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Facts
The assessee, Arya Gram Vikas Samiti, applied for registration under Section 12AB of the Income Tax Act, 1961, for running a girls' school. The CIT(E) rejected the application, citing insufficient evidence to prove the genuineness of the charitable activities.
Held
The Tribunal held that the CIT(E) erred in rejecting the application without proper appreciation of the facts and evidence. The Tribunal found that the assessee's activities were charitable and genuine, and directed the CIT(E) to grant registration.
Key Issues
Whether the CIT(E) was justified in rejecting the registration application for charitable activities due to lack of documentary evidence, and whether the cancellation of provisional registration was valid.
Sections Cited
12AB, 12A(1)(ac)(iii), 12A(1)(ac)(b), 12AB(1), 12AB(4), 12A(1)(ac)(iii)
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Income Tax Appellate Tribunal, DELHI BENCH ‘C’: NEW DELHI
Before: MS. MADHUMITA ROY & SHRI AVDHESH KUMAR MISHRA
This appeal filed by the assessee is directed against the order dated 30.12.2024 passed under Section 12AB/(1)(b)(ii) of the Income Tax Act, 1961 (‘Act’) by the Commissioner of Income Tax (Exemption), Lucknow [hereinafter, the ‘CIT(E)’].
Following grounds have been raised in this appeal: “1) The Ld. CITIE), has committed gross injustice to the appellant by and passed the order rejecting the application for registration filed by the assesse trust u/s 124(1)(ac)(b) of the Income Tax Act, 1961 which is bad both in the eye of law and on the facts of the case.
2) On the facts and circumstances of the case, the Ld. CIT (E) has erred on both on facts and in law in passing the order rejecting the application for registration u/s 12A(1)(ac)(iii) of the Income Tax Act without providing the opportunity of being heard in violation of the principle of natural justice.
3) On the facts and circumstances of the case, the order passed by the Ld. CIT(E) are in violation of the statutory conditions of the act and the procedure prescribed under the law and as such the same is bad in law and liable to be quashed.
4) On the facts and circumstances of the case, the Ld. CIT (E) has erred both on facts and in law in rejecting the application for registration u/s 12A(1)(ac) (iii) of the Income Tax act despite the fact that the assesse filed the application within the prescribed time limit and fulfilled all the conditions as provided under the Income Tax act related to the registration and also filed all the details and documents as and when required by the Ld. CIT (E) during the proceedings for registration and thus, eligible for registration.
5) On the facts and circumstances of the case, the Ld. CIT(E) erred in rejecting the application for registration u/s 12A(1)(ac) (iii) of the Income Tax act, 1961 despite the fact that there is no adverse findings regarding the aims, objects and genuineness of the activities of the trust and hence application for registration cannot be rejected.
6) The appellant craves leave to add, alter, vary, omit, substitute and amend the above grounds of appeal, at any time of hearing of appeal, so as to enable your good self to decide this appeal according to the law.” 2.1 The sole issue in dispute here arises from the rejection of registration under section 12AB of the Income Tax Act, 1961 (‘Act’).
The relevant facts giving rise to this appeal are that the assessee filed an online application in Form No. 10AB read with Rule 17A of the Income- tax Rules, 1962 for its registration under section 12AB of the Act, which was rejected observing as under by the Ld. CIT(E), Lucknow:
“5. As evident, the applicant was given sufficient opportunity to furnish documentary evidences, viz. bills, vouchers, photos, affiliation, license, fire NOC and news coverage by media etc., to substantiate the charitable activities claimed to have been carried out by the applicant in the recent past/last three years for which expenditure has been booked in the income and Expenditure accounts of the relevant years. However, no bills and/or vouchers have been produced in support of expenditure booked in the Income and Expenditure accounts of the relevant years except some photographs which are not sufficient to prove the genuineness of activities of the applicant. The onus to prove the genuineness of the activities and charitable purpose lies on the applicant. In the absence of sufficient evidence with regards to the genuineness of activities claimed to have been carried out for charitable purposes as per the objects of the trust, the applicant's claim for registration cannot be accepted.
