Trust registration denial under Section 12AB remanded for fresh adjudication, contingent on assessee obtaining Rajasthan Public Trust Act registration.
Issue:
When an assessee-trust’s application for registration under Section 12AB of the Income-tax Act, 1961, is rejected by the Commissioner (Exemptions) due to an incomplete Form 10AB, lack of registration under the Rajasthan Public Trust Act, 1959 (RPT Act), and perceived non-genuineness of activities, whether the matter should be remanded to allow the assessee to complete the state-level registration and re-present their case.
Facts:
- The assessee-trust applied for registration under Section 12AB.
- The Commissioner (Exemptions) rejected the application based on three main grounds:
- Form 10AB was incomplete.
- There was no registration under the Rajasthan Public Trust Act, 1959.
- The activities of the assessee were not genuine.
- The assessee submitted that the trust was in the process of applying for registration under the RPT Act, 1959, before the competent authority, and it was likely to obtain such registration.
Decision:
The court held that in view of the aforesaid (especially the ongoing process for RPT Act registration), the matter was to be restored back to the Commissioner (Exemptions). The Commissioner was directed that as and when the assessee-trust would produce a copy of the Registration under the RPT Act, 1959, the application of the assessee-trust for registration under Section 12AB would be decided afresh in accordance with law. The matter was remanded.
Key Takeaways:
- Sequential Compliance (State vs. Income Tax Registration): While registration under a state public trust act (like RPT Act) is typically a prerequisite or strong supporting evidence for income tax registration under Section 12AB, courts often take a pragmatic view. If the state-level registration is genuinely in process, denying the income tax registration outright for its absence might be considered premature.
- Curable Defects: Incomplete forms and pending state-level registrations are generally considered “curable defects.” Courts prefer to provide an opportunity to rectify such procedural shortcomings rather than outright rejecting an application, especially for charitable organizations.
- “Genuineness of Activities”: The assessment of “genuineness of activities” (the third ground for rejection) is often intertwined with the documentary evidence. If the assessee is now able to provide complete details in Form 10AB and the state-level registration, it might strengthen their case regarding the genuineness of their activities.
- Conditional Remand: The court’s direction to remand the matter conditionally upon the assessee producing the RPT Act registration is a common approach. It places the onus on the assessee to fulfil the prerequisite while ensuring the Commissioner then re-examines the application on its merits.
- Facilitative Approach: The judgment promotes a facilitative approach from the tax authorities, allowing charitable organizations a fair chance to comply with all legal requirements.
- Fresh Adjudication: The remand implies that the Commissioner will now conduct a fresh adjudication, considering the newly provided documents and explanations, and assessing the genuineness of activities in that light.
IN THE ITAT JAIPUR BENCH ‘A’
Setu Sansthan
v.
CIT (Exemption) Jaipur
Dr. S. Seethalakshmi, Judicial member
and RATHOD KAMLESH JAYANTBHAi, Accountant member
and RATHOD KAMLESH JAYANTBHAi, Accountant member
IT Appeal Nos. 1567, 1568, 1565 & 1566 (JP)2024
APRIL 24, 2025
R.S. Poonia, CA for the Assessee. Mrs. Anita Rinesh, JCIT-DR for the Revenue.
ORDER
Dr. S. Seethalakshmi, Judicial Member. – These are four appeals filed by the assessee against two different orders of the Ld.CIT (Exemption), Jaipur dated 09-12-2024 passed under section 12AB and 80G of the Income Tax Act, 1961 respectively. The grounds of appeal raised by the assessee in the above mentioned appeals are as under:-
ITA NO. 1567/JP/2024 U/S 12AB of I.T. Act, 1961
| 1. | That the ld. CIT(E), Jaipur has erred in law and in facts of the case by neither recording the independent satisfaction for rejection of provisional registration and nor issued show cause notice for rejection of provisional registration u/s 12A of the Act which is wrong, unwarranted and bad in law. Kindly restore the same. |
| 2. | That the ld. CIT(E), Jaipur has erred in law and in facts of the case in rejecting the provisional registration u/s 12A without issuing separate DIN of the rejection order, which is against the circular and notification issued by the CBDT. So, the same is wrong, unwarranted and bad in law. Kindly restore the same. |
| 3. | That the order passed by ld CIT(E), Jaipur by rejecting provisional registration u/s 12A of the Act is wrong, unwarranted and bad in law. Kindly restore the same. |
ITA NO. 1568/JP/2024 U/S 12AB of I.T. Act, 1961
” That the order passed by the ld. CIT(E),Jaipur by rejecting application u/s 12AB(1)(b) of the I.T. Act, 1961 is wrong, unwarranted and bad in law. Kindly direct to register the same.
