authorised Representative for theassessee time and again stressed that the income should beassessed at Nil in the hands of the assessee as it wasentitled for the exemption under section 11 and 12 of theAct since complete details were filed before the AssessingOfficer, which were verified by him. He also pointed outthat the details have been looked into by the AssessingOfficer at length and no discrepancy has been found in thesaid details. However, in the interest of justice, we areof the view that the Assessing Officer has failed toconsider the conditions of section 11 and 12 of theAct while denying the said exemption to the assesseein all the years. So for the limited purpose ofverification, we restore this matter to the file ofAssessing Officer who shall verify the expenditure URS 3 of 10 4 10-WP 1885-19 @ Others.odt claimed by the assessee as to whether it falls withinthe scope of section 11 and 12 of the Act andrecompute the balance income, if any, in the hands ofthe assessee, in the years under appeal. The AssessingOfficer shall afford reasonable opportunity ofhearing to the assessee. Before parting, we may alsopoint out that the courts have held that the AuditReport for claiming exemption can be filed duringthe assessment proceedings also. Since the assesseehas so filed the same, there is no merit in stand ofAssessing Officer and the same is reversed.Accordingly, all the grounds raised by the assessee arethus allowed.” 3.In terms of this Judgment of the Tribunal when theAssessing Officer took up the proceedings for passing consequentialorder, his inquiries ought to have been limited to the examination ofAssessee's claim of exemption of its income under Sections 11 and 12of the Act. The Assessing Officer, however, expanded the scope of theinquiry and once again went into the question of registration of thePetitioner under Section 12AA of the Act. He passed the impugnedorder dated 31/12/2018 in which he made the followingobservations: “8.After having taken cognizance to the Hon'leTribunal's decision, it is further stated that the issue ofdeemed registration has not reached its culmination sincethe Hon'ble Supreme Court while adjudicating the issue ofdeemed approval in the case of CIT Vs Society for thePromotion of Education, 382 ITR 6 (SC), relied upon by URS 4 of 10 5 10-WP 1885-19 @ Others.odt the Hon'ble ITAT in its impugned order, has considered thedecision of Division Bench of Allahabad High Court in thecase of Society for the Promotion of Education AdventureSport and Conservation of Environment Vs CIT, 261 CTR(All) 167 and not the decision of the Full Bench of theAllahabad High Courtin the case of of CIT Vs MuzafarNagar Development Authority, 372 ITR (ALL)(FB)wherein the decision of the Division Bench of Allahabadwas reverted and the Full Bench had held that “nondisposal of an application for registration before theexpiry of six months as provided u/s 12AA would notresult in deemed grant of registration”. 5 10-WP 1885-19 @ Others.odt the Hon'ble ITAT in its impugned order, has considered thedecision of Division Bench of Allahabad High Court in thecase of Society for the Promotion of Education AdventureSport and Conservation of Environment Vs CIT, 261 CTR(All) 167 and not the decision of the Full Bench of theAllahabad High Courtin the case of of CIT Vs MuzafarNagar Development Authority, 372 ITR (ALL)(FB)wherein the decision of the Division Bench of Allahabadwas reverted and the Full Bench had held that “nondisposal of an application for registration before theexpiry of six months as provided u/s 12AA would notresult in deemed grant of registration”. 8.1Further, the Hon'ble High Court of Allahabad,Lucknow Bench, vide its decision dated 31.07.2017 in thecase of CIT Faizabad Vs Harshit Foundation SehmalpurJalalpur Janupur, ITAD No.24 2013, has allowedRevenue's appealby stating and holding the following :“10.......... However, we find that SupremeCourt in the judgment dated 16.2.2016 has heldthat all other questions of law are left open,meaning thereby question of law raised in appealby C.I.T. has not been decided, but left open,hence it cannot be said that judgement of thisCourt has merged with the judgement ofSupreme Court on the above question of law,which was decided by this Court in Society forthe Promotion of Education, Allahabad(Supra). 