Whether The Tribunal Ts Correct In Law And Facts, Inrelying Upon The Aecision Ofkajasthan High Court In The Caseof Cii v. M/S Vijaya Mahantesh Vidyavardhak Sangha

IN THER HIGH COURT OF KARNATAKDHARWAD BENCH ON THE 23 DAY OF JULY, 2015 BEEBEO THE HON’BLE MR. JUSTICE RAVI MALIMATH AND THE HON’BLE MR. JUSTICE P.S. DINESH KUMAR LT.A.NO.5023/2011 BETWEEN THE COMMISSIONER OF INCOME TAXKHEMJIBAI COMPLEX Dr. AMBEDAKAR ROAI BELGAUM APPBLILANT (By Sri. Y V RAVIRAJ, ADV.., AND M/s. VJAYA MAHANTESH VIDYAVARDHAKSANGHA, HUNGUND BAGALKOT DISTRICT ~~. RESPONDENT (By Sti SANGRAM S KULKARNI, ADV.,) THIS ITA FILED U/SEC.260A OF THE INCOME TAX ACT,1961 AGAINST ORDER PASSED IN ITA.NO.150/PNJ/2010 DTD;952011 ON TJHEK FILER OR THR INCOME TAX APPELLATTRIBUNAL, PANAJI BENCH, PANAJI, ALLOWING THE APPEALFILED BY AN ASSEKSSEE RESKBRVED ON30.6.2015PRONOUNCED ON 23.07.2015 THIS APPEAL COMING ON THIS DAY, P.S.DINESH KUMAR J.DERBELIVEBRED THER FOL L JUDGMENT Revenue has preferred this appeal calling 1n question theorder dated 9.5.2011 in ITA No.150/PNJ/2010 passed by theIncome Tax Appellate Tribunal, Panaji Bench, Panaji (ITAT’ forshort). ? This appeal was admitted on 10.12.2012 to consider the following questions of law:- 1)Whether the Tribunal ts correct in Law and Facts,holding that the respondent assessee society's action inmaintaining separate account in respect of vermucular projectwithout bringing into society's account which 1s mandatory inview ofprovisions of Section 11 that assessee should maintainbooks ofaccount in respect ofgrants, income recewed by wt anaits utilization? 2)Whether the Lribunat is correct in Law and facts,holding that the respondent asssessee 1s not required to takethe grant of money recewed from the Govt. of India, in tsbooks which 1s contrary to the provisions of Sec. 30G()(wv) ofthe Income Lax Act, 1961, which require maintenance ojregular books of account in oraer to claim exemption underSec.80G of the I. 1.Act, 1961 3)Whether the IL_AL ts correct in law andfacts, holdingthat the respondent assessee society has not committed anyfault of not accountingfor such grant money as income of theassessee and utilize the same to the extent of 855% which tmandatory in view ofprovisions of Sec.11(2) of the IL AtT9I6T 4)Whether the tribunal is correct in law ana facts, inholding that respondent assessee society cannot bepunishedforthe misappropriation of funds by the Chairman and theSecretary of the society as the same would defeat the verypurpose and intention of the Legislature in bringing theprovisions ofSec.13 ofthe I] Act 1967¢ 5)Whether the tribunal ts correct in law and facts, inrelying upon the aecision ofKajasthan High Court in the caseof CII v. Cosmopolitan Education Society reported in 244IIR 495 when the facts and circumstances were totallyaafferent that of the case of the respondent in whose case hasreported various discrepancies and violations which inatcate nolonly the Chairman ana Secretary but also the responaentassessee has violated in aischareing its duties and as such thedecision relied upon by the Lribunal ts not applicable to thejacts ofthe case¢ 5)Whether the tribunal ts correct in law and facts, inrelying upon the aecision ofKajasthan High Court in the caseof CII v. Cosmopolitan Education Society reported in 244IIR 495 when the facts and circumstances were totallyaafferent that of the case of the respondent in whose case hasreported various discrepancies and violations which inatcate nolonly the Chairman ana Secretary but also the responaentassessee has violated in aischareing its duties and as such thedecision relied upon by the Lribunal ts not applicable to thejacts ofthe case¢ 4 The facts leading to this case are that the respondentfiled an application for renewal of exemption under Section 80Gof the Income Tax Act, 1961 [‘Act’ for short] before theCommissioner of Income Tax, Belgaum, who vide order dated28.35.2010 rejected the said application. It was contended by threspondent that it 1s running various educational institutions inBagalkot District. It had also founded a foundation namely., ‘S.S.Kadapatti Agriculture and Rural Development Foundation’ toundertake Vermiculture Project, which was sanctioned