1 IN HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS 4TH DAY OF JUNE 2020 PRESENT HON BLE MR. JUSTICE ALOK ARADHE AND HON BLE MR. JUSTICE HEMANT CHANDANGOUDAR I.T.A. NO.173 OF 2011 BETWEEN: DIRECTOR OF INCOME-TAX EXEMPTIONS C.R.BUILDING QUEENS ROAD BANGALORE. APPELLANT (BY SRI.K.V.ARAVIND, ADV.,) AND: ST.ANN S EDUCATION SOCIETY NO.742, 6TH BLOCK RAJAJINAGAR BANGALORE 560010. RESPONDENT (BY SRI.A.SHANKAR, SENIOR COUNSEL FOR SRI. M.LAVA, ADV.) THIS ITA IS FILED UNDER SECTION 260-A OF I.T.ACT, 1961 ARISING OUT OF ORDER DATED 07.01.2011 PASSED IN ITA NO.796/BANG/2001, PRAYING THAT THIS HON BLE COURT MAY BE PLEASED TO: (I) FORMULATE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN, (II) ALLOW APPEAL AND SET ASIDE ORDERS PASSED BY ITAT, BNAGALORE IN ITA NO.796/BANG/2001 DATED 07.01.2011 CONFIRMING ORDER PASSED BY DIRECTOR OF INCOME TAX, EXEMPTIONS, BANGALORE, IN INTEREST OF JUSTICE AND EQUITY. 2 THIS ITA COMING ON FOR FINAL HEARING, THIS DAY, ALOK ARADHE J., DELIVERED FOLLOWING: JUDGMENT This appeal under Section 260A of Income Tax Act, 1961 (hereinafter referred to as Act for short) has been preferred by revenue. appeal was admitted by bench of this Court vide order dated 24.08.2011 on following substantial questions of law: (i) Whether tribunal was correct in holding that objects of assessee is of general public utility and is entitled to registration under Section 12AA of Act in view of its earlier order in M/s Karnataka Golf Association? (ii) Whether tribunal order is vitiated on account of non-consideration of legal evidence on record as set out in para 2 of substantial questions of law in appeal memo? 3 2. facts leading to filing of this appeal in nut shell are that assessee was registered as society under Karnataka Societies Registration Act on 14.10.1990 with object of establishing and conducting Nursery, Primary and Middle Schools and technical training institutes, teachers training school, adult education, tutorial college, child care center, cr che etc. assessee only established school sometime in 1994. Managers of assessee took another school being run by another association viz., M/s Vishwa Bharathi Vidhya Mandir. Since then, assessee did not file returns of income. assessee filed application for grant of registration under Section 12A(a) of Act on 17.09.1999. communication was issued to assessee calling for certain details including audited statement of accounts in Form No.10B for last 5 years and details of furnishing of returns of income. assessee filed reply on 27.07.2000 and furnished audited accounts upto 4 23.12.1998 and stated that assessee being engaged only in advancement of education, its income is exempt under Section 10(22) of Act and no returns of income have been filed. 3. Thereafter, search was conducted in premises of Sri.T.Balakrishna and concerns under Section 132 of Act on 13.07.1999 and subsequently, proceeding under Section 158BD of Act were initiated on 26.10.1999. During pendency of block assessment proceedings file was transferred to DIT (Exemptions), Bangalore on 01.10.2001. Thereafter, notice dated 05.10.2001 was issued to assessee to file audited accounts for year ending 31.03.1999 and 31.03.2000. However, same was not filed. assessee thereafter was heard. Director of Income Tax (Exemptions) vide order dated 31.10.2001, inter alia found that admittedly, assessee had borrowed substantial amounts in cash from various persons at high interest rates and repayment and interest 5 payments of such amounts have not been recorded in regular books of accounts. It was held that affairs of association was not conducted in transparent manner. It was noticed that for years 1994 and 1995, assessee had admitted that some voluntary contributions from parents were received. It was held that aforesaid voluntary contributions are amounts collected from parents to grant admissions to their children in schools. It was also held that aforesaid amounts were collected illegally. On basis of entries made in audited balance sheets, it was held that association did not have adequate book balance of cash and association recorded payments and therefore, cash was being maintained without recording same in books. It was also held that affairs of associations are not being conducted either in transparent manner or with view to achieve objects for which assessee was formed. It was also held that funds of assessee were diverted to 6 private limited companies of management. Thus, it was held that school was being run like proprietary concern of Sri.T.Balakrishna and existed on paper only as fa ade to enable management to make money. Accordingly, application under Section 12AA of Act was rejected. 