SUNRISE SHIKSHAN SANSTHAN, SIKAR V. CIT(E), JAIPUR

ITA 1321/JPR/2019

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 9408 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2019-2020
• Appeal Filed On: 01-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MOHAN CHOUDHARY
• Keywords: Charitable institution; Principle of natural justice; Opportunity of cross examination; Third party statement; Benefit of exemption; Set aside
• Section: 11; 12A; 12AA; 13

Judgement Text

vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES “B”, JAIPUR Jh ,u-ds-lSuh] mik/;{k ,oa Jh lanhi x®lkÃa] U;kf;d lnL; ds le{k BEFORE: SHRI N.K. SAINI, VICE PRESIDENT & SHRI SANDEEP GOSAIN, JM vk;dj vihy la-@ITA No. 1321/JP/2019 Assessment Year: .................... Sunrise Shikshan Sansthan, Sikar Salasar Road, Nechhwa, Sikar (Raj)-332026 cuke Vs. C.I.T.(Exemptions), Jaipur. PAN No.: AAFAS 9535 A vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Mohan Choudhary (Adv) jktLo dh vksj ls@ Revenue by : Shri B.K. Gupta (Pr.CIT-DR) lquokbZ dh rkjh[k@ Date of Hearing : 30/11/2021 mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 31/01/2022 vkns'k@ ORDER PER: SANDEEP GOSAIN, J.M. The present appeal has been filed by the assessee against the order of the ld. CIT(A), CIT(Exemptions), Jaipur dated 30/09/2019 passed U/s 12AA(1)(b) of the Income Tax Act, 1961 (in short, the Act). The assessee has raised following grounds of appeal: “1. T h a t o n t h e f a c t s a n d i n t h e c i r c u m s t a n c e s o f t h e c a s e , t h e o r d e r p a s s e d b y t h e l d . C I T ( E x e m p t i o n s ) , J a i p u r i s b a d i n l a w a n d b a d o n f a c t s . 2. That on the facts and in the circumstances of the case, the ld. CIT(Exemptions), Jaipur has erred in rejecting the registration of the assessee-society u/s 12AA of the Act. ITA 1321/JP/2019_ Sunrise Shikshan Sansthan Vs CIT(E) 2 3. That on the facts and in the circumstances of the case, the ld. CIT(Exemptions), Jaipur has also erred in recording various observations in the order which are contrary to the facts. 4. That the petitioner may kindly be permitted to raise any additional or alternative grounds at or before the time of hearing.” 2. The hearing of the appeal was concluded through video conference in view of the prevailing situation of Covid-19 Pandemic. 3. The brief facts of the case are that the assessee filed application online on 01/03/2019 for seeking registration U/s 12AA of the Act. Statutory notices were issued to the assessee to submit certain documents/explanations and also produce original RC/MOA for verification. The assessee submitted reply alongwith documents before the ld. CIT(E) but the ld. CIT(E) had not satisfied with the explanation offered by the assessee and the application for seeking registration U/s 12AA of the Act was rejected. 4. Against the said order of rejection for registration U/s 12AA of the Act, the assessee has preferred the present appeal before the ITAT on the grounds mentioned above. 5. All the grounds raised by the assessee are interlinked and interrelated and mainly relates to challenging the order of the ld. CIT(E) in rejecting the application for seeking registration U/s ITA 1321/JP/2019_ Sunrise Shikshan Sansthan Vs CIT(E) 3 12AA of the Act. In this regard, the ld. AR appearing on behalf of the assessee has reiterated the same arguments as were raised before the ld. CIT(E) and also relied on the written submissions filed before the Bench and the contents of the same are as under: “(i) It is respectfully submitted that the appellant-assessee is wholly engaged in running a school, which is not disputed even by the Ld. CIT(E). Such educational activity falls in the category of charitable within meaning of section 2(15) of the Act. (ii) The only issues raised by the ld. CIT(E) is that on enquiry it is seen that the assessee is showing lower tuition fee and not disclosing bus fee in the books of account. The appellant-assessee replied and explained that there is no understatement of any receipts. As to the secrete enquiry through Departmental Inspector, it was stated by the assessee that "It appears that someone out of jealously might have alleged recklessly. In absence of complete details of the same, the assessee reserves its right of further submissions." The CIT(Exemptions) has mentioned the same in his impugned order. However, no such document or opportunity was provided to the assesse even to demand. Subsequently, on 22.07.2020 after the impugned order was passed, the ld. ITO (HQ) 0/o CIT(E) replied that no third party statements were recorded. Vide letter dated 31.07.2020 & 07.10.2020, the assessee again requested to provide the documents alongwith detailed report of the enquiry conducted by the Departmental Inspector on the basis of which the allegation had been made against assessee. However, no such material was supplied to the assessee and the CIT (E) adjudicated the matter relying upon the same material without supplying the copy to the assesse. ITA 1321/JP/2019_ Sunrise Shikshan Sansthan Vs CIT(E) 4 (iii) It is submitted that the material collected behind the back of assessee could not be utilized against assessee unless the copy of the same was supplied to the assessee and he was given an opportunity to rebut the same. The assessee furnished full explanation to the query raised. No opportunity was provided to the assessee for cross- examination. Such material cannot