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Facts
The Assessee, Maharashtra Industrial Development Corporation, a statutory body, appealed the CIT(E)'s order cancelling its registration under Section 12A of the Income Tax Act. The CIT(E) alleged the Assessee's activities were commercial and not charitable, while the Assessee contended they were for public utility and that no effective opportunity of hearing was provided.
Held
The Tribunal held that the CIT(E) violated principles of natural justice by cancelling the registration without providing the Assessee an effective opportunity of being heard. The order was set aside, and the matter was remanded to the CIT(E) for fresh adjudication after granting due hearing.
Key Issues
Whether the cancellation of registration under Section 12A violated natural justice due to lack of effective hearing; and whether the assessee's activities constitute "charitable purpose" or are commercial.
Sections Cited
12A, 12AB, 12A(1)(ac)(i), 12AB(4), 2(15), 143(3), 11, 12
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
order : 29.10.2025 O R D E R [ Per Rahul Chaudhary, Judicial Member:
1.
The present appeal has been preferred by the Assessee against the Order, dated 30/09/2025, passed by Commissioner of Income Tax (Exemptions), Mumbai [hereinafter referred to as the ‘CIT(E)’] whereby registration granted to the Assessee under Section 12A of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] was cancelled. The Assessee has also filed Stay Application No. 123/Mum/2025 seeking Stay of the aforesaid order passed by the Learned CIT(E). Both the appeal and the Stay Application were listed S.A. No.123/Mum/2025 Assessment Year 2026-2027 for hearing.
2. The Assessee has raised following grounds of appeal :
Being aggrieved by the order dated 30.09.2025 passed by the Ld. Commissioner of Income-tax (Exemptions), Mumbai ( CIT(E)"), the Appellant has preferred to file the present appeal on the following grounds which are without prejudice to each other.
1. That in the facts and circumstances of the case and in law, the Ld. CIT(E) erred in cancelling the registration granted to the Appellant under Section 12A of the Act vide order dated 28.05.2021 for Assessment Years 2022-23 to 2026-27, with effect from the date of the said order.
2. That on the facts and in the circumstances of the case and in law, the Ld. CIT(E) erred in holding that the activities carried on by the Appellant do not qualify the test 'charitable purpose' as defined in Section 2(15) of the Act.
3. That on the facts and circumstances of the case and in law, the impugned order is vitiated having been passed by the Ld. CIT(E) without hearing the Appellant in a gross violation of the principles of natural justice. The Appellant submits that the impugned order was passed in gross violation of the authority vested on the Respondent, in so far as the personal hearing in the proceedings was conducted by the Income-tax Officer (ITO) and the order was passed by the Ld. CIT(E).
4. That on the facts and in the circumstances of the case and in law, the Ld. CIT(E) erred in holding that the Appellant is engaged in providing 'structured commercial transactions and its objects are not towards advancement of an object of general public utility in any altruistic sense
5. That on the facts and in the circumstances of the case and in law, the CIT(E) erred in holding that the Appellant is engaged in activities in the nature of trade, commerce or business.
6. That on the facts and in the circumstances of the case and in law, the CIT(E) erred by failing to appreciate that the Appellant is a statutory corporation set up under the MID Act and it is well settled that statutory corporations engaged in similar activities of industrial development for the benefit of the public at large are entitled to be considered as a charity advancing an objective of general public utility. 2 S.A. No.123/Mum/2025 Assessment Year 2026-2027
7. That on the facts and circumstances of the case and in law, the Ld. CIT(E) erred by failing to appreciate that the Appellant is owned and controlled by the Government of Maharashtra and is undertaking activities in furtherance of its functions and objectives under the MID Act, which is driven by public requirements, and not as a commercial venture.
8. That on the facts and circumstances of the case and in law, the Ld. CIT(E) grossly erred in not appreciating that the Appellant, being a statutory corporation, is not allowed to distribute any excess of income over expenditure. The excess is redeployed only towards the activities undertaken by the Appellant i.e. development of industries in Maharashtra, and there is no element of commercial gain. 9. That in the facts and circumstances of the case and in law, the impugned order passed by the Ld. CIT(E) is vitiated since the reference made by the Ld. AO under the 2nd Proviso to Section 143(3) of the Act to the Ld. CIT(E) for withdrawal of the registration granted to the Appellant was never made available to the Appellant. 10. The Appellant craves leave to, add to, alter, amplify, modify or delete all or any of the aforesaid ground at or before the hearing.” 3. The relevant facts in brief are that the Assessee is a corporation established under the Maharashtra Industrial Development Act, 1961 (in short ‘MID Act’) as the industrial infrastructure development agency of the Government of Maharashtra, inter alia, for the purposes of securing and assisting in the rapid and orderly establishment and organization of industries in industrial areas and industrial estate in the State. The stated functions of the Assessee is to promote and assist in the rapid and orderly establishment, growth and development of industries in the State of Maharashtra.
