Commissioner Of Income Tax (Central), Gurgaon v. M/S Manav Rachna Educational Society, Faridabad

ITA-276-2012 -1- IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH ITA-276-2012 Date of Decision: 16.1.2019 Commissioner of Income Tax (Central), Gurgaon Versus ....Appellant. M/s Manav Rachna Educational Society, Faridabad ...Respondent. CORAM:- HON'BLE MR. JUSTICE AJAY KUMAR MITTAL.HON'BLE MRS. JUSTICE MANJARI NEHRU KAUL.HON'BLE MRS. JUSTICE MANJARI NEHRU KAUL. PRESENT: Mr. Tajender K. Joshi, Sr. Standing Counsel for the appellant. Mr. S.K. Mukhi, Advocate for the respondent.****** AJAY KUMAR MITTAL, J. 1.This order shall dispose of a bunch of three appeals bearingITA Nos.276, 277 and 286 of 2012 as according to learned counsel for theparties, identical questions of law and facts are involved therein. Forbrevity, the facts are being extracted from ITA-276-2012.2.ITA-276-2012 has been preferred by the revenue under Section260A of the Income Tax Act, 1961 (in short “the Act”) against the orderdated 25.5.2012 (Annexure A-2) passed by the Income Tax AppellateTribunal, Delhi Bench 'E', New Delhi (hereinafter referred to as “theTribunal”) in ITA No. 793/Del/2011. The appeals were admitted by thisCourt vide order dated 10.7.2014 for determination of the substantialquestions of law as proposed in para 13 of the appeals which are as under:-ITA-276-2012 (i)Whether the Tribunal has erred in interpretation ofSection 12AA(3) of the Income Tax Act by ITA-277-2012 ITA-286-2012 holding that the cancellation of registrationordered by Commissioner is not sustainable whenthe addition made to returned income during anyassessment year has been deleted in appeal? (ii)Whether the Tribunal was justified in law inobserving that when the additions made to returnedincome of trust has been deleted in the quantum ofappeal, nothing survives which can be made basisof denial of registration, while the provisions ofSection 12AA(3) empower cancellation ofregistration based on the analysis of the activitiesof the trust and not on sustainability of income?observing that when the additions made to returnedincome of trust has been deleted in the quantum ofappeal, nothing survives which can be made basisof denial of registration, while the provisions ofSection 12AA(3) empower cancellation ofregistration based on the analysis of the activitiesof the trust and not on sustainability of income? (iii)Whether any activity(ies) on the basis of which anaddition to the returned income was made whichcould not be sustained, still can be activity againstthe objects of trust warranting cancellation ofregistration under Section 12AA(3) of Income TaxAct?addition to the returned income was made whichcould not be sustained, still can be activity againstthe objects of trust warranting cancellation ofregistration under Section 12AA(3) of Income TaxAct? Whether in the facts and circumstances of the case theITAT has not erred in extending consequential benefit ofaccording approval u/s 80G of I.T. Act when thecancellation of Registration u/s 12AA of Income Tax Actwas fully justified? Whether in the facts and circumstances of the case the ITA-276-2012 -3- Tribunal has not erred in extending consequential benefitof exemption u/s 11 of the Act to the Corpus Fund ofof exemption u/s 11 of the Act to the Corpus Fund of ` 7,89,96,478/- when the cancellation of registration u/s12 AA(3) of IT Act was fully justified?12 AA(3) of IT Act was fully justified? Whether in the facts and circumstances of the case theITAT has not erred in extending consequential benefit ofaccording approval u/s 80G of I.T. Act when thecancellation of Registration u/s 12AA of Income Tax Actwas fully justified? Whether in the facts and circumstances of the case the ITA-276-2012 -3- Tribunal has not erred in extending consequential benefitof exemption u/s 11 of the Act to the Corpus Fund ofof exemption u/s 11 of the Act to the Corpus Fund of ` 7,89,96,478/- when the cancellation of registration u/s12 AA(3) of IT Act was fully justified?12 AA(3) of IT Act was fully justified? 3.A few facts necessary for adjudication of the instant appeal asnarrated therein may be noticed. The assessee was granted registrationunder Section 12AA of the Act on 27.3.2001 by the Commissioner ofIncome Tax, Rohtak. Vide order dated 31.5.2002, the Commissioner ofIncome Tax, Rohtak granted exemption to the assessee-Trust under Section80G(5) of the Act which was valid from 1.4.2002 to 31.3.2007. On4.8.2005, a search operation was conducted at the premises of the assesseeas well as at the residence of the trustees. Further, vide order dated30.1.2008, the registration granted to the assessee under Section 12AA ofthe Act was cancelled. A corrigendum was passed vide order dated1.5.2008 by the Commissioner of Income Tax (C), Ludhiana to make theorder under Section 12AA(3) of the Act effective from 1.10.2004. Theassessee filed an appeal before the Tribunal against the cancellation ofregistration who vide order dated 15.2.2010 set aside the said order andremanded the matter back for fresh consideration. In pursuance thereto, theCIT(C), Ludhiana vide order dated 23.12.2010 (Annexure A-1) declined torestore back the registration granted to the assessee under Section 12AA ofthe Act and affirmed the order of cancellation under Section 12AA(3) dated30.1.2008 effective from 1.10.2004. Feeling aggrieved by the order,Annexure A-1, the assessee filed an appeal before the Tribunal. TheTribunal vide order dated 25.5.2012 (Annexure A-2) finding no ground fordenial of registration to the assessee, allowed the appeal and while setting aside the order of the CIT(C), Ludhiana directed to grant the exemptionunder Section 80G of the Act to the assessee. Hence, the present appeals bythe revenue. 