HARIBANDHU TRUST,VARANASI vs. CIT (EXEMPTION), LUCKNOW

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ITA 103/VNS/2024Status: DisposedITAT Varanasi07 May 20266 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal noted that the CIT(E) had rejected the assessee's application for registration under Section 12A ex-parte, primarily due to the absence of a reply from the assessee. The Tribunal found that the assessee was not afforded a proper and sufficient opportunity of being heard. Therefore, the Tribunal decided to set aside the order of the CIT(E) and restore the matter to his file. The CIT(E) is directed to consider the application for registration under Section 12A after giving the assessee a proper and sufficient opportunity of being heard and to consider the requisite documents. The ratio decidendi is that an ex-parte order rejecting a registration application without providing a reasonable opportunity of hearing is unsustainable and requires a remand for proper adjudication. The Tribunal did not decide on the merits of the charitable activities or the alleged business activities, as the primary issue was procedural.

What were the facts?

The assessee, Haribandhu Trust, is a charitable trust engaged in educational activities, operating institutions like Hari Bandhu International School. It had obtained provisional registration under Section 12A(1)(ac)(vi) of the Income Tax Act, 1961, valid until AY 2024-25. On October 30, 2023, the assessee filed an application for renewal of registration under Section 12A. The Commissioner of Income Tax (Exemption) [CIT(E)], Lucknow, rejected this application on April 23, 2024. The rejection was based on the assessee's failure to respond to enquiry letters seeking documents and information to verify the genuineness and charitable nature of its activities. The assessee appealed this order to the Income Tax Appellate Tribunal (ITAT), Varanasi.

What were the issues?

1. Whether the learned CIT(E) erred in issuing an ex-parte order without affording the appellant a reasonable opportunity to be heard, and whether proper notice was served before issuing such an order? (Question of law and fact, concerning principles of natural justice and procedural fairness under Section 12AB of the Act). 2. Whether the learned CIT(E) erred in not adequately justifying the urgency for issuing the ex-parte order and in omitting to state in the order that the trust operates the school for charitable purposes? (Question of law and fact, concerning the reasoning and completeness of the order). 3. Whether the learned CIT(E) failed to consider information already available on the portal, such as the trust deed and audited financial statements, which were uploaded at the time of filing the application? (Question of fact, concerning the evidence considered). 4. Whether the learned CIT(E) erred in not giving a finding on the claim that some activities were in the nature of business activities, potentially leading to rejection of registration? (Question of law and fact, concerning the scope of charitable activities under Section 2(15) of the Act). 5. Whether the learned CIT(E) erred in law by not recognizing that providing educational services under Section 2(15) includes incidental activities necessary for the main objective, and by failing to consider the audit report filed in Form 10BB/10B? (Question of law and fact, concerning the interpretation of Section 2(15) and the relevance of audit reports). Assessee's Contentions: The learned CIT(E) passed an ex-parte order without a reasonable opportunity of hearing. The order was passed in haste after issuing notices at short intervals. Much of the required information was already available on the portal. The burden of proof for non-genuineness of activities lies with the tax authority, not the assessee. The process under Section 12AB should be an aid to justice, not an obstruction. The assessee sought restoration of the matter to the CIT(E) for providing documents and an opportunity to be heard. Revenue's Contentions: The learned CIT(DR) opposed the prayer for another opportunity and submitted that the appeal may be dismissed.

Which sections of the Income-tax Act were involved?

Section 12A,Section 12A(1)(ac)(iii),Section 12A(1)(ac)(vi),Section 12AB,Section 2(15)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, VARANASI CIRCUIT BENCH, VARANASI

Before: SHRI. SUDHANSHU SRIVASTAVA & SHRI NIKHIL CHOUDHARY

For Appellant: Shri Anoop Tandon, C.A

PER SUDHANSHU SRIVASTAVA, J.M.: This appeal has been preferred by the Assessee against the order dated 23.04.2024, passed by the Learned Commissioner of Income Tax (Exemption), Lucknow [Ld. CIT(E)] rejecting the Application of the assessee for Registration 12A(1)(ac)(iii) of the Income Tax Act, 1961 (hereinafter called 'the Act’).

2.0 The brief facts of the case are that the assessee is a Charitable Trust registered with the Office of the Sub-Registrar under the Registration Act, 1908 on 19.03.2014 and the assessee-Trust is primarily engaged in carrying out educational activities through its own Institution, namely ‘Hari Bandhu

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International School’, ‘Hari Bandhu Nursing & Paramedical Institute’ and ‘Hari Bandhu ITI College’. The assessee-Trust was granted provisional registration under section 12A(1)(ac)(vi) of the Act by the Ld. CIT(E), Lucknow on 27.05.2021, vide Registration No.AABTH3842CE20214 for the assessment year 2022-23 to assessment year 2024-25. Since the provisional registration granted by the Ld. CIT(E) was valid upto assessment year 2024- 25, the assessee filed an application dated 30.10.2023 in Form No.10AB before the Ld. CIT(E) for renewal of the registration under section 12A of the Act. However, the Ld. CIT(E) rejected the application of the assessee for registration under section 12A of the Act observing that in the absence of reply to the enquiry letters sent by the Ld. CIT(E), requiring the assessee to furnish certain documents and information to verify the genuineness of the activities as well as the charitable nature and commencement of the activities, the charitable object and genuineness of the charitable activities of the Trust could not be proved and, therefore, the application of the assessee for registration under section 12A of the Act was liable to be rejected.

