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Facts
The assessee, Shree Nidhi Trust, had applied for approval of registration under section 80G(5) of the Income Tax Act. The CIT(E) rejected the application citing incomplete documents and violations of sections 80G(5)(ii) and 80G(5B). A show cause notice was issued with a very short reply time, and the application was rejected.
Held
The Tribunal held that the CIT(E) did not provide sufficient opportunity for hearing to the assessee, violating the principles of natural justice. The rejection order was deemed not legally sustainable.
Key Issues
Whether the rejection of the application for registration under section 80G(5) by the CIT(E) was done without providing adequate opportunity of hearing, thereby violating principles of natural justice.
Sections Cited
80G(5), 80G(5)(ii), 80G(5B), 80G(5)(iii)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
Before: SHRI B R BASKARAN & SHRI RAJ KUMAR CHAUHAN
O R D E R PER RAJ KUMAR CHAUHAN (J.M.): 1. This appeal is filed by the appellant/assessee against the order dated 28.09.2024 of Learned Commissioner of Income Tax (Exemption), Mumbai [hereinafter referred to as the “CIT(E)”], wherein the Ld. CIT(E) has rejected the appellant’s application for approval of registration u/s 80G(5) of the Income Tax Act Page | 1
The assessee was granted provisional approval and has filed application in Form 10AB for regularization of provisional approval granted by the CPC in Form 10AC under clause (iii) of first proviso to sub-section (5) of section 80G of the Act. On verification of Form 10AB filed by the assessee, the Ld. CIT(E) found that the application was not complete and all the documents required to be accompanying the application were not furnished, hence a notice was issued to the assessee on 05.07.2024 requesting the assessee to furnish the complete set of documents mentioned in Rule 11AA. A reminder notice was issued on 29.08.2024 and the assessee trust had made submission on 01.09.2024 and 02.09.2024. However after going through the submission made by assessee, the Ld. CIT(E) has noticed that the assessee trust has made violation of section 80G(5)(ii) and 80G(5B) of the Act. A show cause notice was issued regarding the above mentioned violations vide notice dated 26.09.2024. In response the assessee vide letter dated 27.09.2025 under protest stating that the notice has given less than 24 hours time to reply and this was in violation of principle of natural justice. However, despite the protest made by assessee, the Ld. CIT(A) proceeded to reject the application on 28.09.2024.
Aggrieved by the order of Ld. CIT(E), Assessee preferred the present appeal before us and has raised the following grounds of appeal:-
1. Learned CIT Exemptions Mumbai erred in rejecting the assessee trust application u/s 80G(5) based surmises and conjunctures.
2. The Learned CIT Exemptions Mumbai erred in ignoring the scheme of the INCOME TAX ACT which allows the assessee to spend up to 5% of its revenue towards religious activity u/s 80G(58) and rejecting the application based on surmises and conjectures.
3. The Learned CIT Exemptions Mumbai erred in ignoring the fact that the assessee trust has not spent a single rupee towards religious objects in the past two years since its inception and has also provided an affidavit from the trustees that they do not intend to spend more than 5% towards public religious activity.
4. The Learned CIT Exemptions Mumbai erred in not giving enough opportunity and rejected the application by giving less than 24 hours to reply to the Show Cause Notice (Show cause notice issued on 26th September 2024 evening and the reply to be filed by 27th September 2024) thought the application in form 10AB was filed on 23rd March 2024.
5. The assessee eves leave to add/alter/amend or delete any of the above grounds of appeal.
We have heard Ld AR and DR and examined the record. At the outset, it is pointed out by Ld. AR that the Ld. CIT(A) has passed the impugned Page | 3
order in a very hurried manner without giving sufficient opportunity to the assessee which is evident from the show cause notice issued on 26.09.2024 calling reply to be filed by 27.09.2024 and without giving sufficient time has rejected the application on 28.09.2024, therefore the impugned order passed by the Ld. CIT(E) is not legally sustainable in the eyes of law. Ld. AR requested that the impugned order be set aside and restore to the file to Ld. CIT(E) for giving proper opportunity of hearing to the assessee for furnishing the required documents, if any, in respect of regularisation of the provisional approval u/s 80G of the Act.
On the other hand, Ld. DR supported the impugned order of Ld. CIT(E) and stating that the appeal is liable to be dismissed.
We have considered the rival submissions of both the parties. It is a settled law and legislative intent that the revenue authorities are bound to abide the principal of natural justice and it is mandatory to give sufficient opportunity to the assessee of being heard before deciding the matter. It is evident from the above facts and circumstances that the show cause notice was issued on 26.09.2024 calling reply filed by 27.09.2024 and without giving sufficient time to the assessee, has rejected the application on 28.09.2024 despite the protest raised by assessee. This fact shows Page | 4
that the assessee has not been given sufficient opportunity of hearing which has resulted into miscarriage of justice, therefore impugned order passed by the Ld. CIT(E) is not legally sustainable in the eyes of law.
For these reasons, we set aside the impugned order passed by Ld. CIT(E) and restore the matter to the file of Ld. CIT(E) for fresh adjudication of the case of assessee for grant of approval u/s 80G(5)(iii) of the Act after giving proper opportunity of hearing to the assessee. The appellant/assessee shall present its case before the Ld. CIT(E) within 90 days of this order. The impugned order is accordingly set aside and appeal filed by the assessee is allowed in above terms.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 25.03.2025.