Reserved on 11.04.2017 Delivered on 07.07.2017 Court No. 3 Case : INCOME TAX APPEAL No. 74 of 2015 Appellant : Dr. Bhim Rao Ambedkar Educational Society Through President Respondent : Commissioner Of Income Tax (Exemption) Ashok Marg Lko. Counsel for Appellant : Ashish Raj Shukla Counsel for Respondent : Alok Mathur Hon'ble Sudhir Agarwal,J. Hon'ble Dr. Kaushal Jayendra Thaker, J. (Delivered by Hon'ble Sudhir Agarwal, J. under Chapter VII Rule 2 of Allahabad High Court Rules, 1952) 1. This is Assessee's appeal under Section 260A of Income Tax Act, 1961 (hereinafter referred to as "Act, 1961") arising from judgment and order dated 31.03.2015 passed by Income Tax Appellate Tribunal, Lucknow (hereinafter referred to as "Tribunal") in ITA No. 548/LKW/2012 dismissing appeal and confirming order dated 03.09.2012 passed by Commissioner of Income Tax II, Lucknow (hereinafter referred to as "CIT II") cancelling registration granted under Section 12AA(1)(b)(i) of Act, 1961 by exercising power under Section 12AA(3) of Act, 1961. 2. appeal was admitted on following two substantial questions of law: "1. Whether on facts and in circumstances of case, Income Tax Appellate Tribunal was legally justified in upholding order of Commissioner of Income Tax under section 12AA (3) of Income Tax Act withdrawing registration granted under Section 2 12AA(1)(b)(i) of Act by Commissioner to appellant by order dated 01.05.2008 in compliance to order of Tribunal dated 31.01.2008? 2. Whether on facts and in circumstances of case, Income Tax Appellate Tribunal was justified in allowing Commissioner to travel beyond grounds taken by him in show cause notice dated 27.02.2012 de hors interpretation of amended deed dated 21.09.2002?" 3. Brief facts giving rise to present appeal are as under. 4. Dr. Bhim Rao Ambedkar Educational Society, Village Dharsania, Post Asaini, District Barabanki was registered as "Society" under Societies Registration Act, 1860 (hereinafter referred to as "Act, 1860") by Registrar of Societies, U.P. on 22.03.1994. Memorandum of Society was amended on 21.09.2002 with view to establish Dental College and Dental Hospital for benefit of local people in rural area. Aims and objectives contained in Items No. 10, 11, and 12 of amended Memorandum, read as under: "10- MsUVYk dkyst dh fu%'kqYd LFkkiuk o lapkyu djuk 'kklu dh iwoZ vuqefr ysus ds i'pkr 11- MsUVy ,twds'ku ls lEcfU/kr f'k{k.k o izf'k{k.k dh O;OkLFkk djuk vkSj mlls LkEcfU/kr leLr tkudkjh nsuk rFkk yksxksa dks tkx:d dj fu%'kqYd izpkj izlkj dk dk;Z djukA 12- MsUVy fpfdRlk dh fu%'kqYd O;OkLFkk djukA" "10. Free Establishment and Operation of Dental College after prior sanction of state. 11. Making arrangements for education and training related to Dental Education and providing all informations related to it and to do work of free advertising by making people aware. 3 12. Making arrangements for free Dental Treatment." (English translation by Court) 5. Approval from Government was obtained in 2002 and thereafter Dental College was set up in name of Chandra Dental College and Hospital at Safedabad, Barabanki. It was duly recognized by Dental Council of India, New Delhi (hereinafter referred to as "DCI") which prescribes courses run by Dental Colleges and monitored by DCI. Dental College is affiliated with Avadh University, Faizabad for purpose of conducting examination. It had 40 seats for first academic session in year 2003 04. Fee to be charged by Medical and Dental Colleges is fixed by Committee constituted by State Government in view of Supreme Court's judgment in Islamic Academy of Education and another vs State of Karnataka and others, 2003(6) SCC 697. Pursuant thereto fee of students undergoing dental course in College, run by appellant, was fixed tentatively by said Committee, as communicated by State Government vide letter dated 07.09.2005, at Rs. 1,50,000/ lacs per Session for 2004 05 and 2005 06. Subsequently it was finally determined at Rs. 1,72,000/ for Session 2004 05, 2005 06 and 2006 07 vide Government's letter dated 17.07.2006. 