4. Being aggrieved, assessee filed appeal before Income Tax Appellate Tribunal (hereinafter referred to as 'the Tribunal' for short). tribunal vide order dated 21.02.2005, inter alia held that as per provisions of Section 12AA(2) of Act, order on application for grant of registration under Section 12A of Act, either granting or refusing to grant registration has to be passed before expiry of six months. It was further held that application for grant of registration was filed on 17.09.1999 and order was passed on 31.10.2001 i.e., almost over period of two years. Thus, mandatory provision requiring order to be passed on application under Section 12A of Act 7 within six months has not been complied with. tribunal therefore, set aside order passed by Director of Income Tax (Exemptions) and direct authorities to proceed as if registration was granted under Section 12AA of Act. 5. revenue challenged aforesaid order in ITA No.2791/2005. division bench of this court by order dated 21.04.2010, remitted matter to tribunal to consider same afresh after reconsidering decision in case of KARNATAKA GOLF ASSOCIATION . tribunal by order dated 07.01.2011 placing reliance on decision of tribunal in case of KARNATAKA GOLF ASSOCIATION vs. DIRECTOR OF INCOME TAX (EXEMPTION) passed in ITA NO.175/BANG/2003 DATED 31.07.2003 inter alia held that assessee is entitled to registration under Section 12A of Act as object of assessee is object of general public 8 utility. In aforesaid factual background, this appeal has been filed. 6. Learned counsel for revenue while inviting our attention to para 3.6 of order passed by tribunal submitted that despite directions issued by this court, tribunal has not examined matter on merits and by cryptic order, in view of decision in case of KARNATAKA GOLF ASSOCIATION has held that assessee is entitled to registration. It is further submitted that even assuming that assessee is entitled to registration under Section 12A of Act, mere registration would not entitle assessee to benefit of provisions contained in Sections 11 and 12 of Act automatically. On other hand, learned senior counsel fore assessee submitted that application under Section 12A of Act was filed on 17.09.1999 and same was admittedly decided beyond period of six months i.e., on 30.10.2001. Therefore, no sanctity can be attached to aforesaid order in view of 9 decision of supreme court in COMMISSIONER OF INCOME-TAX, KANPUR VS. SOCIETY FOR PROMN. OF EDN., ALLAHABAD , (2016) 67 TAXMANN.COM 264 (SC). copy of order dated 03.06.2003 passed under Section 12AA (1)(b)(II) of Act has also been produced and it has been pointed out that assessee has already been registered under Section 12A of Act by aforesaid order and therefore, substantial questions of law involved in this case have been rendered academic. It is also pointed out that block assessment proceedings were also initiated against assessee, which has attained finality in view of order passed by division bench of this court in ITA Nos.1254/2006 and 1253/2006. However, it is fairly submitted by learned Senior counsel for assessee that mere grant of registration will not automatically entitle assessee to benefit of provisions of Section 11 and 12 of Act. 10 7. We have considered submissions made on both sides and have perused record. Admittedly, application under Section 12A of Act on 17.09.1999 and order on aforesaid application has been passed beyond period of six months i.e., on 30.10.2001. Therefore, in view of law laid down by Supreme Court, registration under Section 12A of Act shall be deemed to have taken effect after six months from date of presentation of application i.e., 18.03.2000. In any case, registration has already been granted in favour of assessee under Section 12A of Act vide order dated 03.06.2003. Therefore, it is not necessary for us to examine validity of order passed by tribunal and therefore, in our opinion, substantial questions of law framed by bench of this court have been rendered academic. Therefore, it is not necessary to answer same. However, appeal is disposed of with observation that mere grant of registration to 11 assessee shall not result in grant of benefit to it ipso facto under Sections 11 and 12 of Act and if any, regular assessment is pending, same may be completed in accordance with law. Needless to state that if any proceeding for regular assessment is initiated, same shall be initiated subject to law of limitation. In view of preceding analysis, appeal is disposed of. Sd/- JUDGE Sd/- JUDGE ss Director of Income-tax Exemptions, Bangalore v. St. Ann's Education Society