2020 (6) TMI 631 - AT - Income Tax

Registration u/s 12AA and u/s 80G denied - Whether objects of the society/trust should be charitable in nature and the activities of the society/trust should be genuine? - HELD THAT - CIT(E) has not disputed the charitable nature of the activity of the assessee but the registration has been rejected mainly due to non-genuineness of the activity of the assessee concluded on the basis of non-submission of evidence by the assessee. Before us, the Ld. Counsel has accepted that various activities have been carried out by the assessee in furtherance of its objects till date. As already held that the ratio in the case of Baburam Education Society 2017 (12) TMI 867 - ALLAHABAD HIGH COURT is not applicable over the facts of the assessee and it is imperative to examine the genuineness of the activities of the assessee duly supported with the evidences. The genuineness of the activities would mean that the activities are not bogus or artificial or camouflaged by some means and whether the activities are in accordance with the object of the institution - we feel it appropriate to restore the matter of registration under section 12AA of the Act back to the Ld. CIT(E) for examining the genuineness of the activities with the direction to the assessee to submit the necessary details of the activities carried out supported by the evidences. The appeal of the assessee against rejection of registration is accordingly allowed for statistical purposes. The matter of approval u/s 80G of the Act is an action consequent to the registration, therefore, the appeal filed against rejection of approval u/s 80G is also restored to Ld. CIT(E ) for deciding afresh. Appeals of the assessee are allowed for statistical purposes.

Summary

Issues:
- Rejection of registration under section 12AA and section 80G of the Income-tax Act, 1961.

Analysis:
1. Rejection of Registration under Section 12AA:
The assessee's application for registration under section 12AA was rejected by the Ld. CIT(E) mainly due to the lack of evidence of actual activities, which led to the inability to establish the genuineness of the activities. The rejection was also based on the absence of any change in circumstances since the earlier application withdrawal. The Ld. CIT(E) highlighted that the applicant had not submitted true evidence of expenditure towards charitable activities, thus failing to satisfy the conditions for registration under section 12AA. The rejection was further supported by the absence of evidence of charitable activities, with the activities being deemed theoretical and academic without any substantial charitable impact.

2. Legal Arguments and Decision:
During the proceedings, the assessee's counsel argued that the rejection based on the earlier application's dismissal should not impact the present application. Referring to the Baburam Education Society case, the counsel emphasized the charitable nature of the assessee's objectives, including involvement in health programs with the government. On the other hand, the DR contended that the assessee failed to provide evidence of its activities with the government, and highlighted the presence of another organization at the same address. The Tribunal noted the requirement for charitable objects and genuine activities for registration under section 12AA. It differentiated the case from the Baburam Education Society precedent due to the lack of evidence supporting the claimed activities. The Tribunal also clarified that the earlier rejection was due to withdrawal, not merit, and directed the assessee to provide evidence of its activities for reevaluation.

3. Restoration and Directions:
The Tribunal found that while the charitable nature of the activities was not disputed, the rejection was based on the lack of genuineness due to insufficient evidence. Consequently, the matter of registration under section 12AA was referred back to the Ld. CIT(E) for reassessment with a directive for the assessee to provide necessary details and evidence of its activities. The appeal against the rejection of registration was allowed for statistical purposes. The matter of approval under section 80G was also remanded to the Ld. CIT(E) for fresh consideration. Ultimately, both appeals of the assessee were allowed for statistical purposes, with the decision pronounced on 25th June 2020.