2023 (7) TMI 1461 - AT - Income Tax

Rejection of registration u/s. 12AB - assessee had not incurred any expenditure as per the objects mentioned in the trust deed and a perusal of the receipt/payment account of the assessee showed that the assessee s trust had collected mess fees 50 times of the admission fee and had also incurred expenditure on fooding @ 50% of the gross receipts - HELD THAT - The order of registration can be issued only after recording satisfaction with regard to the genuineness of the activities of the trust as provided u/s.12AA of the Act. In this Full Bench judgment M/S REHAM FOUNDATION KANDHARI LANE LAL BAGH LUCKNOW 2019 (10) TMI 151 - ALLAHABAD HIGH COURT as further held that where the Commissioner has refused to accept application for registration of trust u/s. 12AA of the Act after recording his finding on the basis of material on record before him holding that the activities and objects of the trust were not genuine, the Tribunal, on the basis of same material on record, can come to the conclusion that the order of the Commissioner was perverse. In such a situation, Tribunal can direct the registration of trust without remanding the matter to the Commissioner. However, the evidences furnished before us in the form of paper book which were also submitted before the CIT(E) , are unfortunately not sufficient evidence to enable us to satisfy ourselves that the objects of the trust are indeed genuine. CIT(E) has ignored/misconstrued /misinterpreted the evidences placed before her. The material before us is also not sufficient for us to reach a conclusion regarding the genuineness of the activities of the assessee trust. Therefore, on the peculiar facts of this case, we deem it appropriate to restore the issue to the file of the ld. CIT(E) with the direction to decide the issue afresh. Appeal filed by the assessee stands allowed for statistical purposes.

Summary

Issues:
1. Rejection of registration u/s. 12AB of the Income Tax Act, 1961 by the Ld. CIT(E).
2. Grounds of appeal challenging the rejection of registration.
3. Discrepancies in the observations made by the Ld. CIT(E) regarding the income and expenditure account.
4. Submission of documents and evidences by the assessee to support charitable activities.
5. Arguments presented by the authorized representative and the Senior Departmental Representative.
6. Tribunal's analysis and decision on the appeal.

Detailed Analysis:
1. The appeal was filed against the rejection of the assessee's application for registration u/s. 12AB of the Income Tax Act, 1961 by the Ld. CIT(E). The rejection was based on the grounds that the activities of the trust were not appearing genuine and were not in consonance with the trust's objects. The Ld. CIT(E) required the assessee to provide detailed information on activities conducted, charitable/religious activities, and supporting documentary evidence.

2. The grounds of appeal raised by the assessee challenged the rejection on various legal and factual aspects. The appellant contended that all required materials and evidence were submitted, deserving registration under section 12A(1)(ac)(iii). The appellant argued that the CIT(E) erred in law and on facts, did not appreciate the submissions made, and did not provide a due opportunity to be heard.

3. The authorized representative highlighted discrepancies in the observations made by the Ld. CIT(E) regarding the income and expenditure account of the trust. The representative pointed out that the facts considered by the CIT(E) were incorrect, as evidenced by the income and expenditure account provided by the assessee. The representative also emphasized that certain documents, such as invoices and photographs, supporting charitable activities were not considered during the registration process.

4. The authorized representative submitted various documents and evidences to support the charitable nature of the trust's activities. These included invoices for charitable expenditures, copies of photographs and brochures reflecting charitable activities, and detailed replies to queries raised by the CIT(E). The representative argued that even if all objects were not being carried out, registration should be granted based on the carried-out activities.

5. The Senior Departmental Representative supported the CIT(E)'s order, emphasizing that the trust's activities were not genuine and did not align with the trust's objectives. The representative argued that activities beyond the scope of the trust's objects, even if charitable, should not entitle the trust to registration. It was contended that the CIT(E) rightly rejected the application, and the appeal should be dismissed.

6. The Tribunal analyzed the submissions and evidence presented by both parties. It acknowledged the discrepancies in the CIT(E)'s observations and the importance of verifying the genuineness of the trust's activities. While recognizing the misinterpretation by the CIT(E), the Tribunal found the evidence insufficient to conclude on the genuineness of the trust's activities. As a result, the Tribunal directed the issue to be reconsidered by the CIT(E), with a mandate to fully evaluate the evidence and provide the assessee with a fair opportunity to present its case.

In conclusion, the appeal filed by the assessee was allowed for statistical purposes, and the matter was remanded back to the CIT(E) for a fresh decision after proper evaluation of the evidence and additional evidences if required.