2023 (10) TMI 848 - AT - Income Tax

Exemption u/s 11 - application for registration u/s. 12AB rejected - assessee society was maintaining two types of audit reports for each year - HELD THAT - It is a matter of fact borne from the record that the assessee society on being queried about the expenses incurred in relation to the activities which were claimed to have been carried out by it, had come forth with two audit reports of the assessee society for F.Y 2019-20 to F.Y 2021-22. It is absolutely incomprehensible and a matter of serious concern as to how two sets of audit reports, which, as observed by the CIT(Exemption), revealed a glaring mismatch in the total income and expenditure, had been filed by the assessee society in the course of the proceedings before him. We are of a strong conviction that as the genuineness of the activities of the assessee society has not been substantiated, no infirmity emerges from the order of the CIT(Exemption), Bhopal, who had rightly declined its application for grant of registration u/s. 12AB - CIT(Exemption) rightly declined the application filed by the assessee society for grant of registration u/s. 12AB - Decided against assessee.

Summary

Issues:
The judgment involves the rejection of the assessee society's application for registration under section 12AB of the Income-tax Act, 1961 by the Commissioner of Income-Tax (Exemption), Bhopal, based on discrepancies in audit reports and lack of substantiation of activities.

Grounds of Appeal:
1. The CIT(Exemption) erred in rejecting the registration application without properly appreciating the materials furnished to prove the genuineness of the society's charitable activities.
2. The CIT(Exemption) erred in rejecting the application without providing a proper opportunity of being heard.
3. The appellant reserved the right to amend or withdraw any grounds of appeal at the time of hearing.

Details of Judgment:
The assessee society was engaged in various charitable activities but failed to show related expenditures in the income and expenditure account for the relevant years. Upon inquiry, the society submitted two sets of audit reports, one with errors and one corrected. Discrepancies in income and expenditure were found between the old and new reports, raising doubts about the maintenance of accounts by the society. The CIT(Exemption) observed that the society had not substantiated the genuineness of its activities and maintained two types of audit reports, leading to the rejection of the registration application under section 12AB of the Act.

Legal Analysis:
The judgment upholds the decision of the CIT(Exemption) to decline the registration application, citing the lack of substantiation of activities and discrepancies in audit reports. The tribunal found no infirmity in the CIT's decision, as the genuineness of the society's activities was not established. The rejection of the application was deemed appropriate, and the appeal of the assessee society was dismissed.

Conclusion:
The tribunal upheld the order of the CIT(Exemption), Bhopal, declining the registration application of the assessee society under section 12AB of the Income-tax Act, 1961. The decision was based on discrepancies in audit reports and the failure to substantiate the charitable activities, leading to the dismissal of the appeal.