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Facts
The assessee, a charitable trust running educational institutions, applied for registration under Section 80G. The CIT(E) rejected the application, stating that the trust had regular registration under Section 12A and had claimed deductions under Section 11, making Section 80G(5)(iv)(B) inapplicable. The CIT(E) also noted that the assessee failed to respond to notices regarding discrepancies and opportunities to provide supporting documents.
Held
The Tribunal noted that the assessee did not furnish explanations for the discrepancies. Considering the facts and the interest of justice, the Tribunal restored the issue back to the CIT(E) to grant one final opportunity to the assessee to substantiate its case and decide on merits. The assessee was directed to submit details without seeking adjournments.
Key Issues
Whether the CIT(E) was justified in rejecting the 80G registration application due to alleged inapplicability of the cited sub-clause and non-compliance by the assessee, and if a final opportunity should be granted for substantiation.
Sections Cited
80G, 10, 11, 12A, 80G(5), 80G(5)(iv)(B), 11AA(2)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
This appeal filed by the assessee is directed against the order dated 26.07.2024 of the Ld. CIT(Exemption), Pune rejecting the grant of registration u/s 80G of the of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).
Facts of the case, in brief, are that the assessee is a charitable trust running educational institutions. It filed an application in Form 10AB under sub-clause (B) of (iv) of first proviso to sub-section (5) of section 80G of the Act. With a view to verify the genuineness of activities of the assessee trust and fulfillment of conditions laid down in clause (i) to (v) of section 80G(5) of the Act, a notice was issued through ITBA portal on 26.03.2024 requesting the assessee to upload certain information / clarification. The assessee filed certain details. The Ld. CIT(E) while going through the same noticed certain discrepancies for which he issued another notice to the assessee pointing out the discrepancies which are as under: “4. On verification of the details submitted by the assessee in response to the said notice and the documents submitted along with the application, various discrepancies were noticed. Another notice was then issued to the assessee on 11/07/2024 and the discrepancies were duly communicated to it as reproduced below: (i) In reply, to the point 2(ii) of notice dated 26/03/2024, it has been stated that the trust has not claimed exemption u/s 10 or 11 of the Act. However, as per financial statements and ITRs furnished by you, it is seen that the trust had regular registration u/s 12A of the I. T. Act since 1994 and it has claimed deduction u/s 11. Therefore, said provisions of sec. 80G(5)(iv)(B) of the Act are not applicable to your case. As such, your present application is liable to be rejected. Please clarify with supporting documents.”
Since the assessee did not respond to the said notice, the Ld. CIT(E) rejected the application for grant of approval u/s 80G of the Act by observing as under: “5. The assessee was requested to show cause as to why the application should not be rejected and why the approval granted under section 80G(5) of the Income Tax Act, 1961 should not be cancelled. The assessee was also given opportunity of being heard vide the said notice. 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 approval shall also be liable to be cancelled. The compliance to the said notice was due on 18/07/2024. The notice was duly served on the assessee through e-portal and email. 6. Since, the assessee has not furnished any explanation to the discrepancies communicated to it, it is presumed that the assessee has nothing to say in the matter. 7. Considering the above facts discussed in the show notice and discrepancies noticed and also that the assessee has not complied with the provisions of sub- clause (a) of clause (ii) of second proviso to section 80G(5) of the Income Tax Act, 1961 as well as the provisions of Rule 11AA(2) of Income Tax Rules, 1962 in spite giving sufficient opportunities, the undersigned is unable to draw any satisfactory conclusion about the genuineness of activities of the assessee and fulfilment of conditions laid down in clause (i) to (v) of section 80G(5) of the Act.
8. It is clear that the assessee was given sufficient opportunity to comply, but it has failed to comply. It seems that the assessee is not having any supporting documents / evidence to submit. The assessee has failed to comply with the provisions of sub-clause (a) of clause (ii) of second proviso to section 80G(5) of the Income Tax Act, 1961 and hence, the undersigned is unable to draw any satisfactory conclusion about genuineness of activities of the assessee and fulfilment of conditions laid down in clauses (i) to (v) of Section 80G(5) of the Act and has left no alternative but to reject the application.
