M/s Sri Shirdi Sai Nitya Annadana Charitable Trust, Kakinada v. The Commissioner of IncomeTax, Rajahmundry

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NO.486/VIZAG/2009 ASSESSMENT YEAR : N.A. SRI SHIRDI SAI NITYA ANNADANA CHARITABLE TRUST KAKINADA CIT RAJAHMUNDRY (APPELLANT) VS. (RESPONDENT) PAN NO.AAITS 3670R APPELLANT BY: SHRI D.L. NARASIMHA RAO ADVOCATE RESPONDENT BY: SHRI G.S.S. GOPINATH DR ORDER PER SHRI S.K. YADAV JUDICIAL MEMBER:- THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT DENYING THE REGISTRATION U/S 12AA OF THE ACT ON VAR IOUS GROUNDS WHICH ARE AS UNDER:- 1. THE ORDER OF THE LD. CIT RAJAHMUNDRY DECLINING TO GRANT REGISTRATION U/S 12AA OF THE ACT TO THE APPELLANT-C HARITABLE TRUST PASSED IN F.NO.H.QTR/III/199/CIT/RJY/08-09 DATED 28 TH AUGUST 2009 IS ERRONEOUS BOTH IN LAW AND ON FACTS OF THE C ASE; 2. THE LD. CIT OUGHT TO HAVE APPRECIATED THE FACT THAT THE APPELLANT- TRUST WAS FORMULATED ONLY TO SERVE THE PUBLIC AT LA RGE WITHOUT ANY DISCRIMINATION IN TERMS OF CASTE CREED OR RELIGION AS EVIDENCED BY THE TRUST DEED AND THERE IS NO RECITAL IN THE AFO RESAID DEED TO TESTIFY THAT THE ACTIVITIES OF THE TRUST ARE RESTRI CTED TO A CLASS OF PEOPLE ONLY; 3. THE LD. CIT OUGHT TO HAVE NOTICED THAT SIMPLY BECAU SE THE MANAGING TRUSTEE IS ACTIVELY ASSOCIATED WITH THE AF FAIRS OF THE TRUST IT DOES NOT APPEAR REASONABLE TO ARRIVE AT A PRIMA FACIE CONCLUSION UNDER THE CLOUDS OF SUSPICION THAT THERE WAS AN ELE MENT OF COMMERCIALITY IN THE ACTIVITIES OF THE TRUST PARTIC ULARLY IN THE CONTEXT OF PROVIDING MEALS FREE OF COST TO THE GENE RAL PUBLIC WITHOUT ANY SORT OF DISCRIMINATION; 4. BY NOT SUPPLYING THE COPY/COPIES OF ANY STATEMENTS PURPORTED TO HAVE BEEN OBTAINED BY THE DEPARTMENTAL OFFICIALS FR OM CERTAIN PERSONS MANAGING THE DAY TO DAY ACTIVITIES WHICH W ERE MAINLY TAKEN AS A BASIS FOR ARRIVING AT THE CONCLUSION THA T THE ACTIVITIES OF THE TRUST WERE NOT CHARITABLE IN NATURE THERE DID EXIST A CLEAR VIOLATION OF PRINCIPLES OF NATURAL JUSTICE AND ON T HIS TECHNICAL FLAW 2 ITSELF THE IMPUGNED ORDER OF THE CIT IS LIABLE TO BE QUASHED IN LIMINE. 5. THE LD. CIT OUGHT TO HAVE NOTICED THAT IN THE ABSEN CE OF ANY DOCUMENTARY EVIDENCE TO ESTABLISH THAT THE APPELLAN T TRUST VIOLATED THE OBJECTS FOR WHICH IT CAME INTO EXISTENCE DENIA L OF REGISTRATION U/S 12AA OF THE ACT IS AGAINST THE PROVISIONS OF LA W. 6. FOR THESE REASONS AND OTHER REASONS WHICH MAY BE AD VANCED DURING THE COURSE OF HEARING OF THE APPEAL IT IS P RAYED THAT THE APPEAL MAY BE ENTERTAINED AND THE HON'BLE ITAT MAY BE PLEASED TO DIRECT GRANT OF REGISTRATION U/S 12AA OF THE ACT SO AS TO BE IN CONFIRMITY WITH THE PROVISIONS OF LAW. 2. DURING THE COURSE OF HEARING THE LD. COUNSEL FO R THE ASSESSEE HAS SUBMITTED THAT THE CIT HAS COLLECTED SOME EVIDENCE AND MADE INQUIRIES AT THE BACK OF THE ASSESSEE. WHATEVER EVIDENCE WAS CO LLECTED IT WAS NEVER CONFRONTED TO THE ASSESSEES. THE CIT HAS RELIED UP ON THESE EVIDENCES WHILE DENYING THE REGISTRATION U/S 12A OF THE I.T. ACT. T HE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT ACTION OF THE CIT IS AG AINST THE PRINCIPLE OF NATURAL JUSTICE AS SUCH THE MATTER MAY BE SENT BACK TO HIM WITH DIRECTION TO ADJUDICATE THE ISSUE OF REGISTRATION AFTER CONFRONT ING THE MATERIAL OR THE EVIDENCE COLLECTED TO THE ASSESSEE AND ALSO AFTER A FFORDING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEES. THE LD. D.R. DID NOT DISPUTE THIS FACTUAL ASPECT. 3. WE HAVE CAREFULLY PERUSED THE ORDER OF THE CIT I N THE LIGHT OF RIVAL SUBMISSIONS AND WE FIND THAT CIT HAS COLLECTED SOME EVIDENCE AND THE MATERIAL FOR DENYING THE REGISTRATION U/S 12AA OF T HE I.T. ACT. BUT IT IS NOT CLEAR FROM THE ORDER WHETHER THE EVIDENCE COLLECTED BY THE CIT WAS EVER CONFRONTED TO THE ASSESSEES. IN THESE CIRCUMSTANCES WE ARE OF THE VIEW THAT THE PRINCIPLES OF NATURAL JUSTICE HAS BEEN VIOLATED AND WE THEREFORE SET ASIDE THE ORDER OF THE CIT AND RESTORE THE MATTER TO HIS FILE WITH DIRECTIONS TO CONFRONT ALL THE EVIDENCE AND MATERIAL WHICH WERE C OLLECTED BY THE CIT AT THE BACK OF THE ASSESSEES AND TO OBTAIN HIS COMMENTS TH EREON BEFORE ADJUDICATING THE ISSUE OF REGISTRATION. CIT SHOULD ALSO AFFORD AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEES WHILE ADJUDICATING THE ISSUE OF REGISTRATION U/S 12AA OF THE ACT. 3 4. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 13.4.2010 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM DATED 13 TH APRIL 2010 COPY TO 1 MANAGING TRUSTEE SRI SHIRDI SAI NITYA ANNADANA C HARITABLE TRUST DOOR NO.67-2-4 SRI SHIRDI SAI TEMPLE STREET ASHOK NAGA R KAKINADA-533 003 EAST GODAVARI DISTRICT. 2 CIT RAJAHMUNDRY. 3 THE CIT(A) RAJAHMUNDRY 4 THE DR ITAT VISAKHAPATNAM. 5 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM