2022 (11) TMI 9 - AT - Income Tax

Exemption u/s 11 - seeking registration u/s. 12A(1) - registration denied as assessee has failed to satisfy as to genuineness of its activities as well to charitable nature of its objects - HELD THAT - The assessee is consistently not attending the proceedings before the Division Bench, on all the occasions on 20.03.2022, 23.05.2022, 24.05.2022, 05.07.2022 and 24.08.2022 when this appeal was called for hearing before Division Bench, wherein none appeared on behalf of the assessee nor any adjournment application was filed on behalf of the assessee, except only on one occasion on 22.3.2022 when adjournment application was moved on behalf of the assessee which stood allowed by Division Bench. Keeping in view the entire conduct of the assessee as well after carefully consideration of material on record, we are of the considered view that CIT(E) has rightly rejected the application filed by the assessee for grant of registration u/s. 12A(1) of the 1961 Act, as the assessee has failed to satisfy as to genuineness of its activities as well to charitable nature of its objects, and further there are transactions/dealings with related parties covered u/s.13(1)(c) read with Section 13(3) and based on facts and circumstances of the case the benefit is given to related parties covered u/s 13(3). Reference is also drawn to the provisions of Section 114(g) of the Indian Evidence Act, 1872, that evidence which could be and is not produced would, if produced, be unfavourable to the person who withholds it. Assessee in the instant case failed to produce relevant evidences, entire material on records, facts and circumstances of the case, we dismiss this appeal filed by the assessee.

Issues:
1. Denial of registration under section 12AA based on applicability of section 13(1)(c) and section 13(3) of the Income Tax Act, 1961.
2. Failure to grant an appropriate opportunity of hearing violating natural justice.
3. Rejection of registration based on reliance on distinguishable case laws.
4. Failure to produce relevant documents to substantiate charitable nature of activities and genuineness of objects.
5. Delay in filing the appeal and lack of satisfactory explanation for the delay.
6. Lack of vigilance in proceedings and failure to attend hearings before the Division Bench.
7. Transactions with related parties covered under section 13(1)(c) and section 13(3) of the Income Tax Act.
8. Failure to provide explanations regarding transactions with interested parties and related parties.

Analysis:
1. The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Exemption) denying registration under section 12AA of the Income Tax Act, 1961. The denial was based on the applicability of section 13(1)(c) and section 13(3) of the Act due to transactions with specified persons, including relatives of the trustees. The assessee failed to provide explanations regarding these transactions, leading to the rejection of the registration application.

2. The assessee raised concerns about the denial of an appropriate opportunity of hearing and alleged a violation of natural justice. However, the tribunal noted that the assessee did not respond adequately to the queries raised by the Commissioner, which could have clarified the issues related to the transactions with interested parties. The failure to provide necessary information hindered the assessment of the genuineness of the activities and charitable nature of the objects.

3. The tribunal addressed the contention of the assessee regarding the reliance on distinguishable case laws by the Commissioner. It emphasized the importance of providing relevant documents, such as books of accounts, bank statements, and vouchers, to substantiate claims and demonstrate compliance with the provisions of the Act. The failure to produce such evidence weakened the case for registration under section 12AA.

4. The delay in filing the appeal was a significant issue, with the assessee submitting a belated appeal beyond the prescribed time limit. The reasons provided for the delay, including misplacement of the order and lack of vigilance, were deemed unsatisfactory. The tribunal highlighted the importance of diligence in legal proceedings and the need to adhere to statutory timelines.

5. The lack of vigilance displayed by the assessee throughout the proceedings, including failure to attend hearings before the Division Bench, raised concerns about the seriousness and commitment of the assessee in pursuing the appeal. The tribunal noted the consistent absence of the assessee during scheduled hearings, indicating a casual approach towards the legal process.

6. The tribunal emphasized the provisions of section 12AA(1) requiring the satisfaction of the Commissioner regarding the genuineness of activities and charitable objects of the trust. The failure to provide essential records and documents for verification hindered the assessment process, leading to the rejection of the registration application.

7. The tribunal concluded that the denial of registration was justified based on the failure of the assessee to satisfy the requirements regarding genuineness of activities, charitable nature of objects, and transactions with related parties covered under section 13(1)(c) and section 13(3) of the Act. The dismissal of the appeal was based on the overall conduct of the assessee and the lack of substantial evidence to support its claims.

8. In light of the above analysis, the tribunal dismissed the appeal filed by the assessee in ITA No. 142/Alld/2018, upholding the decision to reject the application for registration under section 12AA of the Income Tax Act, 1961.

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