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Facts
The assessee, a society registered under the Societies Registration Act, 1860, applied for registration under Section 12A of the Income Tax Act. The CIT(E) rejected the application, citing lack of details regarding activities and absence of expenditure on objects in financial statements, and also cancelled the provisional registration. The assessee appealed this order.
Held
The Tribunal restored the matter to the file of the CIT(E) to grant the assessee an opportunity to substantiate its case and consider the application afresh. The CIT(E) was directed to decide the matter on merits after allowing reasonable opportunity of being heard.
Key Issues
Whether the CIT(E) was justified in rejecting the application for registration and cancelling provisional registration without affording sufficient opportunity to the assessee to provide details of its charitable activities.
Sections Cited
12A(1)(ac), 12A, 12AB(1)(b)(i), 12AB(1)(b)(ii), 17A(2)(k)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI R.K. PANDA & MS. ASTHA CHANDRA
The appeal filed by the assessee is directed against the order dated 07.08.2023 of the Ld. Commissioner of Income Tax (Exemption), Pune [“CIT(E)”] whereby he rejected the application of the assessee filed before him on 23.02.2023 in Form No. 10AB under clause (iii) of section 12A(1)(ac) of the Income Tax Act, 1961 (the “Act”).
The assessee has raised the following solitary ground of appeal :- “
On the facts and circumstances of the case and in law:
1. The Hon. CIT (Exemption) erred in: i. dismissing the appeal on grounds that the appellant had not furnished in respond to letter dt 12.07.2023, satisfactory details and explanation on the points raised within the appointed dt 20.07.2023. ii. presuming that the appellant had nothing to say in the matter and in drawing an adverse conclusion without appreciating that the appellant was new and had not been able to gather funds and commence activities on a regular basis pending registration u/s 12A/80G for which an application was filed with the Dept.
2. The appellant pleads that the activities comprised of sharing of knowledge through lecture meetings amongst cardiac doctors who were contributing their time and energy for the objects of the society/trust without charging any fess or honorarium and personally bearing expenses of the meetings.
The appellant prays that the matter be restored to the file of CIT (Exemption), to be heard & decided in accordance with law after duly appreciating the facts and circumstances of the case.
4. The appellant pleads for directions allowing the appeal and craves leave to, add to, alter, amend, modify or withdraw any or all grounds of appeal.”
3. Briefly stated, the facts of the case are that the assessee is registered under the Societies Registration Act, 1860 vide certificate dated 27.08.2019 issued by the Assistant Registrar of Societies, Solapur. The assessee society is set up with the object of carrying on medical research, prevention and treatment of cardiovascular disease. The assessee trust was granted provisional registration in Form 10AC dated 28.03.2022 valid for AY 2022-23 to AY 2024-25. On receipt of application in Form No. 10AB for registration u/s 12AA of the Act along with annexures thereto, with a view to verify the genuineness of activities of the assessee, the Ld. CIT(E) issued a notice through ITBA portal on 23.05.2023 which was duly served upon the assessee requesting the assessee to upload certain information/ clarification. The assessee was requested to submit its compliance by 07.06.2023. The assessee filed its response to the said notice on 05.06.2023. On verification of the same, the Ld. CIT(E) noticed certain discrepancies and therefore issued a show cause notice on 12.07.2023 seeking further clarification as under : “(i) As per the provisions of Rule 17A(2)(k) of the Income Tax Rules, 1962, the application in Form No. 10AB shall be accompanied by note on activities giving details of activities actually carried out. However, it is seen that you have not furnished such details in the note on activity but it seems that the objects of the trust/institution are produced therein without giving the details of actual activities carried out by the trust/institution. Thus, you have failed to comply with the provisions of Rule 17A(2)(k) of the Income Tax Rules, 1962. (ii) You were specifically requested vide the initial notice itself to furnish the copy of bank account statement for the last 3 years. However, you have not furnished the same. Thus, you have failed to comply with the provisions of section 12AB(1)(b)(i) of the Income Tax Act, 1961. (iii) Further, no expenditure is shown on objects of the trust/institution as per the financial statements."
3.1 The Ld. CIT(E) issued another notice on 29.07.2023. The assessee filed its reply to the said notice(s) along with supporting evidences, however, the same were not found to be satisfactory by the Ld. CIT(E). He, therefore, proceeded to pass the impugned order on 07.08.2023 rejecting the application of the assessee and also cancelling the provisional registration granted on 28.03.2022 by observing in para 4 and 5 of his order as under : “4. The assessee furnished its reply on 02/08/2023. On the issue of note on activities, the assessee was requested to furnish details of 'activities actually carried out. However, on perusal of the same, it is seen that the assessee has merely reproduced its submission made in compliance with the earlier notices. In earlier submission, the assessee had only mentioned the objects of the trust/institution without giving the details of actual activities carried out by the turst / institution. Despite a specific query, the assessee has again re-submitted the same note. In its submission, the assessee has stated that no no seminars had been conducted. Further, it has re-submitted the photographs of a seminar purported to be conducted by it. The photographs furnished by the assessee relate to an event which had been conducted in the month of July, 2023 i.e. after the present application in Form 10AB filed by the assessee. No other documentary evidences have been furnished by the assessee.
Considering the above aspects, the absence of any substantial charitable activities during this period raises concerns about the genuineness and intent of ther trust to engage in charitable work, which is a fundamental requirement for granting 12A registration. The lack of any demonstrable charitable activities or initiatives within the past three years indicates a failure to fulfill the stated objectives and purposes for which the trust was established. The absence of tangible charitable work raises doubts about the trust's activities. Section 12A of the Income Tax Act, 1961, requires that a charitable trust seeking registration must be engaged in genuine charitable activities. The prolonged inactivity of the trust is not in line with the statutory requirements.”
