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Facts
The assessee's application for registration under Section 12A was rejected, and its provisional registration under Section 12AB was cancelled by the CIT(Exemption) due to non-compliance with requests for information. The assessee attributed the non-compliance to the preoccupation of its Chartered Accountant and argued that the short notice period for compliance violated principles of natural justice.
Held
The Tribunal condoned the delay in filing the appeal and, noting the principles of natural justice regarding short notice periods, restored the matter to the CIT(Exemption). It directed the CIT(Exemption) to grant one final opportunity to the assessee to submit the requisite details for fresh adjudication, with the condition that the assessee must comply without seeking adjournments.
Key Issues
Whether the rejection of Section 12A registration and cancellation of provisional Section 12AB registration due to non-compliance was valid, particularly when the assessee was given an unreasonably short period for response, violating principles of natural justice.
Sections Cited
12A, 12AB, 12A(1)(ac), 12AB(1)(b)(i), 12A(1)(ac)(vi)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
This appeal filed by the assessee is directed against the order dated 21.03.2024 of the Ld. CIT(Exemption), Pune rejecting the application for grant of registration u/s 12A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) and cancelling the provisional registration granted earlier u/s 12AB of the Act.
There is a delay of 260 days in filing of the appeal before the Tribunal for which the assessee has filed a condonation application along with an affidavit explaining the reasons for such delay. After considering the contents of the condonation application filed along with the affidavit and after hearing the Ld. DR, the delay in filing of the appeal is condoned and the appeal is admitted for adjudication.
Facts of the case, in brief, are that the assessee filed an application in Form No.10AB on 20.10.2023 for registration of the trust under clause (iii) of section 12A(1)(ac) of the Act. 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 by the trust / institution as are material for the purpose of achieving its objects, a notice was issued through ITBA portal on 11.01.2024 requesting the assessee to upload certain information / clarification. The assessee was also requested to submit the compliance by 25.01.2024. Since the assessee did not comply to the said notice, another opportunity was granted by the Ld. CIT(E) vide notice dated 20.02.2024 asking the assessee to explain as to why the application for registration u/s 12A should not be rejected and why the provisional registration granted earlier u/s 12AB should not be cancelled. Further, the assessee was specifically informed that in the event of failure to comply by the due date, the application shall be liable to be rejected and the registration shall also be liable to be cancelled. However, the assessee did not make any submission. The Ld. CIT(E) therefore, rejected the application for grant of registration u/s 12A of the Act and also cancelled the provisional registration granted earlier u/s 12AB by observing as under: “5. The information / details were called for under the provisions of section 12AB(1)(b)(i) of the Income Tax Act, 1961. These are the basic details required to ascertain the overall nature of the activities of the assessee and are directly relevant to the present proceedings. However, the assessee has failed to comply despite giving sufficient opportunities as discussed above including an opportunity of being heard. 5.1 Thus, the assessee has failed to furnish the details called for under the provisions of section 12AB(1)(b)(i) of the Income Tax Act, 1961 to verify the genuineness of activities of the trust / institution and to verify the 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. 5.2 In absence of the compliance to the above requirement, it is not possible to arrive at any conclusion about the genuineness of activities of the assessee and the compliance to the 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. 5.3 It is clear from the above that the assessee was given sufficient opportunity to comply, but it has not complied to the same. It seems that the assessee is not having any supporting documents / evidence to submit. The assessee has failed to comply with the provisions of section 12AB(1)(b)(i) of the Income Tax Act, 1961. Hence, the undersigned is unable to draw any satisfactory conclusion about genuineness of activities of the assessee and the compliance to the 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. Therefore, the undersigned has left no alternative but to reject the application.
6. In view of the above, the application filed by the assessee is hereby rejected and the provisional registration granted on 31/12/2021 under section 12AB read with section 12A(1)(ac)(vi) of the Income Tax Act, 1961 is hereby cancelled.”
Aggrieved with such order of Ld. CIT(E), the assessee is in appeal before the Tribunal by raising the following grounds:
1. The Learned CIT(E) erred in rejecting the application under Section 12A solely on limitation grounds, disregarding the merits of the case.
2. The Learned CIT(E) failed to provide adequate opportunity for the appellant to present evidence demonstrating the genuineness of charitable activities and compliance with Section 12A provisions violating the principles of natural justice.
3. The Learned CIT(E) disregarded the welfare-oriented intent of the Income Tax Act, 1961, and the purpose of Section 12A, which is to promote charitable activities benefiting society.
4. The Learned CIT(E)'s decision conflicts with the Directive Principles of State Policy within the Constitution of India. These principles highlight the legislative intent to support charitable trusts for the public good.
5. The Learned CIT(E) issued notice on 20-02-2024 requesting the appellant to file explanation to the discrepancies pointed out in the above notice, on or before 27-12-2024. Undisputedly, the time given to the appellant for compliance is less than a week, which is against the Standard Operative Procedure ('SOP') issued by the CBDT dated 19.11.2020, wherein, minimum period of 15 days is required to be given to the assessee to comply with notices from the date of issue of the notice. Recently, the Hon'ble Delhi High Court in the case of Dauphin Travel Marketing Private Limited vs. ITO in W.P.(C) 8870/2023 & CM Nos.33516-17/2023 dated 05.07.2023 taking note of this SOP held that the grant of insufficient time to respond the notice violates the principles of natural justice and, therefore, set aside the assessment Thus, it is clear that the appellant was given unreasonably very short period of time to respond to the notice, which is against the principles of natural justice.
6. The above grounds of appeal may kindly be allowed to be amended, altered, modified etic in the interest of natural justice.
The Ld. Counsel for the assessee submitted that due to preoccupation of the concerned Chartered Accountant, the details could not be filed. He submitted that given an opportunity the assessee is in a position to substantiate its case by filing all the relevant details for deciding the issue afresh. He accordingly submitted that in the interest of justice the matter may be restored to the file of the Ld. CIT(E) for adjudication of the issue afresh.
The Ld. DR on the other hand strongly objected to the arguments advanced by the Ld. Counsel for the assessee.
We have heard the rival arguments made by both the sides, perused the order of the Ld. CIT(E) and the paper book filed on behalf of the assessee. It is an admitted fact that due to non-compliance to the 2nd notice issued by the Ld. CIT(E) asking for certain clarifications regarding the discrepancies pointed out by him, he rejected the application for grant of registration and also cancelled the provisional registration granted earlier. It is the submission of the Ld. Counsel for the assessee that given an opportunity the assessee is in a position to substantiate its case by filing all the relevant details before the Ld. CIT(E). Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the CIT(E) with a direction to grant one final opportunity to the assessee to substantiate its case by filing the requisite details to his satisfaction and decide the issue as per fact and law. The assessee is also hereby directed to submit the details as called for by the CIT(E) on the appointed date without seeking any adjournment under any pretext, failing which the CIT(E) is at liberty to pass appropriate order as per law. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open Court at the conclusion of hearing itself i.e. on 31st July, 2025.