Karnataka H.C : Petitioner is before me questioning the rejection order at Annex.-R dt. 4th Aug., 2003, issued by the respondent. Petitioner states that it is a charitable trust.

High Court Of Karnataka

Bangalore Education Trust vs. Director Of Income Tax (Exemption)

Sections 80G, Rule 11AA

R. Gururajan, J

Writ Petn. No. 52394 of 2003

29th January, 2004

Counsel Appeared

K.R. Prasad, for the Petitioner

ORDER

R. Gururajan, J. :

Petitioner is before me questioning the rejection order at Annex.-R dt. 4th Aug., 2003, issued by the respondent. Petitioner states that it is a charitable trust. The objects of the trust are education and medical relief. Petitioner is registered under the provisions of s. 12A of the Indian IT Act, 1961. It is running an engineering college and a primary and middle school. Returns are being filed. Income has been held to be exempted in terms of a notification issued under s. 143 of the Act. Petitioner was granted exemption under s. 80G in the year 1996. It was in force till 2000 as per Annex.-D. Petitioner thereafter made an application seeking for renewal of the same. There were correspondence between the petitioner and the respondents. Thereafter, the authorities have chosen to reject the case of the petitioner. Petitioner is therefore before me. Heard the learned counsel for the petitioner and perused the material on record. In the case on hand, it is seen that the petitioner has made an application on 8th March, 2001, in terms of Annex.-E. Thereafter, the respondents sought for some information in terms of Annexes.-F and J. Petitioner provided the information sought for by the respondents. An opportunity was given in terms of Annex.-K. One Mr. Gopal was examined and thereafter the present order is passed. An argument is advanced that the order is not passed within six months and therefore the order is bad in law in terms of the limitation prescribed under the Act. I am unable to accept this argument in the light of r. 11AA. The proviso provides for inclusion of any time taken in terms of sub-r. (3) to r. 11AA. Sub-r. (3) provides for seeking for document or information. It further provides for enquiries in the case on hand. Material facts would reveal that information was sought for and thereafter enquiry was conducted providing an opportunity to the petitioner in terms of Annex.-K. Annex.-K is dt. 16th July, 2003. Order is passed on 4th Aug., 2003. In the given circumstances, it cannot be said that the order is passed beyond six months in the light of sub-r. (3) to r. 11AA of the Rules. In these circumstances, this argument is not acceptable to me.

Coming to the merits of the matter, it is seen from the material on record that an application was made seeking for renewal. Rule 11AA provides for satisfaction on the part of the authority in the matter of renewal. Sub-r. (2) r. 11AA provides that an application shall be accompanied by certain documents. Sub-r. (3) provides for calling of such further documents and it further provides for enquiries in the matter. In the case on hand, authorities have noticed that the application was defective in as much as detailed information was not furnished. Therefore, the material was asked for. Assessee furnished copies of audit report as required under s. 12A. One Mr. Gopal, chartered accountant was summoned under the Act and his submission was taken. His submission is available in the writ petition. He has stated that he has seen the certificates, balance sheet, receipt and payments accounts and income and payments for the five years mentioned and he confirms that the signatures appearing on these documents are his. To question No. 3 he has answered reading as under : “I regret to say that I have not in fact seen the books of accounts for any of the year nor I have in fact conducted any audit of the books of accounts of the financial statements such as balance sheet, income and expenditure accounts and receipts and payments accounts. One Shri Keshavaraju a senior colleague of mine in my own profession had approached me from time to time with a request to certify these balance sheets and other accounts. He had informed me that being a Trustee of M/s Bangalore Educational Trust he is not in a position to certify them and requested me to certify them to meet the requirements of various laws. I have certified these statements in good faith believing the version of Shri Kesavaraju.” Ultimately he has sated as under : “I admit that I have done improper acts of giving certificates of audit and certifying the balance sheets and other financial statements of M/s BET for the years ended 31st March, 1996 to 31st March, 2000, even though I have in fact not even seen the books of the trust. I regret sincerely my misconduct and swear by God that I would not repeat such misconduct in future.”

This material has been noticed by the authorities to reject the renewal. This material would show that the authority was not satisfied in terms of the Rules. In these circumstances, it is not possible for this Court to accept the argument of the petitioner. In the given circumstances, the order is passed purely on facts available on record and the same requires to be confirmed by me in the light of the law governing. It is also seen by the authority that the trust has committed a fraud furnishing the Department an audit report without actually getting the accounts audited by a qualified chartered accountant. The authority has also noticed that it is a clear case of irregular maintenance of accounts. Insofar as activities are concerned, the authority has noticed that the assessee has not indicated the purpose for which the corpus donation was given by the alleged donors. It is seen that the fund is being used to make substantial advances of Rs. 11,14,50,12 lakhs to some other persons. An indication is given that there is deviation of fund. After noticing the material facts, the authority has rejected the renewal application. The order is based on facts. No acceptable grounds are available to the petitioner. On the facts of this case, I am satisfied that no case is made out for my interference. Petition stands rejected. Before concluding, I deem it proper to observe that the chartered accountants hold a position in the society. Their certificates are accepted and acted upon by the authorities in terms of the various laws governing the field. In the case on hand, rather unfortunately, the chartered accountant prima facie seems to have failed in his professional duties. In these circumstances, I deem it proper to direct the respondent to send a copy of his order dt. 4th Aug., 2003, along with a copy of this order to the chartered accountants’ council or the Institution of chartered accountants for its information. Ordered accordingly. No costs.

[Citation : 267 ITR 549]

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