2022 (11) TMI 1054 - AT - Income Tax

Exemption u/s 11 - application for registration of the trust u/s 12AA - application filed by the assessee for the reason that the trust is established for the benefit of a particular community namely Rajput and not for general public - HELD THAT - It is sufficient if the intention is to benefit a section of the public as distinguished from a specified individual is present . The assessee placed reliance on the case of Ahmedabad Rana Caste Association v. CIT 1971 (9) TMI 8 - SUPREME COURT wherein it was held that an object beneficial to a section of the public is an object of general public utility. But the section of the community sought to be benefited must be sufficiently defined and identifiable by some common quality of a public order or impersonal nature. By way of the above submission, the assessee submitted that CIT(Exemption) never questioned the genuineness of the activities of the Trust. He has only observed that the objects of the Trust show that the Trust is established for the benefit of a particular community . Assessee submitted that insufficient opportunity of hearing was granted by CIT(Exemption). The assessee submitted that in the order CIT(Exemption) mentioned that he was in receipt of the submission in reply to his notices. No show cause notice was issued in response to the written submission filed with CIT (Exemption), proposing to reject the assessee's application and no opportunity was given to the assessee to rebut the same. In absence of any show cause notice issued by CIT (Exemption), the assessee was unable to place the above judicial precedents before Ld. CIT(Exemption) for his consideration, which directly support the case of the assessee as a response to the reasons for which the application was rejected by CIT (Exemption). DR placed reliance on the observations made by CIT (Exemption) in the order. In our view, in the interest of justice, we are restoring the file to the CIT (Exemption) for fresh adjudication, after giving due opportunity of hearing to the assessee to present its case on merits. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
- Rejection of application for registration under section 12AA of the Income Tax Act
- Allegation of trust being established for the benefit of a particular community
- Failure to question the genuineness of trust activities
- Lack of opportunity for the assessee to present its case effectively

Analysis:
1. The primary issue in this case revolves around the rejection of the application for registration under section 12AA of the Income Tax Act by the Ld. Commissioner of Income Tax (Exemption), Ahmedabad. The assessee contested this decision on the grounds that the trust, despite being named "Sarvajanik," was perceived to be established for the benefit of a specific community, namely the Rajputs, rather than the general public. The rejection was based on the assertion that the trust did not meet the requirements of Section 13(1)(b) of the IT Act, as it was deemed to cater exclusively to the Rajput community, thus failing to qualify as a charitable organization.

2. Another crucial aspect of the case was the failure of the Ld. Commissioner to question the genuineness of the activities of the trust. The assessee argued that the trust's activities were never doubted, and the rejection was solely based on the perceived focus on a particular community. The absence of any scrutiny regarding the authenticity of the trust's operations raised concerns about the fairness of the decision-making process.

3. Furthermore, the assessee raised a procedural issue regarding the lack of adequate opportunity to present its case effectively. It was highlighted that the Ld. Commissioner did not provide a sufficient hearing opportunity, as no show cause notice was issued in response to the written submissions filed by the assessee. This procedural flaw hindered the assessee's ability to present relevant judicial precedents supporting its case, which could have influenced the decision-making process.

4. In light of the above issues, the Appellate Tribunal, comprising Ms. Annapurna Gupta and Shri Siddhartha Nautiyal, decided to remand the case back to the Ld. Commissioner for fresh adjudication. The Tribunal emphasized the importance of providing the assessee with a fair opportunity to present its case and address the concerns raised. The decision to allow the appeal for statistical purposes indicated the Tribunal's commitment to ensuring due process and fairness in the assessment of the trust's eligibility for registration under section 12AA of the Income Tax Act.

This detailed analysis encapsulates the key legal and procedural aspects of the judgment delivered by the Appellate Tribunal ITAT Ahmedabad, providing a comprehensive understanding of the case and its implications.