Commissioner of Income Tax vs Edamon Vanitha Society

C.N. Ramachandran Nair, J.—Since respondent refused notice, only option for us is to hear the Standing Counsel for the appellant and dispose of the appeal. Moreover, we find that even before the Tribunal, the respondent did not make any appearance. Therefore, we proceed to hear the Standing Counsel and dispose of the appeal.

It appears the assessee is a society engaged in manufacture and supply of stabilizers to a brand name holder. Even though its claim is exemption, it has not obtained registration as a charitable institution. It is seen that the assessment itself is completed as an income escaping assessment u/s 148 of the Income Tax Act. On appeal, the CIT (Appeals) allowed the claim holding that the department has not established that the income is not utilised for charitable purpose. It is mis order that is confirmed by the Tribunal against which this appeal is filed.

Standing Counsel has relied on decision of this Court in Commissioner of Income Tax Vs. Ernakulam District Cement Dealers Association, . We are unable to uphold the order of the Tribunal and that of the first Appellate Authority because assessee has not discharged its burden of proving that it is a charitable institution and that its income is applied for charitable purposes. In fact, application for registration made u/s 12A was rejected by the Commissioner. Unless the assessee establishes that the income derived is used for charitable purposes and whatever is carried over for utility in subsequent years is done in accordance with the provisions of the Act and Rules, assessee will not be entitled to claim the benefit. It is also seen that assessee does not even care to file return. We are of the view that the burden cast upon the assessee u/s 11 cannot be shifted to the department. It is for the assessee to establish utilisation of income for charitable purposes, failing which tax could be demanded. We, therefore, set aside the orders of the Tribunal and that of the first Appellate Authority with direction to the Assessing Officer to grant one more opportunity to the assessee to prove the application of income of the society and if income is not applied for charitable purposes authorised by the trust deed, tax could be recovered in accordance with law.