ORDER
I.C. SUDHIR, JM
The issues raised in these appeals, all preferred by the assessee, are interconnected. Therefore, these appeals are being disposed of vide a consolidated order.
2. ITA No. 75/Ind/2002-The order of the learned Commissioner withdrawing registration granted under section 12A of the Act to the society has been impugned by the assessee mainly on the following grounds that-
(i) it is illegal and without jurisdiction, perverse, prejudicial and in utter disregard of the canons of justice (Ground Nos. 1 and 2),
(ii) the learned Commissioner has erred in passing the order under section 12A of the Act which is inserted with effect from 1-4-1997 and which is not applicable for cancelling or withdrawing the registration granted on 29-1-1986 under section 12A of the Income Tax Act when no application for registration was pending before CIT (Ground No. 3),
(iii) the ordet impugned is conspicuously silent as to what material was taken by the learned CIT into consideration, it amounts to violation of rule of natural justice (Ground No. 4), .
(iv) the order impugned is silent as to with effect from which date registration is cancelled or withdrawn and as such it has no legal force and is invalid (Ground No. 5).
3. The facts in brief are that the assessee is stated to be remained a charitable institution established by the Government- of Madhya Pradesh engaged in the activities of publication and sale of weekly magazine (Rozgar and Nirman), production of documentary films, T. V. reports, etc. for the State Government departments and public sector undertakings, acting as advertising agency for the State Government departments and public sector undertakings for publication of advertisements in the newspapers, as observed by the lower authorities and stated to be activities of public welfare and utility services by the assessee. It has got its own constitution having Chief Minister , Minister for Public Relations, Principal Secretary (Finance), Principal Secretary (Cultural department), Secretary, Public Relation department, Director, Public Relation Department Controller, Government Printing Press, Managing Director, M.P. Madhyam and Additional Managing Director of MP Madhyarn of the State Government as its executive members. Admittedly, the assessee was registered with the Registrar of Societies under the MP Societies Rggistration Act, 1973, vide certificate dated 16-4-1984; it was also registered by the Commissioner, Bhopal, under section 12A of the Income Tax Act, 1961, vide registration No. BPL/3/85-86 and intimation thereof by the CIT to the assessee dated 29-1-1986; vide this registration the assessee was allowed exemption from tax under section 11 of the Income Tax Act from the assessment years 1985-86 to 1993-94; in the assessment year 1994-95 the assessing officer, however, disallowed the exemption under section 11 of the Act, an appeal was preferred by the assessee before the learned Commissioner (Appeals) but could not succeed as the learned Commissioner (Appeals) was of the view that the assessee had worked as contractor/agent for carrying out jobs of different government departments and the activities of public utility services carried out by the assessee for different government departments and public sector undertakings in lieu of fees or charges for rendering such services could not transform the assessee into a public charitable institution. The learned Commissioner (Appeals) held further that the case of the assessee was covered by the provisions of section 11(4A) and it was, therefore, not entitled to exemption under section 11(1) of the Act.
4. Aggrieved, the assessee went in second appeal before the Tribunal wherein vide order dated 16-3-1999, in ITA No. 559/Ind/1998 the Tribunal held that where on an application filed under section 12A an institution was registered as charitable, registration itself was sufficient proof of the fact that the institution was established for charitable purposes, and in such case it would not be possible for the assessing officer in the course of assessment proceedings to come to a different finding that the institution was not one for charitable purposes. The Tribunal further added that the assessing officer would be, however, entitled to forfeit the exemption to the institution for non-fulfilment of any other statutory requirement and/or contravention of any other provision of law. The Tribunal thus set aside the orders of the assessing officer and of the Commissioner (Appeals) and directed the assessing officer to frame the assessment afresh in the light of the observations made. The department reopened the assessment for the assessment year 1988-89 in March, 1999 under section 148 and reframed the assessment for that year on 30-3-2001 which was set aside in appeal by the learned Commissioner (Appeals) vide its order dated 21-12-2001. The department reopened the assessments for the assessment years 1989-90, 1990-91, 1991-92, 1992-93, 1993-94, 1996-97 and 1997-98 under section 148 of the Act in March, 2001. Thereafter, the learned Commissioner cancelled the registration of the assessee granted on 29-1-1986 under section 12A of the Act by order dated 1-2-2002, questioned herein before us.