6. As per counsel's advise, Assessee filed application in office of CIT II, under Section 12A of Act, 1961, for registration. It was received in office of CIT II on 11.04.2007. CIT II, however, vide order dated 19.10.2007 rejected application for registration by referring to Section 12AA(1)(b)(i) of Act, 1961. Thereagainst Assessee preferred appeal and Tribunal allowed same vide judgment dated 31.01.2008, reported in 2008(114) TTJ 965 (Lucknow) (URO), and directed CIT II to grant registration under Section 12AA of Act, 1961. Consequently order was issued on CIT II on 01.05.2008 granting registration to Assessee Society w.e.f. 01.04.2007. 4 7. survey was conducted under Section 133A of Act, 1961 on 24.02.2009 in which Assessee disclosed and surrendered amount of Rs. 1.10 crores of anonymous donations towards construction cost of building for Assessment Years 2007 08 and 2008 09. surrendered amount included amount invested in construction of building and also under miscellaneous heads. It also admitted and paid tax on said amount under Section 115BBC of Act, 1961. In consequence to survey, Assessing Officer made assessment order dated 31.12.2010 making addition of Rs. 4,14,19,828/ , apropose estimated higher cost of construction in Assessment year 2008 09. Assessing Officer further denied benefit of Section 11 of Act, 1961 for Assessment Year 2008 09 on ground that anonymous donations are merely camouflaged capitation fee showing profit making activity hence Society is not running as charitable institution and not eligible for exemption under Section 11 of Act, 1961. 8. In appeal preferred by Assessee, CIT(A) vide order dated 05.09.2011, not only deleted aforesaid addition but also held that it was charitable institution under Section 2(15) and eligible for exemption under Section 11 of Act, 1961 and issued directions accordingly. Revenue preferred appeal but Tribunal dismissed same vide order dated 28.05.2013 in ITA No. 658/LKW/2011. 9. Further on basis of survey report dated 24.02.2009 conducted under Section 133A, Assistant Commissioner Income Tax (hereinafter referred to as "ACIT") sent proposal dated 27.12.2011 for withdrawal of registration under Section 12AA. Said recommendation was endorsed by Joint Commissioner of Income Tax (hereinafter referred to as "JCIT") vide letter dated 27.01.2012. Consequently show cause notice dated 27.02.2012 was issued under Section 12AA(3) proposing cancellation of registration on following grounds: 5 "i) society's funds are not being utilized solely for charitable purposes. It is seen that imprest account in name of Shri C. P. Chaudhary, President is being maintained in books of society and various incoming & outgoing entries were found therein. However, purpose of utilization thereof for charitable purposes could not be established as Assessee could not satisfactorily explain same before AO at time of assessment proceedings. ii) funds of society are stated to be used for payments for purchase of land but society doesn't have documentary evidences showing registry of land. society also does not have proof to substantiate utilization of alleged advance to various parties which shows that amount of Rs. 53,10,070/ has been used for other than charitable purposes. iii) During course of survey operations on 24.02.2009, sum of Rs. 1.10 crores was surrendered by Society and amount was bifurcated in F.Y.s 207 08 & 2008 09 (relevant to A.Y.s 2008 09 & 2009 10) and surrendered amount includes amounts invested in construction of building and also under Miscellaneous heads. This implies that society is also getting income from unknown sources which are not recorded in books of accounts. iv) funds of society are being used for benefit of members of society instead for objects of society. v) society is being run as commercial venture and is earning profits which implies that it is not being run as charitable organization." 10. Assessee submitted explanation and after considering same, CIT II, passed order dated 03.09.2012 canceling registration. On ground no. 2, CIT II accepted explanation tendered by Assessee but on other grounds explanation was not found satisfactory, hence registration was 6 cancelled. Assessee then preferred appeal before Tribunal, who has rejected same vide order dated 31.03.2015. 