2023 (6) TMI 973 - AT - Income Tax

Trust's 80G Approval Appeal Denied: Lack of Evidence & Purpose.

The Tribunal upheld the CIT(E)'s decision to reject the appellant trust's application for approval u/s 80G of the Income Tax Act, 1961. The trust failed ... Approval u/s 80G - Charitable activity u/s 2(15) - denial of approval real purpose of the trust does not get established - HELD THAT:- Appellant failed to establish the real purpose of the trust and the receipts and the expenses shown in the bank statement remained uncorroborated and the Appellant has not provided the financial statement for the year ending 31st March, 2018. Assessee has also failed to appear before us to support his case and failed to submit any material, thus, we find no reason to interfere with the findings and the conclusion of the CIT(E), we find no merit of the assessee. Grounds of Appeal of the assessee are dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether approval under section 80G can be granted where a trust registered under section 12A claims charitable activity but fails to produce corroborative financial evidence for receipts and expenditures. 2. Whether sporadic or one-off activities that are not in conformity with the stated objects of the trust can establish the 'real purpose' required for 80G approval. 3. Whether provisional financial statements not furnished or the absence of finalized financial statements justifies denial of 80G approval where bank statements show limited routing of receipts/expenditures. 4. Whether registration under section 12A (and claims under sections 11/12) is by itself sufficient proof to obtain approval under section 80G. ISSUE-WISE DETAILED ANALYSIS Issue 1: Sufficiency of financial corroboration for 80G approval (bank statements vs. financial statements) Legal framework: Approval under section 80G requires satisfaction regarding the genuineness and charitable character of activities, which is ordinarily corroborated by documentary and financial evidence (bank statements, financial statements). Precedent Treatment: The tribunal considered the parties' references to earlier judicial observations (as advanced by the appellant) but applied the statutory requirement that material be corroborated; it did not treat registration under section 12A as an automatic substitute for financial corroboration (distinguished). Interpretation and reasoning: The Tribunal emphasized that claimed receipts and expenditures must be corroborated with bank records and financial statements. The bank statements showed only minimal routing of receipts/expenditures (Rs. 15,225 of receipts and Rs. 3,570 of expenditures routed through bank against larger gross figures), creating a gap between claimed figures and bank evidence. The absence of corroborative financial statements for the relevant year exacerbated the deficiency. The Tribunal found that mere documentary claims about activities are insufficient without matching financial corroboration. Ratio vs. Obiter: Ratio - approval under 80G can be denied where claimed receipts/expenditures are not corroborated by bank records and financial statements; absence of such corroboration is a legitimate basis for rejection. Obiter - none significant on this point beyond the direct reasoning. Conclusion: The Tribunal upheld denial of 80G on the ground that financial evidence was not corroborative; therefore, lack of corroboration justified refusal of approval. Issue 2: Character of activities - one-off events vs. systematic activities in conformity with trust objects Legal framework: For 80G approval the activities should reflect the real charitable purpose of the trust and generally be in consonance with the objects in the trust deed and undertaken on a systematic basis rather than as isolated events. Precedent Treatment: The Tribunal distinguished any contention that sporadic activities suffice by referring to the requirement of activities being in sync with stated objects and undertaken systematically; prior judicial statements relied upon by the appellant were not treated as mandating approval where activities are one-off or not conforming to objects. Interpretation and reasoning: The CIT(E) record showed only two asserted activities (celebration of a festival with blind children and medical camps for construction workers). The Tribunal agreed these were one-off/isolated and not demonstrably carried out in a manner consistent with the wide range of objects in the trust deed. In absence of sustained evidence of activity aligned with the objects, the 'real purpose' of the trust remained unestablished for purposes of section 80G. Ratio vs. Obiter: Ratio - one-off activities inconsistent with the stated objects or lacking systematic conduct may justify denial of 80G approval. Obiter - the observation that mere submission of activity documents is insufficient without regularity and object conformity. Conclusion: The Tribunal sustained the view that the claimed activities did not establish the trust's real charitable purpose in the manner required for 80G approval. Issue 3: Role and sufficiency of section 12A registration and claims under sections 11/12 in obtaining 80G approval Legal framework: Registration under section 12A confers exemption in respect of income, and sections 11/12 deal with application of income for charitable purposes; section 80G is a distinct approval regarding donation deductions and requires separate satisfaction. Precedent Treatment: The appellant argued that section 12A registration suffices to establish charitable status for 80G; the Tribunal rejected that submission as insufficient to compel 80G approval, distinguishing registration from the separate statutory criteria for 80G. Interpretation and reasoning: The Tribunal held that 12A registration is not by itself determinative of entitlement to 80G approval. The Tribunal noted that 80G approval involves examination of the actual activities and financial corroboration; mere existence of 12A registration or claims for exemption under sections 11/12 cannot substitute for evidence showing that activities conform to objects and are corroborated financially. Ratio vs. Obiter: Ratio - registration under section 12A does not automatically entitle a trust to approval under section 80G; separate satisfaction of statutory criteria (including corroborative evidence) is required. Obiter - none beyond the immediate holding. Conclusion: The Tribunal concluded that 12A registration and section 11/12 claims did not mandate grant of 80G; denial was justified on evidentiary and purpose grounds. Issue 4: Acceptability of provisional financial statements and failure to furnish requested documents Legal framework: Authorities may request financial statements to verify activities and funds flow; parties are expected to furnish available (including provisional) statements to enable verification. Precedent Treatment: The Tribunal accepted the administrative expectation that provisional financial statements, if available, should be produced for examination; this expectation was applied to the facts and prior judicial authority invoked by the appellant was not allowed to justify non-production. Interpretation and reasoning: The appellant declined to submit provisional financial statements on the ground they were not finalized; the Tribunal found that provisional accounts could and should have been furnished to corroborate bank entries and claimed activities. Non-production left entries uncorroborated and undermined the application for 80G approval. The Tribunal accepted the assessing authority's rejection of the explanation as not tenable. Ratio vs. Obiter: Ratio - refusal or failure to furnish financial statements (even provisional) when requested is a valid ground for denying 80G approval where those statements are material to corroboration. Obiter - remedial note that provisional accounts can suffice for preliminary examination. Conclusion: The Tribunal upheld denial of approval due to non-production of provisional/final financial statements and the consequent failure to corroborate bank entries. Overall Conclusion The Tribunal found no infirmity in the CIT(E)'s refusal of approval under section 80G: the real purpose of the trust was not established because (a) claimed activities were one-off and not clearly in sync with stated objects, (b) receipts/expenditures were not corroborated by bank statements and financial statements, and (c) section 12A registration and claims under sections 11/12 did not by themselves entitle the trust to 80G approval. The appeal was dismissed.