be used against the assessee unless he is supplied the copy of such material and is allowed an opportunity to rebut the same. Similarly, any statement recorded behind the back of the assessee cannot be used against him unless the assessee is supplied the copy of the statement and is allowed an opportunity to cross-examine. In support of this contention, reliance is placed on the decision of Hon'ble Apex Court in the case of M/s Andaman Timber Industries vs. Commissioner of Central Excise, Kolkata-II —281 CTR 241. It is reiterated that the appellant-society is fully charitable and its aim is to provide education to village children whose parents are very financially week and mainly poor farmers, villagers and does not exists for profit. All the receipts of tuition fee/bus fee are properly accounted for in the books of account and nothing is concealed. No documentary evidence of field enquiry was provided to the appellant- society. Even it is not clear whether such enquiry was made from parents or minor students. No statements were recorded in writing of any of the witnesses and no opportunity of cross examination was provided. In Kishinchand Chellaram 125 ITR 713 SC, the Hon'ble Supreme Court has held that any material not confronted to assessee would not constitute as 'admissible evidence'. ITA 1321/JP/2019_ Sunrise Shikshan Sansthan Vs CIT(E) 5 It is a settled proposition of law that as per the principles of natural justice, the CIT (E) should have provided complete evidence to the assessee & grant opportunity of cross-examination. Secondary evidences cannot be relied on as if neither the person who prepared the documents nor the witnesses were produced. The Department cannot be given a second chance as held by the Hon'ble Supreme Court in Sunita Dhadcla's case. Cross-examination is one part of the principles of natural justice. (iv) Without prejudice, it is respectfully submitted that it could not be a ground to draw the inference that the activities of the assessee- society are not being carried out in accordance with the objects of the society or that no genuine activities are being carried on by assessee. Without any admission, it is stated that if the genuineness of recording of fee in one year is doubted, the addition, if any, can be made in the assessment of the relevant assessment year in accordance with law. However, that, by itself, would not be sufficient to deny the registration u/s 12AA. A conclusion could not be drawn that the activities of the society are not being carried out in accordance with the objects of the society or that no genuine activity is being carried out by assessee merely because the accounts of one year is doubted by the Ld. CIT(E). It is stated that the Ld. CIT(E) went wrong in rejecting the application on this ground. It was duly explained to the Ld. CIT(E) that the school is approved by the Government agencies, school is situated in a village where some concessions are allowed to poor & needy students, complete details of such students were furnished. The affairs of the school are monitored by the government agencies and accounts are duly audited and the funds are not available at the discretion of the Society. The allegation of reporting lower fee is based on presumption and surmises. No concrete ITA 1321/JP/2019_ Sunrise Shikshan Sansthan Vs CIT(E) 6 evidence are on record. No opportunity of cross-examination was provided to the assessee. It was told vide latter dated 22.07.2020 that no third party statements are recoded. That books of account, bills and vouchers were available for verification by the Ld. CIT(E). (v) It is evident that at this stage, the CIT (E) is not to examine the application of income. All that he may examine is whether the application is made in accordance with the requirements of section 12A read with rule 17A and whether Form 10A has been properly filled up. He may also see whether the objects of the trust are charitable or not. At this stage, it is not proper to examine the application of income. (vi) The Honble Allahabad High Court in the case of CIT vs. Red Rose School (2007) 163 Taxman 19 (Allahabad) held that: Section 12AA, which lays down the procedure for registration, does not speak anywhere that the Commissioner, while considering the application for registration, shall also see that the income derived by the trust or the institution is either not being spent for charitable purpose or such institution is earning profit. The language used in the section only requires that activities of the trust or the institution must be genuine, which accordingly would mean that they are in consonance with the objects of the trust/institution, and are not mere camouflage but are real, pure and sincere and not aaainst the proposed objects. The profit earning or misuse of the income derived by charitable institution from its charitable activities may be a ground for refusing exemption only with respect to that part of the income but cannot be taken to be a synonym to the genuineness of the activities of the trust or the institution. [Para 34] ITA 1321/JP/2019_ Sunrise Shikshan Sansthan Vs CIT(E) 7 (vii) Similar view was reiterated by the Allahabad High Court in the case of CIT vs. Babu Ram Education Society (2018) 96 taxmann.com 606 (Allahabad) wherein at the instance of the Department order passed by the Agra Bench of the ITAT was put up for judicial scrutiny before the Honble Allahabad High