Mandatory inquiry into genuineness and legal compliance required before granting tax-exempt registration; summary grant set aside and remitted.

Applications falling under the sub-clause requiring scrutiny must be subject to a Commissioner-led inquiry calling for documents and recording findings on the genuineness of charitable activities and compliance with other laws before registration can be granted; this procedural requirement is especially strict where donor tax benefits are implicated. A summary direction to grant registration without the mandated inquiry and recorded findings is legally impermissible. The Tribunal's order directing grant of registration was set aside, and the matter remitted to the Commissioner to decide after conducting the required inquiries and recording reasons in accordance with law.

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Issues: Whether the Income Tax Appellate Tribunal was justified in directing the Commissioner of Income Tax (Exemption) to grant registration under Section 12AB and Section 80G of the Income-tax Act, 1961, instead of remanding the matter to the Commissioner for inquiry into the genuineness of activities and compliance with other laws.

Analysis: The Court examined the statutory scheme distinguishing fresh registration and provisional registration, and the procedure under Section 12AB(1) which, where an application falls under sub-clause (iii) of Section 12A(1)(ac), mandates that the Commissioner call for documents and make such inquiries as necessary to satisfy himself about (A) the genuineness of the trust's activities and (B) compliance with other laws material to achieving its objects. The Commissioner had recorded that the trust had failed to supply documents despite multiple opportunities, and therefore rejected the application after inquiry. The Tribunal, however, recorded that documents had been produced and directed grant of registration without making the requisite findings on genuineness or legal compliance. Given that the respondent's application was filed under Section 12A(1)(ac)(iii) (covered by Section 12AB(1)(b)), the statutory text requires an inquiry and recorded findings before registration can be granted; this requirement is especially stringent where registration under Section 80G is involved because it confers donor tax benefits. The Tribunal's summary direction to grant registration thus bypassed the mandatory inquiry and findings the Commissioner was required to undertake.

Conclusion: The Tribunal was not justified in directing grant of registration under Section 12AB and Section 80G without the Commissioner first conducting the inquiries and recording findings as required by law; the impugned order is set aside and the matter is remanded to the Commissioner to decide the application in accordance with law.

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