2021 (1) TMI 500 - AT - Income Tax

Exemption u/s 11 - denial of registration u/s 12AA - CIT-E held that the assessee had failed to file evidence in support of the expenditure incurred on the charitable objects during the financial year 2018-19 and held that the genuineness of activities of the trust cannot be examined - HELD THAT - Exercise undertaken by the ld. Commissioner of Income Tax, Exemption, Pune by calling for the evidence in support of the expenditure is beyond scope of his powers vested with him u/s 12AA of the Act and furthermore the proof of the expenditure is an item of assessment. The grant of registration and the assessment of income the trust are two different distinct procedure prescribed under the Act. Commissioner of Income Tax, Exemption, Pune had lost sight distinction between the process of registration and the exemption or assessment of income u/s 11 - reasoning given by the ld. Commissioner of Income Tax, Exemption, Pune cannot be sustained in law and, accordingly, we set-aside the order of the ld. Commissioner of Income Tax, Exemption, Pune dated 18.09.2020 passed u/s 12AA of the Act and direct the ld. Commissioner of Income Tax, Exemption, Pune to grant the registration u/s 12AA - Decided in favour of assessee.

Summary

Issues:
Denial of registration under section 12AA of the Income Tax Act.

Analysis:
The appellant, a trust engaged in various charitable activities, filed for registration under section 12AA of the Act. The Commissioner of Income Tax, Exemption, Pune, denied registration based on the appellant's failure to provide evidence of expenditure incurred on charitable objects during a specific financial year. The appellant contended that the denial was unjustified as the Commissioner's role is limited to verifying the charitable nature of the trust's objects and the genuineness of its activities, citing the Ananda Social and Educational Trust case. The Commissioner, however, upheld the denial. The Tribunal observed that the Commissioner's denial solely based on lack of expenditure evidence was beyond the scope of powers under section 12AA. The Tribunal emphasized that the Commissioner's role is to ensure the trust's objects are charitable and its activities genuine, not to delve into expenditure details, which falls under the assessment procedure. The Tribunal referred to various precedents to support this distinction, ultimately setting aside the Commissioner's order and directing the grant of registration under section 12AA.

In conclusion, the Tribunal allowed the appeal, emphasizing that the Commissioner's confusion between registration and assessment procedures led to the unjust denial of registration under section 12AA. The Tribunal directed the Commissioner to grant the registration, highlighting the importance of distinguishing between the two distinct procedures under the Act.