2024 (11) TMI 163 - AT - Income Tax

Rejecting application for registration u/s 12AB - non-furnishing/furnishing of incomplete compliance, which are not to the satisfaction of CIT(E) and in the manner as desired - HELD THAT - There was no comment by the Ld. CIT(E) qua the objects and activities of the assessee trust that the objects of the assessee trust are not in the nature as defined under the provisions of section 11 12 of the IT Act or the Activities carried out by the assessee trust are not genuine. Since the genuineness of activities and conduct of the assessee trust towards the objects of the as per there bylaws are not doubted by the CIT(E), neither any plausible reason or reasonable explanation to hold the same not in charitable nature was noted by the Ld. CIT(E), under such circumstances, we are of the considered view that this crucial aspect was left to be looked into by the approving authority, therefore, the matter requires to be restore back to the file of Ld. CIT(E). Thus, respectfully following analogy of law drawn from the order of Shaheed Nand Kumar Patel Vishwavidyalaya 2024 (9) TMI 976 - CHHATTISGARH HIGH COURT and case of Koi Apna Sa Ho Society 2024 (5) TMI 1481 - ITAT RAIPUR in absence of any contrary decision, fact, or submission by the revenue, we find it appropriate to restore the issue to the files of Ld. CIT(E), with the directions to re-visit the application of the assessee and dispose of the same under express finding qua the objects and activities of the trust in deciding the eligibility of the assessee trust for grant of registration u/s 12AB of the Act. The assessee is also directed to assist in the proceedings before the Ld. CIT(E) to furnish all the information necessary so as to satisfy the approving authority about the objects of the trust and the genuineness of its activities

Summary

Issues Involved:

1. Justification of rejection of application for registration under Section 12AB by the CIT(Exemption).
2. Scope of powers under Sections 12AB and 12AA of the Income Tax Act.
3. Evaluation of the genuineness of the trust's activities and its compliance with legal requirements.
4. Adequacy of documentation provided by the assessee related to donations, expenses, and earmarked funds.

Issue-wise Detailed Analysis:

1. Justification of Rejection of Application for Registration under Section 12AB:

The primary issue in this case is whether the Commissioner of Income Tax (Exemption) [CIT(E)] was justified in rejecting the application for registration under Section 12AB. The CIT(E) rejected the application due to discrepancies in the documentation provided by the assessee, such as incomplete details of donors and inadequate proof of expenses and earmarked funds. The assessee contended that the rejection was arbitrary and not justified as there was no adverse finding on the objects and genuineness of its activities. The tribunal noted that the CIT(E) did not provide any comments indicating that the objects of the trust were non-charitable or that the activities were not genuine. Therefore, the tribunal found the rejection premature and directed the CIT(E) to revisit the application.

2. Scope of Powers under Sections 12AB and 12AA:

The tribunal examined the scope of powers under Sections 12AB and 12AA, emphasizing that the CIT(E) must satisfy themselves about the genuineness of the activities and compliance with any other laws. The assessee argued that the scope of inquiry under Section 12AB(1)(b) is similar to that under Section 12AA(1)(a), which requires the CIT to satisfy themselves about the objects of the trust. The tribunal agreed with the assessee's reliance on previous judgments, which established that registration could not be denied if the objects of the trust were charitable or religious.

3. Evaluation of the Genuineness of the Trust's Activities and Compliance:

The tribunal observed that the CIT(E) did not express any doubts regarding the genuineness of the trust's activities or its compliance with its objects. The assessee provided details of donations, expenses, and earmarked funds, arguing that verification of such details was not within the CIT(E)'s scope at the registration stage. The tribunal found that since the CIT(E) did not question the genuineness of the trust's activities, the matter should be reconsidered, and the application should be evaluated based on the objects and activities of the trust.

4. Adequacy of Documentation Provided by the Assessee:

The tribunal reviewed the documentation provided by the assessee, which included details of donations and expenses. The assessee submitted that complete details of donations were furnished, and sample bills of expenses were provided. The tribunal noted that no further queries were raised by the CIT(E) after the submission of these documents. The tribunal emphasized that the CIT(E) should provide a reasonable opportunity for the assessee to furnish necessary information and should not reject the application solely due to incomplete documentation without further inquiry.

In conclusion, the tribunal set aside the CIT(E)'s order and remitted the matter back to the CIT(E) for reconsideration. The tribunal directed the CIT(E) to re-evaluate the application, ensuring a thorough assessment of the trust's objects and activities, and to provide the assessee with an opportunity to present additional documentation if required. The appeal was partly allowed, and the tribunal's decision underscored the importance of a detailed and fair evaluation process in granting registration under Section 12AB.