2020 (4) TMI 17 - AT - Income Tax

Exemption u/s 11 - application for registration u/s.12AA rejected - As per CIT(Exemption) assessee trust had generated huge surplus in all years and no details were furnished with respect to the fact that the surplus generated was ploughed back to the beneficiaries or utilized for the charitable purposes - entire decision of the Ld. CIT(Exemption) is based on survey report - HELD THAT - Nowhere in the order of the Ld. CIT(Exemption), it comes out that the assessee was given opportunity to counter the survey report or to make any submission in respect thereof before the Ld. CIT(Exemption). That further, opportunity was also not possible since the very next day i.e. on 30.05.2019, the Ld. CIT(Exemption) has passed his order rejecting the application of the assessee trust. CIT(Exemption) has not come out with a reasoned order and his findings as per the relevant documentary evidences submitted are missing wherein he has only relied on the survey report and even did not provide the assessee any opportunity to make submissions regarding the said survey report. We take guidance from the judgment of Shri Anjaneya Medical Trust Vs. CIT 2016 (3) TMI 30 - KERALA HIGH COURT and considering the totality of facts and circumstances, in the interest of justice, we set aside the order of the Ld. CIT(Exemptions) and restore the matter back to his file to adjudicate the issue in accordance with law and as per the principles laid down in the findings of the Hon ble High Court decision (supra.) after providing reasonable opportunity of hearing to the assessee trust. - Appeal of the assessee trust is allowed for statistical purposes.

Summary

Issues:
Rejection of application for registration u/s.12AA of the Income Tax Act, 1961.

Analysis:
The judgment involves an appeal by the assessee against the rejection of their application for registration under section 12AA of the Income Tax Act. The crux of the grievance was the denial of registration for the assessee trust based on various grounds. The assessee trust had filed Form 10A for registration, but issues arose regarding the surplus generated, utilization of funds for charitable purposes, and lack of submission of income tax returns and computation of income for the last three years. The CIT(Exemption) called for information and clarification, leading to a survey under section 133A of the Act to gather necessary evidence.

The assessee contended that they were not given an opportunity to counter the survey report or provide submissions, leading to a violation of natural justice. The counsel relied on a decision by the Pune Bench of the Tribunal and the Hon'ble Kerala High Court, emphasizing that the examination of the trust's funds and activities should occur at the time of assessment, not during registration. The Tribunal set aside the CIT(Exemption)'s order, citing the lack of opportunity for the assessee to respond to the survey report and the absence of reasoned findings based on documentary evidence. The judgment highlighted the need for a reasoned order and providing a fair opportunity for the assessee to present their case.

The Tribunal, following the principles laid down by the Hon'ble High Court decision, remitted the matter back to the CIT(Exemption) for re-adjudication in accordance with the law and after granting a reasonable opportunity of hearing to the assessee trust. Ultimately, the appeal of the assessee trust was allowed for statistical purposes, emphasizing the importance of procedural fairness and adherence to legal principles in such matters.

This detailed analysis of the judgment highlights the issues involved, the arguments presented by the parties, and the Tribunal's decision based on legal principles and precedents, ensuring a fair and thorough review of the case.