2025 (3) TMI 589 - AT - Income Tax

Rejection of approval u/s 80G and registration u/s 12AB - Incomplete Form 10AB Rajasthan Public Trust Act 1959 and Genuineness of Activities - CIT(E) has cancelled the provisional registration of the assessee for the reason that the assessee trust had failed to give proper justification for regularization of provisional registration HELD THAT - As assessee submitted that the assessee trust has applied for registration under RPT Act 1959 before the competent authority and the assessee trust is likely to get the same. Therefore in these circumstances we restore the matter back to the file of the ld. CIT(E) with the direction that as and when the assessee trust produces the copy of the Registration under RPT Act 1959 then the application of the assessee trust for registration u/s 12AA of the Act be decided afresh in accordance with law. The assessee trust is also directed to produce the complete Form 10AB and produce the documents relating to the genuineness of the activities before the ld CIT(E) - Appeals of the assessee are allowed for statistical purposes.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment involve the rejection of applications for registration and approval under sections 12AB and 80G of the Income Tax Act, 1961. Specifically, the issues are:

• Whether the rejection of the application for registration under section 12AB by the CIT (Exemption) was justified.
• Whether the rejection of the application for approval under section 80G was justified.
• Whether the delay in filing the appeal concerning the section 80G application should be condoned.
• Whether the assessee was denied a fair opportunity to present their case, thus violating principles of natural justice.

ISSUE-WISE DETAILED ANALYSIS

1. Rejection of Registration under Section 12AB

• Relevant legal framework and precedents: Section 12AB of the Income Tax Act, 1961, deals with the registration of trusts for tax exemption purposes. The CIT (Exemption) is required to evaluate the genuineness of activities and compliance with statutory requirements.
• Court's interpretation and reasoning: The Tribunal noted that the CIT (Exemption) rejected the registration on grounds of incomplete Form 10AB, non-compliance with the Rajasthan Public Trust Act, 1959, and doubts about the genuineness of activities.
• Key evidence and findings: The CIT (Exemption) found the application incomplete and lacking proper justification for regularizing provisional registration.
• Application of law to facts: The Tribunal acknowledged the procedural shortcomings in the assessee's application but noted the potential for rectification upon obtaining necessary registration under the Rajasthan Public Trust Act.
• Treatment of competing arguments: The assessee argued for a fair opportunity to rectify procedural issues, while the CIT (Exemption) maintained the rejection was justified based on the current application status.
• Conclusions: The Tribunal decided to restore the matter to the CIT (Exemption) for fresh adjudication once the assessee provides the required documentation and registration under the Rajasthan Public Trust Act.

2. Rejection of Approval under Section 80G

• Relevant legal framework and precedents: Section 80G of the Income Tax Act, 1961, pertains to approval for donations to be tax-deductible. Approval requires compliance with specific statutory conditions.
• Court's interpretation and reasoning: The Tribunal noted the withdrawal of the application by the assessee due to non-registration under the Devasthan Vibhag, which is mandatory for section 80G approval.
• Key evidence and findings: The assessee's application was withdrawn based on the realization of non-compliance with mandatory registration requirements.
• Application of law to facts: The Tribunal recognized the withdrawal as a procedural step pending compliance with necessary statutory registrations.
• Treatment of competing arguments: The assessee's request for withdrawal was uncontested by the CIT (Exemption), who acknowledged the procedural necessity.
• Conclusions: The Tribunal's decision on section 12AB registration affects the outcome of section 80G approval, thus rendering the latter consequential.

3. Condonation of Delay in Filing Appeal

• Relevant legal framework and precedents: Appeals must be filed within prescribed time limits unless a reasonable cause for delay is demonstrated.
• Court's interpretation and reasoning: The Tribunal found no sufficient cause for condoning the 139-day delay in filing the appeal.
• Key evidence and findings: The assessee cited legal advice delays and technical issues as reasons for the delay.
• Application of law to facts: The Tribunal did not find the reasons compelling enough to justify condonation.
• Treatment of competing arguments: The assessee's plea for condonation was opposed by the CIT-DR, emphasizing adherence to procedural timelines.
• Conclusions: The Tribunal dismissed the application for condonation of delay but proceeded to hear the appeal on merits to ensure substantial justice.

4. Principles of Natural Justice

• Relevant legal framework and precedents: Fair hearing and opportunity to present one's case are fundamental principles of natural justice.
• Court's interpretation and reasoning: The Tribunal noted the assessee's claim of inadequate opportunity to be heard and emphasized the importance of a fair hearing.
• Key evidence and findings: The Tribunal observed that the CIT (Exemption) conducted proceedings ex-parte, potentially compromising the assessee's right to a fair hearing.
• Application of law to facts: The Tribunal decided to restore the matter to the CIT (Exemption) to ensure a fair opportunity for the assessee to present their case.
• Treatment of competing arguments: The assessee's request for a fair hearing was acknowledged by the Tribunal, overriding the CIT (Exemption)'s procedural stance.
• Conclusions: The Tribunal restored the appeals for fresh adjudication, ensuring compliance with principles of natural justice.

SIGNIFICANT HOLDINGS

• Preserve verbatim quotes of crucial legal reasoning: The Tribunal emphasized, "our decision to restore the matter back... shall in no way be construed as having any reflection or expression on the merits of the dispute."
• Core principles established: The judgment reinforces the necessity of procedural compliance, fair hearing, and adherence to statutory requirements for tax-related registrations and approvals.
• Final determinations on each issue: The Tribunal restored the appeals concerning section 12AB registration for fresh adjudication and acknowledged the consequential nature of the section 80G appeal, emphasizing fair hearing principles.