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Facts
The assessee, a society formed to provide medical aid, was granted provisional registration under Section 12AB. The CIT(E) rejected the application for final registration, citing insufficient evidence of commencement of charitable activities, despite the assessee incurring maintenance expenses.
Held
The Tribunal held that the CIT(E) erred in rejecting the application without providing sufficient opportunity and considering the evidence of commencement of activities. The procedure under Section 12AB(3) was not followed.
Key Issues
Whether the CIT(E) correctly rejected the final registration application without affording proper opportunity and due consideration of evidence of commencement of charitable activities.
Sections Cited
12A, 12AB, 12AB(1)(b)(ii)(B), 12AB(3)
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सुनवाई की तारीख/Date of Hearing : 03/03/2025 उदघोषणा की तारीख/Date of Pronouncement : 03/03/2025 आदेश/Order PER BENCH: Both the above appeals have been filed by the Assessee against the common order of the Ld. CIT(E) Chandigarh, pertaining to Assessment Year 2024-25.
At the outset the Registry has pointed out that the above appeals are barred by limitation by 24 days for which the assessee has filed a condonation application which is placed on record.
After considering the condonation application filed by the assessee in both the above appeals, we condone the delay for which sufficient cause is shown, and admit both the appeals for adjudication.
Since the issues involved in both the above appeals are common and were heard together so they are being disposed off by this consolidated order. With the consent of both the parties we take up Appeal No. 250/Chd/2024 for A.Y 2024-25 as a lead case, wherein Assessee has raised following grounds:
That the order u/s u/s 12A(l)(ac)(iii) r.w.s 12AB dated 21.12.2023 passed by the Id. CIT(Exemptions), Chandigarh is contrary to the facts of the case, illegal and arbitrary.
2. That the Id. CIT(Exemptions), Chandigarh has erred in passing the order dated 21.12.2023 rejecting the application of the Appellant society u/s 12A(l)(ac)(iii) and further cancelling any registration granted u/s 12AB or 12AA of the Income Tax Act. That the Id. CIT(Exemptions), Chandigarh has erred in merely treating the application filed in 3. form 10AB for final registration u/s 12A(l)(ac)(iii) read with section 12AB as deficient in factual evidences without passing any speaking order and without specifically mentioning any reason(s) thereof.
4. That the impugned order dated 21.12.2023 has been passed by the Id. CIT(Exemptions) rejecting the claim of the Appellant for final registration u/s 12AB without appreciating the fact that incurring an expenditure of Rs. 55,000/- by the appellant society after the provisional registration had been granted also amounted to commencement of activities.
5. That the impugned order dated 21.12.2023 has been passed by the Id. CIT(Exemptions) rejecting the claim of the Appellant for final registration u/s 12AB without appreciating the fact that the application in form 10AB had been filed within the limitation prescribed under the Act. That the Appellant craves leave to append, amend or withdraw any ground of appeal till it is 6. finally decided.
The assessee has also raised an additional ground which read as under: “ That the Ld. CIT(Exemptions) has erred in not providing opportunity of being heard before rejecting the application and cancelling the registration under section 12AB(1)(b)(ii)(B) of the Act.”
Briefly the facts of the case are that the assessee is a society registered under the Societies Registration Act, 1860, which was formed on 28.07.2022 with the main objects to provide medical Aid to poor person(s), to provide accommodations for students and for other social gatherings ,etc. The assessee had filed application in Form no. 10A under 02-Item (A) of sub- clause (vi) of clause (ac) of sub-section (1) of section 12A r.w.s 12AB of the income tax Act dated 01.06.2023 and the assessee had been granted provisional registration as per form 10AC issued on 08.06.2023 as applicable from AY 2024-25 to 2026-27. 5.1 The assesse had commenced its activities on 08.06.2023 when maintenance charges of Rs. 55,000 had been paid for the land on which the construction of dispensary, to provide medical facilities and aid to the poor and needy persons, has to be done as per the objects. Pursuant to the filing of application in form 10AB on 09.06.2023 for seeking final / permanent registration under sub clause (iii) of clause (ac) of sub section (1) of section 12A r.w.s 12AB, detailed questionnaire had been issued on 17.08.2023 in order to examine and verify the objects of the society, genuineness of its activities.
