2025 (6) TMI 2039 - AT - Income Tax

Rejection of registration u/s 12A(1)(ac) (iii) and u/s 80G - registration denied as assessee has failed to file the confirmation from the donors exceeding Rs. 50, 000/- to Rs. 1, 00, 000/- details of contractors engaged in construction of low cost house project and drinking water project etc. was not filed - as per DR head office of the trust has been shown at Delhi while the mostly donation were given by the resident of the Kerala state without mentioning the address of the donors - HELD THAT - The assessee has submitted the all details before the CIT(E) during the proceedings which were required for the registration of the Trust. The assessee also provided the addresseses of the donors. CIT(E) did not make any comments on the genuineness of the object of the trust. The registration u/s 12A as well as 80G of the Act was denied for the reason that certain details were not furnished by the assessee. The assessee has furnished the voluminous evidence to prove that the assessee is a charitable trust and activities carried by the assessee are genuine. The queries raised and details required by the Ld. CIT(E) were all subject of verification by the AO while completing the assessment. The Ld. CIT(E) should not have rejected the registration u/s 12A as well as 80G of the Act on the ground that certain details were not furnished by the assessee while all the details were furnished by the assessee. Thus we direct the Ld. CIT(E) to restore the provisional registration granted to the assessee u/s 12A of the Act and also direct to grant registration u/s 12A as well as of the Act to the assessee trust. Appeals of the assessee are allowed.

Issues Presented and Considered

The core legal questions considered by the Tribunal in this appeal include:

Whether the rejection of registration under sections 12A(1)(ac)(iii) and 80G of the Income Tax Act by the Ld. CIT (Exemption) was justified, particularly on the grounds of incomplete or insufficient documentation and details furnished by the assessee trust.
Whether the principles of natural justice were violated in the rejection order due to alleged non-grant of adequate opportunity of hearing and recording of incorrect facts and findings.
Whether the genuineness of the charitable objects and activities of the assessee trust was established to warrant registration under sections 12A and 80G of the Act.
Whether the procedural and substantive requirements for registration under the relevant provisions of the Income Tax Act were complied with by the assessee trust.

Issue-wise Detailed Analysis

1. Legality of Rejection of Registration under Sections 12A and 80G

Legal Framework and Precedents: Registration under section 12A(1)(ac)(iii) and 80G of the Income Tax Act is granted to trusts or institutions established for charitable purposes, provided their objects and activities are genuine. The relevant legal principle, as reiterated by various High Courts and coordinate benches of the Tribunal, is that at the stage of granting registration, the primary focus is on verifying whether the trust's objects are charitable and the activities are genuine. Procedural formalities and detailed verification of every document are generally subject to assessment proceedings.

Court's Interpretation and Reasoning: The Tribunal observed that the Ld. CIT (Exemption) rejected the registration application primarily because certain details were allegedly not furnished, such as confirmations from donors exceeding Rs. 50,000/-, details of contractors engaged in projects, and beneficiary confirmations for various charitable activities. However, the Tribunal found that the assessee had submitted voluminous evidence, including detailed activity reports, audited financial statements, donor lists with addresses, beneficiary details, agreements with contractors, and other documentary proofs.

Key Evidence and Findings: The assessee furnished:

Application forms for registration under 12A and 80G.
Provisional registrations previously granted.
Detailed notes on charitable activities including medical camps, blood donation drives, COVID relief efforts, and educational awareness programs.
Complete donor details with names, addresses, modes of donation, and amounts.
Audited financial statements and income tax returns for multiple assessment years.
Details of trustees and governing body members.
Activity reports supported by bills, vouchers, and proofs of expenses.
Beneficiary lists including Aadhaar numbers and contact details.
Correspondence and replies to notices issued by the Ld. CIT (Exemption).

Application of Law to Facts: The Tribunal emphasized that the genuineness of the objects and activities was not doubted by the Ld. CIT (Exemption). The rejection was solely on technical grounds of incomplete documentation, which the Tribunal found to be incorrect since the assessee had furnished all requisite details. The Tribunal noted that such detailed scrutiny and verification of evidence are more appropriate during assessment proceedings rather than at the registration stage.

Treatment of Competing Arguments: The Department argued that the addresses of donors were incomplete, many donations were received in cash, confirmations from donors and beneficiaries were missing, and contractor agreements lacked legal sanctity. The Department also pointed out the absence of narration for bank entries above Rs. 10,000 and incomplete details regarding charitable projects.

The Tribunal rejected these contentions, holding that:

The donor addresses were sufficiently detailed, and the allegation of incomplete addresses was unsupported by evidence.
Beneficiary details were furnished comprehensively, including Aadhaar numbers and contact information.
Travel and other expenses were substantiated with vouchers and bills.
Contractor agreements, though on plain paper, were submitted and the issue of their legal sanctity was not a ground to deny registration at this stage.
The procedural deficiencies highlighted by the Department did not justify rejection of registration where the charitable nature and genuineness of activities were established.