On 07/05/2025, the Assessee applied for grant of registration under Section 12AB of the Act and filed From 10AB in accordance with the provisions of Section 12A(1)(ac)(i) of the Act. Pursuant to its application, the Assessee received an Order, dated 28/05/2021, S.A. No.123/Mum/2025 Assessment Year 2026-2027 granting registration in Form 10AC under Section 12A(1)(ac)(i) of the Act for Assessment Year 2022-2023 to Assessment Year 2026-2027.
Subsequently, a reference was received by the CIT(E) from the Faceless Assessing Officer (FAO) for cancellation of the above registration granted to the Assessee under the applicable Proviso to Section 143(3) of the Act. Therefore, notice was issued to the Assessee alleging that the Assessee was engaged in various commercial activities in the nature of business with profit motive and that no actual charitable activities were undertaken by the Assessee and the same has resulted in ‘specified violations’ contained in Explanation to Section 12AB(4) of the Act. It was alleged that the Assessee was carrying on commercial activities in violation of the provisions of Section 11 and 12 of the Act. In response, the Assessee filed a detailed Reply, dated 11/04/2025, providing the relevant documents/information and explaining of activities undertaken by the Assessee. Thereafter, another notice, dated 29/07/2025, was issued to the Assessee asking for additional information. It is stated that the Assessee submitted all the requisite details vide Letters, dated 06/08/2025 and 09/09/2025. The Learned CIT(E) granted to the Assessee an opportunity of being personally heard on 09/09/2025. On the scheduled date of the hearing, the Income Tax Officer (for short ‘ITO’), asked for some further additional documentation and explanations, which were duly submitted by the Assessee vide Letter, dated 10/09/2025. By of the aforesaid Letter, the Assessee requested for an opportunity of being heard by the Learned CIT(E) as according to the Assessee on the hearing fixed for 09/09/2025 no effective opportunity of being heard was granted by Learned CIT(E). However, without granting any further opportunity of being heard, the Learned CIT(E), vide Order, dated 30/09/2025, cancelled the Assessee’s registration granted under Section 12A of the Act on the basis that ‘the activities carried on by the Assessee corporation are purely S.A. No.123/Mum/2025 Assessment Year 2026-2027 commercial in nature, devoid of any element of charity.
Being aggrieved, the Assessee has preferred the present appeal before the Tribunal on the ground reproduced at Paragraph 2 above.
When the appeal was taken up for hearing Learned Senior Counsel appearing on behalf of the Assessee after briefly explaining the facts leading up the present appeal pressed into service Ground No.3 and submitted that the impugned Order, dated 30/09/2025, was passed by the Learned CIT(E) without granting opportunity of being heard. On hearing fixed for 09/09/2025, the Learned ITO had raised some queries and asked for submission of additional documents. The Assessee was not heard by Learned CIT(E). In support, reliance was also placed on Letter dated 10/09/2025 filed on 11/09/2025 before the Learned CIT(E) whereby the relevant facts were brought on record by the Assessee and an opportunity of being heard was requested for by the Assessee. It was submitted that on 30/09/2025 the impugned order was passed by the Learned CIT(E) cancelling the registration granted to the Assessee under Section 12A of the Act in complete violation of principle of natural justice and the statutory provisions.
Per contra, the Learned Departmental supported the order passed by the Learned CIT(E) and submitted that sufficient opportunity of being heard was granted by the Learned CIT(E) to the Assessee.
In rejoinder the Learned Senior Counsel appearing on behalf of the Assessee submitted that grievance raised by the Assessee can be redressed in case issue restore back to the file of the Learned CIT(E) for disposal afresh after granting an effective opportunity of being heard to the Assessee.
We have examined the facts of the present case and have perused the material on record. We are of the view that the material on record 5 S.A. No.123/Mum/2025 Assessment Year 2026-2027 [including Letter, dated 10/09/2025, filed by the Assessee before the Learned CIT(E) placed at Page No.39 to 41 of the Paper Book] supports the submission advanced by the Learned Senior Counsel appearing on behalf of the Assessee. Therefore, given the facts and circumstances of the present case we deem it appropriate and in the interest of justice to set aside the order, dated 30/09/2025, passed by the Learned CIT(E) with the directions to the Learned CIT(E) to decide the issue afresh after granting the Assessee effective opportunity of being heard. Accordingly, Ground No.3 raised by the Assessee is allowed for statistical purposes while all the other Grounds raised by the Assessee are dismissed having being rendered infructuous.
Since we have set aside the impugned order dated 30/09/2025 passed by Learned CIT(E), the Stay Application moved by the Assessee is dismissed as having being rendered infructuous.
In terms of above, the present appeal preferred by the Assessee is allowed for statistical purposes and the Stay Application filed by the Assessee is dismissed.