5. It is worthwhile to point out here that the first appeals preferred by the assessee against the assessment orders dated 30-3-2001 under section 143(3) of the Act for the assessment years 1994-95 and 1998-99 were also rejected as infructuous in view of cancellation/withdrawal of registration by the learned Commissioner. Against this common first appellate order, the assessee is in appeal before us vide ITA No. 324/Ind/2002 (assessment year 1994-95) and ITA No. 325/Ind/2002 (assessment year 199899), as mentioned hereinabove.
6. While reiterating the grounds of the appeal, the learned authorised representative submits that provisions of section 12AA of the Act came into operation with effect from. 1-4-1997, which were procedure for registration only and even if it is applied retrospectively, it would apply to pending matters only. The learned authorised representative submits further that there is no provision of cancellation of registration under sections 12A and 12AA of the Act and section 21 of the General Clauses Act does not cloth the official functionaries like Commissioner whether it is applicable on the legislative delegation. He submits that there was no fresh material on record before the authorities for cancelling registration nor has the learned Commissioner shown the violation of terms of granting of registration to the assessee. He cites the decision of the Honble jurisdictional High Court in the case of CIT v. Indore Table Tennis Trust (1997) 227 ITR 836 (MP) and submits that the judgment in this case fully cover the case of the assessee. The learned authorised representative submits further that the principle of promissory estoppel has been violated by the learned Commissioner while cancelling registration. He cites the following decisions in support
(i) B.P. Agarwalla & Sons Ltd. v. CIT (1994) 208 ITR 863 (Cal)
(ii) K.M. Scientific Research Centre v. Lakshman Prasad (1998) 229 ITR 23 (All).
He submits that the power to review the registration is not inherent with the authority like the provisions of section 151 of the CPC. The learned Commissioner by cancelling the registration has actually reviewed its earlier order of the department i.e., approval of registration. He submits that the learned Commissioner is also silent as to with effect from which date the registration is cancelled or withdrawn. Section 12A is not procedural as it gives right to earn registration and section 12AA was applicable with retrospective effect only on pending matters. He cites the decisions of the Honble Supreme Court in the case of Radhasoami Satsang v. CIT (1992) 193 ITR 321 (SC) and in the case of CIT v. P. Krishna Warrier (1994) 208 ITR 823 (Ker). The learned authorised representative while referring the judgment of the Honble Supreme Court in Thiagarajar Charities v. Addl. CIT (1997) 225 ITR 1010 (SC) submits that to establish the charitable purpose of a society, one is to see that the fund earned by the society must be utilised for the aims and objects of the society. He also refers the judgments of the Honble, Supreme Court in the case of CIT v. Surat Art Silk Association (1980) 121 ITR 1 (SC)) and in the case of Samaritan Society v. CIT (1997) 225 ITR 652 (SC)) in support. The learned authorised representative also refers the contents of the order of the Tribunal for the assessment year 1994-95 on earlier occasion on the issue as to whether the assessing officer had rightly disallowed the claim of exemption under section 11 of the Act to the assessee. He also refers the provisions of section 15(2) of the Act wherein phraseology “not involving of carrying on any activity of profit” has been deleted with effect from 1-4-1984. The assessee is not a trust but society registered under the M.P. Societies Registration Act, 1973. The learned authorised representative submits that the learned Commissioner while cancelling the registration was suffering from official bias as he on earlier occasion in the capacity of Commissioner (Appeals) had rejected the claim of the assessee for exemption as charitable society, upholding the assessment order. He cites the decision of the Honble Supreme Court in the case of Manaklal v. Dr. Prem Chand Singhvi & Ors. AIR 1957 SC 425 wherein the Honble Supreme Court was pleased to hold that apprehension is sufficient to establish bias. He invites our attention to page No. 305 of the paper book wherein cause was shown by the assessee to the show cause notice dated 23-1-2002 issued by the learned Commissioner for cancellation/withdrawal of registration under section 12A read with section 12AA of the Act raising an objection vide para 2 relating to official bias.
