2023 (10) TMI 1335 - AT - Income Tax

Exemption u/s 11 - registration u/s.12AB denied - CIT(E) held that he is unable to arrive at the satisfaction of the genuineness of the activities of the assessee Trust - HELD THAT - It is seen from the second show cause notice by the Ld. CIT(E), there is no specific requirement about the deficit of documents or records filed by the assessee trust. In absence of the same, the Ld. CIT(E) could not have rejected the application on the ground that 30% of the total donation to be received by the assessee Trust will be transferred to the State/Union Territory Branch and National Headquarters of Red Cross Society is nothing but contractual or compulsive transfer of donation fund does not fall within the ambit of voluntary donation and cannot be treated as application of the fund towards the object of the assessee Trust. Consequently denying the registration u/s. 12AB - CIT(E) has not indicated exact deficiency in the documents submitted by the assessee and exact nature of clarification, explanation required from the assessee, but rejected the registration application without confronting the issue and affording proper opportunity of hearing to the assessee Trust. Therefore in order to prevent miscarriage of justice, we find it fit and proper to provide one more opportunity of being heard to the assessee in support of its case for registration of the trust u/s. 12AB - Therefore we dispose of this appeal by restoring this issue to the file of the Ld. CIT(E) with a direction upon him to provide further opportunity of being heard to the assessee and consider the documents, evidences which the assessee would file as per the notice issued by the Ld. CIT(E). Appeal filed by the Assessee is hereby allowed for statistical purposes.

Summary

Issues Involved:
- Denial of registration under section 12AB and u/s. 80G(5) of the Income Tax Act, 1961.

Summary of Judgment:

Issue 1: Denial of registration under section 12AB
The assessee, a Trust registered under the Bombay Public Trust Act for charitable purposes, filed an application for registration under section 12AB of the Income Tax Act. The Commissioner of Income Tax (Exemption) rejected the application citing that 30% of total donations were compulsorily transferred to other branches, which did not align with voluntary donation requirements. The CIT(E) held that the genuineness of the Trust's activities could not be ascertained due to this compulsory transfer. The assessee appealed, arguing that proper opportunity was not given to clarify the issue. The ITAT found that the CIT(E) did not specify the deficiencies in the documents submitted by the assessee and did not provide a proper opportunity for clarification. Therefore, the ITAT allowed the appeal, directing the CIT(E) to provide another opportunity for the assessee to be heard and to consider the documents and evidences submitted by the Trust.

Issue 2: Rejection of registration u/s. 80G(5)
Since the registration under section 12AB was rejected, the registration under section 80G(5) was also denied. Following the decision to set aside the registration under section 12AB and provide another opportunity for the assessee to be heard, the ITAT set aside the registration under section 80G(5) as well, directing the CIT(E) to decide the case on merits after giving the assessee another opportunity for hearing.

In conclusion, both appeals filed by the Assessee were allowed for statistical purposes, and the matters were remanded back to the CIT(E) for further consideration and decision in accordance with the directions provided by the ITAT.