ITA NO. 1565/JP/2024 U/S 80G of I.T. Act, 1961
| 1. | That under the facts and in the circumstances of the case, the ld. CIT(E), Jaipur rejected the application u/s 80G(5)(iii) of the Act which is wrong, unwarranted ad bad in law. Kindly direct to register the appellant |
ITA NO. 1566/JP/2024 U/S 80G of I.T. Act, 1961
| 1. | That the ld. CIT(E), Jaipur has erred in law and in facts of the case by neither recording the independent satisfaction for rejection of provisional approval and nor issued show cause notice for rejection of provisional approval u/s 80G of the Act which is wrong unwarranted and bad in law. Kindly restore the same. |
| 2. | That the ld. CIT(E), Jaipur has erred in law and in facts of the case by rejecting the provisional approval u/s 80G without issuing separate DIN of the rejection order which is against the circular and notification issued by the CBDT. So, the same is wrong, unwarranted and bad in law. Kindly restore the same. |
| 3. | That the order passed by ld. CIT(E), Jaipur by rejecting provisional approval u/s 80G of the I.T. Act, 1961 is wrong, unwarranted and bad in law. Kindly direct to register the same. |
3.1 Apropos to the ground so raised by the assessee in ITA Nos. 1567/JP/2024 and 1568/JP/2024, the ld. CIT(E) rejected the assessee’s claim of registration u/s 12AB of the Act by observing as under:-
”05. In view of the above discussion assessee’s claim of registration u/s 12AB is liable to be rejected and thus being rejected on following grounds:-
| ■ | Incomplete Form 10 AB |
| ■ | Registration under Rajasthan Public Trust Act, 1959 |
| ■ | Non Genuineness of Activities and non compliance |
06. Further 12AB(1)(b)(ii)(B) of the Income Tax Act, 1961 also state that if CIT is not satisfied has to pass order rejecting such application and also cancelling its earlier registration. Thus, it is clarified that applicant’s provisional registration under clause (vi) of clause (ac) of sub-section (1) of Section 12A of the Income Tax Act, 1961 dated 27-09-2023 is also being cancelled. Further assessee has failed to give proper justification for regularization of provisional registration, thus with this order provisional registration is also lapsed and cancelled.”
3.2 Apropos to the ground so raised by the assessee in ITA Nos. 1565 & 1566/JP/2024, the ld. CIT(E) rejected the assessee’s claim of exemption u/s 80G of the Act by observing as under:-
”03. In view of above discussion assessee’s claim of approval u/s 80G is liable to be rejected and thus being rejected on following grounds:-
| ■ | Approval u/s 80G cannot be granted without registration u/s 12AB |
4. Further 2nd proviso to Section 80G(5) also state that if CIT is not satisfied has to pass order rejecting such application and also cancelling its earlier approval. Thus, it is clarified that applicant’s provisional approval under clause (iv) of first proviso to sub-section (5) of Section 80G of the Income Tax Act, 1961 dated 28-09-2023 is also being cancelled. Further assessee has failed to give proper justification for regularization of provisional approval, thus with this order provisional approval is also lapsed and cancelled.”
3.3 During the course of hearing, the ld. AR of the assessee in the above appeals mainly submitted that the assessee was not provided adequate opportunity of being heard by the ld. CIT(E) and thus the orders should be quashed being ex-parte orders and against the principles of natural justice. Further, the ld. AR of the assessee stated at Bar that the assessee trust is in the process of applying the registration under RPT Act before the competent authority and it is likely to get the same. Conclusively, the ld AR of the assessee prayed that the assessee trust may be provided one more opportunity to the contest the case before the ld CIT(E) and restore the appeals to the file of ld CIT(E) for afresh adjudication as the assessee was ex-parte before the ld. CIT(E).
3.4. Per contra, the ld. DR relied on the orders of the ld. CIT(E).
3.5 After hearing both parties and perusing the materials available on record, we noticed that the ld. CIT(E) has rejected the assessee’s claim of registration u/s 12AB of the Act on following grounds:-
| ■ | Incomplete Form 10 AB |
| ■ | Registration under Rajasthan Public Trust Act, 1959 |
| ■ | Non Genuineness of Activities and non compliance. |
It is also noticed that the ld.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. It may be noted that the ld.AR of the 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 12AB 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 etc. before the ld CIT(E)
3.6 Since we have restored the appeals of the assessee with regard to the registration u/s 12AB of the Act to the file of the ld. CIT(E) for afresh adjudication, therefore, the outcome of appeals of the assessee u/s 80G of the Act are consequential in nature.
3.7 Before parting, we may make it clear that our decision to restore the matter back (supra) to the file of the ld. CIT(E) shall in no way be construed as having any reflection or expression on the merits of the dispute, which shall be adjudicated by the ld. CIT(E) independently in accordance with law.
4.0 In the result, the appeals of the assessee are allowed for statistical purposes.