SHRI NAMDEV SAMAJ SEWA SANSTHAN,BHILWARA vs. CIT(EXEMPTION), JAIPUR

The assessee has raised the following grounds of appeal: 1. That on the facts and in the circumstances of the case, the order passed by ld CIT(Exemption) is bad in law and bad in facts. 2. That on the facts and in the circumstances of the case, the ld CIT(Exemption)grossly erred in rejecting the application for grant of registration u/s 12AB of the Act, particularly when the appellant trust fulfilled all the conditions for granting of registration as per provision of law. 3. That on the facts and in the circumstances of the case, the ld CIT(Exemption)grossly erred in recording the observation and allegation for rejecting the application for grant of registration u/s 12AB of the Act is contrary to material on record and also against the principle of natural justice. 4. That on the facts and in the circumstances of the case the Ld CIT (Exemption) grossly erred in rejecting the application for grant of registration u/s 12AB on ground of non-registration under RPT Act, 1959. 5. That on the facts and in the circumstances of the case, the ld CIT(Exemption)grossly erred in holding the appellant trust had violated the provision of section 13(1)(b ) and clause (d) of sec 12AB(4) of the Act. 6. That on the facts and in the circumstances of the case, the ld CIT(Exemption)grossly erred in holding that the activities of appellant trust is falls outside the scope of registration u/s 12A of the Act. 7. That on the facts and in the circumstances of the case, the ld CIT(Exemption)grossly erred in not appreciating the facts the object of appellant trust that solely for charitable purposes and not for any other purpose in right perspective and judicious manner. 8. That on the facts and in the circumstances of the case, the ld CIT(Exemption)grossly erred in without appreciating the facts and legal position in right perspective and judicious manner.

On examining the reply and the documents furnished, the learned CIT(E) noticed certain discrepancies and issued a show-cause notice dated 22.02.2024, fixing the matter for compliance on 27.02.2024. The assessee did not furnish a reply by the stipulated date. It subsequently

The learned CIT(E) also noticed that an earlier application filed by the assessee had been rejected vide order dated 17.01.2023 on the grounds of an incomplete Form No. 10AB, non-registration under the Rajasthan Public Trust Act, 1959 and failure to establish the genuineness of its activities. According to the learned CIT(E), some of the deficiencies noticed in the earlier proceedings remained unresolved in the present proceedings.

The first objection recorded by the learned CIT(E) was that the assessee was not registered under the Rajasthan Public Trust Act, 1959. The learned CIT(E), referring to section 12AB(1)(b)(i)(B) of the Act and sections 2(11) and 17(1) of the Rajasthan Public Trust Act, 1959, held that registration under the Rajasthan Public Trust Act was mandatory for a public charitable institution situated in Rajasthan. In response to the initial notice, the assessee stated that it was registered under the Rajasthan Societies Registration Act, 1958 and, therefore, there was no violation of section 12AB(1)(b)(i)(B). In response to the subsequent show-cause notice, the assessee submitted that it was not aware whether

The learned CIT(E), on examining the constitution and objects of the assessee, observed that certain objects referred to the welfare of Namdev Samaj. According to the learned CIT(E), the relevant objects contemplated social unity among families of the Samaj, eradication of social evils prevailing in the Samaj and inculcation of patriotism among the young persons belonging to the Samaj. The learned CIT(E) required the assessee to explain why the application should not be rejected on the ground that its objects were intended for the benefit of a particular caste or community and were hit by section 13(1)(b) and the specified violation referred to in section 12AB(4). In response, the assessee submitted that its objects were intended for the benefit of families

The learned CIT(E) further noticed from the income and expenditure account that the assessee had earned receipts from Nohra bookings, room bookings and electricity charges. The assessee stated that it owned a building known as “Nohra”, constructed approximately 30 to 35 years ago on agricultural land purchased by the society on

The learned CIT(E) further recorded that, despite the notices dated 04.12.2023, 27.12.2023 and 22.02.2024, the assessee had furnished only a partial reply and certain documents without providing a point-wise response. The following deficiencies were noted:

In view of the aforesaid findings, the learned CIT(E) rejected the application for registration under section 12AB. Consequent upon the rejection of the application for regular registration, the learned CIT(E)

Aggrieved by the rejection of regular registration and cancellation of provisional registration, the assessee is in appeal before us.

