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Facts
The assessee applied for registration under Section 12A and approval under Section 80G. The CIT(Exemption) rejected both applications, citing non-synchronization of activities with financial statements, lack of credible evidence, and insufficient details regarding beneficiaries and charitable activities.
Held
The Tribunal found that the rejection was primarily due to the lack of registration under Section 12A. Therefore, the Tribunal restored both issues (12A registration and 80G approval) to the file of the CIT(Exemption) for fresh adjudication.
Key Issues
Whether the CIT(Exemption) was justified in rejecting the application for registration under Section 12A and approval under Section 80G due to insufficient evidence and non-compliance with procedural requirements.
Sections Cited
12A, 80G, 12A(1)(ac), 80G(5), 10(23C), 12AB
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
Before: SHRI R. K. PANDA & MS. ASTHA CHANDRA
1. The above two appeals filed by the assessee are directed against the separate orders dated 27.09.2024 of the CIT(Exemption), Pune rejecting the application seeking for registration u/s 12A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) as well as approval u/s 80G of the Act.
Facts of the case in brief, are that the assessee filed an application in Form No.10AB on 31.03.2024 for registration of the trust under clause (iii) of section 12A(1)(ac) of the Act. With a view to verify the genuineness of the activities of the assessee and compliance to requirements of any other law for the time being in force by the trust / institution as are material for the purpose of achieving its objects, a notice was issued through ITBA portal on 31.05.2024 requesting the assessee to upload certain information / clarification. In response to the same, the assessee filed certain details. On verification of the details submitted by the assessee in response to the said notice and documents submitted along with the application, the CIT(Exemption) noticed various discrepancies for which he issued another notice to the assessee. The discrepancies so noticed were duly communicated to the assessee which are as under: “4. On verification of the details submitted by the assessee in response to the said notice and the documents submitted along with the application, various discrepancies were noticed. Another notice was then issued to the assessee on 04/09/2024 and the discrepancies were duly communicated to it as reproduced below: "(1) The charitable activities carried out as mentioned by you in note on activity is not synchronizing with the financial statements. Therefore, the activities of the institution cannot be considered to be genuine. Kindly submit your explanation with credible evidences (ii) It is seen that no credible evidence is furnished in support of the charitable activities claimed to have been carried out except a note on activity and considering the fact that a very meagre or no expenditure is shown on objects as compared to expenditure on establishment, the satisfaction about the genuineness of activities could not be arrived at. Kindly submitt your explanation with credible evidences. (iii) Kindly submit the photographs on charitable activities as mentioned in your note on activity."
The assessee was also requested to show cause as to why the application should not be rejected and why the provisional registration granted earlier u/s 12AB should not be cancelled. The assessee in response to the same furnished certain details. However, the Ld. CIT(E) was not satisfied with the details furnished by the assessee and rejected the application for grant of registration u/s 12A and also cancelled the provisional registration granted earlier u/s 12AB by observing as under: “6. The assessee furnished its response on 23/09/2024. However, the same is not accepted for the reasons as stated under: (i) The photographs submitted by the trust are not accepted as there are no signage or banners displayed in the photographs so as to show association of the assessee with said activities. (ii) The trust has not submitted any bills regarding the maintenance /constructions of angle rack / badminton court. (iii) The trust has claimed to be supporting development of students every year. However, the trust has failed to submit details of beneficiaries as to how the beneficiaries were identified, program for the said development of each beneficiaries.
7. Considering the above facts discussed in the show notice and discrepancies noticed, the undersigned is not satisfied about the charitable nature and genuineness of activities of the assessee and compliance of requirements of any other law for the time being in force by the assessee as are material for the purpose of achieving its objects.
8. In view of the above, the application filed by the assessee is hereby rejected and the provisional registration granted on 28/05/2021 under section 12AB read with section 12A(1)(ac) (vi) of the Income Tax Act, 1961 is hereby cancelled.”
Aggrieved with such order of CIT(Exemption), the assessee is in appeal before the Tribunal by raising the following grounds:
1. On facts and circumstances prevailing in the case and as per provisions & scheme of the Income-tax Act, 1961 ('The Act') it be kindly held that the order passed by the Commissioner of Income Tax-Exemptions ['CIT(E)'], Pune, rejecting the Appellants application for seeking registration u/s 12AB of the Act is against the provisions of the Act. Accordingly, the order passed by the Ld. CIT(E) be kindly held as not tenable in law and be set aside directing the Ld. CIT(E) to grant registration. The appellant be granted just and proper relief in this respect.
2. On facts and circumstances prevailing in the case and as per provisions & scheme of the Act it be kindly held that Ld. CIT(E) erred in passing the rejection order without properly perusing the submission made by Appellant. Accordingly, the order passed by the Ld. CIT(E) be set aside and Ld. CIT(E) be kindly directed to grant registration. The appellant be granted just and proper relief in this respect.
3. The appellant prays to be allowed to add, amend, modify, rectify, delete, raise any grounds of appeal at the time of hearing.
