SHRI BHAGAVATPADAM ADYATMIKA TRUST,HUBLI vs. COMMISSIONER OF INCOME TAX, EXEMPTIONS , BANGALORE

The brief facts of the case are that the assessee is a charitable trust established in the year 2022. The assessee had several objects which include the charitable, educational and benevolent services to the poor, destitute, sick, aged, orphans and disadvantaged children. The assessee was originally granted the provisional registration on 13/05/2022 for the period from 2023-24 to 2025- 26. The assessee also got approval u/s. 80G of the Act. The assessee in order to get the permanent registration, had applied for the same on 07/07/2024. The assessee also applied for approval u/s. 80G on 04/12/2024. The assessee also furnished the various documents including the annual accounts along with the said applications. Pursuant to the said applications, the jurisdictional AO issued notices for which the assessee furnished their submissions on 02/12/2024 and also enclosed the activities carried on by the assessee, photographs of the activities conducted, bank statements and financial statements. The assessee had not appeared for the hearing notice issued by the Ld.CIT(E) in respect of the application filed u/s. 80G(5) of the Act. The Ld.CIT(E) without issuing any further show cause notice to the registration sought for u/s. 12AB of the Act, had rejected the application filed by the assessee and also cancelled the provisional registration granted. The Ld.CIT(E) had also rejected the application filed for approval u/s. 80G of the Act since the assessee had not responded to the notices. The Ld.CIT(E) had observed in the order that the assessee had spent meager amounts towards the objects and also observed that the assessee has not commenced its activities towards the attainment of the objects.

As against the said orders, the assessee is in appeals before this Tribunal with a delay of 86 days in respect of appeal against 80G order and 239 days in respect of appeal against 12AB order.

The assessee also filed applications explaining the delays. The assessee had explained that soon after the application was rejected by the Ld.CIT(E), they were under the impression that a fresh application can be filed for getting the registration as well as the approval and therefore, filed fresh applications before the Ld.CIT(E). At the time of hearing, the assessee came to know that the proper course of action to be taken by the assessee is that they have to challenge the earlier rejection orders and not filing fresh applications before the Ld.CIT(E). Thereafter, the assessee filed the present appeals before this Tribunal with delays as mentioned above and therefore prayed to condone the said delays.

We have considered the reasons given by the assessee and we are satisfied that the assessee was prevented from sufficient cause for filing the appeal belatedly and therefore, we are inclined to condone the delays and decided to adjudicate the appeals on merits.

At the time of hearing, the Ld.AR submitted that as seen from the income and expenditure accounts furnished by the assessee, the expenses incurred towards the object is increasing year by year and further submitted that the quantum of expenditure incurred could not be a reason for rejecting the application. The Ld.AR further submitted that the Ld.CIT(E) had not doubted about the genuineness of the activities of the assessee and the documents enclosed along with the objections to the notice would exhibit that the assessee is in the process of carrying out the activities towards the objects. The Ld.AR further submitted that the quantum and manner of application of income are matters to be examined by the AO u/s. 11 to 13 of the Act at the stage of assessment and not at the time of granting the registration by the Ld.CIT(E). The Ld.AR further submitted that the Ld.CIT(E) had erred in observing that the assessee had not commenced its activities whereas the income and expenditure account establishes the fact that the activities are carried out by the assessee. The Ld.AR also submitted that the Ld.CIT(E) had not issued any show cause notice before rejecting the application and cancelling the provisional registration. The Ld.AR further submitted that the Ld.CIT(E) had not granted any personal hearing before rejecting the application as prescribed u/s. 12AB(1)(b)(ii)(B) of the Act and therefore the order is against the principles of natural justice. The Ld.AR further submitted that the assessee could not be able to represent the matter before the Ld.CIT(E) and prayed that an opportunity may be granted to explain the queries raised by the Ld.CIT(E) in respect of the approval sought for u/s. 80G of the Act. The Ld.AR also filed a paper book and also enclosed the judgment of the Hon’ble Jurisdictional High Court as well as the orders of the Coordinate Bench of this Tribunal and prayed that the appeals may be allowed.