11. Sri R.P. Shukla, Advocate holding brief of Sri A.R. Shukla, learned counsel appearing for appellant, has advanced submissions orally and also submitted written submissions. His contention is that Tribunal though found explanation of Assessee in respect of four issues which were not accepted by CIT II still it has found new ground for affirming order passed by CIT II in respect whereto no opportunity was afforded to Assessee and, therefore, judgment of Tribunal is erroneous, illegal and in violation of principle of natural justice. He contended that Assessee did not get any opportunity to meet new ground make out by Tribunal. It has also ignored fact that on similar ground, earlier registration itself was cancelled and that judgment of CIT(A) was set aside by Tribunal. He stressed upon that Revenue authorities could not have travelled beyond show cause notice and reliance is placed on judgments in Commissioner of Customs, Mumbai vs. Toyo Engineering India Limited, 2006(7) SCC 592 (SC) and Commissioner of Income Tax XIII vs. Shri Ashish Rajpal, 2010(320) ITR 674 (Delhi). He further urged that Tribunal has upehld order of CIT II cancelling registration on interpretation of Clauses 8, 10, 11 and 12 of Memorandum of Society. This was ground taken by CIT II earlier when application for registration was rejected vide order dated 19.10.2007. CIT II mentioned in order, In objectives of Society fact of free treatment of patients and free imparting of Health Education has been emphasized even though in accounts OPD receipts have been shown. This gives impression that real objective has been camouflaged. This order of CIT II dated 19.10.2007 was set aside by Tribunal vide judgment and order dated 31.08.2008 in ITA No. 670/Luc/2007 relying on judgment of this Court in Commissioner of Income Tax vs. Red Rose School (2007) 163 Taxman 19 observing that Government Agencies have full control and check over college. 7 Society set up College for educational purposes without any profit motive. fee being charged by College is just sufficient for maintaining and running College. It is in terms of fee prescribed by CPMT for its affiliated Colleges. In addition, College has set up dental 100 chair OPD clinic with full qualified doctors and surgeons providing free treatment to villagers at nominal registration fee of Rs. 5 only. College daily attends to about 75 100 patients and provide dental treatment. said order of Tribunal attained finality. Thereupon CIT granted registration and that being so it was not open for Tribunal while passing impugned judgment and order to take different view. In fact Tribunal this time has upheld view taken by Tribunal earlier which has been set at naught by Tribunal's earlier judgment and this was not permissible for Tribunal since earlier order has attained finality and that was binding and no revivable by Tribunal while passing impugned judgment. inter parties judgment binds parties when Court of Competent Jurisdiction has decided lis and that issue could not have been re agitated at subsequent stage. Reliance is placed on Parashuram Pottery Works Co. Ltd. vs. Income Tax Officer, Circle I, Ward A, Rajkot, 1977 (106) ITR 1 (SC); Commissioner of Income Tax, Central vs. L.G. Ramamurthi and Ors., 1977(110) ITR 453 (Mad); Sirpur Paper Mills Ltd. vs. Income Tax Officer, "A" Ward and Anr., 1978(114) ITR 404 (AP); Seshasayee Paper and Boards Ltd. vs. Inspecting Assistant Commissioner of Income Tax, 1986(157) ITR 342 (Mad.); Commissioner of Income Tax vs. Kamla Town Trust, 1992(198) ITR 191 (All.); Gorie Gouri Naidu (Minor) and another vs. Thandrothu Bodemma and others, AIR 1997 SC 808; S.I. Rooplal and Anr. vs. Lt. Governor and others, 2000(1) SCC 644; Sayaji Iron and Engg. Co. vs. Commissioner of Income Tax, 2002(253) ITR 749 (Guj.); Agrawal Warehousing and Leasing Ltd. (now Admanum Finance Ltd.) vs. Commissioner of Income Tax, 8 2002(257) ITR 235 (MP); and, Commissioner of Income Tax vs. Excel Industries Ltd., 2013(358) ITR 295 (SC). 