2024 (9) TMI 1124 - AT - Income Tax

Rejection of Application for registration u/s 12A - charitable activity or not? - CIT(E) objection was that the activities of the appellant Trust were not found as per the objects of the MoA and do not conclusively prove the genuineness of the activities of the Society - HELD THAT - The appellant is required to produce the desired details as show caused by the Ld. CIT(E) to arrive at the necessary satisfaction on charitable objectives viz a viz genuineness of activities as per the MoA. The argument of the Ld. AR that the evidences have not been doubted at all, is not appropriate because the CIT(E) has discussed the issue of source of fund for the purpose of the activity by way of Transfer entry on the same day and transferred back in the same manner to the same one party and thus, CIT (E) s observation cannot be said to given only in a casual manner regarding the activities are not being for charitable activities. In view of natural justice, we consider it deem fit that appellant may be allowed one more opportunity to prove its claim before the PCIT(E). Accordingly, we set aside the impugned order of learned CIT(E) and direct the learned CIT(E) to pass a de novo order in accordance with law after providing reasonable opportunity to the assessee - Thus, the matter is remanded back to the Ld. CIT(E). Appeal filed by the assessee is allowed for statistical purposes.

Issues Involved:
1. Rejection of application for registration under section 12A of the Income Tax Act, 1961.
2. Non-issuance of Show Cause Notice (SCN) and lack of opportunity for hearing.
3. Failure to appreciate replies and documentary evidence.
4. Genuineness of activities and compliance with the objects of the Memorandum of Association (MoA).

Issue-wise Detailed Analysis:

1. Rejection of Application for Registration under Section 12A:
The appellant filed an application in Form No. 10AB on 30.09.2023, seeking registration under sub-clause (iii) of clause (ac) of sub-section (1) of section 12A of the Income Tax Act, 1961. The Commissioner of Income Tax (Exemptions), Chandigarh, rejected the application on 22.03.2024. The rejection was based on the observation that the activities of the appellant did not conclusively prove the genuineness of the activities of the Society and were not in accordance with the objects of the MoA.

2. Non-Issuance of Show Cause Notice (SCN) and Lack of Opportunity for Hearing:
The appellant argued that the rejection was made without issuing any Show Cause Notice (SCN) and without providing any opportunity for a hearing to address the objections raised. However, this ground was not pressed by the appellant and was dismissed as not pressed.

3. Failure to Appreciate Replies and Documentary Evidence:
The appellant contended that the Commissioner failed to appreciate the replies and documentary evidence provided during the proceedings. The appellant submitted various documents, including the MoA, provisional registration, income and expenditure accounts, bank statements, and details of charitable activities. The appellant argued that these documents demonstrated the genuineness of the activities and compliance with the charitable objectives.

4. Genuineness of Activities and Compliance with the Objects of the MoA:
The Commissioner observed that the activities carried out were neither charitable in nature nor in consonance with the objects of the Trust. The financial statements showed significant expenses on printing and posters during COVID-19 and minimal bank expenses, which did not inspire confidence. The bank statements revealed transactions with Harry Auto Fuels and Madhwa Printers, which did not reflect actual charitable activities. The Commissioner concluded that the appellant failed to prove the genuineness of its activities as per its stated objects.

The appellant argued that the activities, although small in scale, were genuine and in line with the charitable objectives. The appellant cited judgments from the Rajasthan High Court and the Supreme Court, emphasizing that the quantum of activities should not be a basis for denying registration if the activities are genuine.

Conclusion:
The Tribunal noted that the Commissioner is required to examine both the objects of the Trust and the genuineness of its activities. In this case, the appellant failed to establish the genuineness of its activities and compliance with the charitable objectives. However, in the interest of natural justice, the Tribunal set aside the impugned order and directed the Commissioner to pass a de novo order after providing a reasonable opportunity to the appellant to prove its claim. The appeal was allowed for statistical purposes, and the matter was remanded back to the Commissioner for reconsideration.

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