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Facts
The assessee, a trust engaged in education, applied for registration under Section 12A(1)(ac) and approval under Section 80G(5). The CIT, Exemption rejected the applications, citing discrepancies in salary payables, high profit ratios, and non-compliance with other laws.
Held
The Tribunal found that the assessee had indeed filed a reply to the notices issued by the CIT, but this was not considered before the rejection. Therefore, the Tribunal set aside the CIT's order.
Key Issues
Whether the CIT erred in rejecting the application for registration and approval without considering the assessee's reply, and whether the grounds for rejection were valid.
Sections Cited
12A(1)(ac), 80G(5)
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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI MANISH BORAD & SHRI VINAY BHAMORE
ORDER PER VINAY BHAMORE, JM: Both the above captioned appeals filed by the assessee are directed against the separate orders dated 31.12.2022 passed by Ld. CIT, Exemption, Pune rejecting the application for registration in Form No.10AB under clause (iii) of section 12A(1)(ac) of the IT Act filed on 10.06.2022 and denying the application for approval in Form No.10AB under clause (iii) of first proviso to section 80G(5) of the IT Act filed on 10.06.2022.
& 523/PUN/2025 : 2. According to the Registry, there is a delay in filing of the present appeal. We are satisfied with the reasons mentioned in the affidavit for condonation that the applicant was prevented by sufficient cause for not filing the appeal within the prescribed time limit. After hearing Ld. DR, we condone the delay and proceed to adjudicate the appeal.
Facts of the case, in brief, are that the assessee is registered under the Bombay Public Trust Act, 1950 w.e.f. 08.03.1984 and is actively engaged in facilitating high quality education for a broad cross section of society. The assessee trust has applied for registration in Form 10AB under clause (iii) of section 12A(1)(ac) of the IT Act on 10.06.2022. With a view to verify the genuineness of activities of the assessee and compliance to requirements of any other law for the time being in force by the trust/institution as are material for the purpose of achieving its objects, a notice was issued on 02.09.2022 through ITBA portal requesting the assessee to upload various information detailed in notice on or before 19.09.2022. According to Ld. CIT, Exemption, Pune the assessee did not comply to the above notice. Therefore, Ld. CIT, Exemption, & 523/PUN/2025 Pune rejected the application filed by the assessee by observing as under :- “3. The assessee has claimed to have engaged in running various educational institutions. The financials indicate that the assessee is in the habit of maintaining extremely high provisions under the head Salary Payable. When the amounts included are examined, it appears that the same are in the range close to Rs.11 Crores. A cursory look at the salary account and salary payable also raises doubt the genuineness of activities of the assesses. The amount of salary payable is Rs.6,47,63,966/-, Rs.9,75,03,201/- as on the year ending on 31/03/2020 and 31/03/2021, respectively. The salary payable for the year ending on 31/03/2016 was at Rs.3,57,76,247/-. It is seen that the assessee is shown such liability year-to-year basis. It is difficult to concur as to why such a large number of teachers will continue to remain unpaid for a sizeable period of time in as much as 5-6 years. The assessee has not provided any sound logic behind such provision. If the amount of salary payable during a financial year is deducted from the surplus of an institution out of various institutions run by the assessee, the profit ratio is very high i.e. in the range of 23% to 86% and even in one institution viz. Latur College of M. Pharmacy, Hasegaon, the profit ratio is 99% for F.Y. 2020-21. The ratio of salary payable during F.Y. 2020-21 to salary debited is 64.26%. The inconsistencies in the financial statements as well as the financial affairs of the trust are therefore questionable and hence the undersigned is not satisfied with the genuineness of the activities of the assessee.
Further, it is pertinent to note here that the assessee has not made any TDS and PF on the said debit of salary. Further, the assessee has raised unsecured loans as appearing the balance amount for F.Y. 2020-21 at Rs.3,63,40,545/- but has not obtained any permission from the Charity Commissioner. Thus, the assessee has failed to comply with the provisions of any other law material for the purpose of achieving its objects.
In view of the above, the application filed by the assessee is hereby rejected.”
4. It is this order against which the assessee is in appeal before this Tribunal.
& 523/PUN/2025 5. Ld. AR appearing from side of the assessee submitted before us that the rejection order passed by Ld. CIT, Exemption, Pune is unjustified. It was submitted that no such information as mentioned in the rejection order was asked from the assessee. It was also submitted that the assessee has furnished written submission on 30.11.2022 i.e. well before the passing of impugned order dated 31.12.2022, however the same was not considered by Ld. CIT, Exemption, Pune. The copy of online acknowledgement of reply furnished by the assessee on 31.11.2022 is produced before the Bench on page no.102 to 103 of the paper book. Accordingly, Ld. AR requested before the bench to set-aside the order passed by Ld. CIT, Exemption, Pune and further requested to provide one opportunity to the assessee to reply to the queries raised by Ld. CIT, Exemption, Pune.
Ld. DR appearing from side of the Revenue relied on the order passed by Ld. CIT, Exemption, Pune and requested to confirm the same.
We have heard Ld. Counsels from both the sides and perused the material available on record including the paper book furnished by the assessee. We find that admittedly the assessee has replied on & 523/PUN/2025 30.11.2022 online to the notice issued by Ld. CIT, Exemption, Pune, however the same was not brought on record by Ld. CIT, Exemption, Pune and rejected the application for registration filed by the assessee. Therefore, considering the totality of the facts of the case and in the interest of justice, we deem it appropriate to set-aside the order passed by Ld. CIT, Exemption, Pune and remand the matter back to him with a direction to decide the application for registration afresh and as per fact and law after providing reasonable opportunity of hearing to the assessee. The assessee is also hereby directed to respond to the notices issued by Ld. CIT, Exemption, Pune in this regard and produce supporting documents/evidences in support of application for registration, without taking any adjournment under any pretext otherwise, Ld. CIT, Exemption, Pune shall be at liberty to pass appropriate order as per law. Thus, the grounds of appeal
filed by the assessee are partly allowed.
8. In the result, the appeal filed by the assessee in is partly allowed for statistical purposes. ITA No.523/PUN/2025 :
9. The instant appeal is against the order passed by Ld. CIT, Exemption, Pune denying grant of approval u/s 80G(5) of the IT