IDEAL RELIEF TRUST,NEW DELHI vs. CIT EXEMPTION, DELHI, NEW DELHI

We find that appellant was formed on 19.07.2022 by way of written trust deed duly registered with Sub-Registrar and its objects were Religious & charitable. Appellant applied for provisional registration u/s 12A(1)(ac)(vi) vide application dated 18.1.2023 and was thus granted provisional registration on 25.01.2023 in terms of section 12A(1)(ac)(vi). At PB 14-27 the copy of Written Trust Deed dated 19.07.2022 settled by Mr. Mohmmad Arif, which contains Religious & Charitable objects of education, religious, relief to the poor and other charitable purposes, is provided. Then at PB 113-117, 111-112 is the provisional registration Application u/s 12A(1)(ac)(vi) dated 18.1.23 &Provisional Registration Certificate u/s 12AB(1)(c) dated 25.01.2023. Thereafter, the appellant applied for regularization of provision registration u/s 12A(1)(ac)(iii) on 27.09.2023 and PB 1-10 is the copy of application for registration u/s 12A(1)(ac)(iii) of the Act. As per ld. Counsel of assessee, during the course of proceeding for grant of registration, queries raised were replied by the assessee along with several evidences / bills/ vouchers / photographs and list of beneficiaries and that the trust was formed for religious- cum for charitable purposes and detailed explanation was furnished regarding the charitable activities undertaken by the appellant Trust. At PB 121 is appellant’s submissions dated 19.12.2023, furnishing copy of Trust Deed, provisional registration certificate u/s 12A, audit report, copies of bills / vouchers/ photographs/ list of beneficiaries, to the ld.CIT(E). Further on record at PB 11-13 is the copy of audited financial statements. PB 28-33 is the copy of annual activity report. PB 34, 35-88, 89-108, 109-110 are the copies of Acknowledgment of return of income for AY 23-24, Full copy of return of income, Form 10BB, Form 10. PB 118-120, 122-123, 126-127 are the copies of the notices dt. 7.11.23, 18.1.24, 8.2.24 issued by Ld. CIT(E).

Ld. Counsel has heavily relied PB 124-125, the copy of appellant’s letter dated 22.01.2024 clarifying that Trust is registered with sub-registrar under the Trust Act, and no special compliance of any other law was required and that it was formed for religious cum-charitable purposes and donations received were used to distribute ration kits for the poor families, financial assistance and scholar-ships to the needy and poor peoples and that Trust is religious organization and attempt has been made to get all information from the donors but getting PAN is very difficult and further, that the trust is not required to maintain PAN, Name, Address of the Donors. Reference was made to PB 125- A which are the details of donations exceeding Rs. 1 Lac and distribution of ration kits provided were filed. Then PB 128-131 is appellant’s third letter dated 20.02.2024 to Ld. CIT(E) explaining that section 13(1)(b) of the Act is not applicable to religious trust or to religious cum charitable trust and further section 115BBC and the method of receipt of donations was also explained and that the donors deposit the donations directly in the bank.

Ld. Counsel has submitted that based on above, Ld. CIT(E) ought to have granted the Registration u/s 12AB(1)(b)(ii)(A). He relied the decision in Dandhavya Chhasath Prajapati Samaj Vs CIT (ITAT Ahmedabad) Appeal Number :

Then with regard to Ld. CIT(E) canceling the Provisional Registration granted u/s 12A(1)(ac)(vi) by exercising his power u/s 12AB(1)(b)(ii)(B) on the ground that ‘specified violation’ mentioned in Explanation below sub-section (4) of section 12AB were committed by the appellant. Ld. Counsel has submitted that appellant had not committed any specified violation because sub- section (4) of section 12AB are similar to section 13(1)(b), which has been the subject matter of litigation in many judicial decisions and placing reliance on CIT Ujjain vs. Dawoodi Bohara Jamat, dated 20.02.2024 (SC), Sunni Muslim Jamat Aamena MadressaEbdatgah Waqf Committee vs. CIT(E) (ITAT Surat), JamiatulBannat Tankaria vs. CIT(E) [2024] 160 taxmann.com 358 (ITAT Ahmedabad), CIT vs. BarkateSaifiyah Society [1995] 78 taxman.com 6 (GUJ) and it was submitted that in case of composite trust principles are to be applied differently.

