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Facts
The assessee's applications for registration under section 12A and approval under section 80G were rejected by the CIT(E) without considering the detailed reply and documents submitted. The CIT(E) issued only one query letter and did not provide a sufficient opportunity to the assessee to clarify deficiencies.
Held
The Tribunal held that the CIT(E) erred in rejecting the applications without affording a proper opportunity to the assessee to explain its case. The orders of the CIT(E) were set aside and the matters were restored to the CIT(E) for fresh consideration.
Key Issues
Whether the rejection of applications for registration u/s 12A and approval u/s 80G by the CIT(E) was justified without providing adequate opportunity to the assessee.
Sections Cited
12A, 80G, 10, 11, 12
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Income Tax Appellate Tribunal, LUCKNOW BENCH “A”, LUCKNOW
Before: SHRI. SUDHANSHU SRIVASTAVA & SHRI ANADEE NATH MISSHRA
These appeals have been preferred by the assessee against separate orders, both dated 26.07.2024, passed by the ld. Commissioner of Income Tax (Exemption) [hereinafter called the ‘Ld. CIT(E)’], Lucknow, rejecting the assessee’s applications for registration under section 12A of the Income Tax Act, 1961 (hereinafter called ‘the Act’) and for grant of approval under section 80G(5) of the Act.
The assessee has raised the following grounds of appeals:
GROUNDS IN ITA NO.595/LKW/2024:
1. That the learned CIT (Exemption) erred in law and on facts by rejecting the application for registration under Section 12A of the Income Tax Act, 1961, without considering the detailed reply submitted by the Appellant on 25th July 2024. The Appellant had provided all requisite documents, including the affidavit and details of charitable expenditure with supporting invoices, as requested by the Ld. CIT (Exemption) in the query letter dated 17th July 2024. The rejection based on non-filing of a reply is factually incorrect.
2. That the rejection order is arbitrary and suffers from non-application of mind as the learned CIT (Exemption) failed to acknowledge or address the submissions made by the Appellant, and instead proceeded to pass the order based on erroneous assumptions. The Appellant had fully complied with both query letters, yet the CIT (Exemption) did not consider the same, leading to an unjust conclusion.
3. That the learned CIT (Exemption) violated the principles of natural justice by failing to provide any opportunity to the Appellant to clarify or rectify any perceived deficiencies before passing the rejection order. The Appellant was neither informed of any insufficiency in its submission nor given any further notice before the application was dismissed. 4. That the impugned order is a non-speaking order as it fails to provide any reasoning or justification for disregarding the documents and information submitted by the Appellant. It is settled law that a rejection order must
be based on proper reasoning, particularly when the Appellant has complied with all procedural requirements. 5. The appellant prays for leave to add, to amend, to delete, or modify the all or any grounds of appeal on or before the hearing of appeal. GROUNDS IN ITA NO.594/LKW/2024:
1. That the learned CIT (Exemption) erred in law and on facts by rejecting the application for registration under Section 80G of the Income Tax Act, 1961, without considering the detailed reply submitted by the Appellant on 25th July 2024. The Appellant had provided all requisite documents, including the affidavit and details of charitable expenditure with supporting invoices, as requested by the Ld. CIT (Exemption) in the query letter dated 17th July 2024. The rejection based on non-filing of a reply is factually incorrect.
2. That the rejection order is arbitrary and suffers from non-application of mind as the learned CIT (Exemption) failed to acknowledge or address the submissions made by the Appellant, and instead proceeded to pass the order based on erroneous assumptions. The Appellant had fully complied with both query letters, yet the CIT (Exemption) did not consider the same, leading to an unjust conclusion.
That the learned CIT (Exemption) violated the principles of natural justice by failing to provide any opportunity to the Appellant to clarify or rectify any perceived deficiencies before passing the rejection order. The Appellant was neither informed of any insufficiency in its submission nor given any further notice before the application was dismissed.
4. That the impugned order is a non-speaking order as it fails to provide any reasoning or justification for disregarding the documents and information submitted by the Appellant. It is settled law that a rejection order must be based on proper reasoning, particularly when the Appellant has complied with all procedural requirements.
5. The appellant prays for leave to add, to amend, to delete, or modify the all or any grounds of appeal
on or before the hearing of appeal.
3. At the outset, the Ld. Authorized Representative for the assessee (Ld. A.R.) submitted before us that the applications of the assessee for registration under section 12A of the Act and grant of approval under section 80G(5) of the Act were rejected by the ld. CIT(E) out-rightly, without considering the detailed reply submitted by the assessee. The Ld. A.R. further submitted that all the requisite documents, including the Affidavit and details of charitable expenditure with supporting invoices were furnished before the ld. CIT(E). However, the ld. CIT(E), without affording reasonable opportunity to the assessee-society to clarify/rectify the deficiencies, if any, passed the orders rejecting the applications of the assessee. The Ld. A.R. prayed that the orders passed by the ld. CIT(E) be set aside and the matter be restored back to the file of the ld. CIT(E) for the deciding the same afresh after affording reasonable opportunity to the assessee.
4. Per contra, the Ld. Sr. D.R. opposed the prayer of the assessee for being given another opportunity.
We have heard both the parties and after having gone through the material on record, we note that the ld. CIT (Exemption) had rejected the applications of the assessee for registration under section 12A of the Act and approval under section 80G(5) of the Act on the ground that the assessee had not provided the (1) details of the expenses incurred on charitable activities alongwith supporting documentary evidence to prove the genuineness of the activities and its charitable nature and (2) certificate declaring that the activities of the trust had commenced and that no income or part thereof of the said trust or institution had been excluded from the total income on account of applicability of sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause(via) of clause (23C) of section 10, or section 11 or section 12, for any previous year ending on or before the dated of such application, at any time after the commencement of such activities. From the orders of ld. CIT (E), it is apparent that the ld. CIT (Exemption) had issued only one letter dated 18.07.2024, requiring the assessee to furnish certain documents. No further opportunity was provided to the assessee in this regard. Under these facts, we feel that one more opportunity should be given to the assessee to explain its case before the ld. CIT (E), as the assessee has not been given proper and sufficient opportunity before disposing of the application of registration under section 12A of the Act and grant of approval under section 80G(5) of the Act by the ld. CIT (E). We, therefore, set aside the orders of the ld. CIT (E) and restore both the matters to his file with the direction to consider the application of the assessee for registration under section 12A of the Act and grant of approval under section 80G(5) of the Act after giving proper and sufficient opportunity of being heard to the assessee. The assessee is also directed to provide the material/clarification as asked for by the ld. CIT (E).
In the final result, both the appeals of the assessee stand allowed for statistical purposes.
Order pronounced in the open Court on 22/04/2025.