2024 (10) TMI 641 - AT - Income Tax

Rejection of application for registration u/s 12AB r.w.s 12A(1)(ac)(vi) - assessee has paid huge commission to three persons which amounts to nearly 12% of the total donations - Assessment of genuineness of activities and compliance by the trust/institution as doubtful - Lack of documentary evidence for activities carried out by commission agents HELD THAT - The assessee has made large payments for purchase of food grain and all the purchases were made from one Shanti Trading Co. Similarly, the donors list furnished by the assessee does not contain full name and address of the donors but only the first name of the persons has been recorded. The copies of receipts were not furnished for verification. CIT(Exemption) came to the conclusion that the charitable nature and genuineness of the activities are doubtful, for which he rejected the claim of registration u/s 12A of the Act. It is the submission of assessee that since the CIT(E) without affording adequate opportunity to the assessee to substantiate its case by filing the requisite details, suddenly came to the conclusion that the charitable nature and genuineness are doubtful, therefore, in the interest of justice, the assessee should be given an opportunity to file the requisite details before him to substantiate its case. We deem it proper to restore the issue to the file of the CIT(E) with a direction to grant one final opportunity to the assessee to substantiate its case by filing the requisite details. Appeal filed by the assessee is allowed for statistical purposes.

Summary

Issues:
1. Delay in filing appeal before the Tribunal.
2. Rejection of application for registration u/s 12A of the Income Tax Act.
3. Lack of opportunity to explain case before rejection of registration.
4. Doubts regarding genuineness of activities and charitable nature.

Analysis:
1. The judgment addresses a delay of 53 days in filing the appeal before the Tribunal. The assessee filed a condonation application explaining the reasons for the delay. After considering the application and hearing the Ld. DR, the delay was condoned, and the appeal was admitted for adjudication.

2. The CIT(Exemption) rejected the application for registration u/s 12A of the Income Tax Act. The assessee had filed an application, but discrepancies were noted in the information provided. The CIT issued notices requesting additional information and clarifications regarding the commencement of activities, financial statements, and commission payments. The assessee's responses were considered insufficient, leading to the rejection of the application.

3. The assessee contended that adequate opportunity was not granted before the rejection of registration. The Ld. Counsel argued that the CIT(Exemption) did not call for further explanations after receiving the last reply. It was emphasized that the assessee should be given another chance to substantiate its case before the CIT(Exemption).

4. The CIT(Exemption) raised doubts about the genuineness of activities and charitable nature based on various factors, including high commission payments, lack of full donor information, and questionable financial transactions. The Tribunal found that the CIT(Exemption) did not provide sufficient opportunity for the assessee to clarify these doubts. Consequently, the Tribunal directed the issue to be restored to the CIT(Exemption) for granting a final opportunity to the assessee to substantiate its case with requisite details, ensuring due process and a fair hearing. The appeal was allowed for statistical purposes.