12. Sri Alok Mathur, learned counsel appearing for Revenue submitted that order passed by Tribunal earlier, when application for registration was to be considered, based on different facts which order of cancellation has been passed looking into facts which have actually been revealed in subsequent assessment proceedings as also survey conducted at premises of Assessee, hence it is not based on mere objectives disclosed by Assessee in its Memorandum. He drew our attention to order of CIT II wherein it has referred to amount shown by Assessee in his account and received from students which is to tune of Rs. 2,17,15,050/ for Assessment Year 2006 07, and reached to Rs. 6,54,92,104/ in Assessment Year 2011 12. He stated that categorical finding has been recorded that Society is not being run according to objects, i.e., free health education and establishment of dental college without fee. He also pointed out that Society if charging nominal fee to maintain its expenses etc., it may not have effect of loosing its character of charitable trust but when specific object of Society is to establish and run dental college without any charge and such Society realize huge fee from students, it would be case where Society is not running according to its objects and, therefore, Section 12 AA(3) of Act, 1961 has rightly been applied by CIT II in cancelling registration order. He stated that Tribunal has not reviewed its earlier order or made out new case inasmuch as Tribunal earlier considered law that at time of registration which was to be seen at that time, i.e., whether objects laid down in bye laws are charitable or not but for purpose of attracting Section 12 AA(3) it is to be examined whether objectives of trust are actually carried out or not which is based on actual activities undertaken by Assessee. 9 13. We have head learned counsel for parties at length and perused record. 14. We have gone through entire order of Tribunal and do not find that it has reversed findings of CIT II recorded in order dated 03.09.2012 on any of grounds on which notice was issued to Assessee proposing cancellation of registration under Section 12 AA(3). It has clearly recorded finding that CIT II was satisfied that activities of trust or institution are not genuine, nor being carried out according to objectives of institution and thereafter has further proceeded to refer to amended Memorandum of Society to observe that Society is not being run as per its objectives set out in Memorandum of Association. Tribunal has not confirmed order on any new ground but upholding entire order of CIT II it in its own wisdom, it has stressed on factum that Society is not run as per objective set out in Memorandum. 15. Now it leads us to go to order passed by CIT II. first ground is regarding imprest account in name of Sri C.P. Chaudhary, President of Society, showing advancement of certain funds to him without any satisfactory explanation about use of such funds for purpose of Society. One of such illustration given by CIT II is advancement of Rs. 5,50,000/ to Dr. C.P. Chaudhary on 28.08.2008. It was sought to be explained by Assessee as advance made to one Sri Ram Naresh Koli, Member of Society, who possess certain piece of land. Assessee explained that funds were advanced to Dr. C.P. Chaudhary for further advancement of Sri Koli since he was Dalit and there is restriction of transfer of land possess by Dalit to non Dalit. This explanation and manner of advancement of such fund to Sri Koli has not been accepted by CIT II. It has clearly recorded finding that books of Society do not show Sri Koli as Debtor to extent of Rs. 4,50,000/ , who is said to have funds advanced for purchase of 10 land. CIT II has held that said money was withdrawn by Dr. Chaudhary for some other purposes. CIT II has further examined genuineness of explanation given by Assessee and has recorded its finding as under: Another feature of land purchased by Sri Koli is that sale deed puts price of land at Rs. 4,50,000/ only while price of land for stamp duty purposes is taken at Rs. 38,09,000/ . In order to determine genuineness of sale price Jt. Commissioner of Income tax, Range 5, was asked to get inquiries conducted at Barabanki to find out price prevailing in area around this time. Income tax Officer, Barabanki could obtain sale deed of property No. 193 which was purchased by asessee society itself on 15.05.2008 for Rs. 43,00,000/ whereas price for stamp duty purposes was Rs. 62,86,000/ . first land measures 0.303 hectares and area of second is 0.513 