HIDAYA EDUCATION TRUST,BHIWANDI vs. CIT EXEMPTION PUNE, PUNE

The assessee has raised the following grounds of appeal : “1) The learned CIT (Exemption) Pune erred in law and on facts in not granting registration u/s 12A of ITA, 1961, and rejecting the Application for the same.

Briefly stated, the facts of the case are that on receipt of the assessee’s application filed in Form No. 10AB u/s 12A(1)(ac)(iii) of the Act along with annexures thereto, with a view to verify the genuineness of the activities of the assessee and compliance to requirements of any other law for the time being in force, the Ld. CIT(E) issued notice on 10.11.2023 through ITBA portal which was duly served on the assessee requesting the assessee to upload certain information/clarification contained therein by 27.11.2023. As the assessee failed to respond, another notice was issued on 18.12.2023 seeking compliance by 26.12.2023. On verification of the details filed by the assessee in response to the said notice, the Ld. CIT(E) observed various discrepancies which were communicated to the assessee vide show cause notice dated 28.02.2024 seeking compliance by 06.03.2024. The said discrepancies pointed out by the Ld. CIT(E) are reproduced below : “2.2 "(i) As per the provisions of Rule 17A(2)(g) of the Income Tax Rules, 1962, the application in Form No.10AB shall be accompanied by the self certified copies of annual accounts relating to earlier three years or since inception, whichever is later. Thus, the annual accounts, at least for F.Y. 2019-20, 2020-21 and 2021-22 were required to be submitted along with the application itself. However, it is seen that you have furnished the annual accounts for F.Y. 2019-20, 2020-21 only. Thus, you have failed to comply with the provisions of Rule 17A(2)(g) of the Income Tax Rules, 1962. Furnish copies of FYs 2021-22 and 2022-23. (ii) Trust has raised loans. Nature/ purpose of the same and its utilisation for each of the institution / project along with copy of permission under section 36A of the Maharashtra Public Trust Act, 1950 from the Charity Commissioner has not been furnished.

1 The assessee filed its reply to the above show cause notice, however, the contentions of the assessee were not found to be acceptable by the Ld. CIT(E) and he proceeded to pass the impugned order rejecting the application of the assessee and also cancelling the provisional registration granted earlier by observing as under : “3. The assessee furnished the compliance to the said notice. As noticed from the financial statements, the assessee has raised considerable loans which stood at Rs. 20.55 Lakhs as on 31/03/2023. The assessee was requested to furnish the copy of permission from the Charity Commissioner under the provisions of section 36A of the Maharashtra Public Trusts Act, 1950. The assessee has contended that loan from trustee was taken on emergency basis and as per section 36A of the Maharashtra Public Trust Act, 1950, trust need to take permission when it gives loan to trustee whereas in the assessee trust's case, trustee has given loan.

The contention of the trust is dule considered. However, the same is not acceptable. In this regard, provision of sec. 36A(3) is reproduced for ready reference:

In view of the above, the undersigned is not satisfied about the genuineness of activities of the assessee and compliance of requirements of any other law for the time being in force by the assessee as are material for the purpose of achieving its objects.

In view of the above, the application filed by the assessee is hereby rejected and the provisional registration granted on 08/02/2022 under section 12AB read with section 12A(1)(ac) (vi) of the Income Tax Act, 1961 is hereby cancelled.”

Dissatisfied, the assessee is in appeal before the Tribunal and all the grounds of appeal relate thereto.

The Ld. AR submitted that the Ld. CIT(E) has rejected the assessee’s application u/s 12A of the Act mainly on account of loan taken by the assessee trust from its trustees without taking permission from the charity commissioner under the provisions of section 36A of the Maharashtra Public Trusts Act, 1950. She contended that the Ld. CIT(E) has not granted sufficient time to the assessee to file its reply to the query raised vide show cause notice dated 28.02.2024. Further, the Ld. CIT(E) has not considered the assessee’s submission(s) wherein the loan transaction has been explained by the assessee and therefore prayed that in the interest of justice, the assessee may be provided with an opportunity to explain and substantiate its case before the Ld. CIT(E) by filing all the requisite details/ documents to his satisfaction and requested that the matter may be restored back to his file for fresh adjudication on merits.

The Ld. DR, on the other hand, supported the order of the Ld. CIT(E). He submitted that the Ld. CIT(E) has rightly rejected the assessee’s application considering the submission of the assessee therefore his order should be upheld.

We have heard the heard the Ld. Representatives of the parties and perused the material available on record. The Ld. CIT(E) has rejected the assessee’s application and also cancelled the provisional registration granted earlier for the reasons reproduced in the preceding paragraph. Before us, the ld. AR has taken a plea that the assessee was given very short notice to file its compliance to the queries raised by the Ld. CIT(E) which is in violation of principle of natural justice and that some of the submissions of the assessee in 5 the impugned query on loan transactions have not been considered by the Ld. CIT(E). The Ld. AR has requested for setting aside the matter to the file of the Ld. CIT(E) for fresh adjudication on merits after affording an opportunity of hearing to the assessee to explain and substantiate its case. Considering the totality of the facts and in the circumstances of the case, we deem it fit and proper, in the interest of justice, to set aside the impugned order of the Ld. CIT(E) and restore the matter to his file with a direction to decide the assessee’s application for registration u/s 12A of the Act afresh on merits as per fact and law after affording one more opportunity of hearing to the assessee. The assessee is also hereby directed to make its submissions before the Ld. CIT(E) on the appointed date without seeking any adjournment under any pretext unless required for the sufficient cause, failing which the Ld. CIT(E) shall be at liberty to pass appropriate order as per law. We hold and direct accordingly. The grounds of appeal raised by the assessee are accordingly allowed for statistical purposes.

In the result, the appeal filed by the assessee is treated as allowed for statistical purposes.

अपील र्थी / The Appellant. 2. प्रत्यर्थी / The Respondent. 3. The Pr. CIT concerned. 4. दिभ गीय प्रदिदनदि, आयकर अपीलीय अदिकरण, “ए” बेंच, पुणे / DR, ITAT, “A” Bench, Pune. 5. ग र्ड फ़ इल / Guard File.