2020 (11) TMI 905 - AT - Income Tax

Exemption u/s 11 - rejection of registration u./s.12AA and denial of claim of exemption u/s.10(23C) (iii)(ad) - trust is not eligible for exemption u/s.10(23C)(iiiad) having its total receipts of more than ₹ 1 crore - CIT(E) observed that in the absence of bills and vouchers, the genuineness of the activities of the assessee trust could not be verified - HELD THAT - The scope of enquiry contemplated u/s 12AA is limited to the extent of Commissioner getting himself satisfied about object of the Trust and the genuineness of its activities so as to grant or refuse the registration u/s 12A - A perusal of the impugned order of the ld. CIT (Exemptions), however, shows that he has not recorded any adverse comment or dis-satisfaction about the object of Trust or genuineness of the Trust activities. Only he has observed some lacuna in the amendment and dissolution clauses. In our opinion, the ld. CIT (Exemptions) thus has clearly gone beyond the scope of enquiry contemplated u/s 12A of the Act and has refused to grant the registration u/s 12A of the Act to the assessee Trust on a totally irrelevant ground without pointing out as to how he was not satisfied either about the amendment clause and dissolution clauses of the Trust or the genuineness of its activities. Contention of the assessee that some bills and vouchers were not produced due to time constrained by ld CIT(E) for appearing before him from a distance of more than 250 kms and also other unavoidable reasons, we find that there is genuine cause for not furnishing bills and vouchers - we direct the assessee to produce the bills and vouchers and books of account before the ld CIT(E) for verification as per Rule 17A in respect of the claim and after getting the same, ld CIT(E) is also directed to examine and verify the genuineness of the activities of the trust keeping in view trust deed and its relevant clauses and decide the issue afresh as per law after affording due opportunity of hearing to the assessee and without being prejudiced his earlier order challenged in this appeal. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
Appeal against rejection of registration u/s.12AA
Denial of claim of exemption u/s.10(23C)(iii)(ad)

Analysis:
1. The appeal was filed against the rejection of registration u/s.12AA and denial of exemption u/s.10(23C)(iii)(ad) for the assessment year 2018-19. The main issue revolved around the rejection of registration by the CIT(E) and the denial of exemption based on various grounds.

2. The CIT(E) disallowed the registration u/s.12AA citing improper amendment and dissolution clauses, lack of intention to transfer trust properties, and absence of a clause requiring auditing of accounts by a C.A. Additionally, the denial of exemption u/s.10(23C)(iii)(ad) was due to the trust's total receipts exceeding the prescribed limit of &8377; 1 crore. The genuineness of the trust's activities was questioned due to the inability to furnish fee receipts and donation details.

3. The Tribunal noted that the CIT(E) had exceeded the scope of inquiry under section 12AA by rejecting registration without valid reasons regarding the trust's objects or activities' genuineness. The Tribunal directed the assessee to produce bills, vouchers, and books of account for verification to assess the trust's activities' genuineness based on the trust deed and relevant clauses.

4. The Tribunal acknowledged the genuine reasons for not furnishing bills and vouchers promptly, considering the distance and other unavoidable circumstances. It directed the CIT(E) to re-examine and verify the genuineness of the trust's activities after reviewing the additional documentation, providing a fair opportunity for the assessee to present their case.

5. Ultimately, the appeal of the assessee was allowed for statistical purposes, emphasizing the need for a thorough examination of the trust's activities and compliance with legal requirements for registration and exemption under the Income Tax Act, 1961.