LAKULISH SANATAN SANSKARITI PRABODHAN ABHIYAN,VADODARA, GUJARAT vs. CIT EXEMPTION , AHMEDABAD, AHMEDABAD

The brief facts of the case are that the assessee, Lakulish Sanatan Sanskriti Prabodhan Abhiyan filed an application in Form 10AB under sub- clause (iii) of clause (ac) of sub-section (1) of section 12A of the Income Tax Act, 1961 (Act), seeking registration of the Trust. On going through the application filed by the assessee / applicant trust, CIT(Exemptions) observed that as per law, such applications are governed by section 12AB(1)(b) and Rule 17A of the Income Tax Rules, which require submission of prescribed forms and supporting documents to verify the genuineness of activities and the charitable or religious nature of the institution. During the course of proceedings, CIT(Exemptions) issued several notices calling upon the assessee / applicant trust to furnish the required details and documents as mandated under Rule 17A(2). However, despite these notices, the assessee neither filed the requisite information nor sought any adjournment. Accordingly, the CIT(Exemptions) relied on the judgment of the Hon’ble Supreme Court in CIT, Ujjain vs. Dawoodi Bohara Jamat (Civil Appeal No. 2492 of 2014), wherein it was held that the Commissioner must call for necessary documents and make due enquiry to satisfy himself about the genuineness of the institution before granting registration under section 12A of the Act. Further, CIT(Exemptions) placed reliance on the decision of the Hon’ble Supreme Court in M/s New Noble Educational Society (Civil Appeal No. 3795 of 2014), which held that while considering applications under similar provisions such as section 10(23C) of the Act, the Commissioner is empowered to examine not only the stated objects but also Lakulish Sanatan Sanskriti Prabodhan Abhiyan vs. CIT(E) Asst. Year –N.A. - 3– the actual functioning, accounts, and related documents to assess the genuineness of the institution. The CIT(Exemptions) noted that in the present case, since the assessee failed to produce any documentary evidence or audited accounts to establish (i) the genuineness of its activities, (ii) that its activities were in consonance with its stated objects, and (iii) that it had complied with other laws relevant to its operation, the CIT(Exemptions) held that he was unable to form satisfaction as required under the law. Accordingly, the application filed in Form 10AB seeking registration under sub-clause (iii) of clause (ac) of sub-section (1) of section 12A was rejected, and the assessee’s provisional registration was cancelled.

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

Before us, the counsel for the assessee submitted that the impugned order passed by the learned CIT(Exemptions) dated 24.05.2025 rejecting the assessee’s application for registration under section 12AB of the Act, was made purely on procedural grounds without any examination of the merits or genuineness of the trust’s activities. It was submitted that the assessee had filed an application in Form 10AB on 05.12.2024 seeking registration as a religious-cum-charitable trust under clause (ac)(i) of section 12A. Subsequently, two notices dated 24.02.2025 and 16.05.2025 were issued by the CIT (Exemptions), Ahmedabad, under Rule 17A(2) of the Income-tax Rules calling for requisite documents such as audited accounts, trust deed, list of activities, and evidence of compliance. The counsel submitted that due to unavoidable circumstances, the appellant could not furnish the required documents within the stipulated time and inadvertently failed to seek Lakulish Sanatan Sanskriti Prabodhan Abhiyan vs. CIT(E) Asst. Year –N.A. - 4– adjournment or extension. However, it was argued that the non-compliance was purely technical and not intentional or indicative of any lack of bona fides. It was further argued that the CIT(Exemptions) passed the order of rejection and simultaneously cancelled the provisional registration without conducting any inquiry into the genuineness of the trust’s activities, charitable nature, or objectives, thereby violating the basic principles of natural justice. The learned counsel contended that the rejection order was in contravention of the law laid down by the Hon’ble Supreme Court in CIT, Ujjain v. Dawoodi Bohra Jamat (Civil Appeal No. 2492 of 2014), where it was held that before rejecting an application under section 12A, the Commissioner must make necessary inquiries to satisfy himself about the genuineness of the activities and the charitable or religious nature of the institution. Reliance was also placed on the judgment of the Hon’ble Supreme Court in M/s New Noble Educational Society v. CIT (Civil Appeal No. 3795 of 2014), wherein it was observed that the authority is required to examine the objects and functioning of the institution in substance and not reject applications merely on procedural grounds. It was further argued that several judicial pronouncements, including those of the ITAT, such as in the case of M.V. Karmari Charitable Trust, have consistently held that in cases of procedural default, the proper course of action is to remand the matter for reconsideration after granting an effective opportunity of hearing rather than outright rejection. The counsel therefore submitted that the order dated 24.05.2025, being passed without affording such opportunity, stands vitiated. The Counsel also pointed out that the order not only rejected the application but also directed computation of tax liability under section 115TD of the Act, which, according to the appellant, was premature and unwarranted since there Lakulish Sanatan Sanskriti Prabodhan Abhiyan vs. CIT(E) Asst. Year –N.A. - 5– was no finding on cessation of charitable activities or conversion of the trust’s property for non-charitable purposes. In summary, the counsel for the assessee submitted that the rejection order of the CIT(Exemptions) be set aside, and the matter be restored to his file for fresh adjudication after affording the assessee a reasonable opportunity to furnish the requisite documents and substantiate the genuineness of its activities.

We have heard the rival contentions and perused the material on record. Having heard both sides and upon perusal of the material on record, we are of the considered view that the CIT(Exemptions) has rejected the assessee’s application solely on account of non-filing of documents, without conducting any verification or inquiry into the merits of the case only two notices of hearing and that too at very short interval of time were issued by Ld. CIT(Exemption). It is settled law that procedural lapses alone should not result in denial of substantial justice. The Hon’ble Supreme Court in the decisions cited supra has held that while considering registration under section 12A/12AB, the Commissioner is required to ascertain both the genuineness of the activities and the charitable nature of the objects, and that denial of registration without such examination is not sustainable. In the present case, the assessee’s non-compliance appears to be technical in nature, and no opportunity for effective hearing was provided before rejection of the application. In our view, in the interest of justice and fair play, the matter deserves to be restored to the file of the learned CIT(Exemptions) for de-novo consideration after affording adequate opportunity to the assessee to submit all relevant documents and explanations in support of its claim for registration under section 12AB of the Act. Accordingly, we set aside the order passed Lakulish Sanatan Sanskriti Prabodhan Abhiyan vs. CIT(E) Asst. Year –N.A. - 6– by the learned CIT(Exemptions) and restore the matter to his file for fresh adjudication in accordance with law, after giving due opportunity of hearing to the assessee. The assessee is directed to cooperate and furnish all necessary documents as may be called for by the CIT(Exemptions).

In the result, the appeal of the assessee is allowed for statistical purposes, in the interests of justice. This Order is pronounced in the Open Court on 15/10/2025