2015 (10) TMI 1375 - AT - Income Tax

Registration under section 12 AA denied - Held that - In the present case, as evident from perusal of case records, the assessee had duly furnished all the information as requisitioned, including objectives of the trust, latest on 18th February 2014 and the learned Commissioner did not have any issues with the same. As a matter of fact, learned Commissioner was satisfied with the same and the hearing was concluded on that aspect. As regards investment in the construction, and acquisition of land, the assessee had duly explained the same vide letter dated 10th February 2014 and the relevant part of explanation is also placed. There is nothing more that the assessee could do, nor did the learned Commissioner ask him to do anything more than that. Yet, learned Commissioner has rejected the registration on the ground that the range Addl. CIT and the AO have not testified the source of investment . This stand of the learned Commissioner is entirely unsustainable in law. The assessee cannot have any control on the internal functioning of the tax authorities, and his application cannot be rejected on the ground that some internal reports, which are anyway non-statutory in nature, have not been received.Under these circumstances, in our considered view, learned Commissioner did indeed err in rejecting the application-particularly as there were no adverse findings on the fundamental issue regarding objectives of the trust. As for the issues regarding investments etc, unless there is a categorical finding about lack of bonafides in activities, these aspects donot affect the registration and can be addressed at the time of assessment. Matter being remitted to the file of the learned Commissioner for the limited purposes of verifications regarding objects of the trust as no categorical findings have been given on the same. - Decided in favour of assessee for statistical purposes

Summary

Issues:
- Rejection of registration under section 12 AA by the Commissioner of Income Tax
- Compliance with requirements for registration under section 12AA
- Source of investment for construction and ownership of land

Analysis:
1. The appeal was against the order declining registration under section 12 AA of the Income Tax Act. The appellant contended that the Commissioner was arbitrary in rejecting the application disregarding facts and evidence. The appellant argued that the trust's objects aligned with the Act and satisfied provisions for registration under sections 12A and 12AA. Furthermore, the appellant highlighted that not owning the land should not have been a reason for rejection, especially when the charitable objects and activities were genuine.

2. The Commissioner rejected the application based on the lack of testimony from the range Addl. CIT and the AO regarding the source of investment for construction. However, the Tribunal noted that the Commissioner's rejection was unsustainable in law. The Tribunal emphasized that for new institutions seeking registration under section 12AA, the Commissioner's role was limited to examining the charitable objectives. The Tribunal found that the appellant had provided explanations and documents regarding the investment and ownership of land, which were satisfactory. The Tribunal concluded that the rejection based on the absence of testimony from tax authorities was unjustified.

3. The Tribunal highlighted that the appellant had fulfilled the requirements for registration under section 12AA, and the Commissioner's rejection lacked legal basis. The Tribunal also noted that the registration process was time-bound, and in the absence of adverse findings within the stipulated period, registration should have been granted. As there were no issues with the trust's objectives, the rejection solely based on the absence of internal reports from tax authorities was deemed incorrect.

4. The Tribunal allowed the appeal for statistical purposes and remitted the matter back to the Commissioner for verification of the trust's objectives. The parties consented to this remittance for verification, and if no issues were found, the Tribunal directed the Commissioner to grant registration under section 12 AA. The Tribunal emphasized the importance of focusing on the charitable nature of the trust's objectives for registration purposes.

In conclusion, the Tribunal found the rejection of registration under section 12AA by the Commissioner to be unjustified and lacking legal basis. The matter was remitted back to the Commissioner for verification of the trust's objectives, with directions to grant registration if no issues were found, emphasizing the limited scope of examination required for registration under section 12AA.