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Facts
The assessee, an educational institution, applied for registration under Section 12AB and approval under Section 80G. The CIT(Exemption) rejected the applications and cancelled the provisional registrations, citing lack of sufficient documentary evidence to prove the genuineness of charitable activities.
Held
The Tribunal noted that the appeals were delayed but condoned the delay. It found that the CIT had denied registration and approval primarily due to the assessee's inability to satisfy him with documentary evidence during the proceedings.
Key Issues
Whether the CIT(Exemption) erred in rejecting the application for registration under Section 12AB and approval under Section 80G due to insufficient evidence, and whether principles of natural justice were followed.
Sections Cited
12AB, 80G(5), 8(5), 12A, 80G
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Income Tax Appellate Tribunal, LUCKNOW ‘A’ BENCH, LUCKNOW
Before: SH. SUDHANSHU SRIVASTAVA & SH. NIKHIL CHOUDHARY
O R D E R PER BENCH: [ These two appeals have been filed by the assessee against the separate orders of the ld. CIT(Exemption), Lucknow, rejecting the application of the assessee for registration under section 12AB of the Income Tax Act, 1961 and also denying the approval under section 80G(5) of the Income Tax Act. The grounds of appeal are as under:-
1. 1. “1. Further, the Impugned Order of the Ld. CIT(E) will cause great injustice to the students studying in the ACTIVE Gurukuls run by the Appellant for providing education to these students.
2. The Ld. CIT(Exemption) has ignored the principle of natural justice by not giving appropriate opportunities of being heard to the Appellant during the proceedings.
3. The impugned Order passed by Ld. CIT(Exemption) is bad in 3 law and deserves to be quashed.
4. The Appellant further craves leave to add, amend, alter vary and or withdraw any of all of the above grounds.
5. The Ld. CIT(Exemption) has ignored these facts and circumstances submitted by the Appellant and legal prepositions upheld in catena of judgments of various Income & 277/LKW/2025 Abhay Charan Teaching Institute of Vedic Education Association A.Y. 2025-26 Tax Appellate Tribunals and High Courts and has erred in emphasizing on the amount of expenses incurred and other conjectures and surmises in arriving at the conclusion that the Appellant has not carried out any charitable activity and rejecting the application for registration under section 12AB of the Act and in cancelling appellant's provisional registration and thus the order passed by the Ld. CIT(Exemption), is erroneous and bad in law.
6. The Ld. CIT(Exemption) has erred in holding that since no bills and/or vouchers and other corroborative evidences have been produced in support of expenditure booked in the Income and Expenditure accounts of the relevant years except some photographs which are not sufficient to prove the genuineness of activities of the applicant, therefore the Appellant has not carried out any charitable activity.
7. The Ld. CIT(Exemption) has erred in cancelling the Appellant's provisional registration which was valid upto the expiry of Asst. Year 2026-27. The provisional registration is intended to provide an interim period during which an organization can establish the genuineness of its charitable activities while being eligible for 12A benefits. The Ld. CIT(Exemption)'s decision to cancel the provisional registration, even if the final registration is not granted, lacks a fair basis and contradicts the objectives of provisional registration. The Learned CIT (Exemption) has not presented any specific and justified circumstances, such as a demonstrable breach of compliance or evidence against the charitable intent of the organization, for cancellation of provisional registration.
8. All requisite documents and clarifications were duly submitted by the appellant to satisfy the requirements for both provisional and final 12AB registration. The unilateral cancellation of provisional registration, therefore, appears arbitrary and unjust depriving the appellant of the fair opportunity to establish compliance through this period.
8. The Ld. CIT(Exemption) has relied upon the judgments which are not applicable to the facts and circumstances of this case.
1. The Ld. CIT(Exemption) has ignored the principle of natural 1 justice by not giving appropriate opportunities of being heard to the Appellant during the proceedings.
The impugned Order passed by Ld. CIT(Exemption) is bad in law and deserves to be quashed.
3. The Appellant further craves leave to add, amend, alter vary and or withdraw any of all of the above grounds.
4. The Ld. CIT(Exemption) has ignored these facts and circumstances submitted by the Appellant and legal prepositions upheld in catena of judgments of various Income Tax Appellate Tribunals and High Courts and has erred in emphasizing on the amount of expenses incurred and other conjectures and surmises in arriving at the conclusion that the Appellant has not carried out any charitable activity and rejecting the application for approval under second proviso to sub-section (5) of Section 80G of the Act and in cancelling appellant's provisional registration/approval and thus the order passed by the Ld. CIT(Exemption), is erroneous and bad in law.
