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Facts
The assessee, Mihu Foundation, applied for registration under Section 12AB and approval under Section 80G(5) of the Income Tax Act, having previously obtained provisional registration. The CIT(E) rejected these applications and cancelled the provisional registration, concluding that the assessee was not engaged in substantial charitable activities based on its income and expenditure account, without providing a proper opportunity to rebut or specific defects. The assessee appealed, arguing the rejection was arbitrary, mechanical, and lacked proper reasoning and opportunity of being heard.
Held
The Tribunal found that the CIT(E) acted arbitrarily by cancelling the provisional registration without outlining how the assessee was not engaged in substantial charitable activities or providing a reasonable opportunity for rebuttal. The Tribunal deemed the orders unsustainable and, in the interest of justice, restored the matter to the CIT(E) for fresh consideration, directing that the assessee be given a reasonable opportunity to explain its activities.
Key Issues
Whether the CIT(E) erred in rejecting applications for registration under Section 12AB and approval under Section 80G(5), and cancelling provisional registration, without providing proper opportunity of being heard or reasoned findings on the genuineness of charitable activities.
Sections Cited
12AB(1)(b)(ii)(B), 80G(5), 12A, 12AB
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Income Tax Appellate Tribunal, LUCKNOW ‘B’ BENCH, LUCKNOW
Before: SH. SUDHANSHU SRIVASTAVA & SH. NIKHIL CHOUDHARY
O R D E R PER NIKHIL CHOUDHARY, A.M. These two appeals have been preferred by the assessee against the rejection of its applications for registration under section 12AB(1)(b)(ii)(B) and section 80G(5) of the Income Tax Act, 1961. As the cases were heard together and are inter- related, therefore, both the cases are taken up for disposal together. The grounds of appeal
in are as under:-
1. The Learned Commissioner of Income Tax (Exemption) erred in law and on facts by rejecting the Applicant's application and canceling its provisional registration without granting a proper opportunity of being heard. The Applicant duly submitted all required documents in the prescribed format through the online portal, which were accepted by the system without any objections or deficiencies being raised. The rejection of the application and cancellation of the registration, without due consideration of the documents submitted and without providing any reasoned opportunity for rebuttal, is arbitrary, unjustified, and contrary to the principles of natural justice.
1. & 210/LKW/2025 A.Y. 2025-26 Mihu Foundation 2. The Ld. Commissioner of Income Tax (Exemption) wrongly concluded that the Applicant failed to prove the genuineness of its activities. The Applicant submitted all necessary documentary evidences and other relevant documents, in compliance with the provisions of the Act. Despite this, the Ld. Commissioner mechanically rejected the application without conducting any independent verification or inquiry into the Applicant's activities. The mere assumption that the Applicant's activities are not genuine, without any tangible basis or evidence to support such a conclusion, is legally unsustainable. The rejection order lacks substantive reasoning and fails to establish any specific non- compliance on the part of the Applicant.
3. The Ld. Commissioner of Income Tax (Exemption) failed to appreciate that the Applicant submitted its documents in the format prescribed under the law, and the online portal duly accepted the submissions without any technical or procedural objections. The entire application process is governed by an online mechanism, and once the system has validated the submissions, the presumption should be in favor of the Applicant unless specific defects are pointed out. The rejection of the application despite the fulfillment of the procedural requirements undermines the credibility of the automated process and places an undue burden on the Applicant. Such an approach defeats the purpose of digital compliance initiatives introduced under the Income-tax Act, leading to unnecessary hardship for genuine applicants.
4. The impugned order passed by the Ld. Commissioner of Income Tax (Exemption) suffers from non-application of mind and lacks any objective reasoning. The Ld. Commissioner failed to analyze the nature of activities carried out by the Applicant, the documents submitted, and the compliance undertaken. The order is based on a generic and sweeping observation that the Applicant failed to prove the genuineness of its activities, without specifying any particular shortcoming or deficiency. A quasi-judicial authority is expected to provide a well-reasoned and speaking order, addressing the submissions and evidence placed before it. In the absence of any specific findings or reasoning, the order is arbitrary, unjust, and liable to be set aside.
5. The Ld. Commissioner of Income Tax (Exemption) acted arbitrarily in canceling the Applicant's provisional registration, without any justifiable reason. The Applicant was granted provisional registration after due verification, and there has been no change in the Applicant's activities that would warrant its cancellation. The cancellation has been done in a mechanical manner, without proper assessment of the Applicant's compliance with the conditions laid down in section 12AB of the Act. Such arbitrary cancellation not only prejudices the Applicant's rights but also affects its ability to carry out charitable activities and receive legitimate donations. The Hon'ble Tribunal is, therefore, requested to set aside the impugned order and direct the Ld. Ld. Commissioner of Income Tax (Exemption) accept the application of the & 210/LKW/2025 A.Y. 2025-26 Mihu Foundation Appellant by considering the documents and evidences produced by the Appellant.
