Genuineness of educational activities may be examined through accounts and supporting records when seeking approval under tax law.

At the approval stage for an educational institution under section 10(23C)(vi), the authority may call for audited annual accounts, supporting documents and explanations to test the genuineness of the institution's activities and compliance with applicable law. Unanswered or unsatisfactory material relating to unaudited accounts, vehicle expenses, examination expenses and the treatment of donation funds can justify refusal of approval. The assessee's reliance on audit exemptions and on New Noble Educational Society did not displace this enquiry, and the claim that the Chhattisgarh Vishwavidyalaya Adhiniyam, 1973 removed the audit requirement was not substantiated. The rejection of registration/approval and cancellation of provisional approval were upheld.

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Issues: Whether the rejection of the application for registration/approval under section 10(23C)(vi) of the Income-tax Act, 1961 was justified on the ground that the assessee failed to furnish satisfactory accounts, supporting documents, and explanations, thereby failing to establish genuineness of its activities.

Analysis: The application was examined in the light of the Commissioner's power under the second proviso to section 10(23C) to call for documents, including audited annual accounts, and to make enquiries to satisfy himself about the genuineness of the institution's activities and compliance with other applicable laws. The assessee's objections that audit was not required for the relevant year, and that the requirement under rule 2C was only for self-certified accounts, were not accepted. The record showed unanswered or unsatisfactory explanations regarding unaudited accounts, vehicle expenses, examination expenses, and the treatment of the donation received for gold medals. The asserted distinction drawn from the decision in New Noble Educational Society did not assist the assessee, because the Commissioner was entitled to examine the accounts and related material to ascertain genuineness and functioning at the approval stage. The assessee also failed to substantiate the claim that the Chhattisgarh Vishwavidyalaya Adhiniyam, 1973 dispensed with audit for the relevant period.

Conclusion: The rejection of the application and cancellation of provisional approval were upheld, as the assessee failed to establish sufficient material to warrant registration/approval under section 10(23C)(vi).

Final Conclusion: The appeal failed, and the Revenue's stand was sustained because the assessee did not satisfy the statutory requirements for approval at the registration stage.

Ratio Decidendi: At the stage of approval under section 10(23C), the authority may scrutinize audited accounts and related material to test the genuineness of the institution's activities, and failure to furnish satisfactory supporting evidence can justify of registration/approval.

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