& 277/LKW/2025 Abhay Charan Teaching Institute of Vedic Education Association A.Y. 2025-26 5. The Ld. CIT(Exemption) has erred in holding that since no bills and/or vouchers and other corroborative evidences have been produced in support of expenditure booked in the Income and 5 Expenditure accounts of the relevant years except some photographs which are not sufficient to prove the genuineness of activities of the applicant, therefore the Appellant has not carried out any charitable activity.
The Ld. CIT(Exemption) has erred in cancelling the Appellant's provisional registration/approval which was valid upto the expiry of Asst. Year 2026-27. The provisional registration/approval is intended to provide an interim period 6 during which an organization can establish the genuineness of its charitable activities while being eligible for 80G benefits. The Ld. CIT(Exemption)'s decision to cancel the provisional registration/approval, even if the final registration is not granted, lacks a fair basis and contradicts the objectives of provisional registration/approval. The Learned CIT (Exemption) has not presented any specific and justified circumstances, such as a demonstrable breach of compliance or evidence against the charitable intent of the organization, for cancellation of provisional registration/approval.
All requisite documents and clarifications were duly submitted by the appellant to satisfy the requirements for both provisional and final 12AB registration/80G approval. The unilateral cancellation of provisional registration/approval, therefore, appears arbitrary and unjust depriving the appellant of the fair opportunity to establish compliance through this period.
8. Further, the Impugned Order of the Ld. CIT(E) will cause great injustice to the students studying in the ACTIVE Gurukuls run by the Appellant for providing education to these students.”
2. At the very outset, it is noticed that both the appeals are delayed by 45 days. Condonation application has been filed in respect of the delay in which it was submitted that the assessee received information on 31.12.2024 regarding the passing of the said orders through SMS on his mobile. The Director, thereafter contacted the present counsel in January, 2025 to get the appeal drafted. After drafting said appeal, the learned counsel sent the same to the Contractor through Speed Post Bearing No. ED715500846IN dated 30.01.2025, which was delivered to or received by some staff of the applicant company on 7.02.2025. However, on the date of the receipt of the said documents, the authorized person namely Sh. Amit Kumar was on a trip to Prayagraj for Mahakumbh. Sh. Amit Kumar only came to know about the draft accompanying appeal on 8.03.2025. He immediately signed the documents and sent the same to the present counsel on 10.03.2025, vide Speed & 277/LKW/2025 Abhay Charan Teaching Institute of Vedic Education Association A.Y. 2025-26 Post Bearing No. EI721919583IN, which was delivered to the present counsel on 17.03.2025. Copies of the postal receipts and delivery reports were attached and it was prayed that the assessee was prevented by sufficient cause from filing the appeal on time. Accordingly, it was prayed that since the delay was neither intentional nor due to negligence on the part of the assessee, the delay may kindly be condoned.
We have duly considered the matter. In view of the fact that the assessee did not stand to gain in any way from delaying the appeal, and has explained the delay on account of the absence of the authorized person from headquarters and after considering that the Directors belong to places other than to Lucknow, we deem it fit to condone the delay in filing the appeal and admit the same for adjudication.
The facts of the case are that, the assessee, which is a company incorporated under section 8 of the Companies Act, 2018 filed an application before the ld. CIT (Exemption) for registration under section 12AB and for approval under section 80G(5). The assessee was provisionally registered vide order dated 29.04.2023 and also granted provisional approval under section 80G on 1.05.2023. The ld. CIT (Exemption), in order to form satisfaction regarding the genuineness of the activities and objects of the assessee-company and to verify the compliance of other laws for the time being in force as were material for the purposes of achieving its objects, issued notices to the assessee to submit certain documents and/or explanations in support of its application by 23.10.2024. The assessee did not respond to this therefore, two more notices were issued to the assessee on 18.11.2024 and 5.12.2024. The assessee did not respond to the notice dated 18.11.2024, but in response to the notice dated 10.12.2024, it filed a reply which the ld. CIT (Exemption) held to be not satisfactory as the same was not accompanied by corroborative evidences sought vide the aforesaid notices. The ld. CIT (Exemption), thereafter looked into the objects of the assessee company and & 277/LKW/2025 Abhay Charan Teaching Institute of Vedic Education Association A.Y. 2025-26 thereafter perused the contents of the income and expenditure account. In the absence of bills, vouchers and other corroborative evidences, he was unable to satisfy himself regarding the genuineness of the activities of the assessee company or the fact that the expenditure made by the assessee company were in accordance with its objects. He placed reliance on the decision of the Hon’ble Delhi High Court in the case of Kyrie Chand Tarawati Charitable Trust vs The Director Of Income-Tax 232 ITR 11 (Delhi) which stated that there was no obligation on the part of the Commissioner to grant a registration or approval only by looking at the instrument creating the trust and shutting its eyes towards the activities carried out by it. Since, the assessee was not carrying out any charitable activity as per its objects, according to the CIT, he was unable to arrive at a satisfaction that the expenditure made by the trust was being made in accordance with its objects and that the same were for charitable purposes. Accordingly, he rejected the application for registration of the trust under section 12AB and also cancelled its provisional registration dated 29.04.2023.