4.After hearing learned counsel for the parties, we do not findany merit in the appeals. 5.The assessee was granted registration on 27.3.2001. The saidregistration was cancelled by the CIT(C), Ludhiana vide order dated30.1.2008 retrospectively from 1.10.2004 on the ground that the activities ofthe assessee were not genuine and charitable allegedly on account ofadditions made during the assessment proceedings for the assessment years2005-06 and 2006-07. The Tribunal while allowing the appeal of theassessee had noticed that the first addition was in respect of unaccountedcash found and seized from the residence of the trustees of the assessee. Inthe quantum appeal, the revenue's appeal was dismissed by confirming therelief granted to the assessee. As far as unaccounted payment of ` 8 lakhsmade to M/s R.K. Engineering Works is concerned, the same had beendeleted and no appeal was filed against the deletion of the addition. Theissue regarding unexplained cash transfer entry was also decided in favourof the assessee. Further, the assessee had been granted registration again on30.11.2008 which was made effective from the assessment year 2008-09finding the activities of the assessee as genuine and the objective beingcharitable. The relevant findings recorded by the Tribunal read thus:- “We have heard both the sides in detail. The registrationof the assessee which was granted on 27.3.2001 wascancelled by the order dated 30.01.2008. Thiscancellation was based on the three additions made to the “We have heard both the sides in detail. The registrationof the assessee which was granted on 27.3.2001 wascancelled by the order dated 30.01.2008. Thiscancellation was based on the three additions made to the income of the assessee for Assessment Year 2005-06 and2006-07. The first addition was in respect ofunaccounted cash found and seized from the residence oftrustees of assessee. In the quantum appeal, we havedismissed the revenue's appeal by confirming the reliefgranted to assessee, therefore, this ground forcancellation no more survive before us. Secondly, theunaccounted payment of ` 8 lakhs made to M/s R.K.Engineering Works has also been deleted and no appealhas been filed against the deletion of the addition.Therefore, in our considered view, this ground also doesnot survive. The third ground of unexplained cashtransfer entry has also been decided in favour of theassessee. Therefore, all the issue on which registrationwas cancelled did not survive. The assessee has beengranted registration again on 30.11.2008 although it wasmade effective from Assessment Year 2008-09. The CIThas found the trust and its activities as genuine and theobjectives have been found charitable. These objectiveswere found charitable at the time of initial registration.The additions made to the income of Trust have beendeleted in the quantum appeal. Nothing survives whichcan be made basis for denial of registration. Therefore,in our considered view, there is nothing on record onwhich the assessee can be denied the continuation of theregistration.” 6.The Tribunal while allowing the appeal bearing ITA-1841/Del/2011 as impugned by the revenue in ITA-286-2012 has noticed asunder:- “We have heard both the sides in detail. The additionwas based on the cancellation of the assessee trust u/s12AA and denying the exemption u/s 11 of the Act.Since we have allowed the appeal of the assessee forgranting the registration, therefore, we set aside theorders of the authorities below.” 7.Further, the Tribunal while allowing the appeal bearingITA/972/Del/2011 of the assessee against the order of the CIT(C), Ludhianafor denying the approval of exemption under Section 80G of the Act againstwhich the revenue has filed ITA-277-2012 before this Court, had observedas under:- “We have heard both the sides on the issue, The CIT,Central, Ludhiana declined the approval of the assesseefor exemption u/s 80G on the basis of the cancellation ofregistration of the assessee trust u/s 12AA. Since wehave allowed the assessee's appeal against thecancellation of registration, therefore, we allow theassessee's appeal on this ground also and set aside theorder of the CIT and direct to grant the exemption u/s80G.” ITA-276-2012 Accordingly, the substantial questions of law are answered against therevenue and in favour of the assessee. The appeals stand dismissed.