Loading judgment…
Facts
The assessee, Shri Ram Mandir Deosthan Wardha, filed an application for registration under Section 12A(1)(ac) of the Income Tax Act. The CIT(E) rejected the application citing various discrepancies and non-compliance by the assessee, including failure to provide details of activities, financial statements, loan permissions, donation details, and sale of land, as well as engaging in commercial activities. The CIT(E) issued show-cause notices, but the assessee failed to provide satisfactory explanations or attend hearings.
Held
The Tribunal noted that while the assessee showed a casual attitude, they acknowledged that small trusts may face difficulties with the revised registration procedures. Considering the overall purpose of fiscal provisions, the Tribunal decided to set aside the matter back to the CIT(E) for fresh adjudication.
Key Issues
Whether the CIT(E) was justified in rejecting the assessee's application for registration under Section 12A(1)(ac) due to non-compliance and discrepancies, and whether the matter should be remanded for fresh adjudication.
Sections Cited
12A(1)(ac), 12A(1)(ae)(iii), 12AB(1)(b)(i), 17A(2), 36A of the Maharashtra Public Trusts Act, 1950
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR
Before: SHRI V. DURGA RAO & SHRI K.M. ROY, ACCOUNTANT, MEMBER
Date of Hearing – 20/01/2025 Date of Order – 14/02/2025
O R D E R PER K.M. ROY, A.M.
This appeal by the assessee is emanating from the impugned order dated 14/03/2024, passed by the learned Commissioner of Income Tax (Exemption), Pune, [“learned CIT(E)”].
In its appeal, the assessee has raised following grounds:–
“1. Whether on the facts and circumstances of the case, learned CIT- Exemptions, Pune was justified in rejecting the application of the appellant for registration under section 12A(1)(ac). 2. The appellant craves leave to add or alter any other ground that may be taken at the time of hearing of this case.”
3. The assessee has filed application in Form no.10AB under section 12A(1)(ae)(iii) of the Income Tax Act, 1961 ("the Act") no 30/09/2023. Vide
2 Shri Ram Mandir Deosthan Wardha ITA no.292/Nag./2024 impugned order dated 14/03/2024, passed by the learned CIT(E), Pune, the application was rejected by holding as under:–
“2.2 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 09/01/2024 and the discrepancies were duly communicated to it as reproduced below: "(i) You have not furnished note on activities. Kindly furnish note on activities giving specific details of activities viz. date wise event/activities carried out by you. Furnish the copies of bills/ invoices of the expenses done for carrying out the activities. (ii) You have mentioned in your submission letter that the activities are been commenced from 23/09/2022 whereas from the financial statement, it is seen that your activities has been started from FY 2018-19. (iii) From financial statement FY 2018-19, 2019-20, 2020-21, it is seen that substantial amount of loan has been raised, in respect of which copy of permission from the charity commissioner under the provisions of section 36A of the Maharashtra Public Trusts Act, 1950 is not furnished. Kindly furnish the same. (iv) Kindly furnish the complete annual accounts and computation of income for FY 2021-22 and 2022-23 along with schedules and annexures." 2.3 The assessee was requested to show cause as to why the application should not be rejected and why the registration granted under section 12AB of the Income Tax Act, 1961 should not be cancelled. The assessee was also given opportunity of being heard vide the said notice. The assessee was specifically informed that in the event of failure to comply by the due date, the application shall be liable to be rejected and the registration shall also be liable to be cancelled. The compliance to the said notice was due on 16/01/2024. The notice was duly served on the assessee through e-portal and email. However, the assessee neither submitted explanation to the show cause notice till date nor availed the opportunity of being heard.
