2024 (10) TMI 520 - AT - Income Tax

Rejection of Provisional registration u/s 12AB/ 80G - Charitable activity or not? - CIT reached at a conclusion that assessee did not furnish note on activities giving details of activities actually carried out by assessee, the details are general note without activity wise details and with respect to the documentary evidence, he held that photographs do not support the assessee's contention and no documentary evidences furnished to prove that the trust is engaged in providing scholarship, prizes and promote for getting higher education etc. HELD THAT - Assessee submitted certain details as per letter dated 21/9/2023 by showing activities and further submitting certain photographs. With respect to the bills and vouchers of the expenses, assessee merely submitted the audited accounts of the trust for last three years. With respect to the objects of the trust and the activities carried on by the trust, assessee has given some details in the above stated later. Some of the photographs also shows the name of the trust. However, with respect to the expenditure incurred by the assessee, nothing was provided except audited annual accounts. In the audited annual accounts for the year ended on 31/3/2019 assessee did not incur any expenditure, for the year ended on 31/3/2020 assessee has incurred expenditure on the object of the trust of ₹ 41,000, for the year ended on 31/3/2021 assessee has incurred expenditure on the object of the trust of ₹ 12,425, and for the year ended on 31/3/2022 assessee has incurred expenditure on object of the trust of ₹ 10,000. Except this no details of such expenditure are available before the approving authority. Therefore, there was no verification about the activities of the trust and expenditure incurred on such activities. Assessee has provided certain details about the activities of the trust supported with some photographs, but CIT was not satisfied with this. If this be the case, the assessee should have been issued one more letter asking for other comprehensive details as desired by the CIT. This opportunity was not provided to the assessee. Assessee also failed to provide the details of the expenditure by producing bills/vouchers and supportings of the expenditure incurred on the object of the trust. In view of this, in the interest of Justice, we restore the matter back to the file of the learned CIT with a direction to the assessee to substantiate the objects with activities carried on and necessary supportings of expenditure incurred shown as spent on the object of the trust. Assessee appeal allowed for statistical purposes.

Summary

Issues:
1. Rejection of provisional registration under Section 12AB of the Income Tax Act.
2. Rejection of provisional approval under Section 80G of the Income Tax Act.

Analysis:

Issue 1: Rejection of Provisional Registration under Section 12AB:
The Appellate Tribunal considered the case of a charitable trust involved in educational activities seeking registration under Section 12A(1)(ac) of the Income Tax Act, which was rejected by the Commissioner of Income Tax (Exemption). The trust failed to provide detailed activities and expenditure evidence as required. The Tribunal found that while the trust submitted some details and photographs, it did not adequately substantiate its activities or expenses. The Tribunal noted discrepancies in the trust's financial statements and directed the trust to provide comprehensive details to verify the genuineness of its activities. The matter was remanded back to the CIT for further consideration after the trust provides necessary substantiation.

Issue 2: Rejection of Provisional Approval under Section 80G:
The Tribunal also addressed the rejection of the trust's application for recognition under Section 80G(5) of the Income Tax Act by the CIT. This rejection was linked to the earlier rejection of provisional registration under Section 12AB. The Tribunal observed that since the registration under Section 12AB was under review, the recognition under Section 80G(5) was dependent on the former. Consequently, the Tribunal remanded this issue back to the CIT for fresh consideration after the registration matter is resolved. The trust was to be given a fair opportunity of hearing in this regard.

In conclusion, the Tribunal allowed the appeals for statistical purposes and emphasized the importance of providing comprehensive details and evidence to support claims for registration and recognition under the Income Tax Act. The Tribunal also condoned the delay in filing the appeal, considering it inadvertent and without malafide intent. The decisions underscored the need for trusts to diligently comply with documentation requirements and substantiate their activities and expenses to secure tax benefits and exemptions under the law.