2025 (1) TMI 910 - AT - Income Tax

Rejection of registration u/s 12A and u/s 80G - certain corroborative evidences as called for were not submitted by the assessee - HELD THAT - As assessee had merely submitted a copy of income tax returns for the three years but there was no mention of satisfaction of conditions u/s. 12A(ac)(vi)-Item B of the Act in the said letter. CIT(E) had raised this specific query after furnishing of these documents by the assessee, vide show cause notice dated 08.07.2024, to which no compliance was made by the assessee. Neither any submission was made by the assessee regarding satisfaction of these conditions. CIT(E) also did not take any pain to verify the income tax returns for A.Ys. 2021-22, 2022-23 2023-24, already brought on record earlier by the assessee, to find out whether the assessee had claimed any deduction u/s. 10(23) or Section 11 or Section 12 of the Act in these years. Thus, we deem it proper to set aside the matter to the file of the Ld. CIT(E) with a direction to allow another opportunity of being heard to the assessee to explain the fulfillment of conditions as stipulated u/s. 12A(1)(ac)(vi)-Item B of the Act. The assessee is also directed to make compliance before the Ld. CIT(E) and to submit the documents and details as required by him. Appeals filed by the assessee are allowed for statistical purpose.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions addressed in this judgment are:

Whether the Commissioner of Income Tax (Exemptions) erred in rejecting the application for registration under Section 12A(1)(ac)(vi)(B) of the Income Tax Act, 1961?
Whether the rejection of the application for approval under Section 80G(5)(iv)(B) of the Income Tax Act, 1961, was justified?
Whether the principles of natural justice were violated due to the alleged lack of opportunity for the appellant to present their case?
Whether the delay in filing the appeals should be condoned?

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Rejection of Registration under Section 12A

Relevant legal framework and precedents: Section 12A of the Income Tax Act requires trusts to be registered to avail tax exemptions. The specific clause in question is Section 12A(1)(ac)(vi)(B), which pertains to trusts that have commenced activities but have not claimed certain exemptions.
Court's interpretation and reasoning: The court noted that the CIT(E) rejected the application because the trust failed to provide corroborative evidence that no income was excluded under Sections 10(23C), 11, or 12 in previous years.
Key evidence and findings: The appellant submitted income tax returns for the years 2021-22, 2022-23, and 2023-24 but did not explicitly demonstrate compliance with the conditions of Section 12A(1)(ac)(vi)(B).
Application of law to facts: The court found that the CIT(E) did not verify the submitted income tax returns to confirm whether the appellant claimed any exemptions. The appellant also failed to respond to a specific show cause notice regarding this issue.
Treatment of competing arguments: The appellant argued that they had provided sufficient documentation, while the CIT(E) maintained that the necessary evidence was not submitted.
Conclusions: The court set aside the CIT(E)'s decision, directing a re-evaluation of the application with an opportunity for the appellant to provide the required evidence.

Issue 2: Rejection of Approval under Section 80G

Relevant legal framework and precedents: Section 80G of the Income Tax Act provides for deductions on donations made to certain approved funds and institutions. Registration under Section 12A is a prerequisite for approval under Section 80G.
Court's interpretation and reasoning: The denial of Section 80G approval was contingent on the rejection of the Section 12A registration.
Key evidence and findings: The court did not delve into the specifics of the 80G application, as it was dependent on the outcome of the 12A registration.
Application of law to facts: The court decided that since the Section 12A issue was being reconsidered, the Section 80G application should also be reassessed.
Treatment of competing arguments: The appellant's arguments were not specifically addressed due to the dependency on the Section 12A outcome.
Conclusions: The court set aside the decision on the 80G application, pending the outcome of the Section 12A registration review.

Issue 3: Alleged Violation of Natural Justice

Relevant legal framework and precedents: The principles of natural justice require that parties be given a fair opportunity to present their case.
Court's interpretation and reasoning: The court acknowledged the appellant's claim of insufficient opportunity to present evidence and arguments.
Key evidence and findings: The appellant claimed they were not given adequate time to respond to the show cause notice.
Application of law to facts: The court found merit in the appellant's claim and decided to provide another opportunity for the appellant to present their case.
Treatment of competing arguments: The CIT(E) argued that sufficient opportunity was provided, but the court found this unconvincing.
Conclusions: The court directed the CIT(E) to allow the appellant another opportunity to present evidence.

Issue 4: Delay in Filing Appeals

Relevant legal framework and precedents: Procedural rules allow for the condonation of delays in filing appeals if justified.
Court's interpretation and reasoning: The court accepted the appellant's explanation for the delay as reasonable.
Key evidence and findings: The appellant filed an affidavit explaining the delay.
Application of law to facts: The court found the reasons for the delay satisfactory and condoned the delay.
Treatment of competing arguments: There was no significant opposition to the condonation of delay.
Conclusions: The delay in filing the appeals was condoned.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "We deem it proper to set aside the matter to the file of the Ld. CIT(E) with a direction to allow another opportunity of being heard to the assessee to explain the fulfillment of conditions as stipulated u/s. 12A(1)(ac)(vi)-Item B of the Act."
Core principles established: The judgment emphasizes the importance of procedural fairness and the necessity for tax authorities to verify evidence before making determinations.
Final determinations on each issue: Both appeals were allowed for statistical purposes, with directions for the CIT(E) to reassess the applications for registration under Section 12A and approval under Section 80G, providing the appellant with an opportunity to present additional evidence.

← Previous Next →