7. The learned Departmental Representative, on the other hand, justifies the order of cancellation and submits that earlier, one had to apply for registration only in a standard format and the registration was allowed without prejudice to the examination on merits of the claim of exemption after the return was filed. He submits that there was no provision in the Income Tax Act to issue certificate earlier whereas now under section 12AA the Commissioner is empowered to examine the claim of charitable purpose while issuing certificate of registration. The learned Departmental Representative submits that even in writ petition filed by the assessee against the issuance of show-cause notice by the learned Commissioner, the Hon’ble jurisdictional High Court did not cancel or hold the show-cause notice as invalid or bad. He invites our attention to page No. 322 of the paper book in this regard. The learned Departmental Representative submits that the same activities of the assessee are there as of a private concern in the same job and charity if any, is being done, it is done by the State Government and not by the assessee. The learned Departmental Representative further submits that it is incorrect to say that earlier registration certificate was issued after thorough examination of the claim of the assessee. On the issue of official bias, the learned Departmental Representative submits that the Commissioner and Commissioner (Appeals) may be of the same rank, but different posts and job. Enough opportunity was provided to the assessee to discharge its onus that they are doing charitable works and when the Commissioner was empowered to issue conditional registration certificate, he also was empowered to cancel the same on breach of conditions laid down for exemption by way of registration as charitable society. The learned Departmental Representative points out that the department has preferred an appeal under section 260A of the Income Tax Act against the order dated 16-3-1999, passed by the Tribunal, Indore, in ITA No. 559/Ind/1998 (assessment year 1994-95) on the proposed question of law as to whether the Tribunal was justified in holding that the assessee is entitled to exemption under section 11 of the Act and secondly as to whether the Tribunal -was justified in holding that grant of certificate under section 12A of the Act is conclusive and debarring the assessing officer to take any contrary view. He also draws our attention to the advertisement made in the “Rojgar and Nirman” placed at p. 11 of the paper book filed by the department and submits that the assessee also used to accept and publish private advertisements regarding admission notices in private institutions. He submits further that the assessee is also indulging in activities like organising film-fair, etc. The learned Departmental Representative also points out that the assessee has also preferred appeal before the Honble High Court under section 260A of the Income Tax Act against the order dated 16-3-1999, of the Tribunal, Indore. Bench.
8. The learned authorised representative in rejoinder submits that the writ petition preferred by the assessee against the show-cause notice for cancellation of registration was dismissed mainly on the basis that the Hon’ble jurisdictional High Court was not inclined to interfere with the proceedings at the stage of show-cause notice in the writ jurisdiction. The assessee has, however, to avoid any technical difficulties in future has preferred LPA against the aforesaid order of the Hon’ble High Court in the said writ petition in precaution. The learned authorised representative refers to page Nos. 41 to 62 of the paper book filed on 23-8-2002. He submits that the assessee has preferred appeal before the Hon’ble High Court against the order of the Tribunal mainly on the ground that while giving its finding in the present case in favour of the assessee on the facts of the case that it was not possible for the assessing officer in the course of assessment proceedings to come to a different finding that the institution is not one for charitable purposes, there was no occasion with the Tribunal to grant entitlement to the assessing officer to forfeit the exemption to the institution for non-fulfilment of any other statutory requirement and/or contravention of any other provision of law, while setting aside the orders of the authorities below with the direction to make fresh assessment in the light of the observations made by the Tribunal. The learned authorised representative submits further that the charitable purpose has been defined under section 2(15) of the Income Tax Act and submits that the money earned by the assessee does not go to the private pocket. He submits that the publication is one of the objects of the assessee. He submits that there was no change on facts in between since the date of initial registration to cancel the same and refers the decision of the Delhi Bench of the Tribunal (Third Member) in the case of ITO v. Dwarka Prasad Trust (1989) 30 ITD 84 (Del). He also cites the decision of the Hyderabad Bench of the Tribunal in the case of Andhra Pradesh State Civil Supplies Corporation v. ITO (1991) 37 ITD 1 (Hyd) wherein it was held that when there is no private gain, it is a charitable purpose.
9. We have considered the arguments advanced by the parties in view of the materials available on record and have gone through the order impugned as well as the judgments relied upon by the parties.
10. The objection raised by the learned counsel for the assessee regarding official bias on the part of the learned Commissioner does not hold water as to establish the bias something more than more apprehension is to be pointed out by the objector. The Commissioner has given reasons for cancelling/withdrawing the registration. We thus reject this objection raised by the learned counsel for the assessee.
