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Facts
The assessee, Laksh Seva Foundation, applied for renewal of registration under Section 12AB of the Income Tax Act, 1961. The CIT(E) rejected the application stating the wrong section code was selected in Form 10AB.
Held
The Tribunal held that the CIT(E)'s order was bereft of reason and violated the principles of natural justice by not providing an opportunity of being heard. The Tribunal opined that the assessee had likely applied the correct section code.
Key Issues
Whether the rejection of the registration renewal application by the CIT(E) without providing a show cause notice and adequate reasoning is sustainable in law?
Sections Cited
12AB, 12A, 10AB, 10AC, 10AD
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A’’BENCH: BANGALORE
Before: SHRI PRASHANT MAHARISHI & SHRI KESHAV DUBEY
PER KESHAV DUBEY, JUDICIAL MEMBER:
This appeal at the instance of the assessee is directed against the order of ld. CIT(E) Bangalore dated 27.1.2025 vide DIN & Notice No. ITBA/EXMF/EXM44/2023-24/1054774935(1) rejecting the application dated 29/02/2024 filed in form 10AB of the Income Tax Act, 1961 (in short “The Act").
The assessee has raised the following grounds of appeal:
Brief facts of the case are that the assessee trust being established vide trust deed dated 24.12.2021 registered before the Jayanagar Senior Sub-Registrar office, Bangalore. For the financial year 2021-22 relevant for assessment year 2022-23, as the trust did not commence any activity and therefore, no income tax return Laksh Seva Foundation, Bengaluru Page 3 of 5 was filed for the said period. The assessee trust initially applied for the provisional registration before the ld. CIT(E) in form 10A under section 12A (1)(ac)(vi) of the Act on 24.3.2022. Thereafter, the assessee had been granted provisional registration in form 10AC u/s 12A(1)(ac)(vi) of the Act on 31.3.2022 effective from AY 2022-23 to AY 2024-25. The assessee trust thereafter commenced its activity on 5.5.2022 and accordingly applied for final registration in form 10AB on 3.2.2023 u/s 12A(1)(ac)(iii) of the Act. Thereafter, ld. CIT(E) Bangalore had granted registration in form 10AD u/s 12A(1)(ac)(iii) of the Act on 1.8.2023 effective from 2022-23 to AY 2026-27 subject to conditions mentioned in annexure to form 10AD.
3.1 Finally, the assessee trust filed form 10AB on 29.9.2024 u/s 12A(1)(ac)(ii) of the Act for the 1st renewal of registration. However, the ld. CIT(E) Bangalore vide order dated 27.1.2025 in form no.10AD rejected the application on the ground that the assessee had selected the wrong section code while applying form 10AB for registration u/s 12A(1)(ac)(ii) of the Act.
Aggrieved by the order of ld. CIT(E), the assessee has filed the present appeal before this Tribunal. The assessee has also filed a paper book comprising 46 pages containing therein various documents/orders/notices relevant for the purpose of its case which were available before the ITO(E) as well as ld. CIT(E).
Before us the ld. A.R. of the assessee vehemently submitted that the ld. CIT(E) erred in rejecting the application without even providing a reasonable opportunity of being heard by way of issuing show cause notice to the assessee. Further, ld. A.R. of the assessee submitted that the assessee trust has in fact applied in a correct section code and is eligible for registration u/s 12AB of the Act as Laksh Seva Foundation, Bengaluru Page 4 of 5 the trust has been carrying on the charitable activities since its inception.
Ld. D.R. on the other hand, supported the order of the authorities below.
We have heard the rival submissions and perused the materials available on record. On going through the order of ld. CIT(E), we find that the order passed by the ld. CIT(A) is bereft of reason. The CIT(E) even not discussed/mentioned about what is the correct section code in which the assessee should have applied for registration and the reason for the same. We are of the considered opinion that another facet of the principles of natural justice is “right to reason”. The ld. CIT(E) has not made any discussion as to how the section code selected by the assessee trust was wrong. Application of mind is best demonstrated by disclosure of mind by the authority making the order and the disclosure is best done by recording the reasons that led the authority to pass the order in question. In the absence of reasons in support of the order it is difficult to assume that the authority had properly applied his/her mind before passing the order. Further, we also take a note of the fact that the ld. CIT(E) before rejecting the application in Form 10AB even did not provide any opportunity of being heard to the assessee trust by way of issuing show cause notice to the assessee which is another violation of the principles of natural justice. On going through the provision of the Act, we are of the opinion that the assessee trust had in fact applied for the correct section code for the first renewal of the registration. In view of the above, we remit the entire issue back to the file of ld. CIT(E) to decide afresh by taking into consideration the application in form 10AB filed on 29.9.2024 as having filed in correct section code and pass the necessary order in accordance with law. Needless to say, Laksh Seva Foundation, Bengaluru Page 5 of 5 reasonable opportunity of being heard must be granted to the assessee. The assessee is also directed to co-operate with the proceedings and produce/furnish such documents/record as called for by the ld. CIT(E) for the purposes of granting renewal of registration. It is ordered accordingly.
In the result, appeal filed by the assessee is partly allowed for statistical purposes.