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Facts
The assessee filed an application for registration under Section 12AB of the Income Tax Act, 1961. The CIT(E) rejected this application, citing non-commencement of substantial activities, failure to furnish current year financials, and lack of documentary evidence for charitable activities, concluding the application was premature.
Held
The Income Tax Appellate Tribunal (ITAT) held that the CIT(E) erred in rejecting the application without affording proper opportunity to the assessee. It recognized that initial years might involve preparatory work and activities might not be substantial. The ITAT set aside the CIT(E)'s order and remanded the matter for fresh consideration, directing the CIT(E) to provide due opportunity to the assessee to furnish details and explanations.
Key Issues
Whether the CIT(E) was justified in rejecting the application for registration under Section 12AB based on non-commencement of activities or insufficient expenditure without providing the assessee a proper opportunity to be heard or submit documents.
Sections Cited
12AB
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Income Tax Appellate Tribunal, ‘B’ BENCH, BANGALORE
Before: SHRI WASEEM AHMED & SHRI SOUNDARARAJAN K
PER WASEEM AHMED, ACCOUNTANT MEMBER:
This is an appeal filed by the assessee against the order passed by the CIT(E), Bangalore dated 13/12/2024 in DIN No. ITBA/EXM/F/EXM45/2024-25/1071195117(1).
This appeal by the assessee is directed against the order of the learned Commissioner of Income Tax (Exemptions), Bangalore [CIT(E)], dated 13.12.2024, whereby the application filed by the assessee under section 12AB of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) was rejected.
The assessee filed an application for registration under section 12AB of the Act. The ld. CIT(E) rejected the application primarily on the following grounds: • The assessee had not carried out any substantial activity in alignment with its stated objects during the financial year 2023– 24, except for incurring capital expenditure of ₹1,80,000 for the purchase of a testing machine;
• The assessee failed to furnish current year financials and details of activities undertaken;
• No substantial expenditure was incurred towards its objects, and there was a lack of documentary evidence or proof of charitable activities.
Based on the above, the ld. CIT(E) held that the application for the regular registration was premature and rejected the same due to non-commencement or insufficient activities.
Being aggrieved by the order of learned CIT exemption, the assessee is in appeal before us.
Before us, the learned Departmental Representative (DR) reiterated the findings of the ld. CIT(E) but stated that the Department has no objection if the matter is remanded to the ld. CIT(E) for fresh consideration as per law.
We have carefully considered the submissions of the learned DR and examined the materials on record. From the preceding discussion, we note that the rejection of the application for regular registration . solely on the basis of non-commencement or insufficiency of activities or substantial expenditure has not been incurred is not consistent with the scheme of the Act. It is necessary to appreciate the fact that initial years may involve lot of preparatory work. Therefore, the activities may not be substantial during the initial heirs. Furthermore, the learned CIT exemption has also observed that the necessary documents justifying the activities undertaken by the assessee were not furnished. In view of the above, we are of the considered opinion that the ld. CIT(E) erred in rejecting the assessee’s application without affording a proper opportunity or seeking clarifications regarding the intended activities. In the interest of justice, we therefore deem it appropriate to set aside the impugned order and restore the matter to the file of the CIT(E) with a direction to re-examine the application afresh. The CIT(E) shall grant due opportunity to the assessee to furnish the relevant details, documents, and explanations, and shall pass a speaking order in accordance with law. Hence, the ground of appeal of the assessee is allowed for statistical purposes.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in court on day of May, 2025