Ld. DR has submitted that despite multiple notices and final opportunities, the applicant failed to satisfactorily address the discrepancies in donor records, source of receipts, and utilization of income and the applicant's replies were found inconsistent, incomplete, and unresponsive to the queries raised. Ld. DR has submitted that there is failure to comply with statutory Requirements. It was submitted that as per Section 12AB(l)(ac)(iii) of the Act, registration is granted only if the genuineness of the activities and the compliance with the trust's objectives are duly established. Despite multiple opportunities, the applicant failed to furnish complete and satisfactory details of donors and their confirmations, including PAN and identity proof, as mandated under the Act. Relying section 115BBC of the Act it was contended that same requires maintenance of records for donations, particularly for anonymous donations. The applicant's contention that it is not liable to maintain such records for anonymous donations is legally untenable. Ld. DR has submitted that the applicant admitted to engaging in both charitable and religious activities, with some religious activities targeting a specific community. This admission substantiated the finding of a "specified violation" under the Act. Ld. DR contended that Explanation (d) to sub-section (4) of Section 12AB explicitly prohibits the application of income for the benefit of any particular religious community or caste by a trust established after the commencement of the Income Tax Act. The applicant’s admission that its religious activities cater to a particular community supports the conclusion that the trust falls under the category of "specified violation." This alone disqualifies it from registration under Section 12AB. It was submitted that the lack of transparency in financial records and the applicant’s inability to substantiate the sources of such significant donations raise serious concerns about compliance with the provisions of the Act, specifically Sections 11 and 12 of the Act. It was also submitted that there is absence of adequate evidence for activities claimed. According to ld. DR the applicant claimed to conduct charitable activities such as community development and distribution of ration kits. However, no concrete evidence, such as beneficiary details, expenditure breakdown, or activity reports proportionate to the quantum of donations, was submitted. This undermines the claim of genuine charitable activities under Section 2(15) of the Act. Ld. DR has submitted that the trust lacks the infrastructure, offices, and personnel to support the scale of operations claimed, further casting doubt on its genuineness. It was contended that there is misinterpretation of Section 13(1)(b) of the Act.

It was submitted that the applicant erroneously relied on Section 13(1)(b) to argue that the provision applies only to trusts established exclusively for charitable purposes. However, the restriction under Section 13(1)(b) applies equally to composite trusts involved in both religious and charitable activities when their benefits are restricted to a particular religious community or caste. It was submitted that there is violation of public trust doctrine. The trust deed's objectives and subsequent actions contradict the fundamental principle that charitable trusts must serve the public at large and not a specific religious or caste group. This violation further disqualifies the applicant from registration under Section 12AB. It was also submitted that there is lack of bona fide effort to address ld. CIT’s Concerns. The applicant’s repeated delays, partial submissions, and failure to respond to specific queries indicate a lack of bona fide effort to comply with procedural requirements. The ld. CIT acted within the framework of natural justice by providing adequate opportunities to the appellant. Reliance is also made on DIT (Exemptions) v. Bharat Diamond Bourse [(2003) 126 Taxman 365 SC to contend registration under Section 12AB was denied for failure to substantiate genuineness and the decision emphasized the requirement to establish genuine charitable activities. Further reliance was made on CIT v. Dawoodi Bohra Jamat [supra] to submit that decision reiterated the principle that benefits must be for the public at large and not confined to a specific community or group.

We find that the Ld. CIT(E) denied the registration u/s 12AB(1)(b)(ii)(B) on the ground that there were doubtful receipts as PAN of 93% of donors were not provided and thus, identity of the donors and genuineness of donations could not be proved. In this context reading of the said clause (b) of section 12AB(1) of the Act establishes at this stage what is material is to examine genuineness of the activities and compliance of other laws and objective assessment of objects of the trust. At page PB 28-33 is the activity report showing the charitable activities and at PB 124-125, 125A are the submissions about the utilization of the donations for the charitable purposes. It is sufficiently established from PB 14-27, the Trust Deed, that same has clauses showing the religious and charitable objects of the Trust. Thus as for the purpose of clause (b) of section 12AB(1) of the Act this all material was supposed to be examined by ld. CIT(E) u/s 12AB(1)(b) of the Act and give a finding if the conditions as prescribed u/s 12AB(1)(b) of the Act stand complied with regard to genuineness of the claimed religious and charitable activity.

