2024 (10) TMI 85 - AT - Income Tax

Rejection of application u/s 12A(1)(ac) (iii) and consequential order of non granting of approval u/s 80G (5) read with Rule 11AA - CIT(E) rejected the application citing lack of proof regarding the activities being carried out by the trust . HELD THAT - It is the case of the assessee that the assessee is running the school in accordance with the objects of the appellants society and to substantiate the same, the assessee has produced copy of balance sheets as on 31/03/2019 to 31/03/2022, copy of registration of society, copy of memorandum of society and copy of Form No. 10C dated 08/02/2022 (provisional registration granted by PCIT/CIT(A)). PCIT has not considered and tested the veracity of those documents while observing that there is no proof about the activities being carried out by the trust . Apart from the same, in our opinion, CIT(A) ought to have followed the ratio laid down by in the case of Anand Society and Educational Trust 2020 (2) TMI 1293 - SUPREME COURT Considering the above facts and circumstances, we restore the matter to the file of the Ld. CIT(E) for deciding the applications filed by the assessee afresh for registration u/s 12AB and the approval under 80G(5) of the Act after giving due consideration to the documents provided by the Appellant and decide the same on hearing the applicant. Appeals filed by the assessee partly allowed for statistical purposes.

Summary

Issues:
Challenge of rejection of application u/s 12A(1)(ac) (iii) of the Act and non-granting of approval u/s 80G (5) of the Act.

Analysis:
The assessee challenged the rejection of their application for registration u/s 12A(1)(ac) (iii) of the Act and the consequential non-granting of approval u/s 80G (5) of the Act. The Commissioner of Income Tax (Exemption) rejected the application citing lack of proof regarding the activities being carried out by the trust. The Commissioner's conclusion of lack of satisfaction about the genuineness of the activities was deemed unsustainable. The appellant contended that the rejection was based on incorrect appreciation of facts and lacked proper opportunity for the appellant, violating principles of natural justice. The appellant sought to quash the Commissioner's order and obtain registration under u/s 12A(1)(ac) (iii) of the Act.

The assessee filed an application seeking registration u/s 12A(1)(ac) (iii) of the Act, which was rejected by the Commissioner due to perceived lack of proof of activities being carried out by the trust. The rejection was based on the trust's limited activities due to fund restrictions and the absence of evidence supporting compliance with the memorandum of association. Subsequently, the application u/s 80G of the Act was also rejected by the Commissioner. The appellant argued that they had submitted financial statements and documents demonstrating compliance with the objects of the society, emphasizing that the Commissioner failed to consider these submissions.

The appellant relied on various judgments to support their case, asserting that the Commissioner should assess the genuineness of the trust's charitable nature and proposed activities rather than the actual activities conducted. The Departmental Representative, however, highlighted the appellant's admission of limited activities due to fund constraints, supporting the rejection of the application. After hearing both parties, the Tribunal found that the Commissioner did not adequately consider the documents provided by the appellant, including balance sheets, society registration, and memorandum copies. The Tribunal referred to a Supreme Court case to emphasize the need to assess the trust's charitable nature and directed the matter to be reconsidered by the Commissioner, granting the appellant another opportunity to present their case.

In conclusion, the Appeals filed by the assessee were partly allowed for statistical purposes, and the matter was remanded to the Commissioner for fresh consideration based on the documents provided by the appellant.