Court. The Honble Court held as under: Section 12A of the Income-tax Act, 1961 — Charitable or religious trust — Registration of (General) — Whether registration of trust does not involve enquiry into actual activities or application of funds, etc. and at that stage, only enquiry required to be conducted is with respect to object of trust alone and if assessee is found to have been actually engaged in any non-charitable activity, benefit of exemption may be denied in manner provided by Act — Held, yes — [Para 7] [In favour of assessee] (Head Note) (viii) It is an undisputed fact that the Society is running and maintaining a school upto senior secondary school and is affiliated to CBSE, Delhi. The Hon'ble Karnataka High Court in the case of CIT vs. A.S. Kupparaju Brothers Charitable Foundation Trust reported in (2012) 69 DTR 315, has held that once it is admitted that in pursuance of the trust deed and in terms of the objects set out therein, schools and colleges are being run and educational institution are being run, nothing more requires to be established to show that the trust in question is a genuine trust. The IIon'ble Court held as under: The certificate of registration is only an enabling provision to claim exemption. By merely granting a certificate income is not exempted. That is only a first stage to claim exemption. The Commissioner of Appeals should not have confused these two aspects and seems to think as the trustees and his family members are treating the property as their own and mis- utilising the property it is not a genuine trust. When once it is admitted that in pursuance of the trust deed and in terms of ITA 1321/JP/2019_ Sunrise Shikshan Sansthan Vs CIT(E) 8 the objects set out therein, schools and colleges are being run and educational institutions are being run as rightly held by the Tribunal, nothing more requires to be established to show that the trust in question is a genuine trust and therefore, the assessee is entitled to the registration under section 12AA of the Act. As set out above, even if the registration is granted, the exemption from the provisions of the Income Tax Act in particular sections 11 and 12 are not automatic. It is only when the assessee satisfies the requirement of section 13, he would be eligible for exemption. That is a matter to be gone into by the Assessing Authority in respect of the returns filed every year and if according to them there is misappropriation of funds and it is hit by section 13 of the Act, certainly, they can deny the benefit of exemption. But that is not a ground to deny the registration in the instant case under Section 12AA, when admittedly the trust has been established to run schools and colleges for imparting education, which is a charitable purpose. In that view of the matter, we do not see any merit in this appeal. The substantial question of law framed in this appeal is answered in favour of the assessee and against the revenue. Accordingly, the appeal is dismissed. (ix) The Hon'ble Madhya Pradesh High Court in the case of CIT vs. D.P.R. Charitable Trust reported in (2011) 61 DTR 410, held in the said decision that while considering the application u/s 12A, the ld. CIT is not required to examine whether the income derived by the trust is being spent for charitable purposes or the trust is earning profit while granting registration. Since the assessee trust was established for educational purposes it was held that the trust is entitled to registration. (x) The Hon'ble Kerala High Court in the case of Sree Anjaneya Medical Trust vs. CIT reported in (2016) 382 ITR 399, has held that while granting registration u/s 12A only genuineness of trust is to be examined and no examination of application of funds or ethical background of settlors called for at that stage. ITA 1321/JP/2019_ Sunrise Shikshan Sansthan Vs CIT(E) 9 It is clear from a plain reading of sections 12A and 12AA that what is intended thereby is only a registration simpliciter of the entity of a trust. This has been made a condition precedent for the claiming of benefits under the other provisions of the Act regarding exemption of income, contribution, etc. No examination of the modus of the application of the funds of the Trust or an examination of the ethical background of its settlers is called for while considering an application for registration. The stage for consideration of the relevance of the object of the Trust and the application of its funds arises at the time of the assessment. Where benefits arc claimed by assessees in terms of sections 11 and 12, the question as to the nature of such contribution and income can be looked into. At the time of registration of the Trust, going by the binding judgments of the Apex Court, what is to be looked into is whether the Trust is a genuine one and whether it is a sham institution floated only to avail the benefits of exemption under the Act. There is no such finding in the impugned order. [Para 10] (xii) In the case of CIT vs. Spring Dale Educational Society reported as (2011)16 taxmann.com 285 the Hon'ble Punjab & Haryana High Court held as under: Section 12AA of the Income-tax Act, 1961 — Charitable or religious trust —Registration procedure — Assessment year 2010-11 — Whether while examining application seeking registration under section 12AA, manner of application of funds of trust do not fall within purview of Commissioner; Commissioner should only satisfy himself