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Facts
The assessee Trust applied for registration under Section 12A(1)(ac)(iii) and approval under Section 80G(5) of the Income Tax Act. The CIT(E) rejected both applications due to the non-submission of audited annual accounts and the presence of religious objects in the trust deed, respectively. The assessee later provided the audited accounts and a revised trust deed.
Held
The Tribunal condoned the 8-day delay in filing the appeal due to genuine reasons. Since the additional documents were not considered by the CIT(E), the Tribunal set aside the CIT(E)'s orders and remanded the matters back for fresh adjudication after considering the revised trust deed and audited financial statements.
Key Issues
Whether the CIT(E) erred in rejecting the Section 12A registration and Section 80G approval without considering the subsequently submitted audited accounts and amended trust deed.
Sections Cited
12A(1)(ac)(iii), 80G(5), 12A
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Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: MS. SUCHITRA KAMBLE & SHRI MAKARAND V. MAHADEOKAR
O R D E R PER MAKARAND V. MAHADEOKAR, AM: These are two separate appeals filed by the assessee relating to registration under Section 12A(1)(ac)(iii) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) and approval under Section 80G(5) of the Act. Since both the appeals involve common facts and issues, for the sake of convenience, they are disposed of by this common order.
The Commissioner of Income Tax (Exemption), Ahmedabad [hereinafter referred to as “CIT(E)”] rejected the application for registration under Section 12A(1)(ac)(iii) of the Act vide order dated 23/10/2024 on the & 64/Ahd/2025 Sant Shiromani Swami Lilashah Trust vs. CITE) grounds that the assessee failed to submit audited annual accounts for Financial Years (FYs) 2021-22, 2022-23, and 2023-24 despite multiple notices. The CIT(E) held that due to non-submission of these crucial documents, the genuineness of the trust's activities could not be verified, leading to rejection. Simultaneously, the CIT(E) rejected the application under Section 80G(5) of the Act on the same date, 23/10/2024, citing that the trust deed contained religious objectives, which contravened Explanation 3 to Section 80G(5) of the Act. The CIT(E) relied on some judicial precedents concluding that even a single religious object disqualifies an entity from 80G approval.
2.1. Therefore, the assessee is in appeal(s) before us, with the following grounds of appeal(s):
1. Learned CIT (Exemption) erred in law and facts by making the order by rejecting the application filed in form 10AB for registration u/s.12(1)(ac)(iii)of the act for not providing annual audit accounts which demanded by the authority.
2. Learned CIT (Exemption) erred in law and facts by making the order by rejecting the application filed in form 10AB for registration u/s.12(1) (ac)(iii) of the act regarding the genuine activities of the trust.
3. Appellant craves to add, alter or delete any grounds either before or in the course of hearing of the appeal.
1. On the facts and in circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Exemption) has erred in rejecting application for registration u/s 80G(5) of the act. & 64/Ahd/2025 Sant Shiromani Swami Lilashah Trust vs. CITE)
3 2. On the facts and in circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Exemption) has rejected the application under 80G(5)(iii) for the objects given in the trust deed are religious in nature. 3. Appellant craves to add, alter or delete any grounds either before or in the course of hearing of the appeal Facts of the Case:
The assessee Trust granted provisional registration under Section 12A(1)(ac)(vi) of the Act on 08/02/2022. Subsequently, the assessee filed an application for final registration in Form 10AB on 27/04/2024. Additionally, an application for approval under Section 80G(5) of the Act was filed.
The CIT(E) issued notices on 02/07/2024 and 12/08/2024 seeking submission of details, including financial statements. The assessee partially complied with the notices but failed to submit audited annual accounts for FYs 2021-22, 2022-23, and 2023-24. A final notice dated 15/10/2024 was issued, reiterating the requirement to submit audited financials and other details, which the assessee failed to comply with. Consequently, the CIT(E) rejected the application for registration under Section 12A of the Act on 23/10/2024 on the grounds of non-compliance.
4.1. Simultaneously, the CIT(E) rejected the application under Section 80G(5) of the Act on 23/10/2024, holding that certain objects in the trust deed were religious in nature, which contravened Explanation 3 to Section 80G(5) of the Act, which mandates that only purely charitable institutions are eligible for approval. & 64/Ahd/2025 Sant Shiromani Swami Lilashah Trust vs. CITE)
4 5. During the course of the hearing before us, the Authorized Representative (AR) of the assessee requested condonation of delay of 8 days in filing the appeal(s), citing reasonable causes mentioned in the affidavits. The AR submitted that part details were submitted before CIT(E), but the audited financial statements could not be submitted due to administrative reasons. The audited financial statements for FYs 2021-22, 2022-23, and 2023- 24 were placed on record before us.
5.1. The affidavits submitted by the assessee explained that the trustees lacked technical knowledge regarding compliance and relied on a part-time accountant-cum-clerk for filing and legal formalities. Due to inadvertent oversight, the accountant failed to respond to the final notice issued by the CIT(E). The affidavit further stated that the accountant, upon receiving the rejection order, realized that the required documents had not been submitted in time. Instead of immediately filing an appeal, he misunderstood the process and initially attempted to challenge the rejection through an incorrect approach, leading to misdirected efforts. Once the trustees became aware of the error, they promptly engaged a Chartered Accountant (CA), who immediately filed the appeal. However, by that time, the appeal was delayed by 8 days.
5.2. The delay, therefore, was not intentional or due to negligence, but arose due to lack of expertise and administrative mismanagement, which has since been rectified by appointing professional assistance.
We have carefully considered the rival submissions and the material on record. It is evident that the rejection of the application under Section 12A & 64/Ahd/2025 Sant Shiromani Swami Lilashah Trust vs. CITE)
5 of the Act was based on non-submission of audited financial statements, and the rejection of the application under Section 80G(5) of the Act was due to certain religious objects in the original trust deed. However, the assessee has now placed on record the audited financial statements for FYs 2021-22, 2022- 23, and 2023-24 and a revised trust deed where the religious objects have been amended.
6.1. The delay in filing the appeal is only 8 days, and considering the bona fide reasons stated in the affidavit, we condone the delay in the interest of justice.
6.2. Since the additional documents (financial statements and modified trust deed) were not before the CIT(E) at the time of passing the orders, and the CIT(E) has not examined these crucial documents, we deem it appropriate to set aside the orders of the CIT(E) and restore the matter back to his file for fresh adjudication after considering the additional documents.
6.3. The Departmental Representative has not raised any objection in restoring both the matters back to the file of CIT(E) for want of verification of additional documents placed before us.
6.4. In view of the above, we set aside the order of the CIT(E) rejecting the application under Section 12A(1)(ac)(iii) of the Act and restore the matter to the CIT(E) for fresh examination after considering the audited financial statements for FYs 2021-22, 2022-23, and 2023-24. & 64/Ahd/2025 Sant Shiromani Swami Lilashah Trust vs. CITE)
6.5. Similarly, we set aside the order of the CIT(E) rejecting the application under Section 80G(5) of the Act and direct the CIT(E) to re-examine the case in light of the modified trust deed, which is now placed on record.
6.6. The CIT(E) shall grant the assessee a reasonable opportunity of being heard before passing a fresh order. The assessee is directed to cooperate in the remand proceedings and furnish all necessary documents as required by the CIT(E).