2021 (9) TMI 3 - AT - Income Tax

Exemption u/s 11 - rejection of application u/s 12AA - ex parte order of CIT rejecting application - non-submission of requisite details during the proceedings - assessee is a trust engaged in educational activities registered with Charity Commissioner - HELD THAT - Upto the date of hearing, the assessee did not file the details but filed those details before the date of order. CIT has given opportunity upto 17.7.2018 and thereafter, it appears to have been reserved for order, during that period, the assessee filed the details. It is not discernible, whether those details were brought to the notice of ld.CIT or not. Though carefree attitude of the assessee in not complying with notice of the ld.CIT may justify action of the ld.CIT to some extent, but outright rejection of the application for grant of registration without considering the same on merit and material placed on record, would burden assessee with a huge tax liability. Before us, the assessee has filed a paper containing copies of its books accounts and auditor s report. Though the same were filed with the office of ld.CIT, they were not being considered by the ld.CIT while deciding the application of the assessee and dismissed the application of the assessee ex parte - we are of the view that assessee should have been given one more opportunity to support its case, and therefore, in the interest of justice, it is appropriate for us to set aside the impugned order and restore the issue, whether or not to grant registration to the assessee under the Income tax Act, back to the file of the CIT (Exemptions) for fresh examination - Decided in favour of assessee for statistical purpose.

Summary

Issues:
Appeal against rejection of registration under section 12AA of the Income Tax Act due to non-submission of requisite details during proceedings.

Analysis:
The case involves an appeal by an assessee-trust against the rejection of its application for registration under section 12AA of the Income Tax Act. The trust, engaged in educational activities, had filed the application along with necessary documents. However, the ld.CIT(Exemptions) rejected the application citing non-submission of required details despite opportunities given. The assessee contended that the details were submitted but not considered before the rejection. The Tribunal observed that the assessee had indeed submitted the necessary details before the order was passed, although it was unclear if the ld.CIT had reviewed them. The Tribunal found the outright rejection without considering the submitted details disproportionate to the alleged negligence of the assessee. Consequently, the Tribunal set aside the order and directed the issue of registration to be reconsidered by the ld.CIT, emphasizing the importance of affording the assessee a fair opportunity to present its case and submit the required details for proper evaluation.

The Tribunal noted that the ld.CIT's rejection of the application solely based on non-appearance and non-submission of details by the assessee was unjustified. It highlighted that the assessee had provided the necessary documents, including bank statements, final accounts, and auditor's report, which were not considered during the initial proceedings. The Tribunal opined that the ld.CIT should have reviewed the submitted details before making a decision, as the rejection could lead to significant tax implications for the assessee. Recognizing the need for a balanced approach between the alleged negligence of the assessee and the consequences of rejection, the Tribunal concluded that granting the assessee another opportunity to present its case and cooperate in providing the required information was essential for a just resolution. Consequently, the Tribunal allowed the appeal for statistical purposes, emphasizing the importance of procedural fairness and proper consideration of all relevant details before making a decision on registration under section 12AA of the Income Tax Act.

In conclusion, the Tribunal's judgment focused on the procedural fairness and the need for a balanced approach in evaluating the registration application under section 12AA of the Income Tax Act. The Tribunal emphasized the importance of considering all relevant details provided by the assessee before making a decision and highlighted the disproportionate nature of outright rejection without proper evaluation. By setting aside the initial order and directing a fresh examination of the registration application, the Tribunal aimed to ensure that the assessee receives a fair opportunity to present its case and cooperate in the process, ultimately upholding the principles of natural justice and due process in tax matters.