11. So far as the finding of the Honble High Court in the writ petition is concerned, it should be read in totality of the facts and circumstances as observed by the Hon’ble High Court in its order at this stage. The Hon’ble High Court in para 5 of its order has been pleased to observe as under :
“5. It is simply a case of issuance of show-cause notice. It is open to the petitioner to file reply to the show-cause against proposed action before the Commissioner, Bhopal. It cannot be said that issuance of show-cause notice is without jurisdiction as such. I am not inclined to interfere at this stage of the proceedings in the writ jurisdiction of this Court.”
From a reading of para 5 it appears that the Hon’ble High Court was not inclined to interfere at this stage of the proceedings in the show-cause notice in the writ jurisdiction with the observation that it was open to the petitioner to file reply to show-cause notice against the proposed action before the Commissioner, Bhopal. Under these circumstances, the Hon’ble High Court was of the view that it could not be said that the issuance of show-cause notice was without jurisdiction as such. There was no issue in the writ petition before the Hon’ble High Court at that stage as to whether the cancellation of registration by the learned Commissioner under section 12A read with section 12AA of the Act was justified or not as at that time the proceeding was only at initial stage. Thus, we feel that the finding in the writ petition does not debar the proceeding before the Tribunal to adjudicate the issue of cancellation of registration.
12. After careful perusal of the provisions of sections 12A and 12AA of the Act, we agree with the submission of the learned authorised representative that these provisions are meant for conditions and procedure for registration and not for withdrawal or cancellation of registration already granted on earlier occasion. Admittedly, no application for registration was pending before the learned Commissioner to allow or deny the same as per initial requirement of the provisions laid down in these two ‘sections of the Act. At the same time, we agree with the submission of the learned Departmental Representative that granting of registration was earlier a prima facie act of the authority under section 12A. The benefit of the principle of promissory estoppel, however, cannot be denied to the assessee who had been enjoying the registration for the last so many years under the same facts and circumstances unless there is a breach of condition laid down for granting registration In specific term. A mere observation of the learned Commissioner that ………” The society was/is engaged in commercial activities intended to earn profit and it was/is providing services of similar nature as were/are being provided by other persons engaged in the activities of publication and sale of newspapers and magazines or in the construction of road/bridges/public buildings, etc…” is not sufficient to cancel or withdraw the registration. Similar was the view expressed by the Tribunal in the appeal for the assessment year 1994-95 preferred by the assessee. The relevant paras 14 and 15 thereof are reproduced hereunder for ready reference:
’14. It is an admitted position that since assessment year 1985-86 the assessee institution has been held to be a public charitable institution and it is only for the assessment year 1994-95 that a different view has been taken by the revenue. In the case of CIT v. Shree Ram Memorial Foundation (1986) 158 ITR 3 (Del), their Lordships observed that when a particular charitable institution has been recognised as such for several years and is carrying on the same objects and there is no change in the relevant law, it is not for the court to reopen the same point from time to time, once the assessee institution has been held to be a public charitable institution. In CIT v. Hindusthan Motors Ltd. (2004) 778 TTJ 89 : (1991) 192 ITR 619 (Cal) their Lordships have held that it is true that there is no res judicata in income-tax matters but there must be some substantial ground for one assessing officer to differ from the view taken by the another assessing officer in an earlier assessment year. In the case before us, there was absolutely no change in the facts of the assessee in assessment year 1994-95 as compared to the preceding assessment years. Therefore, there was absolutely no justification for taking a different view specially when nothing has been brought on record to show that there was change in the facts in any manner in assessment year 1994-95 from those of the preceding years. In the case of Radha Soami Satsang v. CIT (199) 100 CTR (SC) 267 : (1992) 193 ITR 321 (SC), their Lordships have observed that where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order it would not be at all appropriate to allow the position to be changed in a subsequent year.
12. From what has been stated above, we may conclude that where, on an application filed under section 12A an institution is registered as charitable, registration itself is a sufficient proof of the fact that the institution is established for charitable purposes. In such a case, it would not be possible for the assessing officer in the course of the assessment proceedings to come to a different finding that the institution is not one for charitable purposes. However, the assessing officer would be entitled to forfeit the exemption to the institution for non-fulfilment of any other statutory requirement and/or contravention of any other provision of law. We, therefore, set aside the orders of the authorities below and direct the assessing officer to frame the assessment afresh in the light of our observations above.”