The Ld. Counsel for the assessee referring to the paper book containing 86 pages drew the attention of the Bench to the various details including the utilization certificates given by the Chartered Accountants of the various trusts to whom the assessee has given donations. He submitted that given an opportunity the assessee is in a position to substantiate with evidence to the satisfaction of the CIT(E) regarding the bills of maintenance / construction of angle rack / badminton court. Further, the assessee also shall file the details of beneficiaries along with the system of identification of such beneficiaries and the program for the development of each beneficiary. So far as the issue of photographs submitted by the trust is concerned, he submitted that given an opportunity, he can also file the requisite confirmations from the various trusts substantiating the case of the assessee trust for the said activities. He accordingly submitted that in the interest of justice, the assessee should be given an opportunity to substantiate its case by filing the requisite details before the Ld. CIT(E).
The Ld. DR on the other hand heavily relied on the order of the CIT(Exemption).
We have heard the rival arguments made by both the sides, perused the order of the CIT(E) and the paper book filed on behalf of the assessee. We find the CIT(Exemption) rejected the application filed by the assessee for grant of registration u/s 12A of the Act and also cancelled the provisional registration granted earlier u/s 12AB, the reasons of which have already been reproduced in the preceding paragraphs. It is the submission of the Ld. Counsel for the assessee that the various details were furnished before the CIT(Exemption), however, the same were not as per his requirements. It is also his submission that given an opportunity, the assessee is in a position to substantiate its case by filing the requisite details before the CIT(E) to his satisfaction. Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the CIT(Exemption) with a direction to grant one final opportunity to the assessee to substantiate its case by filing the requisite details to his satisfaction and decide the issue as per fact and law. The assessee is also hereby directed to submit the details as called for by the CIT(E) on the appointed date without seeking any adjournment under any pretext, failing which the CIT(Exemption) is at liberty to pass appropriate order as per law. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.
8. The grounds raised by the assessee are as under:
On facts and circumstances prevailing in the case and as per provisions & scheme of the Income-tax Act, 1961 ('The Act') it be kindly held that the order passed by the Commissioner of Income Tax-Exemptions ['CIT(E)'], Pune, rejecting the Appellants application for seeking registration under clause (iii) of first Proviso to sub-section 5 of section 80G of the Act is against the provisions of the Act. Accordingly, the order passed by the Ld. CIT(E) be held as not tenable in law and be set aside directing the Ld. CIT(E) to grant registration. The appellant be granted just and proper relief in this respect.
2. On facts and circumstances prevailing in the case and as per provisions & scheme of the Act it be kindly held that Ld. CIT(E) erred in passing the rejection order without properly perusing the submission made by Appellant. Accordingly, the order passed by the Ld. CIT(E) be set aside and Ld. CIT(E) be kindly directed to grant registration. The appellant be granted just and proper relief in this respect.
3. The appellant prays to be allowed to add, amend, modify, rectify, delete, raise any grounds of appeal at the time of hearing.
After hearing both sides, we find the Ld. CIT(E) rejected the application for grant of approval u/s 80G of the Act by observing as under: “6.1 The conditions for approval under section 80G(5)(vi) of the Act are provided under clause (i) to (v) of section 80G(5) of the Income Tax Act, 1961. As per the condition vide clause (i) of section 80G(5) of the Income Tax Act, 1961 the approval is available only if the income of the institution or fund is not be liable to inclusion in its total income under the provisions of section 11 and 12 or clause (23AA) / clause (23C) of section 10 of the Income Tax Act, 1961. Further, exclusions for the said condition are detailed in clause (a), (b) and (c) of proviso to clause (i) of section 80G(5) of the Act. Therefore, the institution / fund is required to be regularly registered / approved either under section 12AB or 10(23C) of the Income Tax Act, 1961 or the institution / fund shall be a Regimental Fund or Non-Public Fund established by the armed forces of the Union for the welfare of the past and present members of such forces or their dependents. 6.2 In the instant case it is noticed that the assessee is neither registered u/s 12AB read with section 12A(1)(ac) (i) / 12A(1)(ac)(iii) nor approved u/s 10(23C) read with clause (i) / (iii) of first proviso to the said section and the case is not covered under the exclusions provided vide proviso to clause (i) of section 80G(5) of the Act. The assessee is also not a Regimental Fund or Non-Public Fund established by the armed forces of the Union for the welfare of the past and present members of such forces or their dependents. In fact, the application of the assessee in form No. 10AB for registration u/s 12AB filed under the provisions of section 12A(1)(ac) (iii) of the Act has been rejected vide order dated 27/09/2024. Therefore, the condition prescribed under clause (i) of section 80G(5) of the Income Tax Act, 1961 is not fulfilled in this case.
7. Considering the above facts discussed in the show notice and discrepancies noticed, the undersigned is not satisfied about the genuineness of activities of the assessee and fulfilment of conditions laid down in clause (i) to (v) of section 80G(5) of the Act.
In view of the above, the application filed by the assessee is hereby rejected and the provisional approval granted on 28/05/2021 under clause (iv) for first proviso to section 80G(5) of the Income Tax Act, 1961 is hereby cancelled.”
A perusal of the above shows that the denial of approval u/s 80G of the Act is mainly due to non registration of the trust u/s 12AB r.w.s. 12A of the Act. Since we have already restored the issue of registration u/s 12A to the file of the Ld. CIT(E) for adjudication afresh, therefore, we deem it proper to restore the issue of approval u/s 80G also to his file for fresh adjudication. The Ld. CIT(E) shall decide the issue in accordance with law after providing due opportunity of being heard to the assessee. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.
In the result, both the appeals filed by the assessee are allowed for statistical purposes.
Order pronounced in the open Court on 25th February, 2025.