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2019 (4) TMI 213 - AT - Income TaxScope of inquiry while granting registration u/s 12AA - CIT (E) not disputed that objects society is charitable - effect of non-production of books - non explanation of cash deposit etc. - HELD THAT - Stage of granting registration u/s 12AA CIT (E) is not to examine the application of income, which is to be done by the AO on year to year basis at the time of deciding the exemption u/s 11; that the CIT (E) is not to examine the genuineness of the Trust but not the income of the Trust for charitable or religious purpose which functions are assigned to AO and that the registration of the Trust does not involve inquiry into the actual activities or application of the funds etc., particularly when there is nothing on record to make out that the object of the Trust or activities of the Trust were not genuine; and that non-production of books does not mean that the genuineness of the charitable activities of the assessee society is not established. When aims and objects of the assessee society to open schools for imparting education and vocational training which is per se a charitable object under section 2(15) and the assessee society has been running a school in the name and style of Rainbow Kids Valley School, the ld. CIT (E) had no ground to decline the registration under section 12AA of the Act. - Decided in favour of assessee.
Issues Involved:
1. Whether the order passed by the Commissioner of Income-tax (Exemptions) [CIT (E)] is legally valid. 2. Whether the CIT (E) followed a casual approach during the registration process. 3. Whether the CIT (E) erred in rejecting the application for registration under section 12A. 4. Whether the grounds for rejecting the registration were baseless. 5. Whether the assessee was given adequate opportunity to be heard before the rejection of the application. 6. Whether the CIT (E) considered the submissions filed by the assessee. Issue-wise Detailed Analysis: 1. Legal Validity of the Order: The assessee, Mata Parvati Educational & Innovative Society, challenged the impugned order passed by the CIT (E), claiming it was bad in law and against the facts of the case. The Tribunal examined the order and found that the CIT (E) had not disputed the charitable aims and objects of the assessee society but declined the registration based on other grounds. 2. Casual Approach During Registration Process: The assessee contended that the CIT (E) followed a casual approach during the registration process. The Tribunal reviewed the process and found that the CIT (E) did not provide adequate reasons or documentation to support the rejection of the registration application. 3. Error in Rejecting the Application for Registration under Section 12A: The CIT (E) rejected the application on three grounds: - Huge cash deposits in the bank accounts without corresponding documents. - Non-filing of the audited balance sheet for the financial year 2016-17. - The school run by the assessee was not recognized by the Department of Education, Govt. of NCT of Delhi. The Tribunal noted that at the stage of granting registration under section 12AA, the CIT (E) is only required to examine the genuineness of the objects of the society and not the application of income, which is the function of the Assessing Officer (AO) on a year-to-year basis. 4. Baseless Grounds for Rejecting the Registration: The Tribunal found that the CIT (E) had no grounds to decline the registration under section 12AA, as the aims and objects of the assessee society to open schools for imparting education and vocational training are per se charitable under section 2(15) of the Act. The Tribunal emphasized that the CIT (E) is not to examine the income of the trust but the genuineness of its activities. 5. Adequate Opportunity to be Heard: The assessee argued that they were not given an adequate opportunity to be heard before the rejection of the application. The Tribunal found that the CIT (E) did not provide sufficient opportunity for the assessee to present their case, which is a violation of the principles of natural justice. 6. Consideration of Submissions Filed by the Assessee: The assessee claimed that the CIT (E) did not consider the submissions filed by them. The Tribunal reviewed the documents and found that the CIT (E) had not adequately considered the submissions, which contributed to the erroneous rejection of the registration application. Conclusion: The Tribunal concluded that the CIT (E) had no grounds to decline the registration under section 12AA of the Act. The appeal filed by the assessee society was allowed, and the CIT (E) was directed to grant the registration to the assessee society under section 12AA of the Act. The order was pronounced in open court on March 29, 2019.
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