2025 (3) TMI 799 - AT - Income Tax

Rejection of application for registration of trust u/s 12A(1)(ac)(iii) and application for grant of final registration u/s 80G(5)(iii) and cancelled the provisional approval u/s 80G(5)(iii) granted earlier - AR has contended that the assessee-trust is ready to submit all the details and evidences needed by the CIT(E) and 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 HELD THAT - We find that the 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. 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. Therefore in the interest of justice we restore the matter to the file of the CIT(E). Accordingly we set aside the order of CIT(E) and remit the matter to CIT(E) with a direction to pass fresh order in accordance with law after granting reasonable opportunity of hearing to the assessee. Appeal of the assessee is allowed for statistical purposes.

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the Commissioner of Income-tax (Exemption) [CIT(E)] was justified in rejecting the assessee's application for registration under Section 12A(1)(ac)(iii) of the Income-tax Act and cancelling the provisional registration.
Whether the CIT(E) was justified in rejecting the application for final registration under Section 80G(5)(iii) of the Act and cancelling the provisional approval.
Whether the principles of natural justice were violated due to the ex parte decision made by the CIT(E) without adequate opportunity for the assessee to present evidence and arguments.

ISSUE-WISE DETAILED ANALYSIS

Rejection of Registration under Section 12A(1)(ac)(iii) and Section 80G(5)(iii)

Relevant Legal Framework and Precedents: The legal framework involves Section 12A(1)(ac)(iii) and Section 80G(5)(iii) of the Income-tax Act, which pertain to the registration of trusts and approval for tax exemptions. The CIT(E) relied on precedents set by the Supreme Court in CIT, Ujjain vs. Dawoodi Bohara Jamat and M/s New Nobel Educational Society, which emphasize the need for documentary evidence to prove the genuineness of a trust's activities and compliance with its objects.
Court's Interpretation and Reasoning: The Tribunal noted that the CIT(E) decided the matter ex parte due to the assessee's non-compliance with notices and failure to provide necessary documentation. The Tribunal emphasized the principles of natural justice, which require that parties be given a fair opportunity to present their case.
Key Evidence and Findings: The CIT(E) issued two notices requesting documentation, which the assessee did not respond to. The lack of response led to the rejection of the application and cancellation of provisional registration and approval.
Application of Law to Facts: The Tribunal found that the CIT(E) acted within the legal framework by issuing notices and requiring documentation. However, the Tribunal held that the principles of natural justice necessitate granting the assessee another opportunity to submit evidence and be heard.
Treatment of Competing Arguments: The assessee argued that the order was ex parte and requested another opportunity to present evidence. The CIT-DR had no objection to remitting the matter for fresh adjudication. The Tribunal acknowledged the assessee's readiness to comply and the CIT-DR's lack of objection, leading to a decision to remit the case.
Conclusions: The Tribunal concluded that the matter should be remitted to the CIT(E) for fresh adjudication, allowing the assessee a reasonable opportunity to present its case and submit necessary documents.

Principles of Natural Justice

Relevant Legal Framework and Precedents: The principles of natural justice are a fundamental aspect of administrative law, ensuring fair treatment and the right to be heard.
Court's Interpretation and Reasoning: The Tribunal emphasized that the affected party must be given sufficient opportunity to be heard, which was not adequately provided in this case.
Key Evidence and Findings: The Tribunal found that the short span between notices and the lack of response from the assessee warranted another opportunity to ensure compliance with natural justice.
Application of Law to Facts: The Tribunal applied the principles of natural justice to determine that the assessee should be granted another opportunity to provide evidence and argue its case.
Conclusions: The Tribunal directed the CIT(E) to provide a reasonable opportunity for the assessee to be heard and to pass a fresh order in accordance with the law.

SIGNIFICANT HOLDINGS

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 judgment reinforces the importance of adhering to the principles of natural justice and providing parties with adequate opportunities to present their case.
Final Determinations on Each Issue: The Tribunal set aside the orders of the CIT(E) and remitted the matters for fresh adjudication, directing the CIT(E) to provide a reasonable opportunity for the assessee to be heard and to submit necessary documentation.

In conclusion, the Tribunal allowed the appeals for statistical purposes, emphasizing the need for compliance with natural justice and granting the assessee another opportunity to present its case before the CIT(E). The Tribunal's decision underscores the necessity of fair procedural practices in administrative decisions, particularly in matters involving tax exemptions and registrations.

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