6. In view of the above, the Applicant prays that the Hon'ble Income Tax Appellate Tribunal may kindly allow the appeal and grant such relief as may be deemed just and proper under the circumstances.”
2. The grounds of appeal
in are as under:-
1. The Learned Commissioner of Income Tax (Exemption) erred in law and on facts by rejecting the Applicant's application and canceling its provisional registration without granting a proper opportunity of being heard. The Applicant duly submitted all required documents in the prescribed format through the online portal, which were accepted by the system without any objections or deficiencies being raised. The rejection of the application and cancellation of the registration, without due consideration of the documents submitted and without providing any reasoned opportunity for rebuttal, is arbitrary, unjustified, and contrary to the principles of natural justice.
The Ld. Commissioner of Income Tax (Exemption) wrongly concluded that the Applicant failed to prove the genuineness of its activities. The Applicant submitted all necessary documentary evidences and other relevant documents, in compliance with the provisions of the Act. Despite this, the Ld. Commissioner mechanically rejected the application without conducting any independent verification or inquiry into the Applicant's activities. The mere assumption that the Applicant's activities are not genuine. without any tangible basis or evidence to support such a conclusion. is legally unsustainable. The rejection order lacks substantive reasoning and fails to establish any specific non- compliance on the part of the Applicant.
3. The Ld. Commissioner of Income Tax (Exemption) failed to appreciate that the Applicant submitted its documents in the format prescribed under the law, and the online portal duly accepted the submissions without any technical or procedural objections. The entire application process is governed by an online mechanism, and once the system has validated the submissions, the presumption should be in favor of the Applicant unless specific defects are pointed out. The rejection of the application despite the fulfillment of the procedural requirements undermines the credibility of the automated process and places an undue burden on the Applicant. Such an approach defeats the purpose of digital compliance initiatives introduced under the Income-tax Act. leading to unnecessary hardship for genuine applicants.
The impugned order passed by the Ld. Commissioner of Income Tax (Exemption) suffers from non-application of mind and lacks any objective reasoning. The Ld. Commissioner failed to analyze the nature of activities & 210/LKW/2025 A.Y. 2025-26 Mihu Foundation carried out by the Applicant, the documents submitted, and the compliance undertaken. The order is based on a generic and sweeping observation that the Applicant failed to prove the genuineness of its activities, without specifying any particular shortcoming or deficiency. A quasi-judicial authority is expected to provide a well-reasoned and speaking order, addressing the submissions and evidence placed before it. In the absence of any specific findings or reasoning, the order is arbitrary, unjust, and liable to be set aside.
The Ld. Commissioner of Income Tax (Exemption) acted arbitrarily in canceling the Applicant's provisional registration, which was valid up to the Assessment Year 2025-26, without any justifiable reason. The Applicant was granted provisional registration after due verification, and there has been no change in the Applicant's activities that would warrant its cancellation. The cancellation has been done in a mechanical manner, without proper assessment of the Applicant's compliance with the conditions laid down in section 80G of the Act. Such arbitrary cancellation not only prejudices the Applicant's rights but also affects its ability to carry out charitable activities and receive legitimate donations. The Hon'ble Tribunal is, therefore, requested to set aside the impugned order and direct the Ld. Ld. Commissioner of Income Tax (Exemption) accept the application of the Appellant by considering the documents and evidences produced by the Appellant.
In view of the above, the Applicant prays that the Hon'ble Income Tax Appellate Tribunal may kindly allow the appeal and grant such relief as may be deemed just and proper under the circumstances.”
The facts of the case are that the assessee submitted an online application in Form 10AB under sub clause (iii) of clause (ac) of sub section (i) of section 12A of the Income Tax Act, 1961 r.w.s. 17A of the Income Tax Rules, 1962 on 29.06.2024 seeking registration under section 12AB of the Act. The assessee had already been provisionally been registered by an order dated 8.10.2022 with the Unique Registration No.AAPCM8888EE20221. The ld. CIT(E) records that he issued notice to the assessee for filing responses and making compliance on 10.10.2024, 12.11.2024 and 3.12.2024. He further records that vide his query letter dated 10.10.2024, the assessee was required to submit a note on activities conducted since inception / during the last three years and a note specifying main area of charitable / religious activities and a projection / plan for the main charitable / religious activities to be undertaken in the next two years. The ld. CIT(E) outlined his belief that the & 210/LKW/2025 A.Y. 2025-26 Mihu Foundation aforementioned enquiry about the actual activities of the trust was necessary in view of the mandatory provisions of the procedure given in section 12AB of the Income Tax Act, 1961 which was reproduced in his order. In response to the notices issued, he records that the assessee furnished its reply and the details of the objects of the non-profit company as per its memorandum of association were also reproduced in his order. The ld. CIT(E) also reproduced a copy of the income and expenditure account of the assessee for the F.Y. 2023-24 and from the same, he concluded that the assessee was not engaged in any substantial charitable activities as per its objects. Therefore, he concluded that the genuineness of the charitable activities being carried out by the non-profit company had not been satisfactorily established. Accordingly, in view of this belief, he rejected the application filed in Form No.10AB for the registration under section 12AB of the Income Tax Act, 1961 and cancelled the provisional registration granted on 8.10.2022. Simultaneously, the ld. CIT(E) also initiated enquiries with reference to the assessee’s application in Form No.10AB under Rule 11AA of the Income Tax Rules, 1962 seeking approval under sub section 5 of section 80G of the Income Tax Act. In this order also, he reproduced the objects of the company as derived from its memorandum of association and by comparing the income and expenditure account of the said organization in comparison to its objects, he concluded that the assessee was not engaged in any substantial charitable activities as per its objects. Therefore, since the ld. CIT(E) was in doubt regarding the genuineness of charitable activities being carried out by the non-profit company, he rejected the application for approval under section 80G(5) also.