11.In view of full Court Judgment inCommissioner of Income Tax vs. MuzafarNagar Development Authority, Income TaxAppeal No.348 of 2008, the question formulatedabove is answered against Assessee.” 8.2It is further seen that the Hon'ble Tribunal inits said order dated 30.11.2017 has given the directions URS 5 of 10 6 10-WP 1885-19 @ Others.odt for verification of expenditures claimed by the assessee andwhether these claimed expenses fall within the ambit ofSection 11 and 12 of the Act after granting the assesseedeemed registration u/s 12AA of the Act to the assesseevide the said order. However, in this context it is seen thatthe Hon'ble Allahabad High Court in its decision in thecase of CIT Meerut Vs A. R. Trust, Meerut, ITA No.112 of2013 dated 04.09.2017, has held that, “the Tribunal hasno jurisdiction in law to direct for registration of the Trustwithout there being satisfaction recorded by theRegistering Authority as contemplated by Section 12AA ofthe Act” and has set aside the Tribunal's order and sentthe matter to the Registering Authority i.e. CIT forrecording its satisfaction and to pass appropriate order inaccordance with law thereunder. The Hon'ble Court hasrelied upon the following decisions and held thataforesaid decision : a)The Hon'ble Karnataka High Court in thecase of Sanjeevamma Hanumanthe GowdaCharitable Trust Vs DIT (Exemptions) (2006)285 ITR 327 (Karnataka) b)The Hon'ble Allahabad High Court'sdecision in the case of Fifth Generation EducationSociety Vs CIT (1990) ITR 634 (Alld) c)The Hon'ble Kerala High Court's decisionin the case of Sree Anjaneya Medical Trust Vs CIT(2016) 382 ITR 399 (Kerala) d)The Hon'ble Division Bench Allahabad HighCourt's decision in the case of CIT (Exemption) VsYamuna Expressway Industrial DevelopmentAuthority and others (2017) 395 ITR 18 (Alld) e)The Hon'bl Division Bench AllahabadHigh Court's decision in the case of CIT-II Vs R. S.Bajaj Society (2014) 222 Taxmann.com 111(Alld) The CIT-IV, Pune in the assessee's case had rejected theassessee's application for registration u/s 12A of the Act URS 6 of 10 7 10-WP 1885-19 @ Others.odt c)The Hon'ble Kerala High Court's decisionin the case of Sree Anjaneya Medical Trust Vs CIT(2016) 382 ITR 399 (Kerala) d)The Hon'ble Division Bench Allahabad HighCourt's decision in the case of CIT (Exemption) VsYamuna Expressway Industrial DevelopmentAuthority and others (2017) 395 ITR 18 (Alld) e)The Hon'bl Division Bench AllahabadHigh Court's decision in the case of CIT-II Vs R. S.Bajaj Society (2014) 222 Taxmann.com 111(Alld) The CIT-IV, Pune in the assessee's case had rejected theassessee's application for registration u/s 12A of the Act URS 6 of 10 7 10-WP 1885-19 @ Others.odt vide order dated 25.07.2006 after verification of its case.However, the Hon'ble Tribunal had allowed deemedregistration u/s 12A only on the ground that the CITfailed to dispose the application u/s 12A within the timelimit prescribed u/s 12AA(2). In view of the judicialprecedents above, the stand of the Hon'ble Tribunal is notcorrect, since the Registering Authority i.e. the Ld. CIT-IV,Pune had recorded his satisfaction for rejecting theassessee's application for registration u/s 12A of the Act. 8.3Further, it is also seen that the Ld. CIT(E),Pune vide order No.PN/CIT(E)/12AA(3)/ASR/2017-18/6734 dated 28.03.2018 has withdrawn theregistration granted u/s 12AA of the I.T. Act which wasgranted to the assessee by the Ld. CIT-IV, Pune vide theorder No.PN/CITIV/12A/11/2007-08/2364 dated14.12.2007 u/s 12AA(1)(b)(i) r.w.s. 254 of the I.T. Act,1961 in consequence to the Tribunal's order dated15.03.2007. The Ld. CIT(E), Pune has withdrawn thebenefit of registration u/s 12AA in the assessee's case forthe period subsequent to 23.05.2008 which implies thatthe assessee is not entitled to the benefit u/s 11 for theyear under consideration. 