As to the genuineness of donations allegedly not proved, though ld. Counsel has submitted that donations were received online and therefore, it was not possible to maintain complete details / PAN, which is also not the requirement of section 115BBC of the Act for religious & charitable trust and has questioned applicability of section 115BCC of the Act. We acknowledge the contention that genuineness of donations has to be seen at the time of assessment and not at the time for registration of the Trust as section 12AB(1)(b) does not make any specific reference to such requirement and violation of section 115BBC, is not mentioned as one of the ground for rejection of application.

However, we are of considered view that genuineness of the claimed religious and charitable activity, has to be one which, through and through is genuine. Mere recital clauses of such activity or performance of such activity is not sufficient to hold the genuineness of activities of the trust or institution if the source of funds are illegal or otherwise tainted, as by way of money laundering, indicating that though the activity is benevolent, the intention is not. So to hold, that the activities of the trust or institution are genuine and grant registration.

Thus we sustain the contention of ld.AR for the present case as ld. CIT(E) has erred in applying provisions of section 115BBC of the Act to deny registration but we don’t find it fit to make any observation accepting the genuineness of source and let that issue be examined at appropriate issue. However, the rejection of regularization of the provisional registration granted u/s 12A(1)(ac)(vi) granted vide order dated 25.1.23 & by which regularization was sought by the appellant u/s 12A(1)(ac)(iii), on the ground that conditions of section 12AB(1)(b) are not met by questioning genuineness of donation by recourse to section 115BBC, are held to be beyond the scope of enquiry. 10

As with regard to alleged specified violation as basis to cancel the provisional registration, we have considered the copy of assessee’s trust deed available at pages 14 to 27 of the paper book. We find that in the Aims & Objectives of the Trust, it is mentioned that the Trust shall be charitable trust and having partly religious activities in terms of the tenets of Islam. The ‘general objects’ certainly are indicative of conducting activities which may be religious activities. However, when the objects under the head, ‘Education’, ‘Relief to poor’ and ‘other objects’ are considered, the same show that there is no discrimination on the basis of religion, caste and creed. They intent to provide benefit to people of all case and religions in the field of education etc and including environmental sustenance. The activities under these heads are completely charitable in nature with the beneficiaries being not distinct on the basis of religion. As with regard to such composite objects the reliance of ld. AR on the decision of the Hon’ble Supreme Court in the case of CIT vs. Dawoodi Bohara Jamat in Civil Appeal No.2492 of 2014 dated 20.02.2014 ha to be sustained. Further, we find that the coordinate Benches in the decisions Shree Dandhavya Chhasath Prajapati Samaj vs. CIT (E) order dated 16.10.2024, Sunni Muslim Jamat Aamena Madressa Ebdatgah Waqf Committee vs. CIT(E), 161 taxmann.com 555 (ITAT, Surat) and Jaiatul Baaat Tankaria Versus CIT(E) [2024]160taxmann.com 358 9Ahm), have followed the aforesaid decision of the Hon’ble Supreme Court in Dawoodi Bohara Jamat case to hold that registration under section 12AB of the Act cannot be denied, where objects are composite.

However, we are of the considered view that if it is found that the charitable activities, though shown to be for benefit of people of all faith but are not actually of such nature, in terms of actual beneficiary, then based on adequate enquiry, substantive evidences and reasoned findings, by virtue of provisions of sub sections (4) section 12AB the ld. CIT(E) may give a finding of ‘Specified Violation‘ and then cancel the registration in accordance with due procedure under the Act.

Since in the case before us no such exercise has been done. Thus we consider it appropriate to set aside the impugned order with directions to the ld. CIT(E) to examine the issue afresh, by keeping in mind the aforesaid observations of this bench, and giving a due opportunity to assessee, consider the application of assessee, afresh.