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TMI Blog2021 (1) TMI 157X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions cannot be made applicable for grant of registration u/s. 12AA of the Act. None of the findings given in the survey report can justify the refusal of grant of registration to the assessee and the reasons given by the assessee in this regard are found to be acceptable. The CIT(E) has fallen into an error in concluding that the assessee did not adhere to the directions of the Tribunal and provide the necessary clarification. As assessee has also given clarification on other aspects, which will have a bearing on the grant of registration u/s. 12A of the Act. In the impugned order, the CIT(E) has neither dealt with those contentions nor has he found those contentions to be not correct, thus we are of the view that the assessee should be given the benefit of registration u/s.12AA - Appeal of assessee allowed. - ITA No.391/Bang/2020 - - - Dated:- 4-1-2021 - SHRI N.V. VASUDEVAN, VICE PRESIDENT And SHRI B R BASKARAN, ACCOUNTANT MEMBER Appellant by : Shri V. Srinivasan, Advocate Respondent by : Shri Pradip Kumar, CIT(DR)(ITAT), Bengaluru. ORDER Per N.V. Vasudevan, Vice President This is an appeal by the assessee against the order dated 16.3.2020 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(E) vide its show cause letter dated 6/1212017 which is evident from the fact that even though the CIT(E) has asked for various proof including brief note on charitable activities under taken by the assessee since its inception nothing has been filed in order to justify its case that its objects are charitable in nature and its activities are in accordance with its objects. Therefore, we are of the considered view that the issue needs to be reexamined by the id CIT(E) and hence, we set aside the issue to the file of the CIT(E) for fresh adjudication in accordance with law with a reasonable opportunity of haring to the assessee. 6. Pursuant to the order of Tribunal, the CIT(E) examined the plea of assessee for grant of registration u/s.12AA of the Act, in the light of the observations of the Tribunal regarding enquiry on facts brought out in the survey proceedings and proof and evidence regarding activities carried out by the assessee. In the set aside proceedings before the CIT( E), the Assessee submitted that as per the provisions of section 12AA of the Act, the authority granting registration u/s.12AA of the Act, has to satisfy itself about the genuineness of the activitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allegation in the survey report that application of income was also carried on by payments of cash, the assessee submitted that there is no prohibition for cash payments and that section 40A(3) does not apply to charitable trusts. (e) With regard to the allegation in the survey report that the applicant trust also failed to deduct TDS from the appropriate expenditure debited in the profit and loss account in the referred AYs, the assessee submitted that the TDS Failure is also due to ignorance as to the TDS provisions. Since the assessee was not assessed to tax and was under the impression that it is not liable to Income Tax assessment. All the parties (recipients) have filed their return of income and paid the taxes. At best interest u/s sec 201(1A) is attracted. This is also an irrelevant consideration at the stage of grant of registration. (f) With regard to the allegation in the survey report that the chairman of the educational trust who is a non filer, was also running a bar and wine shop routed the funds through the applicant trust, the assessee submitted that the Chairman and the trust are two separate assessable entities and that any irregularity alleged can be c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activity. 8. The assessee placed reliance on the decision of Hon'ble Karnataka High Court in the case of CIT v. M/s. Garden City Educational Trust, 330 ITR 480 (Karn.). In the aforesaid decision, the assessee-trust had filed an application for grant of registration under section 12A. The application was rejected by the Commissioner on the following grounds (i) that amongst its object the trust also had activities which were commercial in nature such as starting of industries in rural areas; (ii) that the trust also had the object of carrying on business in import and export; (iii) the trust deed permitted the trustees to draw remuneration for services rendered and the trust was also charging fee or collecting fee both as tuition fee and otherwise from the students who were being admitted to the educational institutions run by the trust. The Tribunal noticed that the assessee-trust had education as one of its objects and in fact it was carrying on the activity of imparting education and running an educational institution. It held that the assessee-trust was entitled to registration. On appeal to the High Court held, dismissing the appeal, that so long as the trust had educa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the erstwhile CIT(E) dated 6.12.2017. As we have already seen, this show cause notice was issued in proceedings which were ultimately set aside by the Tribunal. The Assessee has in fact sent reply dated 14.12.2017 to this notice and copy of the same is placed at pages 52 53 of Assessee's paper book. (3) The CIT(E) observed regarding activities of the trust as follows:- 8. On the contrary, the assessment orders passed in the case of the assessee for the AY 2016-17 2017-18 on 30.12.2018 27.12.2019 respectively clearly portray that the activities of the Trust do not conform to the objects of the Trust. In the order of assessment u/s. 144. for the AY 2016-17, an addition of ₹ 2,17,02,742 has been made u/s. 69 being unexplained investment. Similarly, in the order u/s. 143(3) passed for AY 2017-18, there is a corresponding unexplained investment added to the total income u/s 69 of ₹ 2,30,94,440/-. The assessee could not provide any satisfactory explanation with regard to its sources and intriguingly there had been no compliance to the repeated notices u/s. 142(1) issued seeking clarification on the correctness of income returned for these two assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e genuineness of the activities of the trust and also about the objects of the trust, whether it is charitable in nature or not. In the present case, there can be no dispute regarding the charitable nature of the objects of trust which is providing for education. As far as genuineness of the activities of the assessee is concerned, the only objection of the CIT(E) is contained in para 8 of his order in which there is a reference to the orders of assessment for AYs 2016-17 and 2017-18. The addition made u/s. 69 of the Act is already subject matter of challenge in the proceedings before the first appellate authority. It is not the case of the assessee that the addition u/s. 69 of the Act has anything to do with the activities of the trust. In these circumstances, there appears to be no basis for the CIT(E) in refusing grant of registration to the assessee. The Hon'ble Karnataka High Court in the case of Garden City Educational Trust (supra) has taken a view that grant of registration will not by itself confer benefits of exemption u/s. 11 and 12 of the Act to a trust and that so long as the activities are charitable in nature and if there is no evidence to show that the activitie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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