Charitable Trust Registration Matter Remanded, CA's busy schedule reasonable cause for not sealing/signing documents.

Charitable Trust Registration Matter Remanded, CA’s busy schedule reasonable cause for not sealing/signing documents.

Issue: Whether an application for permanent registration of a charitable trust under Section 12(1)(ac)(iii) should be rejected solely because the furnished income and expenditure account was not in the prescribed format or lacked the seal and signature of a Chartered Accountant, without providing a reasonable opportunity for rectification.

Facts:

The assessee filed an application for permanent registration in Form No. 10B under Section 12(1)(ac)(iii) of the Income-tax Act, 1961.
The income and expenditure account submitted with the application was not in the prescribed format and did not bear the seal or signature of a Chartered Accountant.
The Commissioner (Exemption) rejected the application for registration, citing dissatisfaction with the genuineness of the assessee’s activities, presumably due to the formal deficiencies.
The assessee explained that its Chartered Accountant was preoccupied with other audits at the time, which prevented him from sealing, signing, and attesting the income and expenditure account.

Decision: The matter was remanded back to the Commissioner (Exemption) to decide the application for registration afresh. The Commissioner was directed to provide a reasonable opportunity of hearing to the assessee to make proper compliance before making a fresh decision.

Key Takeaways:

Opportunity of Hearing is Crucial: Even in cases of formal deficiencies in an application for registration, tax authorities must provide a reasonable opportunity of hearing to the applicant to rectify errors and make proper compliance.
Substance over Strict Formality: The genuine activities of a charitable trust should not be overlooked due to curable formal shortcomings in documentation, especially when a reasonable explanation for the deficiency is provided.
Remand for Rectification: If an application is rejected based on rectifiable errors, the appropriate course of action is often to remand the matter, allowing the applicant to correct the deficiencies rather than outright rejecting the application.
Professional Constraints as Justification: Genuine reasons like a Chartered Accountant’s workload can be considered valid explanations for temporary delays or formal omissions.

IN THE ITAT PUNE BENCH ‘B’

Mangala Foundation

Commissioner of Income-tax, (Exemption)

R. K. PANDA, Vice President
and Vinay Bhamore, Judicial Member

IT Appeal Nos.2382 & 2383 (PUN) of 2024

JANUARY 27, 2025

Smt. Daya Bansal for the Appellant. Ajay Kumar Keshari for the Respondent.

ORDER

Vinay Bhamore, Judicial Member.- Both the above captioned appeals filed by the assessee are directed against the separate orders dated 09.10.2024 passed by Ld. CIT, Exemption, Pune rejecting the application for registration in Form No.10AB under clause (iii) of section 12A(1)(ac) of the IT Act filed on 05.04.2024 and denying the application for approval in Form No.10AB under clause (iii) of first proviso to sub-section (5) of section 80G of the IT Act filed on 01.05.2024.

ITA No.2382/PUN/2024 :

2. The appellant has raised the following grounds of appeal :-

“1. Notice was issued by Commissioner of Income Tax (Exemption) on 23^rd Sep 2024, as per notice we have provided all the documents in response through E-proceeding of Income tax portal on 30^th Sep, 2024 i.e. before due date.

2. As per notice we have submitted last 3 years Financial statements which are in prescribed format as income is below than Rs.5000.

‘As per rejection order, assessee has furnished some information titled as ‘I&E account’ and ‘Statement of Expenditure’ which are not in prescribed formats. Also, they do not bear any seal or signature of chartered accountant. As such, correctness of the same remained questionable.

As our CA was busy in tax audit period of month September so by mistake attached without seal sign copy of financial statement. As income in FY 2022-23 less than 5000 so taken that format and in FY more than 5,000 so taken that format.

3. As per notice it was requested to furnish supporting evidence viz bills/invoices of expenditure done on activity, photographs, cuttings etc. to prove the genuineness of activities. We have provided photographs and invoices. As per commissioner evidences do not bear any banner or signage of the assessee. Also, the so-called invoice furnished by the assessee is nothing but a self-made computerized bill which does not bear name address of seller, its GST/ Shop Act Registration No. etc We have no information about the fact that submitted photographs require with banner as this was our first activity so directly distributed food to needy person.

Invoices submitted have seller Name and address, seller is unregistered so he don’t have GST no.

