2022 (1) TMI 532 - AT - Income Tax

Exemption u/s 11 - application for registration u/s. 12A refused - proof of charitable activity - refusal to grant registration is that the assessee had failed to provide copy of the Memorandum of Association (MOA) to the Trust as well as it had also failed to provide copy of Receipt and Payment account for three years which had been specifically called for by the Ld. CIT(E) - HELD THAT - Assessee society has been formed to provide educational facilities to all including the disadvantaged group of society to establish and run various types of educational institutions i.e. schools, colleges/University for art, science, commerce etc. as well as to acquire land, building, funds for running of Dharamshala/Institutions by way of receiving donation, fee, contributions, grants, loans etc. However, we note that CIT(E) has not considered these objectives of the assessee society while rejecting the application of the assessee. CIT(E) has also stated irrelevant reasons like non-filing of the Receipt and Payment Account as well as stating that the veracity of the income and expenditure account could not be established. It is the assessee's contention that these details were not called for by the Ld. CIT(E). Therefore, on an overall view of the facts of the case and considering the settled law that the Ld. CIT(E) has to satisfy himself about the genuineness of the objectives of the society, which in the present case, CIT(E) has not done as per the mandate laid down by law, we restore this file to the office of the Ld. CIT(E) for the purpose of reconsidering the application of the assessee society by examining the objects of the assessee society and by satisfying himself about the genuineness of the objectives of the society at this stage and not further. Needless to say that the Ld. CIT(E) will grant adequate opportunity to the assessee to support its claim prior to the passing of the order afresh. Appeal of the assessee stands allowed for statistical purposes.

Summary

Issues:
1. Rejection of registration u/s. 12A of the Income Tax Act, 1961 by the Ld. Commissioner of Income Tax (Exemptions), Chandigarh.

Detailed Analysis:

1. Rejection of Registration u/s. 12A:
The appeal was filed by the assessee against the rejection of their application for registration u/s. 12A of the Income Tax Act, 1961 by the Ld. Commissioner of Income Tax (Exemptions), Chandigarh. The grounds raised by the assessee included contentions regarding arbitrary grounds for rejection and lack of objectionable elements in the society's objects or activities. The Ld. Authorised Representative argued that the necessary documents, including the Memorandum of Association and financial statements, were indeed submitted by the assessee. It was highlighted that the failure to provide a Receipt and Payment Account was due to the society's exemption from preparing such statements based on specific criteria. The AR emphasized that the Ld. CIT(E) did not seek further clarification or evidence regarding the society's financial transactions before rejecting the application, indicating a violation of natural justice principles.

2. Observations and Considerations:
Upon reviewing the contentions, the Tribunal noted that the amended Memorandum of Association was submitted with the application, but the pre-amended version was not provided. The Tribunal acknowledged the objectives of the society, primarily focusing on providing educational facilities to various segments of society and acquiring resources for educational institutions. It was observed that the Ld. CIT(E) did not adequately consider these objectives while rejecting the application. The Tribunal also pointed out that reasons such as non-filing of the Receipt and Payment Account were deemed irrelevant, especially since these details were not specifically requested by the Ld. CIT(E). The Tribunal emphasized that the Ld. CIT(E) must ensure the genuineness of the society's objectives during the registration process, which was not satisfactorily done in this case.

3. Decision and Directions:
In light of the above observations, the Tribunal concluded that the rejection of the registration application was not justified. The file was remanded to the Ld. CIT(E) for reconsideration, directing a thorough examination of the society's objectives and genuineness. The Ld. CIT(E) was instructed to provide the assessee with ample opportunity to present supporting evidence before making a fresh decision. The appeal of the assessee was allowed for statistical purposes, indicating a favorable outcome based on the Tribunal's analysis and directions.

This comprehensive analysis of the judgment highlights the key issues, arguments presented by both parties, the Tribunal's observations, and the final decision with specific directions for further proceedings.