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Facts
The assessee, a charitable trust, applied for regular registration under Section 12AB of the Income Tax Act. The AO and Range Head did not recommend registration, citing reasons like insufficient expenses, personal nature of expenses, and lack of proper agreements for premises. The CIT(E) rejected the application and cancelled provisional registration.
Held
The Tribunal held that the CIT(E) failed to provide the assessee with a show cause notice or an opportunity for personal hearing before rejecting the application, which violates the principles of natural justice and Section 12AB of the Act. Therefore, the order of the CIT(E) was quashed.
Key Issues
Whether the CIT(E) followed the mandatory procedure of issuing a show cause notice and providing an opportunity of hearing to the assessee before rejecting the registration application under Section 12AB of the Income Tax Act.
Sections Cited
12AB, 143(3)
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Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI PRASHANT MAHARISHI & SHRI SOUNDARARAJAN K.
Per Prashant Maharishi, Vice President
This appeal is filed by The Daughters of the heart of Mary Diya Kiran Community (the assessee/appellant) against the order passed by the ld. Commissioner of Income Tax (Exemptions), Bangalore [ld. CIT(E)]
dated 30.4.2025 u/s. 12AB of the Income Tax Act, 1961 [the Act]. The assessee is aggrieved and in appeal before us.
The brief facts of the case show that assessee is a charitable trust set up for child education, adult education programme, mahila mandals, hospital facilities, etc. This trust was set up on 25.10.2021. The trust was granted provisional registration on 18.1.2022 and subsequently the trust applied for regular registration u/s. 12AB by filing Form 10AB on 25.10.2024.
The ld. CIT(E) assigned the case to the jurisdictional AO [JAO] for verification. On verification the Range Head and the JAO did not recommend for registration. The main reason was that the trust is claiming to be a religious trust, but very less expenses are incurred and most of the expenditure are in the nature of personal expenses of nuns. It is also run in the premises of another trust viz., Institute of Social Service (Roshini Nilaya), but did not have any separate lease agreement nor NOC. Further the rent agreement dated 13.3.2025 is also not notarised. The ld. JAO and the Range Head also alleged that Institute of Social Service (Roshini Nilaya) is diverting resources for charitable purposes through this trust. The assessee’s representative could not clarify this issue satisfactorily and therefore the genuineness of the assessee trust was in question and the ld. AO and Range Head did not recommend for registration u/s. 12AB of the act. It was further stated that a relook on the registration of Institute of Social Service Roshini Nilaya, Mangalore, is also recommended.
Based on the above recommendation, the ld. CIT(E) rejected the application as well as cancelled the provisional registration granted. Therefore the appeal is in appeal.
We have carefully heard the rival contentions. We find that in this case the ld. CIT(E) neither issued any show cause notice nor gave any opportunity of personal hearing to the assessee. According to the provisions of section 12AB of the Act, the Commissioner is duty bound, on receipt of the application, to pass an order in writing, registering the trust for a period of five years. Before granting the registration, he is duty bound to call for documents or information from the trust or make such enquiries as he thinks necessary in order to satisfy himself about the genuineness of the activities of the trust and whether the trust has complied with the requirement of other law as are material for the purpose of achieving the objects of the trust. After satisfying himself as above, he is duty bound to pass an order in writing granting the registration to the trust. The situation may also arise that on calling for documents and after making enquiry, he may not be satisfied about the genuineness of the activities of the trust as well compliance with any other law. Then, he has to pass an order in writing rejecting such application and also cancelling the provisional registration. But the necessary pre-condition before rejection is that he must afford a reasonable opportunity of being heard to the assessee. This is because of the cardinal principles of natural justice that before deciding against the assessee, he must be heard giving him reasonable opportunity.
In the present case, neither the ld. CIT(E) issued any show cause notice confronting the enquiry of JAO and the recommendations of the Range Head, nor afforded an opportunity of personal hearing to the assessee. In one page order, the ld. CIT(E) reproduced the report of the AO not recommending the registration in the case of the trust, but also a relook on the registration of the other Institute. After reproduction of the same, in one line assessee’s application was rejected. This is in clear violation of the provisions of section 12AB of the Act. Therefore the order is quashed.
The issue is restored to the file of the ld. CIT(E) with a direction to grant an opportunity of personal hearing to the assessee within 30 days from the date of this order and also allow the assessee to make submission on the report of the AO and the Range Head afresh. Thereafter the ld. CIT(E) is directed to pass a speaking order deciding the fate of application of registration u/s. 12AB of the Act of the assessee.
In the result, the appeal of the assessee is allowed.
Pronounced in the open court on this 18th day of September, 2025.