4. Aggrieved with these orders of the ld. CIT(E), the assessee is before us in appeal. It was submitted (in the statements of facts) filed alongwith the appeal that the assessee had been given opportunities to provide documentary evidences to support the genuineness of his activities and it had duly submitted the required documents through the online portal in the prescribed format. However, the ld. & 210/LKW/2025 A.Y. 2025-26 Mihu Foundation CIT(E) without properly verifying the details and evidence submitted through the online process had rejected the application and cancelled the assessee’s provisional registration by his orders dated 23.12.2024. It was further submitted that the ld. CIT(E) had erred in law and in facts by rejecting the said applications without considering the documents submitted by the assessee and without providing the assessee with any reasonable opportunity for rebuttal. It was further submitted that no independent verification or enquiry had been conducted into the assessee’s activities and therefore, the assumption that the assessee’s activities were not genuine was without any tangible basis or evidence to support such a conclusion. It was, therefore, legally unsustainable. It was further submitted that the rejection orders lacked substantive reasoning and failed to establish any specific non- compliance on the part of the assessee. It was, therefore, submitted that the orders passed by the ld. CIT(E) had been passed mechanically without due application of mind but and in fact were based on generic and sweeping observations that the assessee had failed to prove the genuineness of its activities – without specifying any particular shortcoming or deficiency. It was submitted that a quasi-judicial authority was expected to provide a well-reasoned and speaking order addressing the submissions and evidences that have been placed before it. It was further submitted that the assessee had been granted provisional registration after due verification and this provisional registration was valid upto the assessment year 2025-26. Thus, there had been no change in the assessee’s activities that would warrant cancellation of these provisional registrations. Such arbitrariness on the part of the ld. CIT(E) not only prejudiced the assessee’s rights but also affected its abilities to carry out its charitable activities and receive legitimate donations. Accordingly, it was prayed that the order of the ld. CIT(E) being bad in law, may be set aside and assessee may be allowed relief in this regard.
& 210/LKW/2025 A.Y. 2025-26 Mihu Foundation 5. When the case was called out for hearing, nobody was present on behalf of the assessee. However, considering the nature of the argument presented in the statements of fact and grounds of appeal, it was decided to proceed with the appeal. It was observed by us that the ld. CIT(E) had not outlined in the course of his order as to how the assessee was not engaged in any substantial charitable activities as per its objects. It was also evident to us from a perusal of the said order that before coming to such a conclusion, the ld. CIT(E) had not afforded the assessee an opportunity to rebut such conclusions that had been derived by him by comparison of income and expenditure account and the objects of the company. By proceeding to cancel the provisional registration of the assessee without providing the assessee an opportunity to offer an explanation and without pointing out any specific defect which may warrant such a conclusion, the ld. CIT(E) had acted arbitrarily and therefore, the orders passed by him in this regard were not maintainable. These facts were confronted to the ld. CIT DR, Sh. Vachaspati Tripathi, who submitted that the matter could be sent back to the ld. CIT(E) for proper appreciation of the facts and appropriate directions could be issued to the assessee to furnish relevant documents to the ld. CIT(E), as required by him to determine the genuineness of the activities of the trust. In due consideration of the orders passed by the ld. CIT(E), the grounds of appeal and statements of facts filed by the assessee and the arguments presented by the ld. CIT DR, we deem it appropriate in the interest of justice to restore the matter back to the file of the ld. CIT(E) so that the assessee may be provided a reasonable opportunity to explain as to how its activities were charitable and in accordance with the objects for which it was set up. The ld. CIT(E) may therefore, consider the applications filed by the assessee afresh, after providing such opportunities to the assessee. Accordingly, both the appeals of the assessee, against the orders rejecting the application under section 12AB(1)(b) and the application under section 80G(5) are allowed for statistical purposes.