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Facts
The assessee applied for registration under section 12AB of the Income Tax Act. The CIT(E) rejected the application, citing the assessee's failure to provide sufficient documentary evidence regarding the commencement of charitable activities and the expenditure incurred as per the trust's objects. Provisional registration granted earlier continued to remain valid.
Held
The Tribunal found that the CIT(E)'s rejection order was not a speaking order, as it did not clearly specify how the expenditure was not aligned with the trust's objects. Consequently, the matter was restored to the file of the CIT(E) to allow the assessee another opportunity to present evidence of its charitable activities and proper utilization of funds.
Key Issues
Rejection of registration under Section 12A/12AB due to alleged lack of documentary evidence for charitable activities and expenditure. Whether the CIT(E)'s rejection order was a speaking order.
Sections Cited
Section 12A, Section 12AB, Section 2(15)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, LUCKNOW ‘B’ BENCH, LUCKNOW
O R D E R PER NIKHIL CHOUDHARY, A.M.: This is an appeal filed by the assessee against the orders of the ld. CIT (E), Lucknow in rejecting the grant of registration under section 12A of the Income Tax Act, 1961 to the assessee. The grounds of appeal
1. 1. 1. 1. are as under:- “1. The Learned Commissioner of Income Tax (Exemptions) Lucknow has erred in rejecting the grant of registration u/s 12A of the Income Tax Act 1961 to the assessee with total disregard to the facts and circumstances of the case.
2. The assessee reserves its right to add, amend, alter or delete any ground of appeal at the time of hearing of appeal.”
2. The facts of the case are that the assessee made an application for registration of Trust under section 12AB of the Income Tax Act on 23.08.2022 in Form No. 10AB under Rule 17A of the Income Tax Rules, 1962. The ld. CIT(E) issued notices to the assessee on 6.12.2022 and 9.01.2023. In the same, she required the assessee to submit a note on activities conducted since the inception of the Trust / during the last three years and a note specifying the main area of M/s Path Sarthi Trust A.Y. N.A. charitable / religious activities and projection / plan for the charitable / religious activities to be undertaken in the next two years. The assessee was also required to furnish the documentary evidences to substantiate the charitable activities carried out by it. The ld. CIT(E) records that the assessee filed a reply to the said notices and she reproduced a copy of the trust deed in her order which show the objects of the trust. The ld. CIT(E) noted that the assessee had failed to file supporting documentary evidences with regard to commencement of charitable activities, as per the objects of the trust deed. She noted that expenses were not incurred on charitable activities as mentioned in the objects of the trust deed. Therefore, since the assessee failed to file any supporting documents with regard to the commencement of charitable activities as per the objects of the trust deed, the genuineness of the activities did not get established. Therefore, after placing reliance on the judgment of Hon’ble Supreme Court in the case of CIT, Ujjain vs. Dawoodi Bohara Jamat C.A. No. 2492 of 2014, the ld. CIT(E) rejected the application filed in Form 10B for registration of the trust under section 12AB of the Income Tax Act. However, she held that adverse inference was drawn against the assessee and the provisional registration granted under section 12AB on 23.06.2022 would continue to remain valid.
3. The assessee is aggrieved by the said order of the ld. CIT(E). Sh. Rakesh Garg, Advocate (hereinafter referred to as the ld. AR) pointed out that a detailed reply had been submitted before the ld. CIT(E) alongwith enclosures that contained a list of members of the assessee trust with their PAN numbers and their addresses and certificates of the main area of activities of the society, application of funds, charitable activities, vehicle owned by the society and non-infringement of any other laws. The ld. AR also invited our attention to pages 27 to 30 of his paper book which contained photographs and newspaper cuttings of the activities performed by the assessee trust towards the furtherance of its’ objectives. A copy of the bank statement of the assessee trust, as existing in IDBI Bank, were also filed as part of this paper book. Sh. Garg, submitted that perusal of the same would show that all the withdrawals from the said bank account were towards the purposes of M/s Path Sarthi Trust A.Y. N.A. the trusts. The ld. AR invited our attention to a copy of the trust deed, specifically the objects of the same placed on pages 43 to 47 of his paper book and pointed out that all the said activities could be said to be objects of the general public utility within the meaning of 2(15) of the Income Tax Act, 1961. Accordingly, he prayed that since the assessee was a trust set up purely for charitable activities, and had spent its money on account of the same, the ld. CIT(E) was unjustified in rejecting the application of the assessee trust for regular registration. He submitted that the trust was in a position to demonstrate that it had spent funds towards the objects as reflected in its trust deed and accordingly he prayed for one more chance to demonstrate the same.
4. On the other hand, Sh. Punit Kumar, CIT DR (hereinafter referred to as the DR) submitted that the registration had been rejected by the ld. CIT(E) precisely because the assessee had not furnished any documents to demonstrate commencement of charitable activities as per the objects of the trust deed or to show the expenses were incurred on charitable activities that were mentioned in the objects of the trust deed. Since, it was for the assessee to demonstrate that its activities were charitable, he submitted that the assessee had to file the necessary evidences before the ld. CIT(E) to show that it deserved permanent registration. He accordingly prayed that directions may be issued to the assessee to file these documents that evidenced commencement of charitable activities and utilitation of funds for the objects of the trust, failing which the plea of the assessee may be rejected.
We have duly considered the facts and circumstances of the case. We note that the registration of the trust had been rejected primarily on account of the fact that the necessary documentary evidences have not been filed before the ld. CIT(E). In view of the fact that the ld. CIT(E) has not specified how the expenditure made is not as per the objects of the trust, her order is not a speaking order from which it could be gathered as to how the assessee is in violation of its trust deed. Accordingly, in the interest of justice, we deem it fit to restore the matter back to the file of the ld. CIT(E) so that the assessee may have one more opportunity to 3