2020 (6) TMI 33 - HC - Income Tax

Registration u/s 12AA denied - huge cash balances, generation of huge surpluses in the past and non-furnishing of bank statements, which are essential elements to verify the genuineness of the activity of the applicant - CIT (E) has drawed conclusion from the balance sheet of the applicant in which the society is having huge cash balances in the form of FDR which could otherwise be utilized for expansion of education? - HELD THAT - This case are covered by the decision of this Court passed in The Commissioner of Income Tax (Exemptions), Chandigarh vs. M/s Adesh Foundation (Regd.) 2019 (5) TMI 837 - ITAT AMRITSAR wherein held why should a management, in no dearth of funds, risk its reputation and, rather, even the future of its institution, by asking for such ill gotten money? Clearly, we are unable to regard the present case as one of distinct possibility i.e., the test or the threshold which, in our view, must characterize the impugned transactions of donations which the applicant-appellant targets while seeking benefit u/s. 80G(5), so as to oust its case for being a eligible for approval thereunder. In our view, therefore, the assessee cannot be denied approval - Decided in favour of assessee.

Summary

Issues:
1. Interpretation of Section 260A of the Income Tax Act, 1961 regarding registration of entities.
2. Adjudication of substantial questions of law related to registration under Section 12AA of the Income Tax Act.
3. Assessment of evidence and material on record to determine the validity of the Appellate Tribunal's order.

Analysis:
1. The appellant filed an appeal under Section 260A of the Income Tax Act challenging the order of the Income Tax Appellate Tribunal. The primary issue raised was whether the ITAT erred in directing registration instead of re-examination, citing a judgment of the Allahabad High Court. The appellant argued that satisfaction must be recorded by the Registering Authority, which was lacking in this case.

2. The Hon'ble ITAT was criticized for not addressing specific issues raised by the CIT (E) regarding the genuineness of the applicant's activities. These issues included the lack of evidence of donation at the time of registration application, questionable rationale for donations despite substantial cash balances, and failure to provide essential bank statements for verification. The ITAT's decision was questioned for not adequately adjudicating on these crucial matters.

3. Another point of contention was the observation made by the CIT (E) regarding potential misuse of funds in the future, contrasted with the society's significant cash balances in the form of FDRs. The ITAT's decision to dismiss these concerns as based on surmise rather than evidence from the balance sheet was disputed. The overall assessment questioned the validity of the ITAT's order in light of the evidence and material on record, alleging it to be contrary and perverse.

In a subsequent development, the counsel for the appellant acknowledged that the facts of the case aligned with a previous decision of the Court in ITA No. 119 of 2018. Consequently, the present appeal was dismissed in accordance with the decision in ITA No. 119 of 2018. With the main case resolved, any pending applications were also deemed disposed of, bringing a conclusion to the legal proceedings.