4. Mangala foundation have obtained provisional registration in form 10AC under item (A) on 01/11/2023 and activities were commenced in FY 22-23. In FY 22-23 incurred expense of Rs.2500 out of donation received of Rs. 3000 and in the income tax return no benefit have taken of expense incurred in FY 22- 23 under Expense incurred for charitable purpose head and paid tax on Full amount of Rs.3000 income. Activity have commenced on 22/12/2022 before date of registration 01/11/2023 but we have not obtained benefit of exemption.”

3. Facts of the case, in brief, are, that the assessee filed application for registration in Form No.10AB under clause (iii) of section 12(1)(ac) of the IT Act on 05.04.2024. 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 by Ld. CIT, Exemption, Pune through ITBA portal on 05.06.2024 requesting the assessee to upload certain information/clarification. The desired information was furnished by the assessee. However, Ld. CIT, Exemption, Pune was not satisfied with the explanation furnished by the assessee trust and sought some further information and issued notice on 23.09.2024. By this notice the assessee was requested to furnish financial statements for last three years along with its schedules/annexures. Apart from this, the assessee was also requested to furnish supporting evidence i.e. bills, invoices of expenditure done on activity, photographs, paper cuttings to prove the genuineness of the activities. In compliance the assessee has furnished income and expenditure account and statement of expenditure which were neither in prescribed format nor bear any seal or signature of the Chartered Accountant. The photographs so called invoices furnished by the assessee were also self-made computerised bills which does not bear name, address of seller, GST/Shop Act Registration No. etc. Therefore, Ld. CIT, Exemption, Pune was not satisfied about the genuineness of activities of the assessee and compliance of requirement of any other law for the time being in force by the assessee as are material for the purpose of achieving its objects. Accordingly, the application filed by the assessee was rejected and provisional registration granted to the assessee on 01.11.2023 u/s 12AB r.w.s. 12A(1)(ac)(vi) of the IT Act was also cancelled. It is this order against which the assessee is in appeal before this Tribunal.

4. Ld. AR appearing from the side of the assessee submitted before us that the order passed by Ld. CIT, Exemption, Pune rejecting the application of permanent registration u/s 12AB is not justified. In this regard, it was submitted by Ld. Counsel of the assessee that the compliance to both the notices was made by the assessee but since the Chartered Accountant of the assessee was busy in conducting audits in the month of September being last date, could not seal and sign the income and expenditure account and other photographs and invoices etc. It was the sole contention he will make proper compliance with regard to the notice issued by Ld. CIT, Exemption, Pune and furnish reply to each and every query raised by Ld. CIT, Exemption, Pune.

5. Ld. DR relied on the order passed by Ld. CIT, Exemption, Pune and requested to confirm the same.

6. We have heard Ld. Counsel from both the sides and perused the material available on record. We find that the compliance to the first notice was properly made by the assessee and in compliance to the said notice wherein compliance was due on 30.09.2024, the Chartered Account of the assessee could not seal, sign and attest the income and expenditure account & the photographs and also could not reply to some other queries since he was busy in conducting audit u/s 44AB of other clients and admittedly the last date of audit was 30.09.2024 and due to this reason proper reply could not be made before Ld. CIT, Exemption, Pune. Considering the totality of the facts of the case, & in the interest of justice, we deem it proper to set-aside the order passed by Ld. CIT, Exemption, Pune and remand the matter back to his file with a direction to decide the application for registration afresh as per fact and law after providing reasonable opportunity of hearing to the assessee to make proper compliance and furnish reply with regard to the query raised by him. The assessee is also hereby directed to respond to the notices issued by Ld. CIT, Exemption, Pune in this regard and produce relevant documents and reply with regard to the application for registration u/s 12AB of the IT Act without taking any adjournment under any pretext, otherwise Ld. CIT, Exemption, Pune shall be at liberty to pass appropriate order as per law. Thus, the grounds of appeal raised by the assessee are partly allowed.

7. In the result, the appeal filed by the assessee in ITA No.2382/PUN/2024 is allowed for statistical purposes.

ITA No.2383/PUN/2024 :

8. The instant appeal is against the order passed by Ld. CIT, Exemption, Pune denying grant of approval u/s 80G(5) of the IT Act. Since we have remanded the issue of grant of registration u/s 12A(1)(ac)(iii) to the file of Ld. CIT, Exemption, Pune for de novo adjudication, therefore, in the interest of justice, it would be appropriate to remit the issue of grant of approval u/s 80G(5) as well to the file of Ld. CIT, Exemption, Pune being consequential, for de novo adjudication.

9. In the result, the appeal filed by the assessee in ITA No.2383/PUN/2024 is allowed for statistical purposes.

10. To sum up, both the above captioned appeals filed by the assessee are allowed for statistical purpose.