about genuineness of aims and objects of trust/institution and genuineness of its activities as enumerated in clause (b) of sub-section (1) of section 12AA — Held, yes 17. The observation of the Ld.CIT(E) that books of accounts and vouchers had not been produced does not empowers the CIT(E ) to reject the application as rightly contended by the Ld. A.R by relying on the order in the case of Vidyadayani Shiksha Samiti v/s CIT (Exemptions), Lucknow wherein while addressing the identical objection raised by the Ld. CIT(E), Lucknow the ITAT held as under: ITA 1321/JP/2019_ Sunrise Shikshan Sansthan Vs CIT(E) 10 16. Now, coming to the powers of the Commissioner as to whether while granting registration u/s 12A he is required to examine the books of account etc. or he is only to satisfy himself regarding the objects of the trust and genuineness of the activities of the trust, we find various courts have held that while granting registration u/s 12A the ld. CIT is required to see only the objects of the assessee trust/society and not to examine the application of income. He is not required to examine whether the income derived by the trust is being spent for charitable purposes or the trust is earning profit while granting registration. He is only required to examine the objects of the trust. We find identical issue had come up before the Tribunal in the case of Bhartiya Kisan Sangh Sewa Niketan (supra). In the said case also the assessee trust did not produce the books of account, bills and vouchers etc. for verification of the ld. CIT for which the ld. CIT held that the assessee society is not carrying out any charitable activities. Due to noncompliance of assessee society, the genuineness of the activities could not be verified. The ld. CIT, therefore, relying on various decisions including the decisions which have been relied on by the ld. CIT in the present case, rejected the claim of registration u/s 12A(1) of the I.T. Act. When the matter travelled to the Tribunal, the Tribunal allowed the claim of registration by holding that at this stage on granting registration u/s 12A the ld. CIT is required to see the objects of the society and not required to examine the application of income which will have to be undertaken by the Assessing Officer on a year to year basis after the assessee files the return of income claiming exemption u/s 11 of the I.T. Act. (xiii) The said view has also been adopted in the case of Rasee Educational Institute vs. CIT(Exemption), Lucknow in ITA No. 462/Agra/2017 wherein vide order dated 30.07.208 similar view was adopted where identical objections were raised by the Ld. CIT(E ). (xiv) It is humbly & respectfully submitted that while passing impugned order CIT (E) seems to be under gross misconception that it is his satisfaction and definition of charitable activities de hors requirement ITA 1321/JP/2019_ Sunrise Shikshan Sansthan Vs CIT(E) 11 of law would only enable an institution to be granted registration under section 12AA of the Act as once registration is granted, the entire income of the institution would become exempt. The said view, in the light of precedents referred above is wholly opposed to law. The judgments relied upon by the appellant-society are of higher forum than cited by the Ld. CIT (E). The principles enunciated in the judgements referred to by the Ld. CIT (E) were rendered in different context and divergent facts of the case. It is respectfully submitted that under section 12AA of the Act, the Ld. CIT (E) is entitled to see that whether the objects are charitable in nature, which term has been well defined in the Act and also to see whether the activities are genuine or not. The genuineness of activities would mean to see that activities are not camouflage, bogus, artificial and whether these are in accordance with the objects of the institution. The scope of enquiry does not extend beyond that point. On the other hand, the registration granted by CIT (E) does not extend any exemption to an institution under section 11 except to the fact that such registration is mandatory for claiming exemption under section 11. Meaning thereby, in other words, exemption under section 11 can be availed by institutions, which are genuinely engaged in charitable activities. An institute though registered under section 12AA, would still be taxed on the income which has not been applied in accordance with section 11 or in respect of which section 13 comes into play. Thus, the registration under section 12AA is only fait accompli to the objects of the institution. The activities of an institution though genuine at the time of grant of registration may not remain so during its life span and the registration granted to it cannot be life time guarantee that it would remain so, that is why the law prescribes procedure for withdrawal of registration once granted. ITA 1321/JP/2019_ Sunrise Shikshan Sansthan Vs CIT(E) 12 In the backdrop of aforesaid facts, circumstances and legal position, it is respectfully submitted that the application submitted by the appellant-society is in consonance with the procedural requirement prescribed in this regard. From the constitution and other documents of the appellant-society which were filed before the Ld. CIT(E), the objects of the society could be ascertained. From the same and from factual activity of running school, it is evident that the objects of the society are charitable in nature and are in tune with section 2(15) of the Act and, therefore, the order of the CIT (E) rejecting the application under section 12AA is unjustified and bad in law. Hence, it is prayed to kindly allow the appeal. 