byGovernment of India involving manufacture of organic manures.In terms of the order passed by the Ministry of RuralDevelopment, the project was to be implemented by VyayMahantesh Vidyavardhak Sangha and co-ordinated by ZillaPanchayat, Bagalkot. Out of total sanctioned grant of Rs.4.26|Crores, first installment of Rs.1,29,74,000/- was sanctionedduring the year 2000-07. On these among other reasons,respondent sought for renewal of exemption under Section 80G.The Commissioner has held in his order that receipt of a sum ofRs.1,18,50,000/- from the Government towards Vermiculture project during the year 2007-2008 and details of transactions withregard to expenses of Rs.71,47,430/- said to have been incurredwere not reflecting in the books of accounts of the Society. Theaccounts revealed only some of the advances given to theVermiculture Project and therefore the applicant was called uponto explain. A Consultant on behalf of the respondent sought toexplain that the Society had spent a sum of Rs.61,30,812/-towards capital expenditure and Rs.10,16,078/- on revenueexpenditure on Vermiculture Project. The Commissioner did notaccept the claim of the Society made through the Consultant. TheCommissioner also noted that certain advances were given tooutside institutions. On consideration of the material before him,the Commissioner ultimately held that the respondent was noteligible for consideration of the application for exemption underSection 80G(5) and rejected the same as per Section 80G(5)(1) ofthe Act. The said order passed by the Commissioner was|challenged by the assessee — respondent before the ITAT, Panayjtwhich came to be allowed by the impugned order. Hence, thisappeal. A We have heard Sri Y.V. Raviraj, learned standingCounsel for Income Tax Department and Sri Sangram S.Kulkarni, learned Counsel for the respondent and perused therecords. 5)Learned Counsel for the Revenue mainly contendsthat the exemption under Section 80G is extended to certaininstitutions, which are doing youmen services. Such exemption 1ssubject to certain conditions, whichanter altg“include maintenanceof proper accounts. 6.Assailinge the order of the ITAT, learned Counsesubmits that the Tribunal erred in reversing the order of theCommissioner of Income Tax without there being any cogentreasons to do so. He draws our attention to the reasoning of theimpugned order in paragraph — 16 of the impugned order,wherein, the Tribunal has considered the merits of the case andattived at a conclusion that the dispute is only with regard tosome advances given to the Vermiculture Project by the Societyand the Society had treated the said project as a separate entity and a separate account of the project was maintained. TheTribunal, on this premise held that the project belonged to theassessee — Society. 6.Assailinge the order of the ITAT, learned Counsesubmits that the Tribunal erred in reversing the order of theCommissioner of Income Tax without there being any cogentreasons to do so. He draws our attention to the reasoning of theimpugned order in paragraph — 16 of the impugned order,wherein, the Tribunal has considered the merits of the case andattived at a conclusion that the dispute is only with regard tosome advances given to the Vermiculture Project by the Societyand the Society had treated the said project as a separate entity and a separate account of the project was maintained. TheTribunal, on this premise held that the project belonged to theassessee — Society. TLearned Counsel for the Revenue submits that theappellate authority has only recorded some of the contentions ofboth parties and finally held that the Commissioner of IncomeTax has proceeded on a wrong premise to hold that financial helprendered by the assessee was similar to loan. He contends thatthe Tribunal has further held that such assumption by theCommissioner was not sustainable on facts to deny the benefit ofregistration to the respondent and allowed the appeal on suchefroneous assumptions. The learned standing Counsel, furthersubmits that the issue involved in the case is, that the respondent— assessee had admittedly received large sums of money from theCentral Government for the Vermiculture