Tribunal cannot direct registration under Section 12AB and 80G without inquiry into genuineness of trust activities.

The Respondent Trust, which held provisional tax registration, applied for final registration under Section 12A(1)(ac)(iii) and Section 80G of the Income Tax Act, 1961.

The Commissioner of Income Tax (Exemption) rejected the application on June 26, 2024, noting that despite multiple notices issued in February and March 2024, the Trust failed to produce the necessary records or information.

On appeal, the Income Tax Appellate Tribunal (ITAT) set aside the rejection and directly ordered the Commissioner to grant the registration, asserting that the documents produced before the Tribunal proved the Trust's genuineness.

The Revenue appealed this direction to the Delhi High Court.

1. Whether the Tribunal was justified in directing the CIT (Exemption) to grant registration under Section 12AB and Section 80G, or whether it should have remanded the matter for fresh examination.

The Court applied Section 12AB(1)(b) of the Income Tax Act, 1961, which mandates that for final registration (post-provisional stage), the Commissioner must call for documents and conduct inquiries to satisfy himself regarding the genuineness of the trust's activities and its compliance with other applicable laws.

It also considered Section 80G, which requires a finding that the trust's activities are "bonafidely charitable" for the purpose of granting donation tax benefits to third parties.

The court distinguished this from the initial "provisional registration" under Section 12AB(1)(c), where such deep inquiry may not be required.

The High Court found the Tribunal’s direct order to grant registration "ex-facie erroneous".

It reasoned that while provisional registration is granted with minimal scrutiny, the transition to final registration under Section 12AB(1)(b) necessitates a mandatory inquiry into the genuineness of activities.

Since the Respondent had failed to provide documents to the Commissioner, the Commissioner had no choice but to reject the application.

The Tribunal erred by substituting its own judgement for the statutory inquiry process required by the Commissioner.

Furthermore, regarding Section 80G, the court emphasized that since it involves a 50% tax deduction for donors, the genuineness of activities is a mandatory requirement that cannot be bypassed without a formal inquiry and finding by the primary authority.

The Court held that the Tribunal cannot bypass the statutory inquiry process by issuing sweeping directions to grant registration.

The matter was remanded to the Commissioner to decide the application afresh within three months, following an inquiry into the Trust's activities and compliance in accordance with the law.