5.2 The assessee had duly submitted the reply to the above mentioned questionnaire on 18.10.2023. 5.3 The Id. CIT Exemptions, Chandigarh has vide order issued in form 10AD dated 21.12.2023, rejected the application filed by the appellant for registration u/s 12A(l)(ac)(iii) and also cancelled the registration granted u/s 12AB of the Act, by holding that "Apart from a single expense of Rs. 55,000/- on the maintenance of land held by it, the applicant has not made any expenditure on any kind of charitable activity. Even the single expense incurred by the applicant does not reflect any charitable activity. Further the applicant society itself stated that the applicant society intends to carry out its charitable activities from the land mentioned supra. It shows that the society has yet to start its activities".
5.4 The Id. CIT Exemptions, Chandigarh has arbitrarily rejected the application of the assessee filed in form 10AB by holding that the appellant has yet not commenced its activities and without considering and appreciating the fact that the appellant had incurred maintenance expense of Rs. 55,000 which had been paid through banking channels and copy of Bank statement had been duly filed during the proceedings for registration.
Aggrieved by the order of the Ld. CIT(E) the assessee is in appeal before us.
During the Course of hearing, the assessee has made two fold submissions before us firstly, that the Ld. CIT(E) before passing the order under section 12AB for rejecting the final registration, had not granted the sufficient and adequate opportunity by giving show cause notice to the assessee secondly, it was submitted that the assessee had filed the evidence before this Tribunal as well as the records before the Ld. CIT(E) showing the commencing of activity. However the Ld. CIT(E) has failed to consider the same. It was submitted that given a chance, the assessee would be in a position to explain the commencement of activity before the Ld. CIT(E) and therefore it was pleaded that the matter may kindly be remanded back to the file of the Ld. CIT(E).
Per contra, the Ld. CIT DR had submitted that the Department has no objection if the matter is remanded back to the file of the Ld. CIT(E) for passing an appropriate order.
We have heard the rival contention of both the parties and perused the material available on the record. In the present case, the provisional registration was granted to the assessee on 08/06/2023 and on the date of provisional registration, the assesse has spent a money of Rs. 55,000/- for the purpose of maintenance charges for the land, meant for charitable purposes. It was submitted that immediately after the grant of provisional registration and spending the amount, the assessee had applied for grant of final registration in accordance with law. The Ld CIT(E) has came to the conclusion that no evidence has been filed by the assessee to show the commencement of the activity for the purpose of Aims & Objection of the Trust which are charitable in nature and therefore in the absence of any evidence showing the commencement of activity the assessee has not entitled to grant the final registration under section 12AB of the Act.
9.1 In our view once the evidence has been filed by the assessee before us showing the commencement of activity which are in consonance with the Aims & Objects of the Trust, albeit which are charitable in nature i.e; to run the charitable dispensary, medical aid etc. then Ld. CIT(E) should have consider the evidence and pass the reasoned speaking order. However in case, the Ld. CIT(E) is not satisfied with the commencement of activity, then the sufficient opportunity should be given to the assessee before cancelling the provisional registration.
9.2 In our view the statute has provided the procedure in Section 12AB(3) which is as under : . [(3) The order under sub-section (1) shall be passed, in such form and manner as may be prescribed, within a period of,-- (i) three months calculated from the end of the month in which the application was received in case of clause (a); (ii) six months calculated from the end of the quarter in which the application was received in case of sub-clause (ii) of clause (b); and (iii) one month calculated from the end of the month in which the application was received in case of clause (c).] Since in the present case the Ld. CIT€ has failed to follow the mandate of law as given in 12AB(3) supra, therefore were are of the considered opinion the matter is required to be remanded back to the file of the Ld. CIT(E) to pass a fresh order and the assessee is directed to furnish all evidence of showing the doing the charitable activities till date, showing the commencement / carrying out of the charitable activity. The Ld. CIT(E) is also directed to consider all the evidences / documents, now filed by the assesse or to be filed by the assessee with a view to establish that the assessee is carrying out the charitable activities. On verification of documents / evidence Ld. CIT(E) , filed by the assessee, if any, shall record a finding, as to whether the assesse had fulfilled the condition for grant of registration or not. In case the conditions are fulfilled Ld. CIT(E) shall grant registration to the assessee. Needless to say the above said exercise shall be carried out by the Ld. CIT(E) after following the principles of natural justice and after affording opportunity of hearing to the assesse.
In the result, appeal filed by the Assessee is allowed for statistical purposes.
Both the parties fairly submitted that the facts and circumstances of other appeal i.e Chd/2024 are exactly identical to the Appeal in ITA No. 250/Chd/2024 and similar contentions raised therein may be considered, therefore, our findings and directions given in ITA No. 250/Chd/2024 shall apply mutatis mutandis to other appeal also.
In the result, both the above appeals filed by the Assessee are allowed for statistical purposes.