Charitable Trust (Cow Care) Registration Application Remanded for Fresh Adjudication Due to Summary Rejection and Portal Issues.

Issue:

Whether a Commissioner (Exemption) can summarily reject an application for registration under Section 12A of the Income-tax Act, 1961, from a trust engaged in cow care, merely because the assessee claimed not to have filed a formal “reply” on the portal (due to a non-functional tab), when the assessee had submitted an explanation via email and explicitly stated having no activities/income chargeable to tax.

Facts:

The assessee-trust, involved in charitable activities of taking care of cows, filed an application for registration under Section 12A. The Commissioner (Exemption) issued a notice requesting various details/information. The assessee attempted to submit its explanation via email, as the specific tab for furnishing a reply against that notice at the Income Tax Portal was unavailable at that time. However, the Commissioner (Exemption) subsequently passed an order summarily rejecting the assessee’s application for registration, stating that the assessee had not filed any reply to the notice. The assessee had explicitly stated in its explanation that it had not filed returns as it had no activities and thus no income chargeable to tax.

Decision:

In favor of the assessee (Matter remanded): The court held that when the assessee had explicitly stated that it had not filed returns as it had no activities and thus no income chargeable to tax, it was incumbent upon the Commissioner (Exemption) to evaluate such an explanation objectively and to call for any further clarifications or a proposed activity plan, rather than summarily rejecting the application. Therefore, the matter was remanded back to the Commissioner (Exemption) for a fresh adjudication, and the assessee was directed to furnish any further details that may be required to ascertain the genuineness of its claim.

Key Takeaways:

Duty of Commissioner (Exemption) in 12A/12AB Registration: The Commissioner (Exemption), when processing applications for registration under Section 12A (now 12AB), has a duty to conduct a reasonable inquiry into the genuineness of the trust’s objects and activities. This requires objective evaluation of explanations provided by the assessee.
Principles of Natural Justice: Summarily rejecting an application without properly considering the assessee’s attempts to provide information (even if through alternative channels like email due to portal issues) and without seeking clarification, violates the principles of natural justice.
“No Activities / No Income” Explanation: If a newly formed trust or one in its nascent stages states that it has no activities or income yet, this explanation needs to be objectively evaluated. The Commissioner should then seek a proposed activity plan or further details to ascertain the genuineness of its future charitable intentions, rather than rejecting summarily.
Portal Technicalities Not to Override Substance: The court implicitly recognized that technical glitches on the income tax portal (like an unavailable tab for reply) should not be held against the assessee if they made a bona fide attempt to communicate.
Scope of Inquiry for Registration: At the registration stage (under Section 12A/12AB), the focus of the Commissioner is primarily on the genuineness of the objects of the trust and the proposed activities, not necessarily on the current year’s income or full-fledged operations, especially if the trust is new.
Remand for Fair Adjudication: Cases where registration is summarily denied due to procedural missteps by the department are frequently remanded by appellate authorities for fresh consideration after providing the assessee a proper opportunity.

IN THE ITAT RAJKOT BENCH

Khodiyar Gau Seva Yuvak Mandal Charitable Trust

Commissioner of Income-tax (Exemption)

Dinesh Mohan Sinha, Judicial Member
and Dr. Arjun Lal Saini, Accountant Member

IT Appeal No. 96 (Rjt) OF 2024
[Assessment year 2023-24]

MAY 1, 2025

Ms. Amoli Gusani, Ld. AR for the Appellant. Sanjay Punglia, Ld.CIT-DR for the Respondent.

ORDER

Dinesh Mohan Sinha, Judicial Member. – This appeal by the assessee is directed against the order passed by the Ld. Commissioner of Income Tax (Exemption), Ahmedabad [hereinafter referred to as “CIT(E)”], dated 18/12/2023, rejecting the application for registration under section 12AB of the Income Tax Act, 1961 (hereinafter referred to as “the Act”).

