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Facts
The assessee, Shri Balashah Bava Sanstha Sarvajanik Trust, filed applications for registration under Section 12A and approval under Section 80G of the Income Tax Act. These applications were rejected by the Ld. CIT(E) on grounds related to previous rejections and the validity of the applications within extended timelines.
Held
The Tribunal held that the CIT(E) passed the order without affording adequate opportunity of hearing to the assessee and noted that judicial precedents suggest CBDT circulars cannot unduly restrict assessee rights. Consequently, the matter was restored to the CIT(E) for de novo consideration.
Key Issues
Whether the CIT(E) correctly rejected the assessee's applications for registration and approval without providing adequate opportunity for hearing and in light of relevant CBDT circulars and judicial pronouncements.
Sections Cited
12AB, 12A, 80G(5), 279, 143, 239, 119
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Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
Before: DR. BRR KUMAR & SHRI SIDDHARTHA NAUTIYAL
O R D E R
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
These are appeals have been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Exemption), (in short “Ld. CIT(E)”), Ahmedabad vide orders dated 03.12.2024 and 06.12.2024. Since common facts and issues are involved for both the years under consideration, both the cases are taken up together.
The Assessee has taken the following grounds of appeal:-
“1. On the facts and circumstances of the case and in law, the order passed by the learned CIT (EXEMPTION), Ahmedabad rejecting application for registration of the trust u/s 12AB of the Income Tax Act, 1961 is ab initio void being bad in law. 2. In law and on the facts and in the circumstances of the case of appellant, the Ld. CIT(Exemption), Ahmedabad has erred in rejecting application for registration of the trust u/s. 12A of the Income Tax Act, 1961.
&304/Ahd/2025 Shri Balashah Bava Sanstha Sarvajanik Trust vs. CIT(E) Asst. Years –N.A. - 2–
3. The appellant craves leave to add, alter or amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal.”
“1. On the facts and circumstances of the case and in law, the order passed by the learned CIT (EXEMPTION), Ahmedabad rejecting application for registration of the trust u/s 80G(5) of the Income Tax Act, 1961 is ab initio void being bad in law.
2. In law and on the facts and in the circumstances of the case of appellant, the Ld. CIT (Exemption)m Ahmedabad has erred in rejecting application for registration of the trust u/s. 80G(5) of the Income Tax Act, 1961.
The appellant craves leave to add, alter or amend and/or withdraw any ground or grounds of appeal
either before or during the course of hearing of the appeal.” First we shall deal with assessee’s appeal in ITA No. 303/Ahd/2025
3. The brief facts of the case are that the assessee/applicant trust filed application for grant of approval under section 12A of the Act on 28th June, 2024 which was rejected by CIT(Exemptions) on the ground that on the basis of details available, the assessee/applicant trust had earlier filed application for approval under section 12A, which was rejected vide order dated 06-10- 2023. However, since the above referred rejection order dated 06-10-2023 is not covered by paragraph 4.1 of CBDT Circular No. 07 of 2024 dated 5-04- 2024, accordingly the application filed by the assessee within the extended date that is 31-06-2024 is non-maintainable.
The assessee/applicant trust has filed the present appeal before us against the aforesaid order has been passed by CIT(Exemptions). Before us, the counsel for the assessee submitted that the aforesaid order has been passed against the principles of natural justice and without affording the assessee adequate opportunity to present its case on merits.
&304/Ahd/2025 Shri Balashah Bava Sanstha Sarvajanik Trust vs. CIT(E) Asst. Years –N.A. - 3– 5. Before going into the merits of the case, it would be useful to reproduce the relevant extracts of CBDT circular number 07 of 2024 dated 5-04-2024, for ready reference:
4.1 Further, in cases where any trust, institution or fund has already made an application in Form No. 1OAB, and where the Principal Commissioner or Commissioner has passed an order rejecting such application, on or before the issuance of this Circular, solely on account of the fact that the application was furnished after the due date or that the application has been furnished under the wrong section code, it may furnish a fresh application in Form No. 10AB within the extended time provided in paragraph 3(ii) i.e. 30.06.2024.
On going through the contents of the order passed by CIT(Exemptions), certain facts are noteworthy. Firstly, we observe that only one date of hearing was given to the assessee (27-08-24) after which the application of the assessee/applicant trust was rejected. Secondly, we observe that the assessee/applicant trust had in fact filed the revised /second application within the extended time of 30 June 2024 granted by the aforesaid Circular issued by CBDT. Thirdly, while passing the order CIT(Exemptions) has summarily rejected the application for grant of approval under section 12A of the Act, without discussing as to on what basis the earlier application filed by the assessee/applicant trust was rejected and why the case of the assessee/applicant trust was not covered by exemption granted under paragraph 4.1 of CBDT Circular number 07 of 2024 dated 5-04-2024. Accordingly, on going through the contents of the order passed by CIT(Exemptions), we are of the view that the same has been passed without affording adequate opportunity to assesssee/applicant trust to present its case on merits and to file it’s submissions / reply on the application of the assessee/applicant trust is maintainable on merits.
&304/Ahd/2025 Shri Balashah Bava Sanstha Sarvajanik Trust vs. CIT(E) Asst. Years –N.A. - 4– 7. Further, it is a well-settled law that CBDT circulars, though binding on the Tax Authorities are not binding on the taxpayers per se. CBDT Circulars cannot be used to curtail the rights of the assessees/taxpayers. We may point out that in CBDT Circular No. 14(XL-35) of 1955, dated 11-4- 1955 [also reproduced Chokshi Metal Refinery v. CIT [1977] 107 ITR 63 (Guj.)], it has been stated as under:
Officers of the department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the Department, for it would inspire confidence in him that he may be sure of getting a square deal from the department.
