Rejection of 12A application merely on basis of suspicion without making meaningful investigation not valid- ITAT Nagpur

The trust made an application for the first time for registration u/s 12A and provisional registration was granted in Form 10AC on 24-05-2022 which was valid till AY 2025-26. The appellant then filed application in Form 10AB under sub clause (iii) of section 12A(1)(ac) of the Income Tax Act, 1961 on 21-09-2023. With a view to verify the genuineness of activities of the appellant, proceedings were initiated and notice was issued calling for information and clarifications.

However, the application for registration was rejected vide order dated 16/03/2024 reading as below:

• The assessee has not furnished any justification on observation that entire expenditure has been made by the trust only on religious activities though the trust has been mentioned as 'Religious cum Charitable Trust' in form 10AB.

• The only expenditure shown on 'other charitable objects' was Rs. 1.05 Lakhs incurred in FY 2021-22. The assessee was requested to furnish details of the same and evidences. In compliance, the assessee trust has furnished few bills. However, on perusal of the same, they are not found to be genuine.

• The trust has furnished three bills of one Agarwal Xerox & Binding Works. As mentioned in the bills, it is engaged in binding, xerox and printing. However, in the bills produced, the material mentioned is sell of note books, medical camp pamphlets and stationery and files. Said firm is not engaged in selling activity as no such activity is mentioned in bills.

• The trust has further furnished bills of shoes. However, even if it is assumed that the trust has carried out some activity like distributing stationery, note books, school uniforms to students or shoes, no details of the same such as date of activity, number of students, how they were identified, schools they study in etc has been furnished by the trust. No supporting evidences in the form of school appreciation letter, photographs, cuttings etc has been furnished.

• The trust has also furnished bill of mithai boxes. However, the concern issuing bill is engaged in box manufacturing and packaging. The trust has not clarified if the bill relates to purchase of mithai or the purpose for which the boxes were purchased.

On the basis of the above, the L’d CIT (E) doubted the genuineness of the activities of the assessee and rejected the application for registration.

Submission by the Assessee:

The learned Authorised Representative appearing for the assessee furnished a detailed Paper Book containing following documents:–

• Objects of the Trust & Statement of activities carried out by the Trust
• 1st Written submission filed on 24-11-2023
• 2nd Written submission filed on 27-02-2024
• Some Invoices of Grains (Kirana) purchase/ School Books and Stationary Purchases/ School Uniform Purchase/ Shoes purchases
• Photographs of Medical Camp/ Note Books Distribution/ Food Distribution/ School Uniform & Shoes distribution

Verdict of Tribunal

The rejection is not sustainable as the learned CIT(E) has made half backed inquiry and has raised only suspicions on documentation without making any meaningful investigation. He has not clearly established as the objects are not charitable or activities are not genuine. Merely raising some suspicion on the details, voluminous submissions without unravelling any truth is not sufficient to cancel provisions registration and deny permanent registration. We direct learned CIT(E) to grant registration forthwith under section 12AB of the Act.

Disclaimer: 

The above article is based upon the ruling of the Hon'ble ITAT and is meant for educational purposes only. Readers are requested to act diligently and under consultation with a professional before applying the information contained in this article. For any support, mail at: support@taxwink.com