2. The brief facts of the case are that, the appellant-assessee is a charitable trust carrying out the charitable activities of having built the cowsheds for cows. The activities of Trust include assistance in grooming, treating, rearing caring for, or maintaining sick, malformed abandoned or unowned cows or cattle. The scope’ activities expand to taking care of cows to protect them from rain, sun, etc. The nature of activities also includes in times of calamities like draught, rail, flood, scarcity, cyclone, Epidemic, etc. to make camps, and observation centers, to provide grass, to provide medicine, medical treatment and vaccination for the needy, injured and infected animals or cows. The activities also include to obtain, supply and disseminate necessary guidance, information and make all necessary arrangements for the dairy industry or its allied industries or milk production societies, etc. The nature of activities also includes to get information about the diseases spread in cattle or cows, to propagate the same and to carry out all necessary vaccinations for the removal and prevention of infectious diseases and for animal health veterinary schools, colleges, medical clinics, hospitals, clinic homes, treatment centers, nursing homes, to establish medical aid centers and camps, etc. to run them or to provide necessary assistance to such running institutions. The scope also includes making provision of fodder for cows and other dumb cattle and maintenance of gauchar lands for the same. Also to take care of making such lands available to the government, to make demands or to provide appropriate help to the persons or organizations doing such activities. Thus, to sum up, the trust (i.e. Shree Khodiyar Gau Seva Yuvak Mandal Charitable Trust) without discrimination of any caste, caste, religion or gender and free from political motives or activities serves cows, prevent cow killing, atrocities on cows.

2.1. The trust carrying the above mentioned charitable activities is duly eligible for availing benefits of section 11 and 12 of the Act, hence had applied for registration u/s. 12A of the Act, which is rejected by the Ld. CIT(E) without considering the written submission along with the supporting documentary evidences furnished before him against the notices issued by him calling for various details/ information/ explanation.

2.2. The assessee’s written submission in brief is that, the assessee is a Charitable Trust, which applied for its registration u/s. 12A of the Income Tax Act, 1961 as on 09.06.2023. Thereafter, notices dated 04.10.2023 and 03.11.2023 were issued by the Ld. CIT(Exemption), for which we had requested adjournment as on 16.11.2023 and the assessee received notice as on 21.11.2023 which was supposed to be replied on or before 06.12.2023. The assessee thus submitted the detailed reply along with necessary documentary evidences as on 06.12.2023 via Email as the particular tab for furnishing the reply against the said notice dated 21.11.2023 at the Income Tax Portal was unavailable at that time. The applicant had explained these facts to the Ld. CIT(E), however, the same was not considered by the Ld. CIT(E). The reply furnished by the applicant via email was also not considered and the Rejection Order dated 18.12.2023 was passed, stating that the application for Final Registration has been rejected and that applicant’s Provisional Registration was also cancelled stating that the applicant had not filed any reply to the notice dated 21.11.2023.

3. Aggrieved by the order of CIT(E), the assessee is in appeal before us with following grounds of appeal:

“The Rejection Order is bad in law.

2. The Rejection of the final as well as provisional application on the grounds that the applicant has not furnished any reply in response to final opportunity given, may please be disregarded.”

4. On perusal of the record, it is noted that the assessee trust had furnished documents apart from documents uploaded along with the application filed and had also never claimed exemption under section 11, 12 or section 10(23C) of the Act. In light of such disclosure, the application was rightly filed under section 12A(1)(ac) of the Act.

5.1. The Ld. Authorized Representative (AR) for the assessee submitted that, instead of verifying the genuineness of the trust or examining its charitable objects and proposed activities, rejected the application. The approach of the Ld. CIT(E) appears to be excessively technical and contrary to the scheme of registration, particularly in a case where the assessee asserts that activities have not commenced.

5.2. The Ld. Departmental Representative (DR) for the Revenue did not object to the restoration of the matter to the file of the CIT(E) for a fresh adjudication on merits.

5.3. We have heard the rival submissions and perused the material available on record. It is a settled principle of law that the process of registration under section 12AB of the Act is not an assessment of income, but rather a preliminary stage to examine the genuineness of the trust’s objects and proposed activities. When the trust has explicitly stated that it has not filed returns as it had no activities and thus no income chargeable to tax, it was incumbent upon the Ld. The CIT(E) to evaluate such explanation objectively and to call for any further clarifications or proposed activity plan rather than summarily rejecting the application.

5.4. In our considered view, the interest of justice would be served, if the matter is restored to the file of the Ld. CIT(E) for de novo adjudication. The assessee is directed to co-operate in the proceedings and furnish any further details that may be required to ascertain the genuineness of its claim. At the same time, the Ld. CIT(E) shall decide the matter on merits and in accordance with law, after granting due opportunity of being heard. The assessee may also be permitted to make necessary correction in the application in Form No.10AB under sub-clause (iii) of clause (ac) of sub-section (1) of section 12A of the Act.

5.5. In view of the foregoing discussion, we set aside the impugned order of the Ld. CIT(Exemption), Ahmedabad dated 18/12/2023 and restore the matter to his file for deciding the application for registration afresh and in accordance with law, after providing adequate opportunity of hearing to the assessee.

6. In the result, the appeal of the assessee is allowed for statistical purposes.