A show-cause notice must be issued before rejecting a Trust registration application.

Trust Registration Denial Set Aside; Matter Remanded for Fresh Adjudication with Opportunity of Hearing

Issue: Whether the denial of registration under Section 12AB and 80G of the Income-tax Act, 1961, is valid when the Commissioner (Exemptions) rejected the application due to the assessee’s alleged failure to submit details within a short timeframe.

Facts:

The assessee-trust filed an application for registration under Section 80G and Section 12AB.
The Commissioner (Exemptions) rejected the application because the assessee failed to submit details to prove the genuineness of the trust and compliance with its objectives.
The assessee submitted before the Tribunal that the time given to submit the details was very short, and therefore, they could not comply.
The assessee also expressed willingness to furnish all details to the Commissioner (Exemptions) if given an opportunity.

Decision:

The court held that the matter should be remitted back to the file of the Commissioner (Exemptions).

Key Takeaways:

Reasonable Opportunity: The principle of natural justice requires that a reasonable opportunity be given to the assessee to present their case.
Short Timeframe: If the time given to comply with requirements is unreasonably short, it can be a ground for remanding the matter.
Willingness to Comply: The assessee’s willingness to furnish all necessary details if given an opportunity is a factor considered by the court.
Fresh Adjudication: Remanding the matter ensures that the Commissioner (Exemptions) considers all relevant facts and arguments before making a decision.
This decision ensures that genuine trusts are not denied registration due to procedural lapses or unreasonably short timelines.

IN THE ITAT MUMBAI BENCH ‘G’

Simple vedas foundation

CIT (Exemptions)

Rahul Chaudhary, Judicial Member
and OMKARESHWAR CHIDARA, Accountant Member

IT Appeal Nos. 4913 & 4914 (Mum.) of 2024
[Assessment Year 2024-25]

DECEMBER 30, 2024

Bharat Kumar, for the Appellant. Dr. Kishor Dhule, CIT-DR for the Respondent.

ORDER

Omkareshwar Chidara, Accountant Member. – These appeals by the assessee are directed against two separate orders both dated 01.07.2024 and 26.07.2024 passed by the Ld. Commissioner of Income-tax (Exemptions), Mumbai [in short ‘the Ld. CIT(E)’].

2. The Ld. AO has stated that the assessee filed two appeal ITA No. 4913/Mum/2024 and ITA No. 4914/Mum/2024. The grievance of the appellant trust is that it was denied the registration sought for u/s 12AB and denied the 80G exemption.

3. ITA No. 4913/Mum/2024 deals with rejection of application filed by the appellant for 80G exemption and ITA No. 4914/Mum/2024 deals with rejection of registration sought u/s 12AB of the Income-tax Act, 1961 (in short ‘the Act’).

4. In the appeal ITA No. 4913/Mum/2024, the appeal filed the following ground:

On the facts and in the circumstances of the case and in law, the Ld. CIT(E) erred in rejecting application filed for 80G exemption)

5. The Ld. CIT (Exemption) has issued a letter to the appellant with regard to proceedings u/s 80G(5)(iii) stating that the funds received by your trust cannot be applied beyond Indian shores and in view of same why the application in form No. 10AB should not be rejected. The Ld. CIT(Exemption) has also requested the appellant to filed documentary evidence relating to the activities already carried out and details of expenses incurred thereby. The appellant trust was also requested to provide the details of donations received from Financial Year (FY) 2022-23 and 2023-24 and with documentary evidences, bank statement. The appellant trust was requested to file all these details on 24.07.2024 failing which it will be deemed that there is no objection for proposed rejection of application u/s 80G.

5.1 Since the required details as mentioned above were not submitted before the Ld. CIT(Exemption), an order was passed stating as follows:

The appellant has also applied for registration u/s 12AB of the Act vide Form 10AB u/s 12A(1)(ac)(iii) of the Act and same was rejected vide order dated 26.07.2024. The provision of section 80G(5)(i) of the Act stipulates that the provision of this section is only available for institution or fund for which section 11/12 or clause 23(aa) or clause 23(c) of section 10 of the Act applies. The appellant fails to fulfill any of the above criteria in view of rejection of its application for registration u/s 12AB of the Act. Thus, its application for approval u/s 80G of the Act becomes untenable and hence rejected.

6. Aggrieved by the above order, the appellant trust filed appeal with the grounds of appeal mentioned above. During the appeal proceedings before ITAT, the Ld. AR of the appellant has stated that the time given to submit the details was very short and hence could not submit the same. It was also submitted before the ITAT that all the details would be furnished before the Ld. CIT(Exemption) and an opportunity may be given. The Ld. Departmental Representative (DR) did not controvert the submission of the appellant.

7. After hearing both sides it is decided to give an opportunity to the appellant trust to file all the details which were required by the Ld. CIT(Exemption). The Ld. CIT (Exemptions) is directed to take into consideration all the details submitted by the appellant trust and pass an order afresh. Accordingly, the issue is remitted to the file of Ld. CIT(E).

7.1 The appeal of assessee is allowed for statistical purposes.

ITA No. 4914/Mum/2024

8. The Ld. CIT(Exemption) rejected the Registration sought by the appellant trust u/s 12AB of the Act. From the order of the Ld. CIT(Exemption) page 4 para 3 it is observed that certain notices were issued to the appellant trust requesting them to submit the details/explanation along with documentary evidences relating to application of the funds outside India as mentioned in the object clause of the trust deed. The appellant Trust was requested to file evidence of activities carried out and the details of donations received in financial year 2022-23 and 2023-24 with necessary documentary evidences. This notice was issued by the Ld CIT(Exemption) vide his letter 20.07.2024. The appellant trust was requested to file all these information within a week and in response to the same the appellant trust could not submit the relevant information and requested for an adjournment till 10.08.2024. From para 4 of the above said order of the Ld. CIT(Exemption), it is observed that the statutory limitation to decide on the application is 31.07.2024. The request of adjournment was rejected by stating that the above details are required to come to a conclusion about the genuineness of the Trust and to find out whether all the objects were complied with as per law. In the absence of necessary compliance by the appellant within the stipulated time, the Ld. CIT(Exemption) has stated that he is unable to come to the conclusion about the genuineness of the trust. Hence, the application seeking registration u/s 12AB was rejected.

9. Aggrieved by the order of the Ld. CIT(Exemption), the appellant filed an appeal before the ITAT. Before the ITAT, the Ld. AR of the appellant has stated that the time given to submit all the required details is quite short and the Trust is genuine in all represents and he is entitled for registration u/s 12AB and 80G of the Act. It was submitted that during the hearing proceedings before the ITAT, the Ld. AR of the appellant has stated that if an opportunity is given, all the required details would be submitted. Hence, it is requested that an opportunity may be given to file all the required details before the Ld. CIT(Exemption). After hearing the submission of the appellant Trust and perusing the order of the Ld. CIT(Exemption) it is decided that an effective opportunity was not given to the appellant trust with reasonable time to submit all the required details. Hence, the Ld. CIT(Exemption) is directed to take all the required details as submitted by the appellant trust and pass a fresh order accordingly. Accordingly, the issue is remitted to the file of Ld. CIT(E).

10. Both the above appeals in ITA No. 4913 and 4914/Mum/2024 are allowed for statistical purposes.