Conclusions: The Tribunal concluded that the Ld. CIT (Exemption) erred in rejecting the registration under sections 12A and 80G on grounds of non-furnishing of certain details, which were in fact provided. The Tribunal directed restoration of provisional registration and grant of registration under sections 12A and 80G to the assessee trust.

2. Violation of Principles of Natural Justice

Legal Framework: Principles of natural justice require that before adverse orders are passed, the affected party must be given adequate opportunity to present their case and respond to allegations or deficiencies pointed out.

Court's Interpretation and Reasoning: The assessee contended that the order rejecting registration was passed without granting adequate opportunity of hearing and was based on incorrect facts and findings. The Tribunal considered these submissions and noted that the assessee had filed multiple detailed replies and submissions in response to notices and queries raised by the Ld. CIT (Exemption).

Key Evidence: The record showed extensive correspondence, replies to notices dated 21.12.2023, 06.02.2024, 03.04.2024, and 08.05.2024, along with voluminous documentary evidence submitted by the assessee.

Application of Law to Facts: Given the detailed submissions and evidence filed by the assessee, the Tribunal found no merit in the contention that the assessee was denied an opportunity to be heard or that the order was passed without proper consideration of facts.

Conclusions: The Tribunal held that the principles of natural justice were not violated and that the rejection order was based on incorrect appreciation of facts rather than procedural lapses.

3. Sufficiency and Authenticity of Evidence Submitted

Legal Framework: While registration under section 12A and 80G requires proof of charitable objects and genuine activities, the evidentiary threshold at this stage is not as stringent as in assessment proceedings. The authorities are to be satisfied prima facie about the genuineness of the trust's objects and activities.

Court's Interpretation and Reasoning: The Tribunal reviewed the extensive documentary evidence submitted by the assessee, including activity reports, financial statements, donor and beneficiary details, and agreements. It noted that the Ld. CIT (Exemption) had not doubted the genuineness of the objects and activities but rejected the application on technical grounds.

Key Findings: The Tribunal found that the evidence was sufficient to establish that the trust was engaged in bona fide charitable activities such as medical camps, blood donation drives, COVID-19 relief, health awareness campaigns, and other community services.

Application of Law to Facts: The Tribunal emphasized that issues such as completeness of donor addresses, authenticity of contractor agreements, and corroboration of travelling expenses are matters for detailed scrutiny during assessment, not at the registration stage.

Conclusions: The Tribunal concluded that the evidence submitted was adequate to prove the charitable nature and genuineness of the trust's activities and objects, warranting grant of registration.

4. Applicability and Scope of Provisional Registration

Legal Framework: Provisional registration under section 12A is granted to trusts pending final registration, subject to fulfillment of conditions.

Court's Interpretation and Reasoning: The Ld. CIT (Exemption) cancelled the provisional registration on rejection of the main registration application. The Tribunal found that since the main application was wrongly rejected, the cancellation of provisional registration was also improper.

Conclusions: The Tribunal directed restoration of the provisional registration pending final grant of registration under sections 12A and 80G.

Significant Holdings

"The Ld. CIT(E) did not make any comments on the genuineness of the objects of the trust. The registration u/s 12A as well as 80G was denied only for the reason that certain details were not furnished by the assessee. As held by various High Courts while granting registration u/s 12A one has to see whether the objects of the trust are charitable and the activities of the trust are genuine. The voluminous evidences furnished by the assessee proves that the assessee is a charitable trust and the activities carried on by the assessee are genuine."

"The queries raised and details required by the Ld. CIT(E) were all subject matter of verification by the Assessing Officer while completing the assessment. Therefore, since the genuineness of the objects of the trust and the activities of the trust were not in doubted by the Ld. CIT(E) he should not have rejected the registration u/s 12A as well as 80G of the Act on the ground that certain details were not furnished by the assessee which otherwise all the details were in fact furnished by the assessee."

"The Ld. CIT(E) should not have rejected the registration u/s 12A as well as 80G of the Act on the ground that certain details were not furnished by the assessee, while all the details were furnished by the assessee. Thus, we direct the Ld. CIT(E) to restore the provisional registration granted to the assessee u/s 12A of the Act and also direct to grant registration u/s 12A as well as of the Act to the assessee trust."

Core Principles Established:

At the stage of registration under sections 12A and 80G, the primary consideration is the genuineness of the charitable objects and activities, not exhaustive documentary verification.
Technical or procedural deficiencies in documentation, where the genuineness is not in doubt, should not lead to rejection of registration.
Details and evidence required for registration can be subject to detailed scrutiny during assessment proceedings.
Principles of natural justice require that adequate opportunity be given to the applicant, and rejection without proper consideration of submissions and evidence is impermissible.
Provisional registration should not be cancelled arbitrarily when the main registration application is pending or wrongly rejected.

Final Determinations on Each Issue:

The rejection of registration under sections 12A and 80G was erroneous and unsustainable.
The assessee had furnished all necessary details and evidence to establish the charitable nature and genuineness of activities.
The principles of natural justice were not violated as the assessee had ample opportunity to present its case.
The provisional registration wrongly cancelled was ordered to be restored.
The appeals were allowed with directions to grant registration under sections 12A and 80G of the Income Tax Act to the assessee trust.

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