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Facts
The assessee, a trust registered for conservation of Crabs and welfare programs, applied for registration under section 12AB of the Income Tax Act. The CIT(E) rejected the application, stating the trust was for the benefit of members and not the public.
Held
The Tribunal held that the CIT(E) passed a stereotyped order without proper inquiry or confronting the assessee with findings, violating the principles of natural justice. The CIT(E) also wrongly assumed authority to decide on utilization of funds at the stage of registration.
Key Issues
Whether the CIT(E) correctly rejected the application for registration under Section 12AB by making unilateral conclusions without affording an opportunity of being heard and without conducting due inquiry.
Sections Cited
12A, 12AB, 11, 2(15), 12 AB(1)(b)(i)
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Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI
Before: HON’BLE SHRI MANU KUMAR GIRI & HON’BLE SHRI AMITABH SHUKLA
Assessment Years: 2021-22 M/s.Crab Meat Processors Association, Commissioner of Income Tax No.18, Tuticorin Cooperative Industrial (Exemption), Estate Limited, Korampallam, Tuticorin, Chennai. Tamil Nadu-628 101. [PAN: AACAC8490R] (प्रत्यर्थी/Respondent) (अपीलार्थी/Appellant) अपीलार्थी की ओर से/ Assessee by : Shri D.Anand, Advocate प्रत्यर्थी की ओर से /Revenue by : Ms.E.Pavuna Sundari, CIT सुनवाई की तारीख/Date of Hearing : 13.08.2025 घोषणा की तारीख /Date of Pronouncement : 20.08.2025 आदेश / O R D E R PER AMITABH SHUKLA, A.M :
This appeal is filed by the assessee against the order bearing DIN & Order No.ITBA / EXM / F / EXM45 / 2024-25 / 1071551425(1) dated 24.12.2024 of the Learned Commissioner of Income Tax(Exemption) [herein after “CIT(E), Chennai for the assessment year 2021-22. The reference to the word “Act” in this order hereinafter shall mean the Income Tax Act, 1961 as amended from time to time. 2.0 The only issue raised through its grounds of appeal is regarding the denial of exemption u/s 12A by the Ld.CIT(E ) on the premise that the assessee trust was existing for the mutual benefit of its members and not for public. 3.0 Brief facts of the case are that the assessee trust, registered under the society Act has been found with the objective of conducting various activities at the field level with regard to conservation of Crabs in the Palk Bay and coordinate with stake holders comprising fisher folks, government agencies and policy makers with regard to sustainable fishing and conservation of marine life ecology. The trust also endeavours to implement welfare program in the area of education, health and sanitation in the coastal villages located in the Palk Bay area. The assessee trust was in possession of a provisional registration granted by the Revenue. Vide its application dated 18.06.2024 in Form 12AB it had applied for grant of registration u/s 12AB of the Act. The impugned application was rejected by the Ld.CIT(E) through its order dated 24.12.2024 which is being contested before us. 4.0 The Ld.Counsel for the assessee has argued that the Ld.CIT(E) has totally misread the facts of its case while presuming that it is engaged in any kind of commercial activity and not in any activity comprising relief to poor, education, medical relief, preservation of environment and advancement of any other object of general public utility. It has been argued that the conclusion drawn that objects and activities of trust are for benefit of members only and not for any general public as well as the Page - 2 - of 5 application of principle of mutuality is unfounded and unwarranted. It has been argued that no credible evidence has been brought on records by the Ld.CIT(E ) to lend credence to the above allegation. Without prejudice, it has also argued that no specific show cause was given before arriving at above decision. The Ld.Counsel has also argued that at para 4.4 on page 14 / 15 of his order Ld.CIT(E) has raised a presumption qua inappropriate application of funds by the appellant trust and which has been also included as a contributory factor for denial of its application for grant of registration. It is the case of the appellant assessee that the said action of the Ld.CIT(E) is not permissible by law. It has been argued that section 11 of the Act empowers Revenue to decide whether income of the trust has been utilized for purposes for which it was formed or not. It has been vehemently argued that no such authority is available with the CIT(E) at the stage of grant of registration u/s 12AB. The Ld.Counsel for the assessee has also argued that section 12. AB(1)(b)(i) empowers a Ld.CIT(E) to call for documents or information from the trust and / or conduct enquiries upon the receipt thereof before concluding whether assessee is entitled for registration or not. It has been submitted that no such documents were requisitioned from the assessee nor was any enquiry conducted before drawing adverse conclusions.
Page - 3 - of 5 5.0 Per contra, the Ld.DR relied upon the order Ld.CIT(E). 6.0 We have heard rival submissions in the light of material available on records. We find sufficient force in the arguments of the appellant assessee. At the outset, we have noted that the Ld.CIT(E) has passed a stereotyped order and by making theoretical presumptions. We have noted that the Ld.CIT(E) has not confirmed to the prescription contained in section 12 AB(1)(b)(i) which empowers a Ld.CIT(E) to call for documents or information from the trust and / or conduct enquiries upon the receipt thereof before concluding whether assessee is entitled for registration or not. We have noted that in para 4.5 of his order the Ld.CIT(E ) has merely concluded that the activities of the trust qua relief of poor, education, medical relief, preservation of environment cannot be concluded as falling under definition of charitable as defined in section 2(15) of the Act. A unilateral conclusion cannot be basis for a judicious decision. It is trite law that opportunity of being heard is the basic right available to a litigant and cannot be taken away unilaterally. We have also noted from para 4.4 of the order that while examining financials of the appellant trust, the Ld.CIT(E ) has concluded that “…it is observed from the above that the applicant has income including receipt by way of subscription from members and foreign contributions. The applicant has spent expenses to the objective of the society i.e. for the benefit of community / members….”. Thus we are of the considered view that the Page - 4 - of 5 Ld.CIT( E ) has drawn unilateral conclusions without confronting the appellant assessee with his findings and without passing a speaking order. Accordingly, we set aside the order of the Ld.CIT(E ) and direct him to readjudicate the matter afresh by passing a speaking order, in accordance with law, and after giving due opportunity of being heard. The assessee shall comply with all the notices issued by the Ld.CIT(E ). Accordingly, all the grounds of appeal raised by the assessee are allowed for statistical purposes. 7.0 In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced on 20th , Aug-2025 at Chennai. Sd/- Sd/- (मनु कुमार धिरर) (अधमताभ शुक्ला) (MANU KUMAR GIRI) (AMITABH SHUKLA) न्याधयक सदस्य / Judicial Member लेखा सदस्य /Accountant Member चेन्नई/Chennai, धदनांक/Dated: 20th , Aug-2025. KB/- आदेश की प्रतितिति अग्रेतिि/Copy to: 1. अिीिार्थी/Appellant 2. प्रत्यर्थी/Respondent 3. आयकर आयुक्त/CIT - Chennai/Coimbatore/Madurai/Salem. 4. तिभागीय प्रतितिति/DR 5. गार्ड फाईि/GF
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