Trust gets second chance to prove charitable activities after section 12AB registration denial

ITAT Ahmedabad allowed the appeal of a Public Charitable Trust operating a primary school for physically disabled children whose registration under section 12AB was denied by CIT(E). The Trust had previous registrations under sections 12AA and 80G(5) but failed to file income tax returns and audit reports for three preceding financial years despite three hearing opportunities. ITAT found the denial premature and restored the matter to CIT(E) with directions to provide another hearing opportunity, allowing the Trust to submit required documents including returns and audit reports to prove genuineness of charitable activities.

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Issues Involved:
The judgment deals with the denial of registration under section 12AB of the Income Tax Act, 1961 to a Public Charitable Trust running a Primary School for physically disabled kids.

Issue 1: Denial of Registration under Section 12AB
The Commissioner of Income Tax (Exemption) denied the registration under section 12AB of the Income Tax Act, 1961 to the Assessee due to incomplete submission of required details/documents, leading to a lack of verification of the genuineness of the Trust's activities and adherence to legal requirements. The rejection was based on the failure of the Assessee to provide essential documents like bank statements, identity proofs, previous year returns, and necessary undertakings as mandated by the Act. The Commissioner emphasized the need to establish the genuineness of activities and ensure compliance with the Trust's objects before granting registration under section 12AB.

Issue 2: Appeal Against Rejection
The Assessee appealed against the rejection, arguing that they had submitted relevant documents like the Trust Deed, Registration Certificates, and Income Tax Returns for the past years, indicating a history of compliance and genuineness in their activities. The Assessee contended that they had been granted provisional registration under section 12AA after due verification by the Commissioner, and requested another opportunity to provide the necessary documents for registration under section 12AB. The Revenue, on the other hand, supported the rejection based on the Assessee's failure to submit Income Tax Returns and Audit Reports, which hindered the verification process.

Issue 3: Tribunal's Decision
After considering the submissions and details provided by the Assessee, the Tribunal observed that the Assessee had now produced the required Income Tax Returns and Audit Reports for the preceding years. The Tribunal acknowledged the importance of filing necessary documents as per Rule 17A of the Income Tax Rules for registration under section 12AB. In order to prevent any injustice, the Tribunal decided to grant the Assessee one more opportunity to be heard and present additional documents to establish the genuineness of their activities. The Tribunal directed the Commissioner to consider the new submissions and issue a speaking order on the registration application, warning that failure to cooperate would result in a decision strictly in accordance with the law.

In conclusion, the Tribunal allowed the appeal filed by the Assessee for statistical purposes, emphasizing the importance of providing complete and accurate documentation to support the application for registration under section 12AB of the Income Tax Act, 1961.

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