Opportunity to Respond Granted to Charitable Trust Before Cancellation of Registration

Summary in Key Points:

Issue: The Commissioner (Exemption) canceled the registration of a charitable trust under Section 12AB due to discrepancies in the application and the trust’s failure to respond to a show cause notice after an initial adjournment.
Facts: The trust requested an adjournment to respond to the notice, which was granted. However, they did not submit a reply subsequently, leading to the cancellation of their registration.
Decision: The ITAT remanded the matter back to the Commissioner (Exemption), directing them to provide the trust with one final opportunity to explain its case and submit the required details.
Reasoning: The ITAT emphasized the principles of natural justice and granted the trust another chance to present its case before a final decision is made.

Decision:

The ITAT’s decision highlights the importance of affording taxpayers a fair opportunity to respond to notices and rectify any deficiencies before taking adverse action.
This ensures a fair and transparent process for charitable trusts seeking registration under Section 12AB.

IN THE ITAT PUNE BENCH ‘A’

Jalna Maheshwari Charitable Foundation

Commissioner of Income-tax (Exemption)

R. K. PANDA, Vice President
and Ms. Astha Chandra, Judicial Member

IT Appeal No.1288 (PUN) of 2024

DECEMBER 12, 2024

Anand Partani, for the Appellant. Amol Khairnar, CIT-DR for the Reespondent.

ORDER

R. K. Panda, Vice President.- This appeal filed by the assessee is directed against the order dated 05.03.2024 of the CIT (Exemption), Pune rejecting the application for grant of registration u/s 12A of the of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) and also rejecting the provisional registration granted on 28.02.2023 u/s 12AB of the Act.

2. There is a delay of 30 days in filing of this appeal before the Tribunal, for which the assessee has filed a condonation application along with an affidavit explaining the reasons for such delay. After considering the contents of the condonation application filed along with the affidavit and after hearing the Ld. DR, the delay in filing of the appeal is condoned and the appeal is admitted for adjudication.

3. Facts of the case, in brief, are that the assessee filed an application in form No.10AB under clause (iii) of section 12A(1)(ac) of the Act on 30.09.2023. With a view to verify the genuineness of activities of the assessee and compliance to requirements of any other law for the time being in force by the trust / institution as are material for the purpose of achieving its objects, a notice was issued requesting the assessee to upload certain information. The assessee was requested to submit the compliance by 08.12.2023. The assessee responded to the said notice. Thereafter, another notice was issued on 21.12.2023 requesting the assessee to make some other compliance by 27.12.2023 which was also responded by the assessee on 26.12.2023. On verification of the details submitted by the assessee, the CIT (Exemption) noticed various discrepancies for which another notice was issued to the assessee on 25.01.2024. The assessee was requested to show cause as to why the application should not be rejected and why the registration granted earlier u/s 12AB of the Act should not be cancelled. The compliance to the said notice was due on 01.02.2024. The assessee vide mail dated 05.02.2024 requested for adjournment of some days which was granted upto 15.02.2024 vide notice dated 09.02.2024. However, thereafter, there was no response from the side of the assessee for which the CIT(Exemption) rejected the application filed for grant of registration u/s 12A of the Act and also rejected the provisional registration granted earlier u/s 12AB of the Act by recording as under:

“3 Since, the assessee has not furnished any explanation to the discrepancies communicated to it, it is presumed that the assessee has nothing to say in the matter.

4 Considering the above facts discussed in the show notice and discrepancies noticed and also that the assessee has not complied with the provisions of section 12AB(1)(b)(i) of the Income Tax Act, 1961 as well as the provisions of Rule 17A(2) of Income Tax Rules, 1962 in spite giving sufficient opportunities, the undersigned is unable to draw any satisfactory conclusion about the genuineness of activities of the assessee and compliance of requirements of any other law for the time being in force by the assessee as are material for the purpose of achieving its objects.

5. In view of the above, the application filed by the assessee is hereby rejected and the provisional registration granted on 28/02/2023 under section 12AB read with section 12A(1)(ac) (vi) of the Income Tax Act, 1961 is hereby cancelled.”

4. Aggrieved with such order of the Ld. CIT(Exemption), the assessee is in appeal before the Tribunal by raising the following grounds:

Under the facts and circumstances of the case and in the law, the Ld. CIT Exemption Pune has erred in rejecting the application filed under section 12AB r.w.s. 124(1)(ac)(vi) without considering the facts and submissions made by the appellant.

Without prejudice, the Ld. CIT(E) has erred in cancelling the provisional registration granted to the appellant which is bad in law.

The appellant craves leave to add, amend, and alter any or withdraw any grounds of appeal at or before the time of Appeal hearing.

5. The Ld. Counsel for the assessee submitted that sufficient opportunity was not granted by the CIT(Exemption). Further, he submitted that in the interest of justice, the matter may be restored to the file of the CIT(Exemption) with a direction to grant one more opportunity to substantiate its case by the assessee.

6. The Ld. DR on the other hand strongly supported the order of the CIT(Exemption).

7. We have heard the rival arguments made by both the sides and perused the order of the CIT(Exemption). It is an admitted fact that upon noticing certain discrepancies, the CIT(Exemption) issued a notice to the assessee to make some further compliance. We find the assessee filed adjournment application which was also granted but thereafter, the assessee remained silent for which the CIT(Exemption) decided the issue against the assessee since he was unable to draw a proper conclusion about the genuineness of the activities of the assessee trust and compliance of any other law for the time being in force by the trust / institution as are material for the purpose of achieving its objects. It is the submission of the Ld. Counsel for the assessee that given an opportunity, the assessee is in a position to explain the case properly before the CIT(Exemption). Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the CIT(Exemption) with a direction to grant one final opportunity to the assessee to substantiate its case by filing the requisite details before him. The Ld. CIT(Exemption) shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. The assessee is also hereby directed to appear before the Ld. CIT(Exemption) on the appointed date and file the requisite details without seeking any adjournment under any pretext, failing which the Ld. CIT(Exemption) is at liberty to pass appropriate order as per law. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.

8. In the result, the appeal filed by the assessee is allowed for statistical purposes.