6. On the other hand, the ld. Pr.CIT-DR has vehemently supported the order of the ld. CIT(E) and submitted that on being asked the documents alongwith original RC/MOA from the assessee, then the authorized representative of the assessee only filed part reply of the questionnaire dated 14/06/2019. He further submitted that on various times, on being requested by the Revenue, the assessee only submitted part of the details and after verifying full of the documents as well as facts and circumstances of the case, the ld. CIT(E) rejected the application for seeking registration U/s 12AA of the Act. The ld. Pr.CIT-DR has relied on the impugned order passed by the ld. CIT(E). 7. We have considered the rival contentions and carefully perused the material placed on record. From perusal of the record, we observed that ITA 1321/JP/2019_ Sunrise Shikshan Sansthan Vs CIT(E) 13 the assessee society is registered under the Rajasthan Societies Registration Act, 1958 and running a school under the name & style as Sunrise International Public School at Village & Post-Nechhwa, Sikar after obtaining permission from the appropriate authority on 27.02.2009. It is duly affiliated to the Central Board of Secondary Education, Delhi for Secondary & Senior Secondary School Certificate Examination. Being an educational institution, the said society had applied for seeking registration u/s 12AA of the Act on 01.03.2019. It is an undisputed fact that the assessee is engaged in running a school, which is not disputed even by the Ld. CIT(E). The ld. CIT(E) has only raised an issue that, on enquiry, it is seen that the assessee is showing lower tuition fee and not disclosing bus fee in the books of account. The assessee replied and explained that there is no understatement of any receipts. As to the secrete enquiry through Departmental Inspector, it was stated by the assessee that "It appears that someone out of jealously might have alleged recklessly. In absence of complete details of the same, the assessee reserves its right of further submissions." The ld. CIT(E) has mentioned the same in his impugned order. Subsequently, on 22.07.2020 after the impugned order was passed, the ld. ITO (HQ) O/o CIT(E) replied that no third party statements were recorded. Vide letter dated 31.07.2020 and 07.10.2020, the assessee again requested to provide the ITA 1321/JP/2019_ Sunrise Shikshan Sansthan Vs CIT(E) 14 documents alongwith detailed report of the enquiry conducted by the Departmental Inspector on the basis of which the allegation had been made against the assessee. However, no such material was supplied to the assessee and the ld. CIT (E) adjudicated the matter relying upon the same material without supplying the copy to the assesse. 8. We also observed that the material collected behind the back of assessee could not be utilized against assessee unless the copy of the same was supplied to the assessee and he was given an opportunity to rebut the same. The assessee furnished full explanation to the query raised. No opportunity was provided to the assessee for cross- examination. Such material cannot be used against the assessee unless he is supplied the copy of such material and is allowed an opportunity to rebut the same. Similarly, any statement recorded behind the back of the assessee cannot be used against him unless the assessee is supplied the copy of the statement and is allowed an opportunity to cross-examine. In this regard, we draw strength from the decision of the Hon'ble Apex Court in the case of M/s Andaman Timber Industries vs. Commissioner of Central Excise, Kolkata-II —281 CTR 241. It was reiterated by the ld. AR that the assessee-society is fully charitable and its aim is to provide education to village children whose parents are very financially week and mainly poor farmers, villagers and does not exists for ITA 1321/JP/2019_ Sunrise Shikshan Sansthan Vs CIT(E) 15 profit. All the receipts of tuition fee/bus fee are properly accounted for in the books of account and nothing is concealed. As per record, no documentary evidence of field enquiry was provided to the assessee- society. Even it is not clear from the record as to whether such enquiry was made from parents or minor students. No statements were recorded in writing of any of the witnesses and no opportunity of cross examination was provided. In this regard, we rely upon the decision in the case of Kishinchand Chellaram 125 ITR 713 SC, wherein the Hon'ble Supreme Court has held that any material not confronted to assessee would not constitute as 'admissible evidence'. 9. It is a settled proposition of law that as per the principles of natural justice, the ld. CIT (E) should have provided complete evidence to the assessee and grant opportunity of cross-examination, as secondary evidences cannot be relied on as neither the person who prepared the documents nor the witnesses were produced before the ld. CIT(E). Since the department has not given the opportunity to the assessee to cross examine the said alleged witnesses or confront the evidence if any. Thus, the department has violated the basic principle of natural justice, therefore, in these circumstances, the department cannot be given a second chance as held by the Hon'ble Supreme Court in Sunita ITA 1321/JP/2019_ Sunrise Shikshan Sansthan Vs CIT(E) 16 Dhadcla's case wherein it was held that cross-examination is one part of the principles of natural justice. 