2019 (6) TMI 784 - AT - Income Tax

Approval for exemption u/s 80G - applicant society has been accorded registration u/s 12AA by CIT, Rohtak vide order dated 01.04.1997 - HELD THAT - The contention of the ld. AR for the applicant society that all these facts are required to be taken care of at the time of scrutiny assessment and in the earlier years, clean assessment has been framed, is not tenable as no such document has been placed before the ld. CIT (A) nor before the Tribunal in the form of paper book. Even the documents specifically called for by the ld. CIT (E) discussed in the preceding paras have not been supplied so as to satisfy ld. CIT (E) as to the mandatory requirements for according approval u/s 80G of the Act. By now all these documents must be ready with the applicant society, so to meet with the ends of justice, applicant society who is claiming that it is into charitable activities since 1994 must be given an opportunity to produce all documents discussed in the preceding paras before ld. CIT (E). So, the case is remanded back to ld. CIT (E) to decide afresh after providing an opportunity of being heard to the applicant society. Appeal filed by the applicant society is allowed for statistical purposes.

Issues:
1. Rejection of application seeking approval for exemption u/s 80G of the Income-tax Act, 1961.

Analysis:
1. The Appellant, a charitable hospital society, sought to set aside the order rejecting their application for exemption under section 80G. The grounds for appeal included the alleged arbitrary and unjust nature of the rejection.
2. The rejection was based on the society's failure to provide sufficient reasons for seeking donations, lack of transparency in financial transactions, and inability to substantiate the need for donations. The society's activities were deemed non-transparent due to cash transactions and failure to address queries raised by the Department.
3. The Appellant challenged the order before the Tribunal, seeking a review of the decision made by the Commissioner of Income-tax (Exemptions).
4. After hearing both parties' representatives and reviewing relevant documents and orders, the Tribunal considered the case in light of the facts and circumstances.
5. While the society had registration under section 12AA of the Act, a prerequisite for applying for section 80G exemption, this registration alone did not guarantee approval for donation exemption.
6. The Tribunal highlighted the conditions under section 80G(5)(i) to (vii) that must be met for approval, emphasizing the need for real charitable purpose and proper documentation to support the application.
7. The Commissioner had issued detailed questionnaires to the society to provide necessary documents and clarifications, aiming to ensure compliance with the requirements for approval.
8. Concerns were raised regarding unverifiable expenditure, lack of financial statements for certain years, and a significant portion of receipts being in cash, hindering proper verification of the society's activities.
9. The absence of provisional financial statements for a specific year made it challenging to examine the society's financial transactions and claims effectively.
10. The Commissioner noted the society's failure to explain the target group for donations, expansion plans, and the utilization of accumulated surpluses, indicating a lack of transparency and clarity in their operations.
11. Given the deficiencies in documentation and explanations provided by the society, the Tribunal decided to remand the case back to the Commissioner for a fresh decision, allowing the society to produce all necessary documents for proper assessment.
12. The appeal was allowed for statistical purposes, emphasizing the importance of meeting all mandatory requirements for approval under section 80G to ensure transparency and compliance with the law.

This detailed analysis of the judgment highlights the issues involved, the grounds for rejection, the Tribunal's considerations, and the decision to remand the case for further review based on the need for proper documentation and compliance with the provisions of the Income-tax Act, 1961.

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