For withdrawal or cancellation of registration, the revenue ought to see as to whether the funds earned were being utilised for aims and objects of the society. There is no dispute that when a public utility service is done with commercial approach and purpose, it cannot be termed as charitable, but if the same public utility service is carried with charitable approach and purpose, the same cannot be termed as commercial. When there is no change in the facts and circumstances since the day when registration was initially granted and the assessee has been enjoying the same equipped with the principle of promissory estoppel, the department is heavily burdened to establish as to how the approach of the assessee has now been turned as commercial to justify the cancellation of registration like profit earned is not being utilised to achieve the aims and objects of the society or they are earning huge profit under the garb of registration as charitable society. For this a detailed comparative study is required to be made by the department between a non-registered person and a registered person engaged in the same public utility service. For an example, there is a difference between a canteen run on meagre profit to meet its establishment expenses on no profit no loss basis to supply the food for poor people to achieve its charitable purpose but when the same is run to earn maximum possible profit out of it, its purpose cannot be termed as charitable.”
13. The Hon’ble jurisdictional High Court in the case of CIT v. Indore Table Tennis Trust (supra) relied on by the learned authorised representative was pleased to hold that exemption once earned was not lost lightly. There was no proof of any contravention, secondly the assessee could not be denied the benefit of promissory estoppel as well. The Hon’ble Supreme Court in the case of Thiagarajar Charities v. Addl. CIT & Anr. (supra) relied on by the learned authorised representative was pleased to follow the ratio laid down in its earlier judgment in the case of Addl. CIT v. Surat Art Silk Cloth Manufacturers Association (supra) wherein it was held that if a trust is entitled to the exemption under section 11 read with section 2(15) of the Income Tax Act, 1961, because it has been established for the advancement of an object of general public utility not involving the carrying on of any activity for profit is whether predominant object of the activity involved in carrying out the object of general public utility is to subserve the charitable purpose or to earn profit. Where profit-making is the predominant object of the activity, the purpose, though an object of general public utility, would cease to be a charitable purpose. But where the predominant object of the activity is to carry out the charitable purpose and not to earn profit, it would not lose its character of a charitable purpose merely because some profit arises from the activity. The exclusionary clause does not require that the activity must be carried on in such a manner that it does not result in any profit. It would indeed be difficult for persons in charge of a trust or institution to so carry on the activity, that the expenditure balances the income and there is no resulting profit. That would not only be difficult of practical realism but would also reflect unsound principles of management. If the profits must necessarily feed a charitable purpose under the terms of the trust, the mere fact that the activities of the trust yield profit will not alter the charitable character of the trust. The test now is more clearly than in the past, the genuineness of the purpose, tested by the obligation created to spend the money exclusively or essentially on charity. The restrictive condition that the purpose should not involve the carrying on of any activity for profit would be satisfied, if profit making is not the real object.
14. On careful perusal of the order impugned in view of the arguments advanced by the parties and the judgments relied on, we find that the learned Commissioner while cancelling the registration has failed to specify as to how the profit making in the case of the assessee was pre-dominant object of the activity rather to carry out the charitable purpose. Under these circumstances, we come to the conclusion that the cancellation of the registration was not justified as the same was not supported with specific reasons.
15. In the result, the appeal is allowed.
16. ITA Nos. 324 & 325/Ind/2002-In these appeals the assessee has impugned the common first appellate order for the assessment years 1994-95 and 1998-99 mainly on the same issues that the learned Commissioner (Appeals) has erred in his finding that the order by the CIT cancelling/withdrawing registration under section 12A has retrospective effect and, therefore, applicable in all pending proceedings and, therefore, in the impugned assessment year the assessee is not entitled to the benefits of section 11 of the Act and denying the exemption claimed for, the assessee cannot be regarded as charitable institution and confirming the levy of interest under sections 234A, 234B and 234C of the Act.
17. We, after considering the arguments advanced by the parties in view of the material available on record and having gone through the order impugned find that the Commissioner (Appeals) has rejected the first appeal mainly on the basis that in the meantime the registration of the assessee as charitable institution was cancelled/withdrawn without discussing the merits of the case and without following the spirit of expression of the Tribunal in the appeal for the assessment year 1994-95.
18. Since we have already allowed the appeal against rejection of registration, the very basis of dismissal of the present appeals by the learned Commissioner (Appeals), the order of the first appellate authority is reversed.
19. In the result, the appeals are allowed.