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Facts
The assessee, a charitable trust previously registered under Section 12A and holding provisional registration, applied for final registration under Section 12AB. The CIT(E) rejected the application and cancelled the provisional registration after the assessee failed to respond to notices seeking details on the genuineness of its activities and compliance with other laws. The assessee attributed this non-compliance to the trustees' inexperience with electronic communications.
Held
The Tribunal observed that the rejection was based solely on technical non-compliance without any adverse findings on the trust's charitable nature or genuine activities. Citing the benevolent intent of exemption provisions and Supreme Court precedents, the Tribunal set aside the CIT(E)'s order and remanded the matter back for fresh adjudication on merits, with directions to provide the assessee adequate opportunity to be heard and furnish all required documents.
Key Issues
Whether registration under Section 12A/12AB can be denied purely due to technical non-compliance in responding to notices, without examining the charitable nature and genuineness of the trust's activities.
Sections Cited
12A, 12AB
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Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD
Before: SHRI SANJAY GARG & SHRI MAKARAND V. MAHADEOKAR
O R D E R
PER MAKARAND V. MAHADEOKAR, ACCOUNTANT MEMBER:
This appeal by the assessee is directed against the order passed by the learned Commissioner of Income Tax (Exemptions), Ahmedabad [hereinafter referred to as “CIT(E)”] in Form No. 10AD dated 13.11.2024, whereby the application of the assessee in Form No. 10AB seeking registration under section 12A of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] was rejected and the provisional registration earlier granted was cancelled. Shreeji Janseva Khandi Gramodyog Sangh vs. CIT(E) Asst.Year –N.A. - 2– Facts of the case 2. The assessee is a charitable trust registered under the Bombay Public Trust Act, 1950 vide registration No. F/1209, Ahmedabad dated 05.03.1987. The assessee was earlier granted registration under section 12A of the Act. The assessee was also granted provisional registration on 23.06.2022. The assessee filed an application for registration of trust under section 12A of the Act in Form No. 10AB, accompanied with audit reports, audited balance sheet, profit and loss account for the preceding three years.
Thereafter, the CIT(E) issued notices dated 04.09.2024 and 24.10.2024 calling for further details. As recorded in the impugned order, the assessee did not file any reply to the said notices. The CIT(E) observed that in the absence of documentary evidence, he was not satisfied with:
(i) genuineness of the activities of the trust, (ii) whether the activities are in consonance with the objects of the trust and (iii) whether other laws material for achieving the objects were complied with.
Placing reliance on the judgments of the Hon’ble Supreme Court in CIT v. Dawoodi Bohra Jamat (364 ITR 31) and New Noble Educational Society v. CIT (448 ITR 594), the CIT(E) rejected the Shreeji Janseva Khandi Gramodyog Sangh vs. CIT(E) Asst.Year –N.A. - 3– application in Form 10AB and also cancelled the provisional registration.
Aggrieved by the order of CIT(E), the assessee is in appeal before us raising following grounds of appeal:
The learned CIT (Exmp) has erred in law and on facts in rejecting the application filed in Form 10AB of the Act and also cancelling the provisional registration.
The Ld. CIT(Exmp) has erred in law and facts in rejecting the Application u/s 12A in spite of the fact that the officials of the Trust being novice and ignorant about the technicalities of Email and website. Hence the order rejecting the application should be cancelled. 3. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of appeal.
The learned Authorised Representative submitted that the trust is a genuine charitable organisation registered since 1987 under the Bombay Public Trust Act and has already been granted registration under section 12A earlier. The AR emphasised that the assessee is engaged in the activity of manufacturing and trading in Khadi and allied products, which are genuine charitable activities. This is supported by audited financial statements. The AR further submitted that the subsequent notices dated 04.09.2024 and 24.10.2024 were not properly attended to, as the trustees were inexperienced in handling electronic communications and portal compliance. The non-compliance was therefore inadvertent and not deliberate. Shreeji Janseva Khandi Gramodyog Sangh vs. CIT(E) Asst.Year –N.A. - 4– 7. It was submitted that rejection solely on technical grounds is contrary to the benevolent intent of section 12AB and the principles laid down by courts. The AR therefore prayed that the matter may be restored to the file of the CIT(E) for fresh adjudication on merits after giving adequate opportunity.
The learned Departmental Representative relied upon the order of the CIT(E). However, he fairly submitted that he has no objection if the matter is restored back to the file of the CIT(E) for consideration afresh, subject to the assessee furnishing all requisite documents.
We have considered the rival submissions and perused the material on record. The undisputed facts are that the assessee is a registered charitable trust, was earlier granted registration under section 12A, and had also been granted provisional registration under section 12AB upon filing Form 10AB.
The rejection of the application by the CIT(E) is solely on account of non-furnishing of details in response to notices dated 04.09.2024 and 24.10.2024. We note that there is no adverse finding by the CIT(E) either on the charitable nature of objects of the trust or the genuineness of its activities.
It is settled law that provisions relating to exemption of charitable institutions are benevolent in nature and should be interpreted liberally to advance the object of charity. The Hon’ble Shreeji Janseva Khandi Gramodyog Sangh vs. CIT(E) Asst.Year –N.A. - 5– Supreme Court in CIT v. Dawoodi Bohra Jamat (364 ITR 31) has laid down that the Commissioner must record satisfaction on genuineness of activities and objects, and registration cannot be denied on technical grounds alone without such examination.
In the present case, the assessee has explained that the lapse occurred due to lack of technical knowledge of the trustees in handling electronic notices and portal compliance. Considering the bona fide explanation, and in the interest of natural justice, we are of the considered view that one more opportunity ought to be granted to the assessee.
Accordingly, we set aside the impugned order of the CIT(E) and restore the matter back to his file with the direction to examine the application of the assessee afresh on merits, after affording adequate opportunity of being heard. The assessee is directed to cooperate fully and furnish all requisite documents to establish the genuineness of its activities and compliance with statutory requirements.