The law requires a conjunctive test whereby objects of the applicant trust/institution have to be charitable and genuineness of charitable activities should be established for registration of application u/s 12AB of the Act. Mere recital of objects or activities without cogent or corroborative evidence is not sufficient by themselves to enable a registering authority to arrive at the satisfaction mandated by law. Further the registering authority has to satisfy itself about compliance of such requirement of any other law for the time being in force by the trust/institution as are material for the purpose of achieving its objects. As discussed above, the applicant has failed to file documentary evidences to enable me to satisfy about the genuineness of its charitable activities.
7. Hence, from the above, it is clear that the activities are not verifiable and it could not be determined whether the applicant is genuinely carrying out charitable activity. Considering the aforementioned facts and circumstances, I am unable to arrive at the satisfaction about the object of the trust/institution and genuineness of its activities. Hence. the application filed in the Form No. 10AB for registration u/s 12AB of the Act is hereby rejected.” [Emphasis supplied] 4. Aggrieved, the assessee filed appeal before us.
At the outset, the Ld. Authorized Representative (‘AR’) drew our attention to the fact that the appellant assessee, a registered society for several decades, was running a Girls Intermediate College in the Village Rathora, District: Baghpat, Uttar Pradesh. The said school had been duly recognized and affiliated with the Uttar Pradesh Education Board, as evident from the certificate issued by the regional office of the Uttar Pradesh Education Board, Meerut. The same was placed on record [page no. 107 to 114 of the Paper Book (PB)]. The Ld. AR further drew our attention to the renewal of the FCRA registration granted to the appellant assessee from time to time as evident from the letter of the Home Ministry (FCR Division Wing) dated 18.12.2021 (page no. 63 and 64 of the PB). It was submitted that the appellant assessee is solely engaged in the charitable purpose by running a girls’ school in a rural area at village Rathora, District: Baghpat, Uttar Pradesh. The receipts of the assessee society were from school fees, donations and interest whereas the major expenses are related to salaries of teachers, staff members and other expenses for running the school. Students of the assessee’s school had written various annual exams not only pf the school but also of the Uttar Pradesh Education Board, which itself established the activities carried out by the appellant assessee. It was submitted that the above-mentioned documents and the audited Income & Expenditure Account and Balance Sheet of the Financial Years ending on 31.03.2022, 31.03.23 and 31.03.24 were duly filed before the Ld. CIT(E) along with detailed reply dated 18.12.2024. 4 5.1 The Ld. AR further submitted that the KYC of all members of the society, the copy of affiliation of the school run by the assessee with the Uttar Pradesh Education Board, trust deed, and details of the activities carried out by assessee etc., were duly filed. The Ld. AR drew our attention to the fact that the donations/contributions from abroad had helped the assessee to run the school with the minimal fee charged from students. It was submitted that the Ld. CIT(E) did not consider the submission of the assessee or appreciated the facts of the case and had wrongly mentioned that the assessee did not ensure the compliance of various notices issued from his office though he had extracted the objects of the assessee society along with the details of Income & Expenditure Account. Further, it was submitted that the appellant assessee’s Income Tax Returns (‘ITRs’) filed for years had been accepted by the AO. Thus, it was contended that the finding of the Ld. CIT(E) that “I am unable to arrive at the satisfaction about the object of the trust/institution and genuineness of its activities. Hence. the application filed in the Form No. 10AB for registration u/s 12AB of the Act is hereby rejected.”, in view of the above facts, prima- facie, was unjustified.
5.2 The Ld. AR contended that the school was in existence and its student wrote various annual exams, etc. Thus, it was submitted that adverse observations made by the Ld. CIT(E) was without appreciating the details and evidence filed in the course of registration proceedings. It was further submitted that some of these points were to be seen at the time of assessment and these points did not have any significance for grant of registration.
6. On the other hand, the Ld. CIT-DR contended that the Ld. CIT(E) had already considered the assessee’s reply dated 18.12.2024 as evident from para 2.1 of the impugned order. Hence, the argument that the Ld. CIT(E) had not considered/appreciated the assessee’s submission, was not factually correct. He prayed for rejection of the appeal.