After verification of the submission made by the assessee, it is seen that the trust had regular registration u/s 12A of the I. T. Act since 1994 and it has claimed deduction u/s 11. Therefore, said provisions of sec. 80G(5)(iv)(B) of the Act are not applicable to the assessee's case.
In view of the above, the application under sub clause (B) of (iv) of first proviso to sub-section (5) of section 80G of the Income Tax Act, 1961 filed by the assessee is hereby rejected.”
Aggrieved with such order of the Ld. CIT(E), the assessee is in appeal before the Tribunal by raising the following grounds: 1] The learned CIT(E) erred in holding that the assessee trust had regular registration u/s 12A since 1994 and accordingly, the application filed u/s 80G(5)(iv)(B) by the assessee trust was to be rejected. 2] The learned CIT(E) erred in not appreciating that simply because the assessee had selected the wrong code for filing the application for approval u/s 80G did not mean that the application of the assessee was not maintainable and he ought to have disposed off the application by considering the correct clause of section 80G(5). 3] The assessee submits that the learned CIT(E) should be directed to reconsider the application filed by the assessee by considering the correct clause applicable to the assessee trust and accordingly, grant registration u/s 80G to the assessee trust. 4] The learned CIT(E) erred in not following the CBDT Circular No. 7 of 2024 while dismissing the application filed by the assessee trust without appreciating that the case of the assessee was covered by the said circular
and accordingly, the learned CIT(E) may be directed to grant approval u/s 80G to the assessee trust. 5] The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal.
The Ld. Counsel for the assessee at the outset submitted that the assessee was an old trust and it was already granted registration u/s 80G and 12AA of the Act prior to the amendment in 2021. Now, inadvertently, the provisional application was made instead of final application and the trust was granted provisional approval vide order dated 27.05.2021. He submitted that the assessee trust should have been given regular approval u/s 80G instead of the provisional approval since it was an old trust and registered u/s 80G prior to the amendments introduced in 2021. Further, the assessee should not be denied registration for mentioning wrong clause when originally it should have been allowed regular registration instead of provisional registration. He accordingly submitted that the Ld. CIT(E) should be directed to consider the application filed by the assessee for regular registration and grant approval u/s 80G of the Act.
The Ld. DR on the other hand submitted that the assessee did not respond to the notices issued by the Ld. CIT(E) pointing out certain discrepancies, therefore, the same should be upheld. In his alternate contention, he submitted that the matter may be restored to the file of the Ld. CIT(E).
We have heard the rival arguments made by both the sides and perused the order of the Ld. CIT(E). We find the assessee made an application in Form 10AB of the Act for grant of approval u/s 80G of the Act. On the basis of notice issued by the Ld. CIT(E), the assessee filed certain details. However, when the Ld. CIT(E) upon noticing certain discrepancies in the said details, issued another notice to the assessee trust asking it to show cause as to why the application should not be rejected and why the approval u/s 80G of the Act granted earlier should not be cancelled, the assessee did not file any reply, for which Ld. CIT(E) rejected the application for grant of approval u/s 80G of the Act, the reasons of which have already been reproduced in the preceding paragraphs. It is the submission of Ld. Counsel for the assessee that since the assessee is an old trust having registered u/s 12A and 80G and inadvertently the assessee applied for provisional approval instead of regular registration, the Ld. CIT(E) should have granted regular registration and approval u/s 80G. In our opinion, since the assessee did not furnish any explanation to the discrepancies communicated to it, therefore, considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue back to the file of the Ld. CIT(E) with a direction to grant one final opportunity to the assessee to substantiate its case by filing the requisite details and decide the issue on merit as per fact and law. The assessee is also hereby directed to make its submissions, if any, before the Ld. CIT(E) on the appointed date without seeking any adjournment under any pretext, failing which the Ld. 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 on 24th February, 2025.