10. Even otherwise, we are of the view that even if the fee is not fully recorded in the accounts then an inference cannot be drawn that the activities of the assessee-society are not being carried out in accordance with the objects of the society and in case, the genuineness of the recording of the fees in one of the year is doubted, then in that eventuality the addition, if any, can be made in the assessment of the relevant assessment year in accordance with law. However, that, by itself, would not be sufficient ground to deny the registration u/s 12AA of the Act. We are also of the view that a conclusion could not be drawn that the activities of the society are not being carried out in accordance with the objects of the society or that no genuine activity is being carried out by assessee merely because the accounts of one year is doubted by the Ld. CIT(E). It was stated by the ld. AR that the Ld. CIT(E) went wrong in rejecting the application of the assessee on this ground, when it was duly explained to the Ld. CIT(E) that the school is approved by the Government agencies, school is situated in a village where some concessions are allowed to poor & needy students and complete details of such students were furnished. According to the ld. AR, the affairs of the school are monitored by the government agencies and accounts are duly audited and ITA 1321/JP/2019_ Sunrise Shikshan Sansthan Vs CIT(E) 17 the funds are not available at the discretion of the Society. It was submitted that the allegation of reporting lower fee is based on presumption and surmises and no concrete evidence are on record. It was further submitted that no opportunity of cross-examination was provided to the assessee and no third party statements were recorded. That books of account, bills and vouchers were available for verification by the Ld. CIT(E). 11. We are of the view that at this stage, the CIT (E) was not to examine the application of income. All that he was required to examine was as to whether the application is made in accordance with the requirements of Section 12A read with Rule 17A and whether Form 10A has been properly filled up or not. He may also see whether the objects of the trust are charitable or not. At this stage, it is not proper to examine the application of income. In this regard, we draw strength from the decision of the Honble Allahabad High Court in the case of CIT vs. Red Rose School (2007) 163 Taxman 19 (All) wherein it was held as under: “Section 12AA, which lays down the procedure for registration, does not speak anywhere that the Commissioner, while considering the application for registration, shall also see that the income derived by the trust or the institution is either not being spent for charitable purpose or such institution ITA 1321/JP/2019_ Sunrise Shikshan Sansthan Vs CIT(E) 18 is earning profit. The language used in the section only requires that activities of the trust or the institution must be genuine, which accordi ngly wo ul d mea n that they are in cons o nance wi th the objects of t he trust/institution, and are not mere camouflage but are real, pure and sincere and not against the proposed objects. The profit earning or misuse of the income derived by charitable institution from its charitable activities may be a ground for refusing exemption only with respect to that part of the income but cannot be taken to be a synonym to the genuineness of the activities of the trust or the institution. [Para 34]” Similar view was also reiterated by the Hon’ble Allahabad High Court in the case of CIT vs. Babu Ram Education Society (2018) 96 taxmann.com 606 (Allahabad) wherein at the instance of the Department order passed by the Agra Bench of the ITAT was put up for judicial scrutiny before the Hon’ble Allahabad High Court. The Hon’ble Court held as under: “Section 12A of the Income-tax Act, 1961 — Charitable or religious trust — Registration of (General) — Whether registration of trust does not involve enquiry into actual activities or application of funds, etc. and at that stage, only enquiry required to be conducted is with respect to object of trust alone and if assessee is found to have been actually engaged in any non-charitable activity, benefit of exemption may be denied in manner provided by Act — Held, yes — [Para 7] [In favour of assessee] (Head Note)” It is an undisputed fact that the Society is running and maintaining a school up to senior secondary school and is affiliated to CBSE, Delhi. The Hon'ble Karnataka High Court in the case of CIT vs. A.S. ITA 1321/JP/2019_ Sunrise Shikshan Sansthan Vs CIT(E) 19 Kupparaju Brothers Charitable Foundation Trust reported in (2012) 69 DTR 315, has held that ‘once it is admitted that in pursuance of the trust deed and in terms of the objects set out therein, schools and colleges are being run and educational institution are being run, nothing more requires to be established to show that the trust in question is a genuine trust. The Hon'ble High Court held as under: “The certificate of registration is only an enabling provision to claim exemption. By merely granting a certificate income is not exempted. That is only a first stage to claim exemption. The Commissioner of Appeals should not have confused