2021 (8) TMI 1158 - AT - Income Tax

Registration u/s 12AA - proof of charitable activities u/s 2(15) - power of Commissioner to look into objects of society and genuineness of same - CIT(E) has rejected the application of the Assessee by holding that there are certain defects and deficiencies in the basic documents and rules and regulations and doubts about the charitable activities to verify basic purpose of objectives of the Society and that the Appellant Society was not incorporated for solely education purpose and had been engaged in profit making activities - HELD THAT - Under section 12A, the provisions of sections 11 and 12 shall not apply in relation to the income of any trust or institution unless various conditions are fulfilled. The power of the Commissioner to look into the objects of the Society and the genuineness of the same cannot be doubted when the basis is of non-supply of information. In such circumstances, it would be appropriate that the Commissioner undertakes the exercise afresh, on the basis of the application which has already been filed, keeping in view the material which can be produced by the assessee or filed on record by digital mode. In the case of CIT-1, Chandigarh vs. Sri Guru Gorakh Nath Charitable Educational Society , 2015 (5) TMI 363 - PUNJAB HARYANA HIGH COURT had answered the question that Whether power of Commissioner to look into objects of society and genuineness of same could not be doubted when basis was of non-supply of information and as such it would be appropriate for Commissioner to undertake exercise afresh on basis of application which had been filed keeping in view material which could be produced by assessee and matter remanded back. Hon'ble Apex Court in the case of Ananda Social Education Trust Vs. CIT 2020 (2) TMI 1293 - SUPREME COURT has held that Even without any activity having been undertaken by trust, it is entitled to be considered for registration under section 12AA and various high court on the issue for grant of registration, that the CIT(E) has to be examine the genuineness of the objects only the stage of registration, and not genuineness of activities - we hereby set aside the order of the CIT(E) with a direction to decide expeditiously, the application, filed for registration under Section 12AA, afresh with the following observation verify that whether the objectives of the assessee trust are charitable in nature and activities carried out are genuine during the year for which the registration is sought for by the assessee society in the light of evidences prima facie relevant, for the year under consideration for the purpose of grant of registration u/s. 12AA - Appeal is treated allowed for statistical purposes.

Summary

Issues Involved:

1. Rejection of application for registration under Section 12AA.
2. Defects and deficiencies in the basic documents and doubts about charitable activities.
3. Non-compliance with terms and conditions for exemption under Section 10(23C)(vi).
4. Non-consideration of binding judgments.
5. Non-consideration of society's registration under the Society's Registration Act.
6. Non-submission of consolidated receipts and payments account.
7. Rejection of application against facts and circumstances.
8. Non-consideration of submissions during the hearing.
9. Lack of reasonable and sufficient opportunity to the assessee.

Detailed Analysis:

1. Rejection of Application for Registration under Section 12AA:
The appellant society challenged the rejection of its application for registration under Section 12AA of the Income Tax Act. The CIT(E) rejected the application citing defects in the documents and doubts about the charitable nature of the society's activities.

2. Defects and Deficiencies in Basic Documents and Doubts about Charitable Activities:
The CIT(E) highlighted that the society's by-laws did not specify the institution for which it was registered, and there were doubts about the society's charitable activities. The CIT(E) concluded that the society was engaged in profit-making activities rather than solely educational purposes.

3. Non-compliance with Terms and Conditions for Exemption under Section 10(23C)(vi):
The CIT(E) found that the society did not satisfy the necessary terms and conditions for exemption under Section 10(23C)(vi) of the Act. Specifically, the society's activities did not align with the requirements for being recognized as an educational institution existing solely for educational purposes and not for profit.

4. Non-consideration of Binding Judgments:
The appellant argued that the CIT(E) failed to follow the binding judgment of the Hon'ble Supreme Court in the case of 'Pine Grove Society.' The CIT(E) was accused of wrongly appreciating the facts of the case and not considering relevant judicial precedents.

5. Non-consideration of Society's Registration under the Society's Registration Act:
The appellant contended that the CIT(E) did not consider the society's registration under the Society's Registration Act XXI of 1860. The society had been registered since 20.01.2004, and this fact was allegedly overlooked by the CIT(E).

6. Non-submission of Consolidated Receipts and Payments Account:
The CIT(E) mentioned that the appellant did not produce the consolidated receipts and payments account and other details as requested. The appellant argued that the requisite details had been duly replied to by mail, but the CIT(E) did not consider them.

7. Rejection of Application against Facts and Circumstances:
The appellant claimed that the rejection of the application was against the facts and circumstances of the case. The appellant society maintained that it was engaged in charitable activities, specifically imparting education, and had been maintaining audited books of accounts.

8. Non-consideration of Submissions during the Hearing:
The appellant argued that the submissions made during the course of the hearing were not properly considered by the CIT(E). The appellant provided detailed explanations and supporting documents, which were allegedly ignored.

9. Lack of Reasonable and Sufficient Opportunity to the Assessee:
The appellant contended that no reasonable and sufficient opportunity was afforded to the assessee to present its case properly. The CIT(E) was accused of making the decision without giving the appellant a fair chance to address the concerns raised.

Conclusion:
The tribunal found that the CIT(E) had not properly considered the details and submissions provided by the appellant society. The tribunal set aside the order of the CIT(E) and directed a fresh examination of the application for registration under Section 12AA. The CIT(E) was instructed to verify the objectives and activities of the society in light of the relevant judicial pronouncements and provide a reasonable opportunity for the appellant to present its case. The appeal was allowed for statistical purposes.