We have heard both parties and have perused the material available on the record. A detailed paper book containing 117 pages was filed before us with the certification that the same had already been filed before the Ld. CIT(E). From perusal of the material available on the records (Balance Sheets, Income & Expenditure Accounts and other material, we are of the considered view that the appellant-assessee had carried out the charitable activities by running a Girls School in the rural area and providing education at a low cost.
Section 12AB(1) of the Act reads as under:
"where the application is made under sub-clause (ii) or sub-clause (iii) or sub-clause (iv) or sub-clause (v) [or item (B) of sub-clause (vi)] of the said clause,--
(i) call for such documents or information from the trust or institution or make such inquiries as he thinks necessary in order to satisfy himself about--
(A) the genuineness of activities of the trust or institution; and (B) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects;
(ii) after satisfying himself about the objects of the trust or institution and the genuineness of its activities under item (A) and compliance of the requirements under item (B), of sub-clause (i),--pass an order in writing registering the trust or institution for a period of five years; or (B) if he is not so satisfied, pass an order in writing,--
(I) in a case referred to in sub-clause (ii) or sub- clause (i) or sub¬clause (v) of clause (ac) of sub- section (1) of section 12A rejecting such application and also cancelling its registration; (II) in a case referred to in sub-clause (iv) or in item (B) of sub-clause (vi) of sub-section (1) of section 12A, rejecting such application, after affording a reasonable opportunity of being heard;"
At the stage of registration under section 12AB(1) of the Act, the Ld. CIT(E), can only examine objects of the trust, genuineness of the activities and compliance of any other law which is material for the purpose of achieving its objects. Needless to say, that the running of girls’ school that too in a rural area is nothing but charitable activity in nature. The assessee society activities have not been found as non-genuine. Further, there has been no violation of any other law. The registration under section 12AB(1) of the Act has been rejected on the reasoning that the Ld. CIT(E) was not satisfied with the object of the trust/institution and genuineness of its activities. However, the trust deed and the details of running the schools making part of the PB had already been filed before the Ld. CIT(E). Therefore, the order is bad in law and is required to be reversed. From perusal of the documents forming the part of the PB, we are of the considered view that that all objects of the assessee are charitable in nature and its activities are genuine and any other law applicable to the appellant assessee has been complied with.
The power of the Tribunal is co-extensive with power of commissioner. However, the order for registration under section 12AB(1) of the Act can be issued only after recording satisfaction with regard to the object and genuineness of the activities of the Trust and compliance of any other law which is material for the purpose of achieving its objects. Since the Ld. CIT(E) has not held that the assessee has done any infringement of any other law which is material for the purpose of achieving its objects; hence, this limb is not in dispute.
The Ld. CIT(E) has also cancelled provisional registration granted on 07.05.2021. The cancellation of registration including provisional registration is governed by the provisions contained in Section 12AB(4) of the Act. This provision provides that provisional registration can be cancelled on occurring of any specified violations mentioned in Explanation to this subsection. The Ld. CIT(E) has neither called for any information/document from the appellant assessee nor mentioned which of the specified violation has been committed by appellant assessee after conducting such enquiry and after calling document or information as mentioned in the sub-section. He summarily cancelled the provisional registration on the ground that the 8 application for registration filed under section 12A(l)(ac)(iii) of the Act is rejected. He could not have done so without giving proper opportunity to the appellant assessee and demonstrating the specified violation entailing cancellation of registration has been committed by the appellant assessee out of violations mentioned in clauses (a) to (g) of the Explanation. This amounts to violation of principle of natural justice. Therefore, we direct the Ld. CIT(E) to reverse the cancellation of provisional registration contained in Para 8 of the impugned order.
As far as the verification of certain expenses are concerned, this can be seen during the course of assessment of the appellant assessee and not at the time of granting registration. Since we have already held above that the objects of the Trust are charitable and its activities are genuine; therefore, we also direct the Ld. CIT(E) to grant registration under section 12AB of the Act.
In the result, the appeal of the assessee is allowed as above.
Order pronounced in open Court on 17.07.2025.