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Facts
The assessee, Tie India Foundation, applied for registration under Section 12AB and approval under Section 80G(5) of the Income Tax Act. The CIT(E) rejected both applications based on a JAO report, citing the assessee's failure to provide proof of expenses, bank statements, and demonstrating only administrative expenses rather than charitable activities, despite showing substantial expenditure. The CIT(E)'s order contained contradictory findings regarding the commencement of charitable activities.
Held
The Tribunal quashed the CIT(E)'s order due to these contradictory findings and the lack of clarity regarding the opportunity of hearing provided to the assessee. The case is remanded back to the CIT(E) with a direction to allow the assessee 90 days to furnish requisite information and for the CIT(E) to pass a speaking order determining the genuineness of charitable activities and entitlement to registration under Sections 12AB and 80G(5) afresh after granting due opportunity.
Key Issues
Whether the CIT(E) was justified in rejecting applications for registration under Section 12AB and approval under Section 80G(5) based on incomplete information and contradictory findings, without adequate opportunity for the assessee to explain expenditure and furnish proof of charitable activities.
Sections Cited
12AB, 80G(5)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI PRASHANT MAHARISHI & SHRI SOUNDARARAJAN K.
Per Prashant Maharishi, Vice President 1.
Tie India Foundation [assessee/appellant] against the order passed by the CIT(Exemptions), Bangalore [ld. CIT(E)] dated 23.12.2024 wherein the application filed by the assessee in Form 10AB dated 28.6.2024 for registration u/s. 12AB of the Income Tax Act, 1961 [the Act] was rejected and provisional registration granted was cancelled.
Therefore against both the above orders, the assessee is in appeal before us.
The facts show that assessee preferred an application in Form 10AB on 28.6.2024 for registration u/s. 12AB of the Act. The ld. CIT(E) assigned the case for verification to the jurisdictional Assessing Officer (JAO). The JAO has not recommended the case for registration for the reason that assessee has not furnished proof in respect of expenses incurred and also the bank statement called for. Further the financial statement furnished showed that only expenses incurred by the assessee are administrative in nature and did not include any charitable expenditure. Only Rs.6 lakhs expenses is incurred on account of payment made to Chennai Angels Network to obtain a list of start-ups in order to identify such start-ups. The assessee has also not furnished proof in respect of expenses of Rs.14 lakhs. In view of this, the ld. JAO and the Regional Head did not recommend the registration.
On the basis of the above recommendation, the ld. CIT(E) also rejected the registration granted and also the present application holding that assessee has not commenced charitable activities.
The ld. AR, Mr. Rohan Sohangi, vehemently submitted that merely on the basis of information of the ld. JAO, the ld. CIT(E) has cancelled the provisional registration as well as application for continuation of registration u/s. 12AB of the Act. He submits that had the assessee been given opportunity to explain these expenditure, same would have been submitted and at least the assessee should have been put the questions before rejecting the application.
The ld. CIT(DR) stated that the assessee did not furnish information before the JAO and therefore same was rejected. If the assessee shows the details of the expenditure or that it carries on charitable activities, then only the assessee can be granted registration. As the assessee has failed to show the details on the basis of the report of the JAO who made the enquiry, therefore application has been correctly rejected.
We have carefully considered the rival contentions and perused the orders of the ld. lower authorities. In fact assessee earlier applied for registration on 19.9.2022 which was rejected by order dated 25.3.2023. Once again the assessee made an application on 28.6.2024 which was also rejected. Therefore assessee is in appeal before us.
During the course of verification, the assessee submitted copy of the MoA and AoA along with financial statements. On verification of financial statement, it is alleged that assessee did not furnish proof of expenses incurred and it was found that assessee has only incurred administrative expenses. Further the JAO did not find the details of major expenses of Rs.6 lakhs for the year ended 31.3.2023 and of Rs.14 lakhs for the year ended 31.3.2024. On this basis, it was stated that there is no merit in the claim of assessee. It is not the case that activities of the assessee were not found to be genuine. It is also not clear that when these details were called for, why the assessee did not furnish, despite giving proper opportunity of hearing. The report of the JAO which is made part of the order of the ld. CIT(E) also does not show when these details were asked for. Further ld. CIT(E) has merely followed the recommendation of the JAO. She also reached at a conclusion that assessee has made substantial amount of expenditure towards the objects, but assessee has not submitted any proof or evidence of such activities and therefore she reaches at a conclusion that assessee has not commenced its activities towards the attainment of objects. These are contradictory findings. In view of this, the order passed by the ld. CIT(E) dated 23.12.2024 is quashed.
The assessee is directed to furnish requisite information to the ld. CIT(E) afresh as mentioned in the report of verification of the JAO within 90 days from the date of receipt of this order. The ld. CIT(E) may carry out examination herself or also direct the verification unit for examination of the details. Thereafter, a speaking order may be passed about the genuineness of the activities of the trust with a specific finding that whether assessee is carrying on charitable activities or not. Despite showing substantial expenditure, the observation of the ld. CIT(E) that assessee has not commenced its activities is contradictory, but it is necessary to ascertain what for these expenditure are incurred.
The assessee is duty bound to explain the same to show the genuineness of the activities.
As the assessee’s application is rejected twice for registration u/s. 12AB of the Act, the onus is on the assessee now to establish before the ld. CIT(E) that it is carrying on charitable activities, its activities are genuine and assessee is entitled to registration under that section. On furnishing the information by the assessee, the ld. CIT(E) may decide the issue afresh, after granting opportunity of hearing to the assessee.
The assessee’s appeal in is against the rejection of application u/s. 80G of the Act which is dependent on the fate of the application of the assessee for registration u/s. 12AB of the Act. After deciding the fate of the application u/s. 12AB of the Act, the ld. CIT(E) may examine the application of the assessee for recognition u/s. 80G(5) of the Act and decide the issue afresh, after granting opportunity of hearing to the assessee.
In view of the above, both the appeals of the assessee are allowed for statistical purposes.
Pronounced in the open court on this 25th day of July, 2025.