Loading judgment…
Facts
The assessee filed appeals against two orders of the CIT(Exemption) rejecting their applications for registration under section 12AB and approval under section 80G of the Income Tax Act, 1961. The CIT(E) rejected the applications primarily on the grounds of alleged siphoning of funds and conducting business activities beyond its objects.
Held
The Tribunal held that the assessee was not provided adequate opportunity for being heard by the CIT(E). The matter was restored to the file of the CIT(E) for fresh adjudication, providing the assessee with an adequate opportunity to present their case and submit documents.
Key Issues
Whether the assessee was denied a fair opportunity of being heard by the CIT(E) before rejecting the applications for registration and approval under the Income Tax Act.
Sections Cited
12AB, 80G, 10(23C), 13(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCHES,”A” JAIPUR
आयकरअपीलीय अधिकरण] जयपुरन्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A” JAIPUR Mk0 ,l- lhrky{eh] U;kf;dlnL; ,oaJhjkBkSM+ deys'kt;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;djvihyla-@ITA No.1107 & 1108/JPR/2024 u/s 12AB and 80G of the Act Samajik Prerna Avam Gramin Vikas cuke The CIT-Exemption, Vs. SansthanLaporiya , Village: Laporiya, Gargardu Jaipur. Dudu, Jaipur- 303 008 LFkk;hys[kk la-@thvkbZvkjla-@PAN/GIR No.: ACBAS 3236 L vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksjls@Assesseeby :Shri R.S. Poonia, CA jktLo dh vksjls@Revenue by: Shri Rajesh Ojha, CIT-DR lquokbZ dh rkjh[k@Date of Hearing : 28/04/2025 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 07/05/2025 vkns'k@ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM
These are two appeals filed by the assessee against two different orders of the Ld.CIT (Exemption), Jaipur both dated 30-07- 2024 passed under section 12AB and 80G of the Income Tax Act, 1961 respectively. The grounds of appeal raised by the assessee in both the appeals are as under:-
U/s 12AB of I.T. Act, 1961 ‘’That under the facts and in the circumstances of the case, the ld. CIT(E) , Jaipur rejected the application u/s 12A(1)(ac)(vi)(B) of the I.T. Act, 1961 on the basis of arbitrariness, hypothetical and baseless allegations, which is wrong, unwarranted and bad in law. Kindly direct to register the same.
U/s 80G of I.T. Act, 1961 ‘’That under the facts and in the circumstances of the case, the ld. CIT(E) , Jaipur rejected the application u/s 80G(5)(iv)(B) of the I.T. Act, 1961 on the basis of arbitrariness, hypothetical and baseless allegations, which is wrong, unwarranted and bad in law. Kindly direct to register the same.’’ 2.1 Apropos to the ground so raised by the assessee in the ld. CIT(E) rejected the assessee’s claim of registration u/s 12AB of the Act by observing as under:- 3.4 The appellant in its submission stated that it is no matter of siphon of trust fund because payment to Rajesh Kanwar wife of trustee Mr. Jagveer Singh has been recovered back and to other a member as salary of 7 months as he gave services. On perusal of submission of the applicant, it is noticed that the trust has recovered of Rs.1,14,686/- out of Rs.1,71,986/- from Smt. Rajesh Kanwar. This acts clearly proves that the applicant has recovered the same from wife of the trustee i.e. Smt.Rajesh Kanwar. Further, the trustee Shri Jagveer Singh itself,enjoythefund of the trust in name of travel, vehicle expenses etc. and received payment of Rs.54,161- from the trust. After considering the above discrepancies, it is clear assessee trust is siphoning of money. Thus, it is clear that activities are not genuine and trustee are siphoning of funds. This makes trust ineligible for registration under section 12AB of IT Act as activities are not genuine and many of trust is being run by management for personal benefit ‘’04. In view of above discussion applicant’s application for registrat4ion u/s 12AB is liable to be rejected and thus being rejected on followinggrounds:-
Assessee having business income and doing business in garb of charity and doing activity beyond the objects. Siphonsing off the funds of the institution.
2.2 Apropos to the ground so raised by the assessee in the ld. CIT(E) rejected the assessee’s claim of registration u/s 80G of the Act by observing as under:- ‘’02. Approval u/s 80G cannot be granted without registration u/s 12AB:- 2.1. As per rule 11AA of the Income Tax Rule, 1962, the registration u/s 12A/12AB or notification u/s 10(23C) is a precondition for granting approval u/s 80G of the I.T. Act, 1961. Vide this office order No.ITBA/EXM/F/EXM45/2024- 25/1067152550(1) dated 30.07.2024 the applicant Society/trust/Samiti has been denied registration u/s 12AB. Therefore, it is not eligible for exemption u/s 80G of the I.T. Act, 1961. In view of above discussion, the application in form No. 10AB seeking exemption u/s 80G is liable to be rejected.