these two aspects and seems to think as the trustees and his family members are treating the property as their own and mis-utilising the property it is not a genuine trust. When once it is admitted that in pursuance of the trust deed and in terms of the objects set out therein, schools and colleges are being run and educational institutions are being run as rightly held by the Tribunal, nothing more requires to be established to show that the trust in question is a genuine trust and therefore, the assessee is entitled to the registration under section 12AA of the Act. As set out above, even if the registration is granted, the exemption from the provisions of the Income Tax Act in particular sections 11 and 12 are not automatic. It is only when the assessee satisfies the requirement of section 13, he would be eligible for exemption. That is a matter to be gone into by the Assessing Authority in respect of the returns filed every year and if according to them there is misappropriation of funds and it is hit by section 13 of the Act, certainly, they can deny the benefit of exemption. But that is not a ground to deny the registration in the instant case under Section 12AA, when admittedly the trust has been established to run schools and colleges for imparting education, which is a charitable purpose. In that view of the matter, we do not see any merit in this appeal. The substantial question of law framed in this appeal is answered in favour of the assessee and against the revenue. Accordingly, the appeal is dismissed. ITA 1321/JP/2019_ Sunrise Shikshan Sansthan Vs CIT(E) 20 We also draw strength from the decision of the Hon'ble Madhya Pradesh High Court in the case of CIT vs. D.P.R. Charitable Trust reported in (2011) 61 DTR 410, wherein it was held that ‘while considering the application u/s 12A, the ld. CIT is not required to examine whether the income derived by the trust is being spent for charitable purposes or the trust is earning profit while granting registration. Since the assessee trust was established for educational purposes it was held that the trust is entitled to registration’. The Hon'ble Kerala High Court in the case of Sree Anjaneya Medical Trust vs. CIT reported in (2016) 382 ITR 399 has held that while granting registration u/s 12A only genuineness of trust is to be examined and no examination of application of funds or ethical background of settlors called for at that stage. 12. We also observed from the plain reading of Sections 12A and 12AA of the Act that what is intended thereby is only a registration simpliciter of the entity of a trust. This has been made a condition precedent for claiming of benefits under the other provisions of the Act regarding exemption of income, contribution, etc. No examination of the modus of the application of the funds of the Trust or an examination of the ethical background of its settlers is called for while considering an application for registration. The ITA 1321/JP/2019_ Sunrise Shikshan Sansthan Vs CIT(E) 21 stage for consideration of the relevance of the object of the Trust and the application of its funds arises at the time of the assessment, where benefits arc claimed by assessees in terms of sections 11 and 12, the question as to the nature of such contribution and income can be looked into. At the time of registration of the Trust, going by the binding judgments of the Hon’ble Apex Court, what is to be looked into is whether the Trust is a genuine one and whether it is a sham institution floated only to avail the benefits of exemption under the Act. There is no such finding in the impugned order. In this regard, we draw strength from the decision in the case of CIT vs. Spring Dale Educational Society reported as (2011)16 taxmann.com 285 the Hon'ble Punjab & Haryana High Court held as under: “Section 12AA of the Income-tax Act, 1961 — Charitable or religious trust —Registration procedure — Assessment year 2010-11 — Whether while examining application seeking registration under section 12AA, manner of application of funds of trust do not fall within purview of Commissioner; Commissioner should only satisfy himself about genuineness of aims and objects of trust/institution and genuineness of its activities as enumerated in clause (b) of sub-section (1) of section 12AA — Held, yes The observation of the Ld.CIT(E) that books of accounts and vouchers had not been produced does not empowers the CIT(E) to reject the application as rightly contended by the Ld. A.R by relying on the order in ITA 1321/JP/2019_ Sunrise Shikshan Sansthan Vs CIT(E) 22 the case of Vidyadayani Shiksha Samiti v/s CIT (Exemptions), Lucknow wherein while addressing the identical objection raised by the Ld. CIT(E), the Coordinate Bench of Lucknow, has held as under: 16. Now, coming to the powers of the Commissioner as to whether while granting registration u/s 12A he is required to examine the books of account etc. or he is only to satisfy himself regarding the objects of the trust and genuineness of the activities of the trust, we find various courts have held that while granting registration u/s 12A the ld. CIT is required to see only the objects of the assessee trust/society and not to examine the application of income. He is not required to examine whether the income derived by the trust is being spent for charitable purposes or the trust is earning profit while granting registration. He is only required to examine the