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Facts
The assessee, a charitable trust, was granted provisional registration under Section 12A(1)(ac)(vi) of the Income Tax Act, 1961. They applied for final registration under Section 12A(1)(ac)(iii) but failed to respond to notices issued by the CIT(E) seeking details. Consequently, the CIT(E) rejected the application and cancelled the provisional registration.
Held
The Tribunal held that while the assessee's failure to respond to notices was a cause for concern, the CIT(E) also committed a procedural lapse by not examining the submitted documents. Therefore, the matter was restored to the CIT(E) for fresh consideration with a cost of Rs. 10,000 imposed on the assessee.
Key Issues
Whether the CIT(E) was justified in rejecting the application for final registration and cancelling provisional registration solely based on non-response to notices without examining submitted documents, and whether a procedural lapse by the CIT(E) warrants setting aside the order.
Sections Cited
12AB, 12A(1)(ac)(vi), 12A(1)(ac)(iii), 12A(1)(ac)
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Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD
Before: SHRI T.R. SENTHIL KUMAR & SHRI MAKARAND V. MAHADEOKAR
"ी टी.आर. से""ल कुमार, "ाियक सद" एवं "ी मकरंद वसंत महादेवकर, लेखा सद" के सम!। ] ] BEFORE SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER AND SHRI MAKARAND V. MAHADEOKAR, ACCOUNTANT MEMBER आयकर अपील सं /ITA No.2127/Ahd/2024 िनधा"रण वष" /Assessment Year : - Vardhman Charitable Trust The CIT(Exemption) बनाम/ 158, Hariganga Society Ahmedabad – 380 015 v/s. Opp. CMC Odhav Road Ahmedabad – 382 415 "थायी लेखा सं./PAN: AABTV 2612 E (अपीलाथ$/ Appellant) (%& यथ$/ Respondent) Assessee by : Shri S.N. Divatia, AR & Shri Samir Vora, AR Revenue by : Shri A.P. Singh, CIT-DR सुनवाई की तारीख/Date of Hearing : 20/02/2025 घोषणा की तारीख /Date of Pronouncement: 21/02/2025 आदेश/O R D E R PER MAKARAND V. MAHADEOKAR, AM:
This appeal has been filed by the assessee against the order of the Commissioner of Income Tax (Exemption), Ahmedabad [hereinafter referred to as "CIT(E)"] dated 13.11.2024, rejecting the application for final registration under Section 12AB of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) and cancelling the provisional registration granted under Section 12A(1)(ac)(vi) of the Act. Charitable Trust vs. CIT(E) Asst. Year : - Facts of the Case: 2. The assessee is a public charitable trust, duly constituted on 20.11.2018, and registered under the Gujarat Public Trust Act, 1950. It was previously registered under Section 12AA of the Act and was granted provisional registration under Section 12A(1)(ac)(vi) of the Act on 27.10.2021 in Form 10AC. The trust applied for final registration under Section 12A(1)(ac)(iii) of the Act by filing Form 10AB on 29.06.2024. The CIT(E) issued notices on 22.08.2024 and 14.10.2024 seeking details and documents regarding the establishment and activities of the trust. However, the assessee failed to respond to these notices. The CIT(E), therefore, rejected the application for registration and also canceled the provisional registration, citing non- compliance.
The assessee preferred appeal before us against the order of CIT(E) with following grounds of appeal:
1.1 The order passed by U/s.12AB passed on 30.03.2024 by CIT(Exem), Ahmedabad rejecting the application for registration of the appellant trust u/s 12A(1)(ac)(iii) of the Act and cancelling the provisional registration is wholly illegal, unlawful and against the principles of natural justice.
2.1 The Id. CIT(Exem), has grievously erred in law and or on facts in not appreciating that the appellant could not file response to the notices issued by the respondent for sufficient cause.
