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Income Tax Appellate Tribunal, DELHI BENCH ‘G’ NEW DLEHI
Before: SHRI PRASHANT MAHARISHI & SHRI K. NARASIMHA CHARY
Aggrieved by the order dated 10/3/2021 passed by the learned Commissioner of Income-tax (Exemption) [“ld. CIT(E)] under section 12AA (1) (b) (ii) of the Income Tax Act, 1961 (for short “the Act”), rejecting the application of assessee for grant of registration u/s. 12A of the Act.
Brief facts of the case are that the assessee applied for registration u/s. 12A of the Act and stated objects of the assessee are mainly religious which are daily worship of Jain Lord; to work for society welfare; to open schools and Pathshalas; to open charitable hospitals etc.
Ld. CIT(E) by order dated 10.03.2021 rejected the said application on the ground that for the assessment years 2018-19 to 2020-21, the assessee had surplus, which is their income, but they have not filed any income tax return. On this ground ld. CIT(E) refused to grant the registration sought.
It is the submission on behalf of the assessee by the ld. AR that if the assessee had not filed any return of income, but as a matter of fact, was under legal obligation to file the same, in such condition, the authorities can always take remedial measures, but not filing of return is not a ground to reject the application for registration. He places reliance on the order of coordinate Bench in Shri Shirdi Sai Darbar Charitable Trust (Dharamshala), Barnala vs. CIT (exemptions) (ITA No. 692/Chandi/2015), wherein it was held that in order to grant exemption, ld. CIT(E) had to satisfy that the objects of the assessee are charitable in nature and activities are genuine. Rest of the things are to be taken care at appropriate stage subsequent thereto. Learned DR heavily places reliance on the order of ld. CIT(E).
We have gone through the impugned order. Ld. CIT(E) did not comment on the objects and activities of the assessee, but the sole ground for rejecting the registration is the assessee not filing the income- tax return for earlier years.
In Shri Shirdi Sai Darbar Charitable Trust (Dharamshala) (supra), Barnala v. CIT (exemptions), the Chandigarh Bench of the Tribunal in by order dated 08-06-2016, held that, -
We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. The first reason on the basis of which the Commissioner of Income Tax (Exemptions) has refused to grant registration to the assessee is that the assessee has not been filing its income-tax returns in the earlier years. We do not find that it is a good reason to reject the application for registration since the two conditions which the Commissioner of Income Tax (Exemptions) has to satisfy while granting the registration under section 12A of the Act, are that the objects of the assessee are charitable in nature and the activities are genuine. Just because the assessee has not filed its income tax returns in earlier years, it cannot be said that the activities of the assessee are not genuine. Reliance placed by the learned counsel for the assessee on the judgment of the Allahabad High Court as well as the order of the Chennai Bench of the Tribunal are not out of place, whereby it has been held that non-filing of return cannot be one of the reasons for denying registration under section 12A of the 5 Act.
Section 13 comes into play at the time of granting exemption under section 11 of the Act and not at the time of granting registration under section 12A of the Act. The only two requirements as stated hereinabove while granting registration under section 12A of the Act, 6 are with respect to the charitable nature of the objects of the assessee and genuineness of the activities. Since we observe that no adverse remarks have been made by the Commissioner of Income Tax (Exemptions) with regard to the objects contained in Memorandum and as stated hereinabove that the observations of the Commissioner of Income Tax (Exemptions) do not lead to the conclusion that the activities of the assessee are not genuine, we here by direct the Commissioner of Income Tax (Exemptions) to grant registration under section 12A of the Act to the assessee.
It is, therefore, clear that the ld. CIT(E) did not examine the matter to appreciate the objectives of the assessee or activities thereof. If the assessee is under legal obligation to file the income tax return and did not file the same, it is always open to the authorities to take appropriate action for such lapses, but it cannot be a ground to reject the registration, in the light of the above decision of the Tribunal. We, therefore, set aside the impugned order and restore the issue to the file of ld. CIT(E) for considering the application in accordance with law.
7. In the result, the appeal is allowed.
Order pronounced in the open court on this the 25th day of August, 2021.