2025 (3) TMI 758 - AT - Income Tax

Rejection of application for registration in Form No.10AB under clause (iii) of section 12A(1)(ac) and sub-section (5) of section 80G - CIT(E) cancelling provisional Registration granted and rejecting to grant permanent Registration - HELD THAT - We find that admittedly the assessee made compliance to the initial notice issued by Ld. CIT Exemption Pune but the subsequent notice could not be answered by him. It is the sole contention of Ld. AR that if the assessee has not furnished requisite information/documents on the requisite date one further opportunity should have been provided to him by Ld. CIT Exemption Pune since only 7 days time was allowed to respond against the notice. We find some force in the arguments of Ld. AR therefore considering all we deem it appropriate to set-aside the order passed by Ld. CIT Exemption Pune and remand the matter back to him with a direction to give one more opportunity to the assessee to file the requisite details.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment revolve around two primary issues:

1. Whether the Commissioner of Income Tax (Exemption), Pune, erred in canceling the provisional registration and rejecting the application for permanent registration under section 12A(1)(ac) of the Income Tax Act.

2. Whether the Commissioner of Income Tax (Exemption), Pune, erred in denying the application for approval under section 80G(5) of the Income Tax Act.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Cancellation of Provisional Registration and Rejection of Permanent Registration under Section 12A(1)(ac)

Relevant Legal Framework and Precedents: The legal framework involves section 12A(1)(ac) of the Income Tax Act, which pertains to the registration of trusts or institutions for tax exemptions. The process requires the applicant to demonstrate genuineness of activities and compliance with applicable laws.

Court's Interpretation and Reasoning: The Tribunal noted that the appellant had initially complied with the notice issued by the Commissioner but failed to respond to a subsequent notice. The appellant argued that insufficient time was provided to furnish the necessary information, and the Tribunal found merit in this argument, emphasizing the importance of providing a fair opportunity to present requisite documents.

Key Evidence and Findings: The appellant submitted that the Commissioner did not provide adequate opportunity to respond to the notice, which was crucial for the registration application. The Tribunal acknowledged the appellant's compliance with the initial notice and the short response time for the subsequent notice.

Application of Law to Facts: The Tribunal applied principles of natural justice, highlighting that the appellant should have been given a reasonable opportunity to submit required information. The Tribunal decided to set aside the Commissioner's order and remand the matter for reconsideration, ensuring the appellant is given a fair chance to present their case.

Treatment of Competing Arguments: The Tribunal balanced the appellant's request for additional time against the Commissioner's decision, ultimately siding with the appellant's need for a fair opportunity to comply with the notice requirements.

Conclusions: The Tribunal concluded that the order by the Commissioner was premature and remanded the case for fresh adjudication, directing the Commissioner to provide a reasonable opportunity for the appellant to submit necessary documents.

Issue 2: Denial of Approval under Section 80G(5)

Relevant Legal Framework and Precedents: Section 80G(5) of the Income Tax Act provides for approval of certain donations for tax deductions. Approval is contingent upon the institution's compliance with specific conditions.

Court's Interpretation and Reasoning: The Tribunal noted that the denial of approval under section 80G(5) was consequential to the rejection of registration under section 12A(1)(ac). Therefore, the Tribunal found it appropriate to remand this issue as well for reconsideration.

Key Evidence and Findings: The Tribunal recognized the interdependence of the registration and approval processes, implying that the outcome of the registration issue would directly impact the approval under section 80G(5).

Application of Law to Facts: The Tribunal applied the principle of consequential adjudication, determining that since the registration issue was remanded, the approval issue should also be reconsidered in light of the new findings.

Treatment of Competing Arguments: The Tribunal did not delve into detailed competing arguments for this issue, as it was inherently linked to the resolution of the registration matter.

Conclusions: The Tribunal concluded that the issue of approval under section 80G(5) should be remanded for fresh adjudication alongside the registration issue.

SIGNIFICANT HOLDINGS

Core Principles Established: The Tribunal reinforced the principle of natural justice, emphasizing the need for providing adequate opportunity to applicants to present their case. The decision also highlighted the interrelated nature of registration and approval processes under sections 12A(1)(ac) and 80G(5).

Final Determinations on Each Issue: The Tribunal set aside the orders of the Commissioner of Income Tax (Exemption), Pune, and remanded both issues for fresh adjudication. The Tribunal directed the Commissioner to provide a reasonable opportunity for the appellant to submit necessary documents and information, ensuring compliance with procedural fairness.

Verbatim Quotes of Crucial Legal Reasoning: "Considering the totality of the facts of the case & in the interest of justice and without going into the merits of the case, we deem it appropriate to set-aside the order passed by Ld. CIT, Exemption, Pune and remand the matter back to him with a direction to give one more opportunity to the assessee to file the requisite details and decide the application for registration afresh as per fact and law after providing reasonable opportunity of hearing to the assessee."