With regard to the application under section 80G, the ld. CIT (Exemption) noted that the application for registration under section 12AB of the act had been rejected vide his order dated 27.12.2024 and consequently, the condition laid down in clause (i) of sub section (5) of section 80G was not fulfilled, and since this was one of the mandatory conditions for the grant of approval, hence the application was liable to be rejected. Accordingly, the ld. CIT (Exemption) rejected the application of the assessee under section 80G(5). He also cancelled the provisional approval granted to the assessee on 1.5.2023.
6. The assessee is aggrieved at these orders passed by the ld. CIT (Exemption) and has accordingly come before us in appeal. On the appointed date of hearing, the assessee was not represented. However, we noted that the assessee has filed detailed written submissions and a voluminous paper book accompanied by its incorporation certificate, memorandum and articles of association and also & 277/LKW/2025 Abhay Charan Teaching Institute of Vedic Education Association A.Y. 2025-26 photographs showing the activities undertaken by it towards the fulfillment of its objects. It has also filed a copy of its bank statement and Audit Report and financial statements for the assessment year 2024-25. Ongoing through the written submissions filed by the assessee, it is seen that the assessee is a company incorporated on 28.03.2023 under section 8 of the Companies Act, 2013 which has been set up at Lucknow, Uttar Pradesh for propagating certain spiritual values arising out of the teachings of the Bhagwad Gita, Chaitanya Mahaprabhu and other Saints. It has been submitted that on 29.04.2023, the assessee had been granted provisional registration under sub clause (vi) of clause (ac) of sub section (1) of section 12A of the Act and subject to the conditions mentioned in the copy of the order of provisional registration. Since the order of provisional registration required the assessee to apply for permanent registration, the assessee had filed this application before the ld. CIT (Exemption). It was submitted that the assessee had filed its reply dated 6.12.2024 on 10.12.2024 replying to the notices issued by the ld. CIT (Exemption) and submitting the required details / information / explanation. It had also requested of being provided an opportunity of being heard but the ld. CIT (Exemption) had passed an order rejecting the application of registration and also cancelling the assessee’s provisional registration, granted earlier. It was submitted that the assessee had opened to two active Gurukuls at Indore and Sikar, Rajasthan and its expenditures were primarily with regard to these Gurukuls. The ld. CIT (Exemption) was mistaken in his belief that the assessee had not carried out any charitable activity because the expenditure incurred had been paid towards the Teachers at these Gurukuls. It was also submitted that the assessee did not have many financial resources to meet the expenses of establishment, operation and management of the Gurukuls therefore, the Directors cum Founders of the assessee had made arrangements with different volunteers to provide their services/facilities to the students free of cost, for which no bills/ invoices/ vouchers were generated. It was in that context that bills and vouchers could not be provided to the ld. CIT (Exemption) but the ld. CIT (Exemption) had & 277/LKW/2025 Abhay Charan Teaching Institute of Vedic Education Association A.Y. 2025-26 erred in holding that the genuineness of the activities was not established in the absence of these bills and vouchers. It was also submitted that the order besides being against the principles of natural justice, was also a non-speaking order and furthermore the ld. CIT (Exemption) had erred in cancelling the assessee’s provisional registration, which was valid upto the expiry of assessment year 2026- 27 without presenting evidence of breach of compliance of conditions of the provisional registration or any instances of wrong doing by the company. It was, therefore, prayed that the order of the ld. CIT (Exemption) may be quashed.
7. Similarly, with regard to the denial of approval under section 80G, it was submitted that the application had been rejected only because the earlier application under section 12AB had also been rejected and as the ld. CIT (Exemption) had not provided the necessary opportunities or pointed out any inconsistencies in the activities of the assessee, his decision to refuse the approval and also cancel the provisional approval, granted earlier, was unjustified. It was, therefore, prayed that registration and the approval may kindly be granted.
Sh. R.K. Agarwal, CIT DR assisted the Bench in the matter. He submitted that the main reason for the rejection of the two applications was the failure of the assessee to comply two notices issued by the ld. CIT (Exemption) and to furnish the necessary documentation as required by him. However, considering the submission of the assessee, he would not have objection to the matter being restored to the file of the ld. CIT (Exemption) for considering the documents presented by the assessee before the Hon’ble Tribunal and thereafter deciding the matter on an appreciation of these documents.
We have duly considered the matter. It appears that the assessee has been denied the registration and approval only on account of the fact that it was not able to make compliance to the satisfaction of the ld. CIT (Exemption) during the course of proceedings before him. After considering the explanation of the assessee and the documents that have been filed by it before us, we deem it in the interest of