2023 (9) TMI 1506 - AT - Income Tax

Rejection of application filed in Form 10AD for approval u/s. 80G(5) - registration u/s 12A of the Act has already been approved by the authority - HELD THAT - CIT(E) has not considered the Affidavit filed by the assessee explaining the mistake in Form 10AD of the Act. In our considered opinion, non-consideration of the reply dated 05-01-2023 and the Affidavit thereon is clear violation of Principle of Natural Justice. Therefore in the interest of fair play and justice, we thought it, is a fit case to set aside the matter back to the file of Ld. CIT(E) with a direction to consider the Affidavit filed by the assessee and call for any further explanation thereon and decide the application for approval filed in Form 10AD of the I.T. Rule and also by affording opportunity of hearing to the assessee. Needless to say, the assessee should cooperate by filing all necessary details in adjudicating the registration u/s. 80G(5) of the Act. Appeal filed by the Assessee is allowed for statistical purpose.

Issues:
- Rejection of application of approval under section 80G of the Income Tax Act, 1961.
- Consideration of religious expenses in relation to total income for approval under section 80G(5) of the Act.
- Allegation of not providing a reasonable opportunity of being heard.
- Allegation of hurriedly rejecting the claim without verifying actual expense details.

Analysis:
1. Rejection of 80G Approval Application:
The appeal was filed against the rejection of the application for approval under section 80G of the Income Tax Act by the Ld. Commissioner of Income Tax (Exemption), Ahmedabad. The assessee, a Trust registered under section 12A of the Act, applied for registration under section 80G(5) by filing Form 10AD. The rejection was based on the finding that the Trust had incurred expenditure towards religious activities exceeding the permissible limit of 5% of total income, as required by section 80G(5)(b) clause (ii) and Explanation 3.

2. Religious Expenses vs. Total Income:
The Ld. CIT(E) observed that the Trust had spent amounts exceeding the prescribed limit for religious expenses in both the financial years, which led to the rejection of the application under section 80G(5). The rejection was supported by various case laws. The Trust, through an affidavit, explained that the expenses mentioned as religious were mistakenly classified as such due to clerical errors, and they were actually charitable expenses. The Tribunal found that the rejection without considering the affidavit and verifying the details was a violation of the Principle of Natural Justice.

3. Reasonable Opportunity of Being Heard:
The assessee raised concerns regarding not being provided with a reasonable opportunity of being heard as required under the Second Proviso to Section 80G (ii)(b)(B) of the Act. The Tribunal noted that though the assessee responded to notices and filed an affidavit explaining the mistakes, the rejection was made without due consideration of these submissions, indicating a procedural lapse.

4. Verification of Actual Expense Details:
The allegation of hurriedly rejecting the claim without verifying actual expense details was addressed by the Tribunal. It was emphasized that the Ld. CIT(E) did not adequately consider the explanations provided by the assessee, leading to a decision that lacked proper verification and adherence to the principles of natural justice.

5. Decision and Directions:
The Tribunal allowed the appeal for statistical purposes, setting aside the matter back to the Ld. CIT(E) with a direction to consider the affidavit filed by the assessee, verify the explanations provided, and afford a proper opportunity of hearing. The Tribunal emphasized the importance of fair play and justice in adjudicating the registration under section 80G(5) of the Act, emphasizing the need for cooperation from the assessee in providing necessary details for a comprehensive review.

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