2022 (1) TMI 687 - AT - Income Tax

Exemption u/s 11 - rejecting the application filed under Form No. 10A seeking registration u/s. 12AA - HELD THAT - This Tribunal in the case of Sant Zolebaba Sansthan Chikhali 2021 (1) TMI 999 - ITAT PUNE held the issue of grant of registration and the assessment of income of trust are distinct and separate, by placing reliance in the case of Ananda Social and Educational Trust 2020 (2) TMI 1293 - SUPREME COURT which held the mandate of the provisions u/s. 12AA of the Act is to examine whether objects of the trust are charitable in nature or not and the activities of the trust are genuine. In the present case as discussed above the CIT(Exemption) did not point out anything against the objects and genuineness of the activities of the trust but however rejected the registration on the basis of incorrect finding that no returns of income filed and no taxes were paid. We find that it is a settled principle that the grant of registration and the assessment proceedings or exemption u/s. 11 of the Act is separate and distinct. The process of registration is not on occasion to give a finding whether the assessee filed returns of income and paid taxes or not. These issues cannot be examined during the process of registration u/s. 12AA of the Act. Therefore, in our opinion, the order of CIT(Exemption) in denying the registration u/s. 12AA of the Act cannot be sustained and the impugned order is set aside. Appeal of assessee is allowed.

Summary

Issues:
Delay in filing appeal condonation, rejection of application for registration u/s. 12AA of the Act.

Delay in filing appeal condonation:
The appeal was filed with a delay of 14 days. The Tribunal found the reasons for delay stated by the assessee to be bonafide, leading to the condonation of the delay. Despite no representation from the assessee, the appeal was heard based on the material available on record.

Rejection of application for registration u/s. 12AA of the Act:
The main issue for consideration was whether the CIT(A) was justified in rejecting the application filed under Form No. 10A seeking registration u/s. 12AA of the Act. The CIT(Exemption) rejected the application based on the grounds that the assessee had shown a significant surplus for certain financial years and had not filed income tax returns or paid taxes on the surplus. The CIT(Exemption) also questioned the genuineness of the trust/institution's activities. However, the assessee contended that they had indeed filed income tax returns for the relevant years and paid the due taxes, which the CIT(Exemption) did not consider. The Tribunal noted that the CIT(Exemption) had not pointed out any non-genuine activities of the assessee but rejected the registration solely on the basis of non-filing of income tax returns and non-payment of taxes, which was deemed incorrect. The Tribunal emphasized that the grant of registration under Section 12AA is separate from assessing income or tax payment issues. Relying on legal precedents, the Tribunal held that the rejection of registration solely on the grounds of tax compliance was not valid. Consequently, the Tribunal directed the CIT(Exemption) to grant registration u/s. 12AA of the Act to the assessee.

In conclusion, the Tribunal allowed the appeal of the assessee, setting aside the order of the CIT(Exemption) and directing the grant of registration u/s. 12AA of the Act to the assessee from the date of application.