2021 (11) TMI 254 - AT - Income Tax

Exemption u/s 11 - rejecting the registration u/s. 12AA - Denial of principle of natural justice - main grievance of the assessee order passed by the Ld. CIT(E) without granting adequate opportunity of being heard - HELD THAT - In the instant case it is not clear as to whether the Ld. CIT(E) raised the queries after receiving the reply from the assessee to the earlier queries raised on 19/08/2020. It is well settled that nobody should be condemned, unheard as per the maxim, audi alteram partem . Keeping in view the principles of natural justice deem it appropriate to set aside this case back to the file of Ld. CIT(E) to be adjudicated afresh in accordance with law after providing due and reasonable opportunity of being heard to the assessee. Appeal of the Assessee is allowed for statistical purposes.

Summary

Issues:
1. Rejection of registration under section 12AA of the Income Tax Act, 1961 by the Ld. CIT(E) without granting adequate opportunity of being heard.

Analysis:
The appeal was filed by the Assessee against the order of the Ld. CIT(E) rejecting the application for registration under section 12AA of the Income Tax Act, 1961. The Assessee contended that the Ld. CIT(E) acted hastily, did not properly consider the submissions and documents, and erred in rejecting the registration without providing adequate opportunity to be heard. The main grievance of the Assessee was the lack of opportunity to present their case before the rejection of the application.

The Assessee filed Form No. 10A seeking registration under section 12A of the Act, stating the society's objective to establish educational institutions. The Ld. CIT(E) raised queries and subsequently rejected the application, citing that the corpus fund shown by the Assessee was considered income, making the trust liable to pay taxes. The Ld. CIT(E) emphasized that until the tax against the income was paid, registration under section 12AA could not be granted. The Ld. CIT(E) accused the trust of trying to subvert tax laws and directed the assessing officer to take remedial action.

During the appeal, the Assessee argued that specific queries were not raised, and no opportunity to explain was given before the rejection. The Assessee claimed that their objectives were charitable, warranting registration under section 12AA. The Ld. CIT DR supported the Ld. CIT(E)'s decision. The Tribunal noted the lack of clarity regarding the queries raised and the need for the principle of natural justice, "audi alteram partem," ensuring both sides are heard.

The Tribunal allowed the Assessee's appeal for statistical purposes, setting aside the case to be re-adjudicated by the Ld. CIT(E) with due consideration of providing a reasonable opportunity for the Assessee to be heard. The decision emphasized the importance of adhering to principles of natural justice in administrative proceedings.

In conclusion, the judgment highlighted the significance of granting adequate opportunity to be heard before making decisions in matters of registration under the Income Tax Act. The case was remanded back to the Ld. CIT(E) for reevaluation, emphasizing the importance of upholding principles of natural justice in administrative actions.