Trust registration under the Income-tax Act remanded for fresh consideration after corrective compliance steps were shown.

Rejection of a trust's registration under section 12A read with section 12AA(1)(b)(ii) was challenged on the basis that past irregularities, missing statutory records, no separate bank account, and receipt of income in an individual trustee's name had been relied on to doubt genuineness and object compliance. The ITAT Mumbai noted that the assessee had later taken corrective steps, including change in trustees, obtaining PAN and TAN, and filing the return in the trust's name, but those later materials were not examined in a full de novo exercise. The matter was therefore sent back to the Commissioner (Exemptions) for fresh merits-based consideration after admitting all evidence and giving a hearing.

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Issues: Whether the rejection of registration under section 12A read with section 12AA(1)(b)(ii) of the Income-tax Act, 1961 should be set aside and the application considered afresh on the entire material, including subsequent corrective steps taken by the assessee.

Analysis: The assessee's registration application was rejected on the ground that past irregularities, non-maintenance of statutory records, absence of separate bank account, and use of the school income in an individual trustee's name created doubt about the genuineness of the activities and satisfaction of the objects of the trust. The Tribunal noted that the assessee had shown steps taken in the correction phase, including appointment of new trustees, obtaining PAN and TAN, and filing return of income in the trust's name for the later year. In these circumstances, and since the later material had not been examined in a full de novo exercise, the Tribunal found that one more opportunity was warranted.

Conclusion: The matter was set aside to the Commissioner (Exemptions) for fresh consideration of the registration application on merits after admitting and considering all evidences and explanations, with due opportunity of hearing to the assessee.

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