DIVINE BLESSINGS CHARITABLE FOUNDATION,UDAIPUR vs. CIT(EXEMPTION), JAIPUR

In the course of both proceedings, the learned CIT(E) issued notices dated 21.07.2023, 11.08.2023, 22.08.2023 and 08.09.2023 calling upon the assessee to furnish the requisite information, documents and explanations. The assessee furnished a reply dated 22.08.2023. Thereafter, by show-cause notice dated 08.09.2023, the assessee was required to furnish further explanation by 13.09.2023. The learned CIT(E) recorded that no further compliance was made and proceeded to decide both applications on the basis of the material stated to be available on record.

Aggrieved by the aforesaid two orders dated 20.09.2023, the assessee preferred the present appeals before us.

Before us, the learned Authorised Representative (AR) submitted that a detailed reply to the show-cause notice dated 08.09.2023 had in fact been furnished on 20.09.2023 along with supporting documents, but the same was not considered by the learned CIT(E), though both the impugned orders were also passed on 20.09.2023. It was submitted that the reply explained that the activity of cleaning, restoring and

The learned Departmental Representative relied upon the orders of the learned CIT(E). He, however, submitted that since the reply relied upon by the assessee and the impugned orders were of the same date, the filing and contents of the reply, together with the supporting documents, required verification.

We have considered the rival submissions and perused the material placed before us. Since the two appeals arise from interconnected proceedings, we shall first deal with the appeal

The learned CIT(E) issued a show-cause notice dated 08.09.2023 requiring the assessee to furnish its response by 13.09.2023. The assessee furnished its reply on 20.09.2023. Undisputedly, the reply was furnished after the date stipulated in the show-cause notice. However, it is equally undisputed that the impugned order was also passed on 20.09.2023.

The impugned order proceeds on the premise that no reply had been furnished by the assessee in response to the show-cause notice dated 08.09.2023. The order neither refers to nor deals with the reply dated 20.09.2023 and the documents stated to have been furnished therewith. The material placed before us shows that the said reply specifically addressed each of the objections raised by the learned CIT(E).

In our considered view, the delay of a few days in furnishing the reply could not, by itself, justify the rejection of the application without examining the material which went to the root of the objections raised against the assessee. The proceedings under section 12AB require the prescribed authority to examine the charitable nature of the objects, the

The learned Departmental Representative submitted that the reply and the documents require verification. Ordinarily, where factual material has not been examined by the original authority, the matter may be restored for verification. However, remand is not an inflexible rule. Where the explanations and documentary particulars are available before the Tribunal, the objections are capable of being decided on the basis of the record, and no further factual enquiry is shown to be necessary, the Tribunal is competent to adjudicate the controversy so as to avoid an unnecessary second round of proceedings.

The first objection of the learned CIT(E) was that the activity relating to cleaning, restoration and conservation of Madar Chhoti Jheel was not expressly mentioned in the objects of the trust. The said conclusion does not take into account the complete language of the objects clause. The trust was established, inter alia, for:

More importantly, section 2(15) of the Act expressly includes “preservation of environment” within the expression “charitable purpose”. Cleaning, restoration and conservation of a water body are directly and intrinsically connected with preservation of the environment. A trust deed cannot reasonably be expected to enumerate every individual activity through which a broad charitable object may be pursued. So long as the activity bears a direct and proximate nexus with the stated charitable objects, the absence of a separate and specific reference to that particular activity cannot render it extraneous to the objects of the trust.

The activity concerning Madar Chhoti Jheel was intended for the benefit of the general public. No private or commercial element in the said activity has been alleged or demonstrated in the impugned order. We therefore find that the learned CIT(E) was not justified in holding

The next objection relates to the source and purpose of Rs. 5,00,000/- advanced for acquisition of a boat. The learned CIT(E) drew an adverse inference on the ground that the source of the amount and the charitable purpose for which the boat was to be used had not been furnished.

In its reply dated 20.09.2023, the assessee furnished the following particulars:

The assessee also stated that copies of the returns of income of the contributors were enclosed with the reply. The bank-wise details separately furnished by the assessee reflected loans of Rs. 2,00,000/- from Shri Shakti Singh and Rs. 3,00,000/- from Smt. Jahnvi Kumari.

The intended use of the boat was explained as being connected with the cleaning, restoration and conservation of Madar Chhoti Jheel.

There is no finding in the impugned order that the contributors were fictitious, that the amounts were received otherwise than through banking channels, or that the proposed acquisition was intended for the personal use or benefit of any trustee or specified person. In these circumstances, the adverse inference drawn by the learned CIT(E) in respect of the amount of Rs. 5,00,000/- cannot be sustained.

The learned CIT(E) further noticed a discrepancy in the address of the assessee. The no-objection certificate furnished by the assessee mentioned an address at Udaipur, whereas Form No. 10AB mentioned the address at Bungalow No. 1, Raika Bagh Palace, Jodhpur.