Project which were notreflecting in the Books of the respondent — Society. TheCommissioner of Income tax had meticulously gone into eachaspect of the matter and passed a detailed order. On the otherhand, the Tribunal has not re-examined the issue 1n detail with reference to the factual matrices of the case insofar as the income,expenditure and maintenance of the accounts by the respondent tsconcerned, while reversing the findings recorded by theCommissioner. The Tribunal ought to have re-examined thematter afresh and passed the order with cogent reasons fullybacked by narration of facts of the case. Hence, the impugnedorder is liable to be set aside. 8 Per contra, learned Counsel appearing for therespondent while supporting the order of the Tribunal submitsthat the respondent — assessee is carrying on youmen service andsubmits that the tmpugned order does not suffer from anyillegality and prays for dismissal of the same. Q We have given our anxious consideration to thesubmission made at the bar and perused the records, 10.The principle ground upon which the Commissionerrejected the application is that proper accounts were notmaintained by the respondent — assessee. The Commissioner has laboured substantially in adverting to the various entries in theBooks to arrive at his conclusions. 11,Learned Counsel for the Revenue is right in hissubmission that the paragraphs dealing with the merits of the casein the impugned order passed by the Tribunal, do not advert toany factual matrices of the case insofar as the figures reflectingincome and expenditure which were adverted to by theCommissioner of Income Tax in extenso. The appellate authorityhas reversed the findings of the Commissioner. However, theimpuened order is not supported by reasons and does not suggestthat the Tribunal had re-appreciated the facts with reference tothe various financial entries found in the order passed by theCommissioner. Whenever an order is passed by a quasi — judicialauthorities either upholding or reversing a finding of lowerauthority, the appellate order must necessarily record cogentreasons with reterence to facts and reasons contained in the orderassailed before appellate authority. On perusal of the order of theTribunal, we are of the considered view that the Tribunal has notadverted to the various aspects of factual matrices, which resulted in rejection of application by the Commissioner. Admittedly, theTribunal is the last fact-finding authority. The Commissionerwhile rejecting the application has adverted to various aspects ofthe matter to support his reasoning. They include receipt andexpenditure by the Trust and posting of entries in the books ofaccounts of Trust. The whole intent and purpose of grantingexemption under section 80 to a Trust or an Organisation is tofacilitate the donors to get the benefit of tax exemption and at thesame time, the Trust or the organisation to get donations. Such aTrust or Organisations which perform their duties to further theiraims and objects are duty bound to maintain proper accounts.Admittedly, the applicant was enjoying the benefit of exemptionfor the previous years. It has taken a definite stand that accountswith regard to the project work 1s separately maintained. TheCommissioner has adverted to various aspects and rejected theapplication. Therefore, the Tribunal ought to have considered eachand every aspect and examined as to whether or not the findingsrecorded by the Commissioner are in accordance with law. In the circumstances, we feel 1t appropriate that the matter must bereconsidered by the Tribunal in the light of what 1s stated hereinabove. Accordingly, we deem it appropriate to remandthe matter to the ITAT for re-consideration. 172In the result, we proceed to pass the following:- ORDER $&'Appeal tsallowed, $&&'OrderdatedQ5 2011in.ITA No.150/PNJ/2010 passed by the Income Tax Appellate Tribunal, Panaji Bench, Panaji, ts setaside; andaside; and $&&&'The matter is remitted back to the IncomeTax Appellate Tribunal, Panaji Bench, Panajifor fresh consideration in accordance withlaw.Tax Appellate Tribunal, Panaji Bench, Panajifor fresh consideration in accordance withlaw. No costs. Sd/-JUDGE 94K Sd/-JUDGE