On verification of the details submitted by the assessee in response to the said notice and the documents submitted along with the application, some more discrepancies were noticed. Another notice was then issued to the assessee on 28/02/2024 and the discrepancies were duly communicated to it as reproduced below:
Shri Ram Mandir Deosthan Wardha ITA no.292/Nag./2024
"(i) You have not furnish the details of donation. Please provide full name, complete Postal address & PAN of donor, date & mode of donation, amount, receipt No. issued by trust / institute and copies of donation receipts and directions from the donors, if any. (ii) Substantial amounts of loans are seen to be raised as per the financial statements but purpose of loan and its utilisation for trust object along with the copies of permission from the Charity Commissioner under the provisions of section 36A of the Maharashtra Public Trusts Act, 1950 being compliance to the requirement of any other law for the purpose of achieving objects, is not furnished. (iii) As per the balance sheets for the last three years major part of your funds are invested in FDRs / bank accounts without its utilization on objectives and these funds are lying idle year-to-year whereas various objects have duly been provided in the trust deed for application of income. Amount of Rs.251.26 lacs out of total assets of Rs.264.02 lacs as on 31/03/2023 is lying idle in bank accounts / FDRs without its actual utilisation on objects of the trust. Thus, it is noticed that almost 95% of the total assets are invested in FDRs / Bank accounts. Similar is the case for the earlier two years also. In view of the decision of the Hon'ble ITAT Chandigarh in the case of I.K. Gujral University Vs. CIT(Exemptions) in appeal keeping of funds in bank accounts / FDRs cannot be considered to be any application towards the charitable objects. Please explain with evidence as to why the said decision of the Hon'ble ITAT (supra), should not be applied in your case. (iv) It is seen from the financial statement in F. Y. 2021-22, you have shown Advance against Land sale of Rs. 29,00,398/- and in F. Y. 2022-23, you have shown sale of Land at Rs.100/- only. Please provide details with your clarification on the said transaction alongwith supporting evidences. (v) Further, you have received income from Rent and other source which appears to be purely commercial in nature. Further, it is not clear as to whether the receipts are from the activities intrinsically involved while carrying out the main objectives. No separate books of accounts (financial statements) are furnished in respect of these receipts which are prima facie from an activity in the nature of commercial activities. In absence of such separate books of accounts it will not be possible to check whether such activity is with a profit motive or not. Please substantiate as to how each of such commercial/business activity is intrinsic to the carrying out of the main charitable activity in terms of the recent Law delivered by Hon'ble Supreme Court in the case of Assistant Commissioner of income-tax (Exemptions) v. Ahmedabad Urban Development Authority [(2022) 143 taxmann.com 278 (SC)]. " 3.1 The assessee was requested to show cause as to why the application should not be rejected and why the registration granted under section 12AB of the Income Tax Act, 1961 should not be cancelled. The assessee was also given opportunity of being heard vide the said notice. The assessee was specifically informed that in the event of failure to comply by the due date, the application shall be liable to be rejected and the registration shall also be liable to be cancelled. The compliance to the said notice was due on 06/03/2024. The notice was duly served on the assessee through e-portal and email. The assessee responded to the said notice on 06/03/2024 and requested for the adjournment of some days. The adjournment was granted upto 12/03/2024 vide notice dated 09/03/2024. However, the assessee has not responded to the said notice.
4 Shri Ram Mandir Deosthan Wardha ITA no.292/Nag./2024
Since, the assessee has not furnished any explanation to the discrepancies communicated to it, it is presumed that the assessee has nothing to say in the matter.
Considering the above facts discussed in the show notice and discrepancies noticed and also that the assessee has not complied with the provisions of section 12AB(1)(b)(i) of the Income Tax Act, 1961 as well as the provisions of Rule 17A(2) of Income Tax Rules, 1962 in spite giving sufficient opportunities, the undersigned is unable to draw any satisfactory conclusion about the 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.
6. In view of the above, the application filed by the assessee is hereby rejected and the provisional registration granted on 23/09/2022 under section 12AB read with section 12A(1)(ac)(vi) of the Income Tax Act, 1961 is hereby cancelled.”
4. Before us, the learned A.R. for the assessee, assailing the impugned order prayed that one more opportunity may be extended to her for submission of necessary evidences and details before the competent authority.
5. Per–contra, the learned Departmental Representative submitted that the rejection order is justified
We have heard the learned Departmental Representative at length and perused the material available on record as well as the orders of the authorities below. Before us no evidences have been placed, however, we are aware that due to revised procedure for registration of Trust i.e., w.e.f. 01/04/2021, various small Trusts who do not have ready access to professionals, face a lot of hiecups. Normally, the appeal could have been dismissed in view the casual attitude of the Trust. But, holistically, keeping in view the overall purpose and objective of the fiscal provisions, we deem it fit
5 Shri Ram Mandir Deosthan Wardha ITA no.292/Nag./2024 to set aside the matter back to the learned CIT(E) for denovo adjudication. Here, we take this opportunity to make it clear that this order does not have any precedence to be followed in similar cases under identical facts and circumstances. The assessee is directed to be vigilant and co–operate in the set aside proceedings. Thus, all the grounds raised by the assessee are allowed for statistical purpose.
In the result, assessee’s appeal stands allowed in terms indicated above. Order pronounced in the open Court on 14/02/2025