ITAT Restores 12A Registration Application to CIT(E) to Verify Ownership Documents

ITAT Restores 12A Registration Application to CIT(E) to Verify Ownership Documents

Issue

Whether the Commissioner of Income Tax (Exemption) [CIT(E)] was justified in rejecting the assessee’s application for registration under Section 12A(1)(ac)(iii) and cancelling the provisional registration on the grounds of lack of ownership proof for the land used for charitable activities (Dharamshala), without considering the documents submitted.

Facts

• Application: The assessee-trust applied for registration under Section 12A(1)(ac)(iii) of the Income Tax Act for the Assessment Year 2025-26. It had previously been granted provisional registration.

• Rejection by CIT(E): The CIT(E) rejected the application and cancelled the provisional registration on two main grounds:

  1. Ownership Issue: The trust was constructing a Dharamshala on land it allegedly did not own. The CIT(E) noted a lack of property papers and concluded this violated Section 13(1)(c) (prohibiting benefits to specified persons).

  2. Justification: The CIT(E) held that the applicant failed to file justification for seeking registration and failed to prove the genuineness of its charitable activities.

• Assessee’s Defense: The assessee argued that the CIT(E) passed the order without considering the submissions. Before the Tribunal, the assessee filed an application under Rule 29 of ITAT Rules to submit additional evidence (ownership documents) which could not be filed earlier due to “lack of knowledge and unawareness.”

Decision

• The Income Tax Appellate Tribunal (ITAT) allowed the appeal for statistical purposes.

• Additional Evidence Admitted: The Tribunal allowed the application under Rule 29 to file additional evidence regarding the land ownership.

• Remand to CIT(E): In the interest of justice, the Bench restored the matter to the file of the CIT(E).

• Direction: The CIT(E) was directed to verify the new evidence and grant the assessee one final opportunity to substantiate its claim regarding the genuineness of activities and ownership. The assessee was strictly directed to appear without seeking adjournments.

Key Takeaways

• Rule 29 of ITAT Rules: The Tribunal has the power to admit additional evidence at the appellate stage if there was a sufficient cause (like lack of professional advice or knowledge) for not producing it before the lower authority.

• Ownership of Infrastructure: For charitable registration, proving ownership or a valid leasehold right over the property where activities (like a Dharamshala) are conducted is crucial to rule out violations of Section 13(1)(c).

• Natural Justice: Tribunals prefer adjudication on merits. If a party has evidence that goes to the root of the matter (ownership), they are often given a second chance to present it to the registration authority.