The Ld.DR relied on the orders of the Ld.CIT(E) and prayed to dismiss the appeals.

We have heard the arguments of both sides and perused the materials available on record.

The assessee being a charitable trust had initially got the provisional registration u/s. 12AB of the Act and also got approval u/s. 80G of the Act. In order to get the permanent registration, a fresh application was filed enclosing all the details. Similarly, the assessee also filed an application for approval u/s. 80G of the Act. The assessee also submitted the financial statements before the jurisdictional AO and the photographs of the various activities done by the assessee. Thereafter, the Ld.CIT(E) had considered the said documents and observed that the assessee had spent only meager amounts towards the objects. After relying on the financials and the bank statements, the Ld.CIT(E) had arrived the conclusion that the assessee had not commenced its activities towards the attainment of the objects.

As seen from the documents enclosed in the paper book, we find that the assessee has conducted various activities towards the objects of the trust. The financials also exhibited that the assessee had incurred expenditures towards the activities of the trust. The photographs enclosed along with the objections to the notice also exhibits that the assessee has commenced its activities. We don’t know on what basis the Ld.CIT(E) had observed that the assessee had not commenced its activities when there are evidences available to show that the assessee had commenced its activities. The meager amounts spent towards the objects of the trust would not disentitle the assessee from claiming the registration. Further as submitted by the assessee, the Ld.CIT(E) had not put on notice the assessee about the reasons for rejecting the applications. In fact, no personal hearing has been granted by the Ld.CIT(E) before passing the adverse orders. The spending of the amount would be decided by the AO at the time of making assessment and therefore, the Ld.CIT(E) need not go into that issue while issuing the registration. In such circumstances, the orders of the Ld.CIT(E) in rejecting the application for registration as well as for regularization u/s. 12AB as well as u/s. 80G of the Act are not in accordance with the provisions and also against the principles of natural justice.

We have also perused the judgment of the Hon’ble Supreme Court relied on by the assessee in the case of Ananda Social and Educational Trust vs. CIT reported in 426 ITR 340 wherein it was held that the activities in the provision includes proposed activities and therefore, the Commissioner is bound to consider whether the objects of the trust are genuinely charitable in nature and whether the activities proposed to carry on are genuine in the sense that they are in line with the objects of the trust.

We have also perused the judgment of the Hon’ble Jurisdictional High Court reported in 330 ITR 480 in the case of DIT vs. Garden City Educational Trust wherein the Hon’ble High Court had approved the findings given by the Tribunal in which it was held that the manner of application of funds and as to whether the applicant can claim the benefit of exemption in terms of section 11 and 12 is a question which has to be examined by the AO at the assessment stage and not by the Commissioner.

We have also considered the Coordinate Bench orders of this Tribunal reported in 175 taxmann.com 454 (Bangalore) in the case of Dhwani Shristi Foundation vs. CIT, in the case of Society of St. Vincent De Paul Bondel vs. CIT reported in 190 taxmann.com 272 and in the case of WeVysya vs. CIT reported in 174 taxmann.com 1016 wherein the Coordinate Benches had held that the quantum of expenditure could not be a reason to deny the registration and also it would not be a ground for doubting the genuineness of the activities.

Considering the above orders as well as the judgments and also considering the fact that the Ld.CIT(E) had not considered the various documents produced before the JAO and also not provided a reasonable opportunity of being heard to the assessee, we are inclined to set aside the orders and restore the issue to the file of the Ld.CIT(E) for fresh consideration in accordance with law. We also made it clear that the Ld.CIT(E) order canceling the provisional registration as well as the approval are not in order and therefore, we direct the Ld.CIT(E) to consider the applications filed u/s. 12AB as well as u/s. 80G of the Act afresh. We also permit the assessee to furnish the necessary documents in support of their case and the Ld.CIT(E) is directed to decide the issue based on the above observations given by us.

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