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Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI WASEEM AHMED, AM & SHRI S. S. VISWANETHRA RAVI, JM
आदेश / ORDER
PER WASEEM AHMED, AM:
In the instant case, the appeals were filed by the assessee against the orders passed by the Commissioner of Income Tax (Exemptions) rejecting the application, for registration under section 12AA of the Income Tax Act, 1961 (hereinafter referred as “the Act”) and grant of approval under section 80G(5)(vi) of the Act.
First we take up ITA No.586/PUN/2020.
The assessee has raised the following grounds of appeal:
“1. On the facts and circumstances of the case and in law the ld.CIT erred in rejecting the application for registration u/s 12AA on the sole ground that the expenses of the appellant are evidenced by self-made vouchers without corresponding withdrawals from bank, ignoring the submission of the appellant that it had not opened its bank account till 22.06.2020 and the nature of expenses being such that there would hardly be any third party documentation in respect of the expenses incurred.
The appellant submits that the rejection of registration is not in accordance with law.”
The assessee, a society registered under the Bombay Public Trust Act, 1950, established on 23-11-2012 bearing no. F-26270/KOLHAPUR, filed an online application for registration under section 12AA(1)(b)(ii) of the Act on 29-02-2020 with the ld. CIT (Exemptions). The ld. CIT (Exemptions) issued a letter to the assessee calling for certain queries regarding its application for registration under section 12AA of the Act vide letter dated 08-06-2020 which was complied by the assessee.
However, the ld. CIT (Exemptions) found that the assessee failed to upload the credible documents with respect to the expenditure claimed by it in the earlier three years. As such the assessee has filed only self-made cash vouchers which were not verifiable. Similarly, there was no cash withdrawal reflected in the bank statement filed by the assessee to justify the source of the expenditure. Thus, the ld. CIT (Exemptions) rejected the application moved by the assessee for registration under section 12AA of the Act by observing that the genuineness of the activities of the assessee cannot be verified.
Being aggrieved by the order of the learned CIT (Exemptions), the assessee is in appeal before us.
The learned Authorized Representative before us filed a paper book running from pages 1 to 30 and submitted that at the time of granting of registration under section 12AA of the Act, the books of account are not required to be examined and only the objects of the society are to be looked into. Thus the ld. CIT (Exemptions) had wrongly doubted the charitable
The learned Authorized Representative in support of his contention vehemently relied on the judgment of Hon’ble Supreme Court in the case of Ananda Social and Educational Trust Vs. CIT reported in 426 ITR 340.
It was prayed that therefore, the order of the ld.CIT (Exemptions) may be set aside and he may be directed to grant registration to the assessee society, under section 12AA of the Act.
On the other hand, the learned Departmental Representative submitted that the society was registered in the year 2012 and it has been carrying out its activities whereas it has made an application for registration under section 12AA of the Act in the year 2020. Thus, it was necessary by the ld. CIT(Exemptions) to verify the genuineness of the activities in pursuance to the provisions of section 12AA of the Act. Accordingly, the learned Departmental Representative also pointed out that the principles laid down by the Hon’ble Supreme Court in the case Ananda Social and Educational Trust (supra) cited by the learned Authorized Representative for the assessee are not applicable as in that case it was a new society/trust and did not carry out any charitable activity whereas in the case on hand the assessee is an old society and carrying out activities. The learned Departmental Representative vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion we find that the ld.CIT (Exemptions) had not doubted on the objects of the society whether the society was formed to undertake charitable activities or not. Moreover, the ld.CIT (Exemptions) had not pointed out any specific activity, which could be said to be a non-charitable activity. It is a settled position of law that while granting registration under section 12AA of the Act, the ld.CIT (Exemptions) is required to examine the objects of the assessee. If the objects of the assessee are charitable in nature, registration should be granted to the assessee. It can only be denied, if the ld. CIT (Exemptions) has brought something on record to establish that the assessee was engaged in activities other than charitable ones. On perusal of the finding of the ld. CIT (Exemptions), we find that he has made a reference to the objects of the society by observing as under:
“The applicant is established in 2012 and claims to be engaged in carrying out activities such as providing education to poor people, supporting disabled persons by providing them wheel chair, conducting tree plantation programmes, celebrating National Festivals etc.”
