2022 (12) TMI 169 - AT - Income Tax

Exemption u/s 11 - denial registration u/s 12AA(1)(b)(ii) - HELD THAT - We find that there is a clear mandate of the legislation to pass an order in writing accepting or rejecting the application seeking registration by the assessee society. CIT(E) therefore has to speak through his order reflecting his satisfaction or otherwise about the objects and the activities of the assessee society and basis of arriving at such a satisfaction which in turn will allow the assessee to claim and the AO to examine the claim of exemption u/s 11 and 12 in the respective assessment years and in an event of an adverse order, allow the assessee to challenge such an order before the higher appellate authority. We are unable to accede to the contention of the AR and agree with the contention of the CIT-DR that in absence of any specific finding recorded by the Ld CIT(E), there cannot be any presumption regarding the findings of the CIT(E) regarding the objects and activities of the assessee society. Regarding non-filing of return of income for the financial year F.Y. 2018-19 relevant to A.Y. 2019-20, AR has stated at the Bar that it is a fact that the assessee has not filed the return of income for the said assessment year but at the same time, it was submitted that merely non-filing of the return of income cannot be a basis to challenge the genuineness of the activities actually been undertaken by the assessee society in that year and extrapolating that to all subsequent years - As submitted that even where the return of income was not filed, the assessee society is maintaining its regular books of accounts accounting for its receipts and expenditure relating to various charitable activities which were carried out by the assessee society and given that CIT(E) has not called for the books of accounts, there was no occasion for the assessee society to furnish the same and where so permitted, the assessee society shall produce its books of accounts for necessary examination by the Ld CIT(E). Taking into consideration the entirety of facts and circumstances of the case, we deem it appropriate that the matter be set-aside to the file of the CIT(E) to examine the matter a fresh after calling for books of accounts and other documents as so desired and pass a speaking order recording his satisfaction or otherwise regarding the objects and genuineness of the activities of the assessee society after providing reasonable opportunity to the assessee society - Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
Delay in filing the appeal due to COVID-19 pandemic, denial of registration under section 12AA(1)(b)(ii) of the Income Tax Act, 1961, examination of the objective and activities of the assessee society for charitable nature and genuineness, non-filing of return of income for the financial year F.Y. 2018-19 relevant to A.Y. 2019-20.

Delay in Filing Appeal:
The appeal was delayed by 73 days due to the COVID-19 pandemic. The delay was condoned and the appeal was admitted for adjudication based on the extension of the limitation period by the Hon'ble Supreme Court.

Denial of Registration under Section 12AA(1)(b)(ii):
The assessee challenged the denial of registration under section 12AA(1)(b)(ii) of the Act. The application seeking approval under section 12AA was rejected by the Ld CIT(E) based on findings related to the diversion of receipts in the balance sheet and treatment of corpus funds. The assessee argued that the denial was unjustified as there were no doubts raised regarding the charitable nature of the society's objectives or the genuineness of its activities.

Examination of Objective and Activities of the Assessee Society:
The Ld CIT(E) raised doubts about the genuineness of the activities undertaken by the assessee trust since its inception in 2018. The Ld CIT DR argued that without specific findings on the objectives of the trust, it cannot be presumed that the activities were charitable in nature. The Tribunal emphasized the need for the Ld CIT(E) to pass a written order reflecting satisfaction or rejection based on the objects and activities of the society.

Non-filing of Return of Income for F.Y. 2018-19:
The assessee did not file the return of income for F.Y. 2018-19 relevant to A.Y. 2019-20. However, the assessee maintained regular books of accounts for charitable activities. The Tribunal directed the matter to be sent back to the Ld CIT(E) for a fresh examination after calling for books of accounts and documents to assess the genuineness of the activities undertaken by the assessee society.

In conclusion, the Tribunal allowed the appeal for statistical purposes, emphasizing the importance of a thorough examination by the Ld CIT(E) to determine the charitable nature and genuineness of the activities of the assessee society. The decision highlighted the need for specific findings and a written order to support the registration or denial under section 12AA of the Income Tax Act, 1961.