In view of abovediscussion applicant's application for approval u/s 80G is liable to be rejected and thus being rejected on followinggrounds:- Approval u/s 80G cannot be granted without registration u/s 12AB.’’ 2.3 During the course of hearing, the ld. AR of the assessee in both the appeals mainly submitted that the assessee was not provided adequate opportunity of being heard by the ld. CIT(E). As is evident from the record that ld. CIT(E) has given only two opportunity one on 17.04.2024 and another on 13.05.2024. Thus both the orders should be quashed being against the principles of natural justice. Further, it is submitted by the ld. AR of the assesseethat he has submitted all the required documents as desired by the ld. CIT(E) but the ld. CIT(E) without verifying and /or considering the details, documents, evidences, in a routine manner rejected the approval of registration of trust u/s 12AB of the Act alleging that there is siphoning of fund. The ld.ARof the assessee also submitted that the assessee trust is a charitable Sanstha and its activities are charitable in nature.As regards the amount of Rs.54,161/-, it is submitted by the ld. AR of the assessee that Rs.35,500/- was withdrawal from bank which is recorded in cash book on same day (PB Page 151 to 155) and Rs.18,661/- is reimbursement of travelling expenses for conference of Hubli, Karnataka for which copies of bills and vouchers are placed at PB pages 111 to 124. Further as regards the amount of Rs.1,71,986/- given to Smt. Rajesh Kanwar, the details of such amount is mentioned as under:-
S.N. Date Amount See Note 1. 01-08-2023 11000 See Note I 2. 05-08-2023 17000 See Note I 3. 23-12-2023 8772 See Note I 4. 23-12-2023 1188 See Note I 5. 23-12-2023 12420 See Note I 6. 24-12-2023 29686 See Note I 7. 28-02-2024 57300 See Note 2 8. 26-03-2024 15408 See Note I 9. 26-03-2024 19212 See Note I It is submitted by the ld AR of the assessee in the written submission that expenditure having Note 1 are payment made to Smt. Rajesh Kanwar against the use of her vehicle for charitable activity of the society. The bills and voucherwere made available at paper book pages 65 to 110. He further submitted that complete details and purpose for vehicle is used alongwith log book and comparison with the market rate of hiring of vehicle were also placed on record before the ld CIT(E) for examination but he ignored that documentary evidences submitted by the Trust. Thus there is no siphoning off the funds. He further submitted that Note -2 contains the amount of Rs.57,300/- and it was the repayment of loan taken from Smt. Rajesh Kanwar during the year under consideration whose bills and vouchers are made available at paper book pages 163 to 164. He further submitted that at the most the ld. CIT(E) can allege violation of Section 13(1)© of the Act if the payment is found unreasonable but the violation of Section 13(1)© cannot be basis of neither rejection of registration nor cancellation u/s 12AB(4) of the Act and only the excess amount can be taxed. It is also worthwhile to mention that the assessee trust has filed the paper book containing pages 1 to 64, Bills and vouchers payments made to Smt Rajesh Kanwar having pages 65 to 164 and further pages 111 to 162 pages and written argument with following details. S.N. Particulars Date 1. Form No.10AB u/s 12A(1)(ac)(vi)B, filed directly 11-01-2024 without having provisional registration as activity was already commenced (but wrongly written the date in rejection order 11-06-2024) 2. Query letter raised by CIT(E) 17-04-2024 3. Detailed reply submitted by assessee-trust 02-05-2024 4. Query raised through note sheet 02-05-2024 5. Reply submitted by assessee trust 13-05-2024 6. Supplementary reply submitted by assessee trust 22-05-2024 7. Ld. CIT(E) rejected the registration 30-07-2024 8. Appeal against the order filed before ITAT 24-08-2024 Conclusively, he prayed that he should be given one more chance to contest the case before the ld. CIT(E) to resolve the issue and also to apprise him about the documents already produced by the Trust for registration u/s 12AB of the Act. 2.4. Per contra, the ld. DR relied on the order of the ld. CIT(E). 2.5 After hearing both parties and perusing the materials available on record, we noticed that an application for registration u/s 12AB of the Act was rejected by the ld CIT(E) on following grounds. * Assessee having business income and doing business in garb of charity and doing activity beyond the objects. * Siphoning off the funds of the institution In the course of hearing of the case, it is requested by the ld.AR of the assessee that he had complied with the instructions of the ld. CIT(E) and supplied all the documents demanded by the ld. CIT(E) but it appears that the same has not been properly examined by the ld CIT(E). He submitted that from the records it can be seen the genuineness of the activities of the trust and also its objects and there is no room for siphoning off the funds and all the funds has been utilized for the object of the trust. Hence, he prayed that one more chance should be given to the assessee trust to re-submit or argue the case before the ld. CIT(E) so that he will be in a position reappraise the case to the ld. CIT(A). The Bench adopts the lenient view and feels that the assessee should be given one more opportunity to advance the documents before the ld. CIT(E) as to registration of the trust u/s 12AB of the Act. Hence, in view of all the facts and circumstances of the case, the matter is restored to the file of the ld CIT(E) for afresh adjudication by providing adequate opportunity of being heard and the assessee is also required to submit the documents as demanded by the ld. CIT(E) with regard to registration of the Trust u/s 12AB of the Act. Thus this appeal of the assessee is allowed for statistical purposes. 2.6 Since we have restored the appeal of the assessee with regard to the registration u/s 12AB of the Act to the file of the ld. CIT(E) for afresh adjudication, therefore, the outcome of appeal of the assessee u/s 80G of the Act is consequential in nature.
2.7 Before parting, we may make it clear that our decision to restore the matter back (supra) to the file of the ld. CIT(E) shall in no way be construed as having any reflection or expression on the merits of the dispute, which shall be adjudicated by the ld. CIT(E) independently in accordance with law.
3.0 In the result, both the appeals of the assessee are allowed for statistical purposes Order pronounced in the open court on 07/05/2025. Sd/- Sd/- ¼Mk0 ,l- lhrky{eh ½ ¼jkBksMdeys'kt;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;dlnL;@Judicial Member ys[kklnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 07/05 /2025 *Mishra आदेश की प्रतिलिपिअग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- Samajik Prerna Avam Gramin Vikas SansthanLaporiya 2. izR;FkhZ@The Respondent- The CIT (E). 3. vk;djvk;qDr@CIT 4. विभागीय प्रतिनिधि] आयकरअपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 5. xkMZQkbZy@Guard File {ITA No. 1107 & 1108/JPR/2025} vkns'kkuqlkj@By order
सहायकपंजीकार@Aेेज. त्महपेजतंत