ARHAMGACHCHH STHANAKVASI JAIN SAMPRADAY TRUST,AHMEDABAD vs. COMMISSIONER OF INCOME TAX (EXEMPTION), AHMEDABAD

The assessee/trust is in appeal before us against the order passed by CIT(Exemptions) dismissing the appeal of the assessee.

The Ld. Counsel for the assessee submitted that that the order of the CIT(E) suffered from gross procedural irregularity and violation of principles of natural justice, as the show cause notice was issued on 14.12.2024 at 6:10 PM, allowing the trust barely three days—until 17.12.2024—to respond. It was submitted that the trust could not reasonably be expected to produce voluminous evidentiary documents within such a short time frame. In support, the ld. counsel for the assessee reliance placed reliance on the decisions in Rahim Saib Hiriyur Hyder Ali v. NFAC [2022] 145 taxmann.com 116 (Karnataka), where a two-day response period was held to be violative of natural justice, and Uday Desai HUF v. NFAC [2021] 132 taxmann.com 117 (Bombay), where a one-day response period was similarly held to be inadequate and the order was quashed on that ground. The counsel further submitted that the CIT(E) erred both on facts and in law in concluding that the trust was working for a particular caste or community. It was submitted that the appellant is a charitable-cum- religious trust, wherein the charitable activities—such as providing education, medical relief, and aid to the poor—are open to the general public Arhamgachchh Sthanakvasi vs. CIT (E) AY : NA irrespective of caste, creed, or religion, whereas the religious activities are incidental and confined to the Jain community. The trust deed clearly sets out 25 objects, of which objects nos. 1 to 7 and 19 to 21 relate to the Jain community, while objects nos. 8 to 18 and 22 to 25 pertain to general charitable purposes such as establishing libraries, granting scholarships, organizing medical camps, providing tiffin services for poor patients, promoting non-violence, and protecting animals. It was submitted that the majority of the objects (15 out of 25) are purely charitable in nature and directed towards public welfare. It was further contended that the Ld. CIT(E) failed to appreciate that the trust had not incurred any expenditure of religious nature in any of the financial years under consideration, as clearly evidenced from the audited accounts for F.Ys. 2020-21 to 2023-24. The mere use of the words “Sthanakwasi Jain Community” or references to religious objects in some clauses of the trust deed cannot by itself justify denial of registration. The Ld. Counsel relied on several judicial precedents supporting this position, including CIT (Exemption) v. Vimalnath Jain Swetamber Mandir Trust [2025] 174 taxmann.com 63 (Chhattisgarh), where the High Court held that a trust having both charitable and religious purposes is entitled to registration under section 12AA; Shree Mahavideh Charitable Trust v. CIT (Exemption) [2025] 174 taxmann.com 540 (Surat- Trib.), where the Tribunal held that mere reference to religion in a few objects does not render a trust non-charitable when no religious expenditure is incurred; and Gohilwad Vankar Samaj Seva Trust v. CIT (Exemption) [2025] 173 taxmann.com 263 (Ahmedabad-Trib.), which held that for trusts created prior to 01.04.2021, the applicability of section 13(1)(b) is a matter for assessment and not for denying registration under section 12AB of the Act. 5.1. Accordingly, the counsel submitted that the order of the CIT Arhamgachchh Sthanakvasi vs. CIT (E) AY : NA (Exemptions) was erroneous, arbitrary, and contrary to law, as it was passed without granting reasonable opportunity of hearing and without proper appreciation of the trust’s charitable activities. It was argued that the CIT(E) had failed to distinguish between mixed charitable and religious objects and had mechanically concluded that the trust worked for a particular community. The appellant, therefore, prayed that the impugned order rejecting registration under section 12A(1)(ac)(iii) be quashed, and that the matter be remanded back to the CIT(E) for fresh adjudication after providing a proper and reasonable opportunity of being heard.

In response, Ld. DR placed reliance on the observations made by CIT(Appeals) in the appellate order.

We have heard the rival contentions and perused the material on record. The brief facts, as emanate from the record, are that the assessee trust, Arham Gachchh Sthanakwasi Jain Sampraday Trust, filed an application in Form No. 10AB on 27.06.2024 under section 12A(1)(ac)(iii) of the Act seeking regular registration, following the earlier provisional registration granted on 28.05.2021 in Form No. 10AC under section 12A(1)(ac)(vi). The said application was rejected by the Ld. CIT (Exemptions) on the ground that the trust’s activities and objects were allegedly confined to the benefit of the Sthanakwasi Jain Community and not for the benefit of the general public. Consequently, the CIT (Exemptions) cancelled the provisional registration and declined to grant regular registration under section 12A(1)(ac)(iii). We find from the records that the show cause notice dated 14.12.2024 was issued by the Ld. CIT (Exemptions) at 6:10 PM, calling upon the assessee to furnish its reply by 17.12.2024 at 5:16 PM, thereby granting only a period of three days to respond to the notice. The assessee submitted that it was not Arhamgachchh Sthanakvasi vs. CIT (E) AY : NA practically possible to furnish detailed evidence, including documentary corroboration and activity reports, within such a short period. The limited time granted to the assessee, in our considered view, did not constitute a reasonable opportunity of being heard as envisaged under law. It is a settled principle that any order passed without providing adequate opportunity to the assessee suffers from violation of the principles of natural justice. In this regard, we derive support from the judgment of the Hon’ble Karnataka High Court in Rahim Saib Hiriyur Hyder Ali v. National Faceless Assessment Centre [2022] 145 taxmann.com 116 (Karnataka), wherein it was held that granting only two days’ time to the assessee to furnish a reply to a show cause notice amounts to denial of reasonable opportunity and violates the principles of natural justice, thereby rendering the order unsustainable in law. Similarly, the Hon’ble Bombay High Court in Uday Desai HUF v. National Faceless Assessment Centre [2021] 132 taxmann.com 117 (Bombay) held that a notice allowing merely one day to respond could not be considered reasonable opportunity, and consequently, the order passed without such opportunity was liable to be quashed. The ratio of these judgments squarely applies to the facts of the present case, where the assessee was allowed only three days to furnish an elaborate explanation and evidentiary material in response to the show cause notice involving issues of factual complexity. Further, the Ld. CIT (Exemptions) appears to have rejected the assessee’s claim primarily on the basis of the language used in certain objects of the trust deed, without proper examination of the nature of actual activities undertaken by the trust or the evidence furnished along with the application. The contention of the assessee that it is a charitable-cum- religious trust and that a majority of its activities are charitable in nature, benefitting the public at large, requires detailed verification of records, Arhamgachchh Sthanakvasi vs. CIT (E) AY : NA financial statements, and activity reports. The CIT (Exemptions) ought to have afforded the assessee a reasonable and meaningful opportunity to substantiate its claim with appropriate documentary evidence before arriving at such adverse conclusions. In the light of the above judicial position and factual matrix, we are of the considered view that the order passed by the Ld. CIT (Exemptions) suffers from violation of the principles of natural justice, as the assessee was not granted sufficient opportunity to present its case on merits. The impugned order, therefore, cannot be sustained in its present form. Accordingly, we set aside the order of the Ld. CIT (Exemptions) dated 27.12.2024 and restore the matter to his file with a direction to re-examine the application of the assessee for registration under section 12A(1)(ac)(iii) of the Act afresh, after providing a proper and adequate opportunity of being heard and considering the evidences and submissions that the assessee may file in support of its claim. The CIT (Exemptions) shall pass a speaking order in accordance with law and after affording due opportunity to the assessee.

In the result, the appeal of the assessee is allowed for statistical purposes.