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Facts
The assessee, Zarina Foundation, filed an application for registration under section 12A(1)(ac)(vi)(B) of the Act, which was deemed erroneous and cancelled by the Ld. CIT(E) as the correct provision was 12A(1)(ac)(iii). The assessee claims this was due to technical constraints in the online portal. The Ld. CIT(E) cancelled the application without issuing a show-cause notice.
Held
The Tribunal held that the rejection of the application solely on a procedural ground, without a show-cause notice, violates the principles of natural justice. The Ld. DR could not produce any show-cause notice for the error.
Key Issues
Whether the cancellation of the registration application by the Ld. CIT(E) without issuing a show-cause notice for a technical glitch in quoting the section is valid and in compliance with principles of natural justice.
Sections Cited
12A, 80G(5), 12AB, 10AB, 12A(1)(ac)(vi)(B), 12A(1)(ac)(iii)
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Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI ANIKESH BANERJEE & MISS. PADMAVATHY S
Both the appeals of the assessee were filed against the order of the Learned Commissioner of Income-tax (Exemption), Mumbai [for brevity, ‘Ld.CIT(E)] passed under sections 12A & 80G(5) of the Act, date of both the orders is 27/09/2024. 2. Considering the facts and issue in the present appeals were heard together. is taken as the lead case.
2 ITA 6276 & 6276/Mum/2024 Zarina Trust The ground raised by the assessee in this appeal are as follows: -
1. (a). The order passed u/s. 12AB of the Act is invalid, non-est and bad in law. (b). The Ld. CIT(Exemptions) erred in law and facts in rejecting the application u's 10AB without granting the adequate opportunity of being heard and merely on technical glitch.
2. All the above grounds are independent and without prejudice to each other.
3. The Appellant craves leave to add, amend, delete and modify the above grounds of appeal.”
Briefly stated, the facts are that the assessee is a charitable trust to develop, establish, promote, facilitate, promotion, improvement of educational, social, cultural, economic and medical relief to the poor and downtrodden and advancement of any other charitable and developmental objects of general public utility and community welfare as also to promote social welfare activities intended for the general welfare of the public such as welfare of the destitute, family women, children and the handicapped and assistance in case of un- employment, old age, sickness, disablement and other cases of deserving needs. The assessee has obtained the provisional registration on 22/06/2022 valid for the A.Ys 2023-24to 2025-26 and subsequently claimed exemption by filing ITR-7 for A.Y. 2023-24 i.e. before applying for regularisation of registration in Form 10AB of the Act. Finally, the assessee applied for regularization of registration on 10AB, but the Ld.CIT(E) found that the application is erroneous as the assessee applied under section 12A(1)(ac)((vi)(B) of the Act which is not at all applicable for the assessee. The said registration application was cancelled by an order dated 27/09/2024. In consequence, another application was filed under section 80G(5) due to non acceptance of application under section 12A, the registration 3 ITA 6276 & 6276/Mum/2024 Zarina Trust application for 80G(5) was duly cancelled. Being aggrieved on the impugned order, the assessee filed an appeal before us.
The Ld.AR argued and filed a paper book containing pages 1 to 81, which is kept on the record. The Ld.AR stated the date-wise instance of the assessee’s application, which is tabulated as under:- Sr.No. Issue Date 1. Trust incorporated 29/04/2022 2. Activity started 16/09/2022 3. Provisional registration granted 22/06/2022 4. First Application filed for permanent regn. 13/03/2023 5. First Application rejected 25/09/2023 6. Second Application filed for permanent regn. 20/03/2024 7. Second Application rejected 27/09/2024 The Ld.AR stated that the assessee previously filed an application, but discrepancy found in the trust deed by the Ld.CIT(E). Accordingly, the petition was duly rejected. Finally, the assessee amended the specific provision in the trust deed and filed second application on 20/03/2024. The assessee tried to file this application by perusing section 12A(1)(ac)(iii) of the Act, but in the on-line system, the said section was not accepted. Considering this, the assessee informed the income-tax authority and finally a letter was issued to the CPC, Bengaluru, related to error caused in application for the registration. The copy of letters are duly annexed in APB pages 76-81. But no assistance or reply was received from revenue’s side. Due to restriction of time limit, as per section 12(A)(1)(ac)(iii) of the Act, the assessee filed the application by mentioning the wrong section. He 4 ITA 6276 & 6276/Mum/2024 Zarina Trust further mentioned that in none of the show cause noticesissued by the Ld.CIT(E), it was revealed that the assessee applied under a wrong section in the application form. Finally, when the order was received, the assessee found that the said application was rejected due to quotingthe wrong section. So, the Ld.AR prayed for restoring the matter to the file of the Ld.CIT(E) for accepting the application, as applied for by the assessee.
The Ld.DR argued and only relied on the order of the revenue authorities.
We have heard the rival submissions and perused the documents available on record. Upon consideration, we find that the assessee inadvertently applied for regularization of registration under the incorrect provision, namely Section 12A(1)(ac)(vii)(B) of the Act, whereas the correct provision applicable to the assessee's case is Section 12A(1)(ac)(iii) of the Act. Despite this error, no show- cause notice was issued by the Ld. CIT(E) highlighting the discrepancy in the application.It is observed that the assessee was in a position to correctly quote the applicable section while submitting the application; however, due to technical constraints in the online portal, the correct section could not be selected. The application was ultimately rejected by the Ld. CIT(E) solely on this procedural ground, without adjudicating any substantive issue or issuing a show-cause notice to the assessee in respect thereof. This, in our considered opinion, renders the rejection order unsustainable in law, as it suffers from a violation of the principles of natural justice. The Ld. DR could not produce any show-cause notice issued by the Ld. CIT(E) for the said error. Furthermore, the letter submitted by the assessee to the CPC highlighting the technical difficulty was not addressed. Thus, it is evident that reasonable opportunity of being heard was denied to the assessee.
5 ITA 6276 & 6276/Mum/2024 Zarina Trust The Ld. AR placed reliance on the decisions of the Co-ordinate Bench of the ITAT, Pune Bench, in the cases of Torna Rajgad Parisar Samajonnati Nyas vs. CIT, (2025) 170 taxmann.com 720 and Deodhar Education and Vocational Academy vs. CIT (2025) 172 taxmann.com 312, as well as the decision of the Co-ordinate Bench of the ITAT, Surat Bench in Swaminarayan Gadi Trust vs. CIT(E) (2024) 162 taxmann.com 772.Respectfully following the above precedents, and considering the totality of facts and in the interest of justice, we consider it appropriate to remand the matter to the file of the Ld. CIT(E) with a direction to treat the application already filed by the assessee as one made under clause (iii) of Section 12A(1)(ac) of the Act, instead of clause (vi), and to adjudicate the same afresh in accordance with law after providing a reasonable opportunity of being heard. The assessee is also directed to comply with any notices issued by the Ld. CIT(E) in this regard and to furnish all necessary supporting documents/evidence with due diligence in support of its application for registration. Accordingly, the grounds raised in the appeal by the assessee are allowed.
6. Insofar as the application under Section 80G(5) of the Act is concerned, the decision on the application under Section 12A shall apply mutatis mutandis to this issue as well. Hence, Ld. CIT(E) with similar directions as stated above.