objects of the trust. We find identical issue had come up before the Tribunal in the case of Bhartiya Kisan Sangh Sewa Niketan (supra). In the said case also the assessee trust did not produce the books of account, bills and vouchers etc. for verification of the ld. CIT for which the ld. CIT held that the assessee society is not carrying out any charitable activities. Due to noncompliance of assessee society, the genuineness of the activities could not be verified. The ld. CIT, therefore, relying on various decisions including the decisions which have been relied on by the ld. CIT in the present case, rejected the claim of registration u/s 12A(1) of the I.T. Act. When the matter travelled to the Tribunal, the Tribunal allowed the claim of registration by holding that at this stage on granting registration u/s 12A the ld. CIT is required to see the objects of the society and not required to examine the application of income which will have to be undertaken by the Assessing Officer on a year to year basis after the assessee files the return of income claiming exemption u/s 11 of the I.T. Act.” The said view has also been adopted by the Coordinate Bench of the Agra Tribunal in the case of Rasee Educational Institute vs. CIT(Exemption), Lucknow in ITA No. 462/Agra/2017. We observed ITA 1321/JP/2019_ Sunrise Shikshan Sansthan Vs CIT(E) 23 that while passing the impugned order, the ld. CIT (E) seems to be under gross misconception that it is his satisfaction and definition of charitable activities de hors requirement of law would only enable an institution to be granted registration u/s 12AA of the Act as once registration is granted, the entire income of the institution would become exempt. The said view, in the light of precedents referred above is wholly opposed to law. The judgments relied upon by the assessee-society are of higher forum than cited by the Ld. CIT (E). The principles enunciated in the judgements referred to by the Ld. CIT (E) were rendered in different context and divergent facts of the case. In the provisions U/s 12AA of the Act, the Ld. CIT (E) is entitled to see that whether the objects are charitable in nature, which term has been well defined in the Act and also to see whether the activities are genuine or not. The genuineness of activities would mean to see that activities are not camouflage, bogus, artificial and whether these are in accordance with the objects of the institution. The scope of enquiry does not extend beyond that point. On the other hand, the registration granted by CIT (E) does not extend any exemption to an institution u/s 11 except to the fact that such registration is mandatory for claiming exemption u/s 11 of the Act. Meaning thereby, in other words, exemption u/s 11 can be availed by institutions, which are genuinely engaged in charitable activities. An institute though registered ITA 1321/JP/2019_ Sunrise Shikshan Sansthan Vs CIT(E) 24 u/s 12AA, would still be taxed on the income which has not been applied in accordance with section 11 or in respect of which section 13 comes into play. Thus, the registration U/s 12AA is only fait accompli to the objects of the institution. The activities of an institution though genuine at the time of grant of registration may not remain so during its life span and the registration granted to it cannot be ‘life time guarantee’ that it would remain so, that is why the law prescribes procedure for withdrawal of registration once granted. Considering the totality of the facts, circumstances and legal position, we are of the view that the application submitted by the assessee-society is in consonance with the procedural requirement prescribed in this regard. From the constitution and other documents of the assessee -society which were filed before the Ld. CIT(E), the objects of the society could be ascertained. Even during the pendency of appeal before us, the assessee-society has submitted affidavits as well as balance sheets and these affidavits are in the shape of confirmations coupled with Aadhar Card of the respective persons wherein they have denied the allegations leveled upon the assessee- society. Copies of the said documents were given to the opposite party but the said documents were not rebutted by leading any evidence. Thus, in that eventuality, we also draw inference that the allegations upon the assessee could not be proved by the Revenue and thus from the same ITA 1321/JP/2019_ Sunrise Shikshan Sansthan Vs CIT(E) 25 and from factual activity of running school, it is evident that the objects of the society are charitable in nature and are in tune with section 2(15) of the Act and, therefore, the order of the CIT (E) rejecting the application u/s 12AA of the Act is set aside and we allow the appeal of the assessee. 13. In the result, this appeal of the assessee stands allowed. Order pronounced on 31 st January, 2022. Sd/- Sd/- ¼,u-ds-lSuh½ ¼lanhi x®lkÃa½ (N.K. SAINI) (SANDEEP GOSAIN) mik/;{k@Vice President U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 31/01/2022 *Ranjan vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. vihykFkhZ@The Appellant- Sunrise Shikshan Sansthan, Sikar. 2. izR;FkhZ@ The Respondent- The C.I.T.(Exemptions), Jaipur. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr¼vihy½@The CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 6. xkMZ QkbZy@ Guard File (ITA No. 1321/JP/2019) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar