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Facts
The assessee trust had its provisional registration cancelled and its application for regular registration under Section 12AB rejected by the CIT(Exemption) due to non-compliance with notices. The assessee attributed this to an email oversight and lack of deliberation on merits.
Held
The Tribunal held that the rejection by the CIT(Exemption) was mechanical, failing to consider the merits of the case or the documents submitted. The Tribunal set aside the order and restored the matter for fresh examination.
Key Issues
Whether the rejection of registration application solely on procedural grounds, without deciding on merits, amounts to denial of substantive justice. Whether the CIT(Exemption) properly considered the submitted documents and merits of the case.
Sections Cited
12AB, 12A(1)(ac)(iii), 253(3), 10AD, 2(15)
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Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
Before: MS. SUCHITRA KAMBLE & SHRI MAKARAND V. MAHADEOKAR
1. This appeal filed by the assessee is directed against the order passed by the Commissioner of Income Tax (Exemption), Ahmedabad [hereinafter referred to as "CIT(Exemption)"] dated 03.09.2024, whereby the learned CIT(Exemption) rejected the assessee’s application for registration under section 12AB of the Income-tax Act, 1961[hereinafter referred to as "the Act"] and cancelled the provisional registration earlier granted under section 12A(1)(ac)(iii) of the Act.
Shri Naminath Jain Derasar Trust vs. CIT(E) 2 Condonation of Delay
2. We find that the present appeal has been filed with a delay of 58 days, as against the limitation prescribed under section 253(3) of the Act. The assessee has filed an application supported by an affidavit sworn by Shri Abhaykumar Manubhai Fadia, trustee of the trust, explaining the reasons for such delay. As per the affidavit and submissions the impugned order of the CIT(Exemption) dated 03.09.2024 was sent via email to the registered email address of the assessee trust. However, the email account was operated by the accountant, who did not regularly check it. The order came to the notice of the assessee only on 27.12.2024, upon which necessary consultations were held with legal counsel. After collecting the relevant documents, the appeal was filed on 27.01.2025. The delay is, therefore, of 58 days, and is attributable to non-intentional and bonafide circumstances.
It is a well-settled principle that a liberal and justice-oriented approach must be adopted in condoning delays where there is no evidence of deliberate inaction or negligence and the delay has not prejudiced the Revenue. Considering the explanation offered, the supporting affidavit, and the totality of circumstances, we are satisfied that the delay was not deliberate or due to inaction on the part of the appellant. It was caused due to a communication gap and subsequent procedural steps undertaken in good faith. The Departmental Representative (DR) raised no objection in condoning the delay. Accordingly, the delay of 58 days in filing the appeal is condoned, and the appeal is admitted for adjudication on merits.
Facts of the Case 4. The assessee trust filed an application for registration in Form No. 10AB on 13.03.2024 under clause (iii) of sub-section (1) of section 12A of the Act, seeking regular registration under section 12AB. Prior to this, the Shri Naminath Jain Derasar Trust vs. CIT(E) 3 assessee had been granted provisional registration under section 12A(1)(ac), valid for a limited period. In support of the application, the assessee was expected to furnish requisite documents and evidences as per Rule 17A(2) of the Income Tax Rules, 1962. The CIT(Exemption) issued notices dated 02.07.2024 and 05.08.2024 calling upon the assessee to furnish the necessary documents and information. However, there was no compliance from the assessee in response to these notices. In the absence of any material to verify the genuineness of the trust's activities, the CIT(Exemption) proceeded to reject the application for registration under section 12AB and simultaneously cancelled the provisional registration vide the impugned order dated 03.09.2024. The said order was communicated electronically to the registered email address of the assessee.
Aggrieved by the order of CIT(E), the assessee in appeal before us raising following grounds of appeal:
The Ld. CIT erred in law and in the facts of the case in rejecting the application for registration u/s 10AD of the Act.
The Ld. CIT erred in law and in the facts of the case in rejecting the provisional registration which was granted earlier.
3. The appellant craves the permission for making any alteration or addition in the grounds of appeal
6. The learned Authorised Representative (AR) submitted that the assessee is a bona fide trust carrying on activities in accordance with the objectives of the trust and the non-compliance with the notices was not deliberate but occurred due to a genuine oversight as the email communication from the Department remained unnoticed by the accountant. It was further submitted that the rejection of the application solely on technical non-compliance, without deciding the matter on merits or verifying the activities of the trust, would result in denial of substantive justice.
Shri Naminath Jain Derasar Trust vs. CIT(E) 4 7. The learned DR submitted that the impugned order was passed by the CIT(Exemption) due to the assessee’s failure to respond to notices and furnish documents as required under the law. However, the learned DR fairly conceded that the Department would have no objection if the matter is remanded back to the file of the CIT(Exemption) for fresh consideration after affording proper opportunity to the assessee.
We have carefully considered the rival submissions, the material placed on record, and the contents of the impugned order passed by the CIT(Exemption). From the record, it is evident that the assessee is a religious trust engaged in some religious / charitable activities and was granted provisional registration under the Act. In pursuance of statutory compliance, the assessee filed its application for regular registration in Form 10AB. Along with the application, the assessee submitted various documents including audited financial statements, trust deed, and other supporting materials relevant to its activities and objectives. Despite the availability of such documents, the impugned order proceeds to reject the application solely on the ground of non-compliance with notices issued under Rules. The CIT(Exemption) recorded that the assessee failed to furnish the requisite documents, but did not discuss or evaluate the materials already available on record. There is no examination of the financial statements, no consideration of the stated objects of the trust, and no effort to verify the nature and genuineness of the activities undertaken by the assessee. It is a settled principle that every quasi-judicial authority is required to pass a reasoned and speaking order after due application of mind to the facts and documents on record. Mechanical rejection, without evaluating the merits of the case or examining the materials already filed, falls short of such requirement. Particularly in matters concerning registration under section 12AB, where the consequence affects the substantive rights of a charitable or religious trust, Shri Naminath Jain Derasar Trust vs. CIT(E) 5 due process mandates that the competent authority consider the case on merits and not dismiss it solely on procedural default. In the present case, the CIT(Exemption) has not discharged this duty. There is no finding on the genuineness of activities, nor any determination of whether the objects of the trust are aligned with the requirements of section 2(15) of the Act. In these circumstances, we find it appropriate and necessary to remit the matter for a fresh determination.
Accordingly, we set aside the impugned order passed by the CIT(Exemption) and restore the matter to his file with a direction to re- examine the assessee’s application for registration under section 12AB afresh, in accordance with law. While doing so, the CIT(Exemption) shall: a. Take into account all documents and materials already filed by the assessee along with Form 10AB; b. Call for any further clarification or evidence, as may be necessary; and c. Pass a reasoned and speaking order after granting the assessee a reasonable and effective opportunity of being heard.
We further direct the assessee to actively participate in the proceedings before the CIT(Exemption), to respond to all notices and requisitions without fail, and to furnish all required documents and explanations within the timeline prescribed by the competent authority. Any failure on the part of the assessee to comply with these directions may result in adverse inference.
In the result, appeal filed by assessee is allowed for statistical purposes.
Order pronounced in the Open Court on 10th June, 2025 at Ahmedabad.