In holding so, we draw support and guidance from the judgment of Hon’ble Supreme Court in the case of Ananda Social and Educational Trust (supra) wherein it was held as under:
“12. Since section 12AA pertains to the registration of the Trust and not to assess of what a trust has actually done, we are of the view that the term 'activities' in the provision includes 'proposed activities'. That is to say, a Commissioner is bound to consider whether the objects of the Trust are genuinely charitable in nature and whether the activities which the Trust proposed to carry on are genuine in the sense that they are in line with the objects of the Trust. In contrast, the position would be different where the Commissioner proposes to cancel the registration of a Trust under sub-section (3) of section 12AA of the Act. There the Commissioner would be bound to record the finding that an activity or activities actually carried on by the Trust are not genuine being not in accordance with the objects of the Trust. Similarly, the situation would be different where the trust has before applying for registration found to have undertaken activities contrary to the objects of the Trust.”
Moving further, we note that the ld. CIT (Exemptions) has rejected the application under section 12AA of the Act due to two reasons. Firstly, the expenses incurred by the assessee were doubted on the reasoning that these were supported on self-made vouchers which were not verifiable. Secondly, there was no withdrawal from the bank for the expenses incurred by the assessee.
Regarding the withdrawal of cash from the bank, it was pointed out that the bank account of the assessee was opened in the year 2020. As such, there was no bank account in operation in the earlier years. Thus the finding of the ld. CIT (Exemptions) is contrary to the facts available on record.
Accordingly it is inferred that the assessee has incurred the expenses out of the cash available with it in the earlier respective years. The fact of availability of cash with the assessee in the earlier years was not doubted by the ld. CIT (Exemptions). Similarly, this fact can also be verified from the audited financial statements available on record.
Regarding the expenses claimed by the assessee based on self-made vouchers, we have perused the nature of expenses reflected in the income and expenditure account. From such expenses, we note that these expenses have been incurred for the day to day functioning of the society as well as for its objects. There is no prohibition to incur the expenses in cash. In our opinion certain items of expenditure to a small and reasonable extent may not be supported with proper external evidence. Such self-made vouchers may create the suspicion but in such a situation more investigation is required.
Furthermore, these items of the expenditure are small in value. Therefore only because the expenses are supported by self- made vouchers that alone cannot be a ground to hold that the activities of the society are not genuine in the given facts and circumstances. Undoubtedly, such items would be well within the acceptable limits of reasonableness.
In view of the above and after considering the facts in totality we set aside the issue to the file of the ld. CIT (Exemption) with the direction to grant registration to the assessee under section 12AA of the Act as per the provisions of law. Hence the ground of appeal of the assessee is allowed for the statistical purposes.
In the result, the appeal filed by the assessee is allowed for the statistical purposes.
Now we will take up ITA No.585/PUN/2020
The assessee has raised the following grounds of appeal:
“On the facts and circumstances of the case and in law the ld. CIT erred in not granting recognition u/s 80G on the ground that the appellant’s application for registration u/s 12AA is rejected and thus the requirement of Rule 11AA was not fulfilled.”
At the outset, we note that the application filed by the assessee for the registration under section 80G(5)(vi) of the Act was rejected by the ld. CIT (Exemption) on the reasoning that the application filed by the assessee for the registration under section 12AA of the Act was rejected vide order dated 30.09.2020. However, in this regard, we find that we have allowed the appeal of the assessee for the registration under section 12AA of the Act vide paragraph number 16 of this order. Accordingly, we also allow this appeal of the assessee filed for the registration under section 80G of the Act. Hence, the appeal filed by the assessee is allowed for the statistical purposes.
In the result, the appeal filed by the assessee is allowed for the statistical purposes.
In the combined result, both the appeals filed by the assessee are allowed for the statistical purposes.
Order pronounced on this the 12th day of February, 2021.