3.0 Aggrieved by the order of the Ld. CIT(E), the assessee- Trust is now in appeal before this Tribunal. The assessee has raised the following grounds of appeal:

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A. Ex-Party Order 1. The learned CIT (Exemption) erred in issuing the ex-party order without affording the appellant a reasonable opportunity to be heard. 2. The learned CIT (Exemption) failed to recognize the necessity of verifying whether proper notice had been served before issuing the ex-party order. Consequently, the order passed by the CIT (Exemption) may be subject to reversal. 3. The learned CIT (Exemption) did not adequately justify the extreme urgency for issuing the ex-party order. 4. The Learned CIT (Exemption) omitted to state in the order that the trust operates the school for charitable purposes. 5. Much of the information required by the Learned CIT (Exemption) such as trust deed, Audited Financial Statements were already available on the portal which was uploaded at the time of filing application dated 30.10.2023 but was not considered when the order was issued. B. Merit Available Information 6. Because the information requested in the notice were largely redundant and resubmission was inefficient. 7. Because orders should not necessarily be decided against the appellant even in their absence; all available materials must be duly considered. Insufficient Information

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8.

Because the learned CIT (Exemption) erred in not giving any finding as regards the claim of some of the activities being in nature of business activities causing registration to be rejected in pt.25 of notice. 9. Because the learned CIT (Exemption) erred in law as the activities of providing educational services under Section 2(15) of the IT Act, 1961, include incidental activities necessary for achieving the main objective of the trust. Absence of Material Evidence of Wrongdoing 10. Because the leamed CIT (Exemption) failed to provide evidence indicating that the trust is not functioning in accordance with its stated objectives or is involved in activities that contravene the provisions of section 12AB of IT Act, 1961. 11. Because the learned CIT (Exemption) failed to consider the audit report filed in Form 10BB/10B, which is crucial in determining the integrity of the trust's activities. 12. Because the learned CIT (Exemption) asserted that the absence of a reply from the assessee trust implies a failure to prove its charitable activities whereas burden of proof for existence of non-genuineness of activities lies with the tax authority, and mere non-response by the appellant does not shift this burden. Impact on Beneficiaries and Public Interest 13. Because the appellant is functioning to provide educational activities to young students upto secondary education and professional education, cancellation of

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certificate u/s 12AB would negatively impact its beneficiaries. Servant not a Tyrant 14. Because processual law of section 12AB is not to be a tyrant but a servant, not an obstruction but an aid to justice. 15. The Appellant craves leave to amend, alter or delete any of the above grounds of appeal. 4.0 During the course of hearing before us, the Ld. Authorized Representative for the assessee (Ld. A.R.) submitted that the Ld. CIT(E) has passed the order ex-parte qua the assessee without affording reasonable opportunity of hearing to the assessee-Trust. It was further submitted that the Ld. CIT(E) has passed the order in haste only after issuing two notices at short intervals. The Ld. A.R. prayed that the matter may be restored to the file of the Ld. CIT(E) and if an opportunity is given, the assessee will produce all the relevant documents sought for by the Ld. CIT(E) before him.

5.0 Per contra, the Ld. CIT(D.R.) opposed the prayer of the assessee for being given another opportunity and submitted that the appeal of the assessee may be dismissed.

6.0 We have heard both the parties and after having gone through the material on record, we note that the Ld. CIT (E) had rejected the application of the assessee for registration under

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section 12A of the Act ex-parte qua the assessee mainly in the absence of reply from the side of the assessee. Under these facts, we feel that one more opportunity should be given to the assessee to explain its case and furnish the requisite documents before the ld. CIT (E). We, therefore, set aside the order of the ld. CIT (E) and restore the matter to his file with the direction to consider the application of the assessee for registration under section 12A of the Act after giving proper and sufficient opportunity of being heard to the assessee.

7.0 In the final result, the appeal of the assessee stands allowed for statistical purposes.

Order pronounced in the open Court on 07/05/2026.

Sd/- Sd/- [NIKHIL CHOUDHARY] [SUDHANSHU SRIVASTAVA] ACCOUNTANT MEMBER JUDICIAL MEMBER

DATED:07/05/2026 JJ: Copy forwarded to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR By order

Assistant Registrar/DDO

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