2004 (1) TMI 56 - HC - Income Tax

Charitable trust's exemption renewal denied due to fraud and financial irregularities

The court upheld the rejection of a charitable trust's renewal application for exemption under section 80G due to non-compliance with rules and evidence ... Charitable trust - Application granting exemption under section 80G - Renewal of registration u/s 12A - authorities have noticed that the application was defective inasmuch as detailed information was not furnished - trust has committed a fraud furnishing the Department an audit report without actually getting the accounts audited - assessee has not indicated the purpose for which the corpus donation was given by the alleged donors - fund is being used to make substantial advances to some other persons - there is diversion of fund - authority has rightly rejected the renewal application. Issues:1. Rejection of renewal application for exemption under section 80G.2. Compliance with rules for renewal application.3. Allegations of fraud and irregular maintenance of accounts.4. Role and responsibility of the chartered accountant.Analysis:1. The petitioner, a charitable trust, sought renewal of exemption under section 80G, which was rejected by the authorities. The petitioner contended that the rejection order was invalid. The court observed that the rejection was based on unsatisfactory information provided during the renewal application process.2. The court examined the procedural aspects of the renewal application. It noted that the authorities found the application defective due to insufficient information. The petitioner's chartered accountant admitted to certifying financial statements without auditing the trust's accounts, leading to the rejection of the renewal application.3. The authorities discovered discrepancies in the trust's financial activities, including improper use of corpus donations and substantial advances made to third parties. This raised concerns about fund diversion and irregular maintenance of accounts, which formed the basis for rejecting the renewal application.4. The court highlighted the professional responsibilities of chartered accountants and expressed disappointment in the chartered accountant's misconduct in certifying financial statements without proper audit. As a result, the court directed the authorities to inform the Chartered Accountant's Council about the chartered accountant's actions for necessary action.In conclusion, the court upheld the rejection of the renewal application, citing non-compliance with rules and evidence of fraud and irregularities in the trust's financial operations. The judgment emphasizes the importance of professional integrity for chartered accountants and the repercussions of failing to fulfill their duties.