Before us, the learned AR assailed the impugned order and submitted that the objections raised by the learned CIT(E) travelled beyond the scope of inquiry contemplated at the stage of granting registration under section 12AB. He contended that the issues concerning the applicability of sections 2(15), 11(4A) and 13(1)(b), the quantum and character of rental receipts, maintenance of separate books and application of income were matters to be examined in the course of assessment proceedings. According to him, the learned CIT(E) was not justified in rejecting the application for registration on these grounds.

In response to a specific query from the Bench, the learned AR fairly stated that the assessee had not yet obtained registration under the Rajasthan Public Trust Act, 1959.

The learned DR relied upon the impugned order. He submitted that the assessee had failed to remove the deficiencies despite several

We have considered the rival submissions and perused the material placed on record. The learned CIT(E) rejected the application on the grounds of non-registration under the Rajasthan Public Trust Act, 1959, restriction of benefits to a particular caste or community, commercial nature of the activities, non-genuineness of the activities and incomplete compliance with the notices. The learned CIT(E) also cancelled the provisional registration granted to the assessee on 27.05.2021.

We have also considered the submission of the learned DR that the assessee had failed to remove the deficiencies despite several opportunities and that the earlier application had been rejected on substantially similar grounds. The learned DR submitted that the assessee could apply afresh after obtaining registration under the Rajasthan Public Trust Act, 1959. At the same time, the learned AR has

Insofar as the objections relating to the applicability of sections 2(15), 11(4A) and 13(1)(b), the proportion of commercial receipts and the ultimate eligibility of the income for exemption are concerned, we agree that these aspects ordinarily require examination with reference to the actual activities, receipts, application of income and other facts prevailing during the relevant previous year and may ultimately arise for determination in the assessment proceedings. However, at the stage of registration under section 12AB, the learned CIT(E) is entitled to examine the objects of the institution, the genuineness of its activities and compliance with such other law as is material for achieving its objects. Therefore, the assessee cannot avoid furnishing the documents and explanations necessary for such examination merely on the ground that the ultimate tax consequences may also arise in the assessment proceedings.

The allegation that the objects and activities are confined to Namdev Samaj requires examination with reference to the complete

Similarly, the nature of the receipts from Nohra and room bookings cannot be determined merely from their nomenclature. The assessee is required to furnish the booking registers, details of the persons using the premises, the rates charged, the basis for fixing such charges, receipts and expenditure relating to the property and evidence showing whether the facilities are available to persons outside Namdev Samaj. The assessee shall also explain the ownership and legal status of the Nohra property, its omission from the balance sheet and Form No. 10AB, the construction and renovation expenditure incurred thereon and the maintenance of books of account relating to such activities.

The assessee is also required to substantiate the genuineness of its activities by furnishing the relevant accounts, bank statements, ledger accounts, bills and vouchers, beneficiary details and evidence

As regards registration under the Rajasthan Public Trust Act, 1959, the learned AR has fairly stated that the assessee has not yet obtained the requisite registration. Since this aspect has been specifically considered by the learned CIT(E) with reference to section 12AB(1)(b)(i)(B), the assessee shall place before the learned CIT(E) the registration certificate, if obtained in the meantime, or complete evidence regarding the application made and its present status. The learned CIT(E) shall examine the same independently and in accordance with law.

Having regard to the nature of the objections and the request made by the learned AR, we consider it appropriate, in the interest of substantial justice, to grant the assessee one final opportunity to establish its case. We accordingly set aside the impugned order dated 20.03.2024 and restore the application in Form No. 10AB to the file of the learned CIT(E) for fresh adjudication.

This relief is granted as one final opportunity. The assessee shall make complete and timely compliance with the notices issued by the learned CIT(E) and shall not seek unnecessary adjournments. If the assessee fails to comply without sufficient cause, the learned CIT(E) shall be at liberty to decide the application on the basis of the material available on record.

Since the cancellation of the provisional registration formed part of the same impugned order and was consequential to the rejection of the application for regular registration, the said issue is also restored to the file of the learned CIT(E) for fresh adjudication. After affording a reasonable opportunity of being heard, the learned CIT(E) shall pass a

Accordingly, the substantive grounds raised by the assessee are restored to the file of the learned CIT(E) and are treated as allowed for statistical purposes. Grounds Nos. 10 and 11, being general in nature, require no separate adjudication.

In the result, the appeal filed by the assessee is allowed for statistical purposes.