hectares. What is important is that official rate of 1 st land is Rs. 6,00,000/ per Bigha, while that of 2 nd land is Rs. 5,00,000/ per bigha. This establishes fact that correct purchase price of first price of land has been deliberately suppressed by buyer and seller has been paid in some undeclared manner. To sum up, as per evidence available amount of Rs. 5,50,000/ withdrawn by Dr. C.P. Chaudhary from Society on 28.08.2008 could not have been utilized for purchasing land standing in name of Sri Ram Naresh Koli and has been utilized by him for some unspecified personal purpose. This goes to show that all activities of society are neither genuine nor are being carried out in accordance with objects of society, thereby contravening provisions of Section 12AA(3) of I.T. Act. 16. second ground was use of Rs. 53,10,070/ which Society sought to explain as advancement of money for purchase of land. 11 Regarding this ground explanation of Assessee has been accepted and, therefore, order of cancellation is not founded on this ground. 17. Third ground was surrender of Rs. 1.10 crore in survey dated 24.02.2009. amount surrendered by Assessee in survey was bifurcated in Assessment Year 2008 09 and 2009 10 in following manner and different heads, as under: Head A.Y. 2008 09 A.Y. 2009 10 Building Construction 65,00,000/ 20,00,000/ Advance to Staff 1,30,000/ Cash in hand 8,70,000/ 15,00,000/ 18. CIT II has noted that there was no entry in accounts book of Assessee. Neither it was recorded in books of account nor list of donors was made available. CIT II, therefore, did not accept Assessee's version that said amount was generated by Assessee in course of pursuing objects of trust. It has also noticed that as result of surrender of aforesaid amount of Rs. 1.10 crore, tax has also been paid by Assessee which means that it was not exempted income under Section 11 of Act, 1961. CIT II has taken this aspect showing activities of Society, which are neither genuine nor in accordance with objects of Society. 19. Next ground which has found favour against Assessee is that funds are used for benefit of Members of Society and lastly that Society is not being run as charitable organization but as commercial organization. 20. Therefore, out of five grounds in respect of ground no. 2 only Assessee's explanation has been accepted by CIT II but rest four grounds have been upheld for passing order of cancellation of registration. No part of findings of CIT II has been reversed by Tribunal. It has affirmed view taken by CIT II but for purpose of discussion has relied more on findings of CIT II with respect to ground no. 5. It is not new ground as it is already part of ground no. 5 mentioned in show cause 12 notice. contention of learned counsel for appellant that Tribunal has made out new case, we find unacceptable and contrary to record, hence it is rejected. 21. So far as proposition of law that no new ground can be taken before Tribunal which is not part of show cause notice, in our view, is not at all applicable in present case. Appellant has tried to make out case which is not evident from record and in fact ground which has been stressed by Tribunal in confirming order passed by CIT is part of ground no. 5 which is one of four grounds on which registration was cancelled by CIT II, hence neither judgments relied by appellant, in our view, are applicable in case in hand nor same help appellant in any manner. 22. So far as argument regarding observations made by Tribunal when application for registration was considered, we find has rightly been distinguished by Tribunal. When order is to be passed on basis of activities of Assessee having already taken and borne out from record, same have to be examined not on mere averments contained in Memorandum of Society but in light of actual activities carried out by Society which was not position when issue of grant of registration was to be considered. 23. In result, we answer both questions formulated above against Assessee, i.e., appellant and confirm order passed by Tribunal. 24. appeal lacks merit. Dismissed with costs throughout. Order Date : 07.07.2017 AK BhimRaoAmbedkarEducationalSociety v. CommissionerofIncome-tax(Exemption), Lucknow