9.In view of above discussed facts andcircumstances, it is clear that assessee in spirit is not acharitable society and is working for the benefit of itsmembers in clear violation of Section 13(1)(c) and notworking for providing the medical relief to the needypatients at affordable costs. Assessee thus exists for thepurpose of profit, as discussed in various para 7.3 above.In light of above discussion and in light of the fact thatassessee did not possess registration u/s 12AA during A.Y.2009-10, assessee society therefore cannot be consideredas a charitable society and benefit of sec 11 & 12 cannotbe allowed to the assessee and hence, assessee is herebyassessed as an AOP. URS 7 of 10 8 10-WP 1885-19 @ Others.odt 10.In view of the above facts and discussion,assessee being deemed to be registered u/s 12A hasviolated the provisions of Section 13(1)(c) r.w.s. Section13(3) of the Act for the A.Y. under consideration andtherefore, it is not eligible for grant of exemption u/s 11and 12 of the Act for A.Y. 2009-10. Penalty proceedingsu/s 271(1)(c) of the I.T. Act, 1961 are hereby initiatedseparately for furnishing inaccurate particulars ofincome.” URS 7 of 10 8 10-WP 1885-19 @ Others.odt 10.In view of the above facts and discussion,assessee being deemed to be registered u/s 12A hasviolated the provisions of Section 13(1)(c) r.w.s. Section13(3) of the Act for the A.Y. under consideration andtherefore, it is not eligible for grant of exemption u/s 11and 12 of the Act for A.Y. 2009-10. Penalty proceedingsu/s 271(1)(c) of the I.T. Act, 1961 are hereby initiatedseparately for furnishing inaccurate particulars ofincome.” 4.In our opinion, the Assessing Officer has committedserious error. Firstly, the question of deemed registration of thePetitioner concluded in the earlier round of litigation. In the presentcase, the Assessing Officer was passing a fresh order on assessment asdirected by the Tribunal. The Tribunal, in its order dated30/11/2017, had made it clear that the Petitioner already enjoyedregistration under Section 12AA of the Act. Only question was, onfacts, the Petitioner's claim of exemption under Sections 11 and 12 ofthe Act was valid. Since the Assessing Officer had not applied hismind on this aspect of the matter, the Tribunal remanded proceedingsbefore the Assessing Officer. The scope of the fresh order that theAssessing Officer would pass, pursuant to this order of the Tribunal,was, therefore, confined to the inquiry in relation to the Petitioner'sclaim of exemption under Section 11 and 12 of the Act. The issue of URS 8 of 10 9 10-WP 1885-19 @ Others.odtthe validity of the registration of the Petitioner under Section 12AA ofthe Act was not at large before him. 5.Perusal of the order of the Assessing Officer and inparticular, the quoted portion thereof, would convince us that theAssessing Officer has travelled far beyond the scope of the inquiriesbefore him and has breached all propriety of judicial discipline. TheAssessing Officer has held that the Tribunal was not correct ingranting deemed registration to the Petitioner. He has, in fact,criticized the Judgment of the Supreme Court on the ground that suchJudgment notes a Division Bench Judgment of the High Court but nota larger Bench Judgment. 6.For his own sake, we hope the concerned Assessing Officerdoes not indulge into such bravado in future. Firstly, it was not withinhis scope to decide whether the decision of the Tribunal was correct orincorrect. Far more serious is his conduct of criticizing the SupremeCourt Judgment. The entire hierarchy of judicial set up would bedisturbed if a quasi-judicial authority or for that matter, any Court orsubordinate Judicial Officer were allowed to disregard questioning thecorrectness of the decision of a higher authority, forum or Court. URS 9 of 10 10 10-WP 1885-19 @ Others.odt 7.In the result, the impugned orders are set aside. Since theAssessing Officer has not carried out the directions of the Tribunal toexamine the Petitioner's claim of exemption under Sections 11 and 12of the Act on merits, we place back the proceedings before him forpassing a fresh order. 8. All the Petitions are disposed of accordingly. (SARANG V. KOTWAL, J.) (AKIL KURESHI, J.) URS 10 of 10