2025 (1) TMI 452 - AT - Income Tax

Rejection of application for registration of trust u/s 12AB and provisional registration u/s 80G(5) - applicant failed to file documentary evidences to enable him to satisfy about (i) genuineness of activities of the trust or institution, (ii) that the activities of trust or institution are in consonance with the objects of the trust or institution and (iii) that other laws material for the purpose of achieving objects are complied with - HELD THAT - CIT(E) has decided the matter ex parte due to non-compliance by the applicant to the two notices issued by him. There was also no adjournment request by the assessee. AR has contended that the assessee-trust is ready to submit all the details and evidences needed by the CIT(E). He requested that in the interest of justice, one more opportunity may be given to the assessee to plead its case, which is strong on merits. We are of the view that one more opportunity should be given to the assessee to file requisite documents and evidences before the CIT(E) and to plead its case before him. It is a settled law that the principles of natural justice require the affected party to be granted sufficient opportunity of being heard to contest his case. Grounds of appeal raised by the assessee are allowed for statistical purposes.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the Commissioner of Income-tax (Exemption) [CIT(E)] correctly rejected the application for registration under Section 12AB of the Income-tax Act due to non-compliance by the assessee-trust.
Whether the CIT(E) was justified in canceling the provisional registration under Section 80G(5) of the Income-tax Act.
Whether the principles of natural justice were adhered to in the proceedings before the CIT(E).
Whether the Tribunal should remit the matter back to the CIT(E) for fresh adjudication, granting the assessee-trust another opportunity to present its case.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Rejection of Application for Registration under Section 12AB

Relevant Legal Framework and Precedents: The legal framework involves Section 12AB of the Income-tax Act, which pertains to the registration of trusts for income tax exemptions. The CIT(E) relied on precedents set by the Supreme Court in the cases of CIT, Ujjain vs. Dawoodi Bohara Jamat and M/s New Nobel Educational Society.
Court's Interpretation and Reasoning: The Tribunal noted that the CIT(E) rejected the application due to non-compliance with notices requesting necessary documents. The CIT(E) concluded that the trust failed to demonstrate the genuineness of its activities, alignment with its objectives, and compliance with relevant laws.
Key Evidence and Findings: The lack of response to notices and absence of documentary evidence were pivotal in the CIT(E)'s decision to reject the application.
Application of Law to Facts: The Tribunal acknowledged the CIT(E)'s reliance on Supreme Court precedents but emphasized the need for adherence to natural justice, which requires giving the affected party a fair opportunity to present its case.
Treatment of Competing Arguments: The assessee argued that it was unable to comply due to circumstances beyond its control and sought another opportunity to submit the required documents. The CIT-DR suggested imposing a cost if the matter was remitted.
Conclusions: The Tribunal decided to remit the matter back to the CIT(E) to allow the assessee to present its case, subject to a cost payment.

Issue 2: Cancellation of Provisional Registration under Section 80G(5)

Relevant Legal Framework and Precedents: Section 80G(5) of the Income-tax Act pertains to the approval required for donations to be eligible for tax deductions. The CIT(E) canceled the provisional registration due to non-compliance with procedural requirements.
Court's Interpretation and Reasoning: Similar to the reasoning for Section 12AB, the CIT(E) canceled the provisional registration due to the trust's failure to provide necessary documentation.
Key Evidence and Findings: The absence of compliance with notices and lack of evidence to support the trust's activities were critical factors.
Application of Law to Facts: The Tribunal applied the same reasoning as in the Section 12AB issue, emphasizing the need for procedural fairness.
Treatment of Competing Arguments: The arguments and positions of both parties were similar to those in the Section 12AB issue.
Conclusions: The Tribunal remitted the matter back to the CIT(E) for fresh adjudication, subject to the payment of a cost.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "It is a settled law that the principles of natural justice require the affected party to be granted sufficient opportunity of being heard to contest his case."
Core Principles Established: The Tribunal reinforced the importance of natural justice and the need for affected parties to have a fair opportunity to present their case, especially when procedural non-compliance is cited as a reason for adverse decisions.
Final Determinations on Each Issue: The Tribunal set aside the CIT(E)'s orders and remitted the matters back for fresh adjudication, contingent upon the assessee paying a cost of Rs. 10,000 to the Gujarat High Court Legal Aid Authority. The Tribunal emphasized that the assessee must be diligent in complying with procedural requirements in future proceedings.

Overall, the Tribunal's decision underscores the necessity of balancing procedural compliance with the principles of natural justice, ensuring that parties have adequate opportunities to present their cases before adverse decisions are finalized.

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