Aggrieved, the assessee is in appeal before the Tribunal and all the grounds of appeal relate thereto.
5. Referring to the provision of section 12AB of the Act, the Ld. AR submitted that the Ld. CIT(E) is required to satisfy himself about the objects of the trust, the genuineness of the activities of the trust and compliance of requirements of any other law in order for him to grant registration u/s 12A of the Act and if he is not satisfied about the same then pass an order in writing after affording a reasonable opportunity of being heard to the assessee. The Ld. AR filed a written submission in support of its claim, the relevant extract of which is reproduced below : “7. In the appellant's case the CIT Exemption: i. Has examined the following documents on record furnished in registration proceedings and not denied the charitable nature of the objects: a. the certificate issued by the Assistant Registrar of Societies, b. copy of its Memorandum of Association and Rules & Regulations, ii. Has examined the financial statements of the Society on record for AY 2020-21, 2021-22 and 2022-23 and has observed that there is no expenditure on objects incurred in the said years. iii. Has expressed in Para 6 of the order in Form 10AD dt 07.08.2023 that he is not satisfied about the genuineness of the activities of the assessee.
8. CIT Exemption's conclusion, we submit, is not valid. The Trust had not carried on any activities for initial three years due to abnormal circumstances caused by the COVID lockdown and tremendous pressures on the medical profession to save human lives and provide medical relief. The appellant provided ample evidence (enclosed in Paper Book page no 58-63) of activities involving participation by world renowned Cardiac experts carried on in July 2023 which received very favorable attention in the media. The CIT Exemption dismissed this evidence of activities as subsequent to the filing of the application in Form 10AB on 23.02.2023. Considering the short period of less than five months between the date of application i.e 23.03.2023 and the date of charitable activities (ie 14th to 16th July 2023) carried out by the appellant, the adverse view of the CIT exemption is harsh and arbitrary. The view of the CIT Exemption is technical about dates and dismissive about the real charitable activities of the Society. The section 12AB does not require activities to be carried on as a pre- condition for grant of registration u/s 12A. Section 12AB (1)(b)(i) requires the CIT Exemption to satisfy himself about the genuineness of the activities carried on by the Society. No activity was carried on as the Society was new and due to pressures of COVID pandemic The question of verifying genuineness of activities did not arise. The genuineness in such a case, we submit, is to be ascertained on the basis of the objects of the Society [as specified in [sec 12AB(1)(b)(1) coupled with the compliance by the Society of such requirements of any other law for the time being in force as are material for the purpose of achieving its objects [sec 12AB(1)(b)(ii)]. The Society was compliant with the provisions of the Societies Registration Act, 1860 which is not disputed. Reading from the head note: in the case of Ananda Social And Educational Trust vs. CIT & ANR. (2020) 426 ITR 03:40 (DC) the Delhi High Court's view was upheld that in case of newly registered trust even though there was no activities, it was possible to consider whether trust can be registered under section 12AA- Held, since section 12AA pertains to registration of Trust and not to assess what a trust has actually done, term 'activities in provision includes proposed activities-That is to say, a Commissioner is bound to consider whether objects of Trust are genuinely charitable in nature and whether activities which Trust proposed to carry on are genuine in sense that they are in line with objects of Trust. Under sub-clause B of sec 12AB(1)(b) the CIT Exemption could pass an order in writing of rejection and cancellation only after affording a reasonable opportunity of being heard. The order of rejection/cancellation has been passed on 07.08.2023 without affording such opportunity of being heard to the appellant. Considering the facts and circumstances and the law, we plead for directions cancelling the order of CIT Exemption and a direction to approve the appellant application under section 12A of the Income Tax Act. 1961.”
5.1 In light of the above submissions, the Ld. AR pleaded that the matter may be set aside to the file of the Ld. CIT(E) with a direction to consider the assessee’s application for registration afresh on merits after providing due opportunity of being heard to the assessee. He submitted that given an opportunity the assessee is in a position to submit the required documents /details/evidence in support of its claim to the satisfaction of the Ld. CIT(E).
The Ld. DR, however, opposed the above request of the Ld. AR and submitted that the assessee was given adequate opportunity by the Ld. CIT(E) to present its case, still the assessee failed to prove the genuineness of the activities of the trust to the satisfaction of the Ld. CIT(E). The Ld. CIT(E) was, therefore, fully justified in rejecting the assessee’s application for regular registration and cancelling the provisional registration.
We have heard the Ld. Representative of the parties, perused the material on record as well as written submissions of the assessee (reproduced above) and also the decision in the case of Ananda Social And Educational Trust (supra). Considering the totality of the facts and in the circumstances of the case, we are of the view that it would be judicially expedient and in the interest of justice and fair play if the matter is restored back to the file of Ld. CIT(E) to grant an opportunity to the assessee to substantiate its case before him and consider the assessee’s application for registration u/s 12A(1)(ac)(iii) afresh in the light of the documents/details/submissions already available on record and such other supporting documents/evidence as may be called upon during the fresh proceedings and decide the matter on merits, in accordance with facts and law after allowing reasonable opportunity of being heard to the assessee and present its case. The assessee shall provide the requisite support in terms of submitting the relevant details/documentary evidence/ submissions as may be required/called upon on the appointed date, failing which the Ld. CIT(E) shall be at liberty to pass appropriate order as per law. We order accordingly.
In the result, the appeal of assessee is treated as allowed for statistical purposes.
Order pronounced in the open court on 12th February, 2025.