Short Overview Where CIT had not recorded any adverse comments or dissatisfaction about objects of assessee-trust or genuineness of the trust activities and he only observed some lacuna in the amendment and dissolution clauses of MOA, thus, the CIT clearly went beyond the scope of enquiry contemplated under section 12AA and refused to grant the registration under section 12AA to the assessee on a totally irrelevant ground and accordingly the matter was remanded to the CIT for fresh consideration.

CIT disallowed assessee’s claim of registration under section 12AA on the following grounds; that amendment and dissolution clauses of MOA were not proper; that in the winding clause, the assessee had no intention to transfer the trust properties to some other institution having 12A registration and 80G approval and that there was no clause in the MOA, which required auditing of accounts of the society by a CA. Further, the CIT noted that total receipts of the assessee were more than Rs. 1 crore and therefore, he took the view that the assessee was not eligible for exemption under section 10(23C)(iiiad). Further, the CIT also asked the assessee to furnish fee receipts books and the receipts for the donation. Assessee produced certain documents but could not produce some bills and vouchers; hence, the CIT doubted the genuineness of the activities of the trust.

It is held that A perusal of the order of the CIT showed that he had not recorded any adverse comment or dissatisfaction about objects of trust or genuineness of the trust activities. Only he observed some lacuna in the amendment and dissolution clauses. Thus, the CIT clearly went beyond the scope of enquiry contemplated under section 12AA and refused to grant the registration under section 12AA to the assessee on a totally irrelevant ground. Further, some bills and vouchers could not be produced by assessee due to time constrained by the CIT for appearing before him from a distance of more than 250 kms. and also other unavoidable reasons. Thus, it could be said that there was genuine cause for not furnishing the bills and vouchers. Therefore, the matter was remanded to the CIT and the assessee was directed to produce the bills and vouchers and books of account before the CIT for verification in respect of the claim and after getting the same, the CIT was also directed to examine and verify the genuineness of the activities of the trust and decide the issue afresh.

Decision: Matter remanded.

 

IN THE ITAT, CUTTACK BENCH

CHANDRA MOHAN GARG, J.M. & LAXMI PRASAD SAHU, A.M.

Balika Vidyalaya Educational & Cultural Trust v. CIT

ITA No. 183/CTK/2019

26 November, 2020

Assessee by : P.K. Mishra, AR

Revenue by : M.K. Gautam, CIT-DR

C.M. Garg, J.M.

This is an appeal filed by the assessee against the order under section 12AA(1)(b)(ii) of the Commissioner (Exemption) Hyderabad dt. 22-3-2019 for the assessment year 2018-19.

2. Although the assessee has raised various grounds of appeal, but the effective issue is against the rejection of registration under section 12AA of the Act by the learned Commissioner (Exemption) and denial of claim of exemption under section 10(23C) (iii)(ad) of the Act.

3. We have heard the rival submissions and perused the orders of lower authorities and materials available on record of the Tribunal. The undisputed facts are that the assessee trust is a Society. The assessee filed application in Form No.10A on 30-9-2018 seeking registration under section 12AA of the Income Tax Act, 1961. The Commissioner (Exemptions) disallowed the registration under section 12AA of the Act on the following grounds;

(i) The amendment clause and dissolution clauses are not proper as there is no intention on the part of the trust to take a previous approval/permission of the Commissioner (Exemption) prior to making any amendment.

(ii) In the winding clause, the assessee has no intention to transfer the trust properties to some other institution having 12A registration and 80G approval.

(iii) There is no clause in the MoA which requires auditing of account of the society by a C.A.

