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Facts
M/s. Tathaiah Swami Ashram Trust, which held provisional registration under Section 12AB of the Income Tax Act, applied for permanent registration. The Commissioner of Income Tax (Exemptions) rejected this application, contending that the majority of the trust's activities were commercial in nature, thereby violating the provisions of Section 12AB.
Held
The Tribunal found that the CIT(E)'s rejection order lacked specific instances of commercial activities and cogent reasoning, thus violating principles of natural justice. It observed that the trust's financial statements showed primary receipts from donations and interest on fixed deposits, with all expenditures being temple-related. The Tribunal set aside the CIT(E)'s order and remanded the matter for de novo adjudication, instructing the CIT(E) to provide a reasonable opportunity to the assessee and consider any additional evidence.
Key Issues
Whether the CIT(E)'s rejection of the assessee's application for permanent registration under Section 12AB, based on alleged commercial activities, was justified and complied with principles of natural justice.
Sections Cited
12AB
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Income Tax Appellate Tribunal, Hyderabad ‘B’ Bench, Hyderabad
Before: SHRI VIJAY PAL RAO & SHRI MADHUSUDAN SAWDIA
आदेश/ORDER PER MADHUSUDAN SAWDIA, A.M. : This appeal is filed by M/s. Tathaiah Swami Ashram Trust (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Exemptions), Hyderabad (“Ld. CIT(E)”), dated 24.10.2024.
The assessee has raised the following grounds of appeal :
1. 3. The brief facts of the case are that, the assessee trust was granted provisional registration under section 12AB of the Income Tax Act, 1961 (“the Act”) for the period from Assessment Year 2021–22 to Assessment Year 2023–24 vide order in Form No.10AC dated 27.05.2021. Subsequently, the assessee applied for permanent registration under section 12AB of the Act in Form No.10AB. The Ld. CIT(E) rejected the application of the assessee vide his order in Form No.10AD dated 24.10.2024 on the ground that the majority of the activities carried out by the trust were commercial in nature, thereby violating the provisions of section 12AB of the Act.
4. Aggrieved by the order of Ld. CIT( E ), the assessee is in appeal before us. The Ld. AR submitted that the assessee trust is maintaining a temple, and all receipts and expenditure pertain only to temple-related activities. He invited our attention to the financial statements of the trust for Financial Years 2020–21 to 2022–23 placed at page nos. 21 to 32 of the paper book. It was pointed out that during Financial Year 2020–21, the assessee had no receipts; during Financial Year 2021–22, the assessee received donations; and during Financial Year 2022–23, the assessee received donations and interest on fixed deposits. It was further submitted that the expenditure incurred by the trust related entirely to temple activities, and there was no evidence to suggest that any commercial activity had been undertaken. The Ld. AR argued that the Ld. CIT(E), without identifying any specific deficiency in the submissions or supporting documents furnished by the assessee, made a bald observation that the activities were commercial in nature. According to him, the impugned order was passed without proper consideration of the evidence and is a non-speaking order. Accordingly, he prayed that the matter may be remitted back to the file of the Ld. CIT(E) for fresh consideration after granting adequate opportunity to the assessee, with liberty to file additional evidence if necessary.
Per contra, the Learned Departmental Representative (“Ld. DR”) relied upon the order of the Ld. CIT(E) and contended that the rejection of registration was justified in view of the provisions of section 12AB of the Act.
We have considered the rival submissions and perused the material placed on record. We have gone through the page nos. 21 to 32 of the paper book and find that, the financial statements of the assessee trust for Financial Years 2020–21 to 2022–23 indicate that the primary receipts were from donations and, in the later year, interest on fixed deposits. The expenditure disclosed in the accounts pertains to temple-related activities. On perusal of the impugned order of the Ld. CIT(E), we note that no specific instances of commercial activities have been brought out, nor any cogent reasoning provided to establish that the trust was engaged in commercial activities. In our considered opinion, the impugned order suffers from lack of reasoning and does not address the submissions or documents furnished by the assessee. The principles of natural justice require that the assessee be confronted with the basis of adverse findings, and a reasoned order must be passed after considering the evidence. Since this has not been done in the present case, we deem it fit and proper to set aside the impugned order to the file of the Ld. CIT(E) for de novo adjudication. The Ld. CIT(E) shall grant reasonable opportunity of being heard to the assessee and consider any additional evidence filed, before deciding the issue afresh in accordance with law.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 19th Aug., 2025.