3.1 The Id. CITExem), has grievously erred in law and or on facts in rejecting the application for registration u/s 12AB of the Act holding that the genuineness of the activities of the trust and its consonance with the objects could not be verified.The CITE) has failed to taken into consideration the copy of audited annual accounts and other documents produced along with the application for registration. Charitable Trust vs. CIT(E) Asst. Year : - 3.2 That the in the facts and circumstances of the Id. CIT(Exem), ought not to have rejected the application for registration by ignoring the evidence on record with the application for registration. It is, therefore, prayed that the rejection of the application for registration and cancellation of the provisional registration by the CIT(Exem), may kindly be deleted.
During the course of the appellate proceedings before us, the Authorized Representative (AR) submitted that the assessee had filed Form 10AB along with necessary documents, including the registration certificate, PAN card, trust deed, past 12A certificate, and audit reports for the last three years. The AR contended that the CIT(E) erred in rejecting the application without discussing the documents already submitted.
The AR also contended that the assessee erroneously filed Form 10AB instead of Form 10A and that the CIT(E) should have considered this as a procedural mistake and granted an opportunity for rectification.
On the other hand, the Departmental Representative (DR) did not object to the matter being restored to the CIT(E) for reconsideration.
The Finance Act, 2020, introduced a structured procedure for the registration and re-registration of trusts and institutions under Section 12A of the Act. The following table summarizes the applicable provisions, forms, and timelines:
Section Applicable Purpose Deadline Form 12A(1)(ac)(i) Form 10A Re-registration for existing 31.03.2022 trusts registered under old 12AA Charitable Trust vs. CIT(E) Asst. Year : - 12A(1)(ac)(vi) Form 10A Provisional registration for Valid for 3 newly formed trusts years 12A(1)(ac)(iii) Form 10AB Application for final At least 6 registration after months before provisional registration expiry or within 6 months of commencement of activities 7.1. In the present case, the assessee was granted provisional registration on 27.10.2021, and it was required to file Form 10AB by 26.04.2024 (six months before expiry). However, the application was filed late on 29.06.2024. While the delay is not substantial, the failure to respond to notices issued by the CIT(E) contributed to the rejection of registration.
We have considered the submissions of both parties and examined the records. It is evident that the assessee filed Form 10AB late, beyond the prescribed due date. The CIT(E) issued two notices, which remained unanswered by the assessee. The CIT(E), however, did not discuss or examine the documents already submitted by the assessee along with Form 10AB. The DR did not object to remanding the matter back to the CIT(E) for fresh consideration.
8.1. We note that as per the provisions of Section 12A(1)(ac) of the Act, the correct form for final registration after obtaining provisional registration under Section 12A(1)(ac)(vi) of the Act is Form 10AB, and not Form 10A. The assessee had already been granted provisional registration, and therefore, Form 10AB was the appropriate form to be filed for final registration. The Charitable Trust vs. CIT(E) Asst. Year : - contention of the AR that Form 10A should have been filed is misplaced and does not hold merit.
8.2. We also note that the CIT(E) has committed a procedural lapse by not addressing the evidence that was already on record before rejecting the application. The mere non-response to notices cannot be the sole basis for rejection if relevant documents were available in the assessment file. A fair assessment would require an evaluation of all materials submitted before reaching an adverse conclusion.
8.3. At the same time, the assessee's failure to respond to notices caused unnecessary delays in the proceedings. Non-cooperation with the regulatory authority is not a practice that can be condoned without consequences. To balance the equities, we find it just and appropriate to impose a cost of Rs.10,000/- on the assessee for its non-responsiveness, while setting aside the order of the CIT(E).
8.4. In light of the above findings, we set aside the order of the CIT(E) dated 13.11.2024 and restore the matter back to the CIT(E) for fresh consideration. The CIT(E) is directed to pass a reasoned order after considering all material on record and after giving proper opportunity of being heard to the assessee. The assessee is directed to cooperate with the CIT(E) in proceedings and ensure timely compliance with any further queries and deposit a cost of ₹10,000 to the Income Tax Department for failure to respond to notices. Charitable Trust vs. CIT(E) Asst. Year : -