4. Similarly, the learned Commissioner (Exemption) noticed that the assessee society has claimed exemption under section 10(23)(iid) of the Act of Rs. 1,13,15,802. But as per section 10(23C)(iiiad), the exemption is available to “any institution existing solely for educational purposes and not for purposes of profit it the aggregate annual receipts of such institution do not exceed the amount of annual receipts of Rs. 1 crore vide rule 2BC of Income Tax Rules. Hence, the trust is not eligible for exemption under section 10(23C)(iiiad) having its total receipts of more than Rs. 1 crore. Learned Commissioner (Exemption) also asked the assessee society to furnish fee receipts books and the receipts for the donation. However, the assessee could not furnish the same, hence, the learned Commissioner (Exemption) doubted the genuineness of the activities of the trust. Learned CIT DR, in all fairness, submitted that the department has no serious objection, if it is found just, proper and necessary to restore the issue to the file of the learned Commissioner (Exemption) for fresh adjudication.

5. Learned AR of the assessee submitted that the Notice, dt. 11-3-2019 was sent to the assessee, which was received on 18-3-2019 and the date of hearing was on 19-3-2019. He submitted that the location of the assessee trust is at Sambalpur and hearing was fixed at Bhubaneswar which is nearly 300 kms away. However, learned AR of the assessee appeared on 19-3-2019 and produced certain documents but could not produce some bills and vouchers, which according to learned Commissioner (Exemption), the assessee has violated rule 17A.

In view of above, learned Commissioner (Exemption) observed that in the absence of bills and vouchers, the genuineness of the activities of the assessee trust could not be verified. He prayed that the matter may be restored to the file of learned Commissioner (Exemption) to direct the assessee to furnish the bills and vouchers for verification and consider the objects and genuineness of the activities of the assessee trust. The learned CIT DR, in all fairness, submitted that the department has no serious objection, if it is found just, proper and necessary to restore the issue to the file of the learned Commissioner (Exemption) for fresh adjudication.

6. We find that as per the provisions of section 11 & 12 of the Act, the income derived from property held for charitable or religious purposes and income of Trusts or Institutions from contributions are exempt from tax provided such Trusts or Institutions are registered under section 12A of the Act. The procedure for registration under section 12A is prescribed in section 12AA of the Act which provides that the Commissioner, on the receipt of an application for registration of a Trust or Institution made under section 12A, shall call for such information from the Trust/Institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the Trust/Institution and may also make such inquiries as deemed necessary on this behalf. It further provides that after satisfying himself about the objects of the Trust/Institution and the genuineness of its activities, the Commissioner shall pass an order in writing registering the Trust/Institution under section 12A and if he is not so satisfied, he shall pass an order in writing refusing to register the Trust/Institution. The scope of enquiry contemplated under section 12AA of the Act thus is limited to the extent of Commissioner getting himself satisfied about object of the Trust and the genuineness of its activities so as to grant or refuse the registration under section 12A of the Act. A perusal of the impugned order of the learned Commissioner (Exemptions), however, shows that he has not recorded any adverse comment or dis-satisfaction about the object of Trust or genuineness of the Trust activities. Only he has observed some lacuna in the amendment and dissolution clauses. In our opinion, the learned Commissioner (Exemptions) thus has clearly gone beyond the scope of enquiry contemplated under section 12A of the Act and has refused to grant the registration under section 12A of the Act to the assessee Trust on a totally irrelevant ground without pointing out as to how he was not satisfied either about the amendment clause and dissolution clauses of the Trust or the genuineness of its activities.

7. As regards the contention of learned AR of the assessee that some bills and vouchers were not produced due to time constrained by learned Commissioner (Exemption) for appearing before him from a distance of more than 250 kms and also other unavoidable reasons, we find that there is genuine cause for not furnishing bills and vouchers. Therefore, keeping in view submissions of both the sides and under the facts and circumstances of the case, we direct the assessee to produce the bills and vouchers and books of account before the learned Commissioner (Exemption) for verification as per rule 17A in respect of the claim and after getting the same, learned Commissioner (Exemption) is also directed to examine and verify the genuineness of the activities of the trust keeping in view trust deed and its relevant clauses and decide the issue afresh as per law after affording due opportunity of hearing to the assessee and without being prejudiced his earlier order challenged in this appeal.

8. In the result, appeal of the assessee is allowed for statistical purposes.