ITAT set asides the order of CIT(E) rejecting registration under section 12A & 80G approval

The assessee, Soulful Joy Trust which is a public charitable trust was provisionally registered under Section 12A(1)(ac)(vi) of the Act and Section 80G under Clause (iv) of the first proviso to sub-section (5) of Section 80G of the Act. The assessee applied for conversion of its provisional registration into regular registration under Section 12AB of the Act and approval under Section 80G of the Act.

The assessee sought an adjournment against notices issued by CIT(E) on 04-07-2024 & 06-07-2024, asking for further details. The assessee could not reply to further notice issued by CIT(E) on 08-08-2024 as administrative head of the trust was out of India. The CIT(E), without affording any further opportunity, rejected the applications for both Section 12AB of the Act registration and Section 80G of the Act approval.

Submissions of the Assessee

The Authorized Representative (AR) of the assessee contended that the rejection of the applications under Sections 12AB and 80G of the Act by the CIT(E) was arbitrary and in violation of the principles of natural justice. It was argued that the CIT(E) mechanically rejected the application without properly verifying the documents already submitted along with the application.

Observation of the Tribunal

• The assessee trust had duly applied for conversion of provisional registration into regular registration under Section 12AB of the Act and approval under Section 80G of the Act.
• The ground for rejection by the CIT(E) was non-submission of a note on activities and alleged noncompliance with the notices issued. However, upon examination, we find that the rejection suffers from procedural infirmities and a failure to adhere to the principles of natural justice.
• The assessee had submitted its financial statements for Financial Years (FYs) 2021-22 and 2022-23, an instrument creating the trust, and a registration certificate with the Charity Commissioner, forming part of its application. It is evident that some material relevant to the case was already on record, yet the CIT(E) failed to consider the same before passing the rejection order.
• Consequently, the assessee was unable to respond to the final notice, (due to the fact that administrative head was out of station) leading to a summary rejection without affording any further opportunity of being heard.

Verdict:

• The rejection order is mechanical and lacks proper appreciation of the circumstances under which the assessee could not comply with the notice.
• The CIT(E) failed to provide a final opportunity before rejecting the applications, which constitutes a violation of the principles of natural justice.
• Considering the above facts and in the interest of justice, we set aside the orders of the CIT(E) rejecting Section 12AB of the Act registration and Section 80G of the Act approval and restore the matters to his file for fresh adjudication. The CIT(E) is directed to provide the assessee a reasonable opportunity to furnish the required details and decide the applications afresh after considering the submissions and documents on record.

Disclaimer: 

The above article is based upon the ruling of the Hon'ble ITAT, Ahmedabad and is meant for educational purposes only. Readers are requested to act diligently and under consultation with a professional before applying the information contained in this article.