In the case of Raghavan Nair vs. Assistant Commissioner of Income Tax, Circle-2(1) [2018] 89 taxmann.com 212 (Kerala)/[2018] 253 Taxman 379 (Kerala)/[2018] 402 ITR 400 (Kerala)[04-01-2018], the High Court made the following observations:
“The short question arising for consideration, is whether in the absence of a revised return, the Assessing Officer is precluded from considering, in a proceedings under section 143 the contention of the assessee that the capital gains disclosed in the return filed by him is not exigible to tax and that therefore, there cannot be any assessment on the basis that the deduction claimed by him under that head is not admissible. [Para10] It is beyond dispute that the powers of the Assessing Officers under the Act are quasi- judicial in nature and they are duty-bound, therefore, to act fairly in the discharge of their functions. They are also invested with the authority to do justice to the assessees. True, in a given case where the self-assessment made by an assessee is proposed to be revised on the ground that the deduction made him in the return under a particular head is inadmissible, the Assessing Officer, in the absence of a revised return, would proceed on the basis of the facts disclosed by the assessee in the return. But, in a case where it is apparent on the face of the record that the assessee has included in his return, an income which is exempted from payment of income tax, on account of ignorance or by mistake, the Assessing Officer is bound to take into account the said fact in a proceedings under section 143 of the Act. In other words, if the capital gains on a transaction was exempted from payment of tax, the Assessing Officer had a &304/Ahd/2025 Shri Balashah Bava Sanstha Sarvajanik Trust vs. CIT(E) Asst. Years –N.A. - 5– duty to refrain from levying tax on the said capital gains and he could not, in such cases, refuse to grant relief under section 143 to the assessee on the technical plea that the assessee had not filed a revised return. It is so since the paramount duty of the Assessing Officer is to complete the assessments in accordance with law. It is all the more so in the light of the mandate under article 265 of the Constitution that no tax shall be levied or collected except by authority of law.”
Again, in a recent ruling in the case of Sun Pharmaceutical Industries Ltd. vs. Income-tax Officer [2025] 171 taxmann.com 469 (Delhi) [31-01-2025], the Delhi High Court held that the Central Board of Direct Taxes (CBDT) cannot impose arbitrary time limits to deny taxpayers their right to claim refunds under the Income Tax Act and ruled the CBDT Circular No. 07/2007 which set a two-year deadline for refund applications is ultra vires. The Delhi High Court made the following relevant observations:
Tested on the aforesaid principles, it becomes apparent that paragraph 9 of the Circular No. 7/2007 essentially results in deprivation of a right to petition for refund and thus seeks to extinguish the claim itself. This, the CBDT has chosen to do, not in amplification of a provision contained in the Act, but in purported exercise of powers conferred by section 119. That provision, as was noticed hereinabove, is clearly couched in permissive language and cannot possibly be construed as empowering the Board to extinguish a right or the remedy which otherwise existed in the Statute. [Para 58] While we had referred to the time when Circular No. 7/2007 came to be issued and when sub-section (2) of section 239 had existed on the Statute book, it is found that the prescription of two years would not sustain even when viewed in the backdrop of that provision as it existed at the relevant time. The outer limit which came to be constructed by CBDT could have at best been shored by section 119. However and was noticed in the preceding parts of this decision, the same is confined to relaxation, incorporating a power to condone or to relieve a person from the rigours of the statute. That provision surely cannot be construed as contemplating the CBDT extinguishing a claim or a right. [Para 60]
In the case of Sofitel Realty LLP vs. Income-tax Officer (TDS) [2023] 153 taxmann.com 496 (Bombay)/[2023] 294 Taxman 766 (Bombay)/[2023] 457 ITR 18 (Bombay)[18-07-2023], the Bombay High &304/Ahd/2025 Shri Balashah Bava Sanstha Sarvajanik Trust vs. CIT(E) Asst. Years –N.A. - 6– Court held that when there is no limitation provided under sub-section (2) of section 279 for submission or consideration of compounding application. Accordingly, Compounding Guidelines notified by CBDT cannot provide for limitation nor can it restrict operation of sub-section (2) of section 279 of the Act. Moreover, there is no restriction also on number of applications that could be filed and the only requirement under sub-section (2) of section 279 is that complaint filed should be still pending. Accordingly, High Court held that compounding application could not be rejected on ground of delay in filing application.
Accordingly, in light of the aforesaid facts of the assessee’s case, wherein we observe that the order was passed by CIT(Exemptions) without affording adequate opportunity of hearing to the assessee to present its case and only one date of hearing was granted to the assessee, and the judicial precedents on the subject which have held that CBDT circulars, cannot be read in a manner so as to cannot impose any undue restriction on the rights of the assessee, in interest of justice, the matter is hereby restored to the file of CIT(Exemptions) for de novo consideration.
In the result, appeal of the assessee/applicant trust is allowed for statistical purposes.
Now we shall deal with the assessee’s appeal in 13. We observe that in assessee’s appeal against rejection of application for grant the deduction under section 80G of the Act, the same was rejected by CIT(Exemptions) on the ground that since the assessee/applicant trust is not have any valid order for registration under section 12A of the Act, which &304/Ahd/2025 Shri Balashah Bava Sanstha Sarvajanik Trust vs. CIT(E) Asst. Years –N.A. - 7– is a pre-requisite for grant of approval under section 80G of the Act, the approval under section 80G of the Act could not be granted to the assessee/applicant trust. Since we have restored the matter regarding grant of approval under section 12A of the Act to the file of CIT(Exemptions) for de novo consideration, accordingly, the present appeal is also hereby restored to the file of CIT(Exemptions), for de-novo consideration.
In the result, both the appeals of the assessee are allowed for statistical purposes. This Order is pronounced in the Open Court on 26/05/2025