The assessee explained that the Udaipur address was the residential address of the settlor and had appeared in the earlier no- objection certificate due to an oversight. The trust deed contained the address at Bungalow No. 1, Raika Bagh Palace, Jodhpur Kachery S.O., Jodhpur. The assessee also furnished a fresh no-objection certificate in

The discrepancy was thus capable of a straightforward reconciliation. There is no material on record to establish that the assessee did not exist at the stated address or that the trust was merely a paper entity. A curable discrepancy in supporting documentation concerning the address, when duly explained and supported by a fresh no-objection certificate and documents relating to the premises, cannot constitute a valid basis for holding that the activities of the assessee are not genuine.

The learned CIT(E) also treated the payment of Rs. 1,00,000/- made to Shri Shakti Singh on 11.08.2022 as a benefit conferred upon a specified person within the meaning of sections 13(1)(c) and 13(3) of the Act.

The assessee explained that Shri Shakti Singh had earlier advanced a loan of Rs. 1,00,000/- to the trust on 01.09.2021 and that the payment made on 11.08.2022 represented repayment of the said loan. The financial details furnished by the assessee record the amount credited on 01.09.2021 as “Loan received from Shakti Singh”. Thus, the payment was

Repayment of a genuine loan, in the absence of any finding that excessive interest, premium or any other undue advantage was conferred upon the lender, cannot be regarded as use or application of the trust property for the personal benefit of a specified person. The very foundation of the finding under section 13(1)(c) is therefore contrary to the explanation and the supporting record.

The ultimate conclusion of the learned CIT(E) regarding non- genuineness of the activities was founded upon the aforesaid objections. We have found that the conservation of the water body was within the charitable objects of the trust and also within the statutory expression “preservation of environment”; the source and intended application of Rs. 5,00,000/- were duly explained; the discrepancy in the address stood reconciled and supported by documents relating to the premises; and the payment of Rs. 1,00,000/- was repayment of a loan and not a benefit conferred upon the settlor.

No independent material has been brought on record to suggest that the activities of the assessee were fictitious, colourable, non-

In view of the above findings, restoration of the matter merely for re-verification of the same documents would prolong the proceedings without serving any useful purpose. The material available on record is sufficient to determine the eligibility of the assessee. We accordingly set aside the order dated 20.09.2023 passed by the learned CIT(E) rejecting the application for registration under section 12AB of the Act.

The learned CIT(E) is directed to grant regular registration to the assessee under section 12AB of the Act for the period and with effect from the date permissible in accordance with the statutory provisions and to issue the requisite registration order in the prescribed form.

We shall now deal with the connected appeal concerning approval under section 80G(5) of the Act.

The first reason assigned by the learned CIT(E) for rejecting approval under section 80G was that registration under section 12AB had been denied to the assessee. By the findings recorded hereinabove, we have set aside the rejection of registration and directed the learned

The second objection of the learned CIT(E) was that the assessee had commenced its activities on 29.06.2022, whereas the application in Form No. 10AB was filed on 18.03.2023, beyond six months from the commencement of activities.

Subsequent to the impugned order, the CBDT issued Circular No. 7 of 2024 dated 25.04.2024 in exercise of the powers conferred under section 119 of the Act. Paragraph 4(ii) of the Circular extended the due date for filing Form No. 10AB in the case of an application under clause (iii) of the first proviso to section 80G(5) up to 30.06.2024. The assessee filed Form No. 10AB on 18.03.2023, which was much prior to the extended date of 30.06.2024. The application therefore cannot be treated as belated or non-maintainable.

The contention of the learned DR that the impugned order was passed in accordance with the circulars available on 20.09.2023 does not alter the legal position. The present appeal is a continuation of the original proceedings. The subsequent relaxation granted by the CBDT specifically covers applications under clause (iii) of the first proviso to

Both the reasons assigned by the learned CIT(E) for rejecting approval under section 80G thus cease to survive. The rejection of registration under section 12AB has been set aside and the alleged delay in filing Form No. 10AB stands covered by CBDT Circular No. 7 of 2024 dated 25.04.2024.

The learned CIT(E) has not recorded any other independent finding that the assessee failed to satisfy any of the substantive conditions prescribed under section 80G(5). The activities relied upon by the learned CIT(E) have already been found to be charitable and genuine while deciding the connected appeal concerning registration under section 12AB.

We therefore set aside the order dated 20.09.2023 passed by the learned CIT(E) rejecting the application under section 80G. The learned CIT(E) is directed to grant approval to the assessee under section 80G(5) of the Act for the period and with effect from the date permissible in

Before parting, we make it clear that the registration under section 12AB and approval under section 80G shall remain subject to the statutory conditions governing their continuance. The Assessing Officer or the competent authority shall remain at liberty to examine the actual application of income and compliance with the provisions of the Act in the relevant assessment proceedings in accordance with law. The present direction shall not preclude any action permissible under the Act in the event of a subsequent violation being established on the basis of cogent material.

In the result, both the appeals filed by the assessee are allowed.