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Facts
The CIT(E) cancelled the assessee's registration under section 12AB of the Income-tax Act, holding that the activities were not in accordance with its objects and genuineness was not established. The assessee argued that their appeal against an 80G rejection was allowed and that the CIT(E) failed to consider their submissions and observe principles of natural justice.
Held
The Tribunal held that the CIT(E) did not provide a proper opportunity of being heard and failed to consider the assessee's elaborate written submissions before cancelling the registration. The Tribunal also noted that no specific show-cause notice was issued.
Key Issues
Whether the cancellation of registration under section 12AB was justified and whether principles of natural justice were violated.
Sections Cited
12AB, 80G
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Before: MS SUCHITRA RAGHUNATH KAMBLE & SHRI BIJAYANANDA PRUSETH
आदेश / O R D E R
PER BIJAYANANDA PRUSETH, AM:
This appeal emanates from the order dated 30.06.2025 passed by the Commissioner of Income-tax (Exemption), Ahmedabad [in short “the CIT(E)”], wherein CIT(E) cancelled the assessee’s registration u/s 12AB of the Income-tax Act (in short ‘the Act’).
The grounds of appeal raised by the assessee are as under: “(1) On the facts and in the circumstances of the case as well in law, the CIT (Exemption) erred in cancelling the registration of u/s 12AB of the Act on baseless and incorrect presumptions and without considering the material on records available with the department and hence, order of cancellation of registration u/s 12AB of the Act passed by CIT(E) is without jurisdiction, bad in law, perverse, prejudicial, arbitrary, unwarranted of facts and material on records, illegal and invalid, is liable to be quashed or annulled in toto.
2025-26 Shri Surati Modh Ganchi Gnati Jilla Nanpura Panch (2) On the facts and in the circumstances of the case as well in law, the learned CIT (Exemptions) has grievously failed to provide proper, lawful and meaningful opportunity of being heard and hence, ex-facie in violation of the principals of natural justice and also to the relevant provisions under the law, and therefore, the order of CIT(E) is irrational, unfair, and prejudicial and hence, it is liable to be struck down. (3) Your appellant further reserves it's rights to add, alter, amend or modify any of the aforesaid grounds before or at the time of hearing of the appeal.”
The brief facts of the case are that the assessee-trust was registered before the Assistant Charity Commissioner, Surat on 26.09.1952 with registration No. A/4/Surat. The assessee trust filed an application for registration u/s 12A(a) of the Act and was subsequently granted registration on 03.10.1974. The applicant has obtained a regular registration from CPC by making an application in Form 10A u/s 12A(1)(ac)(i) of the Act on 23.09.2021 from AY 2022-23 to 2026-27. The assessee trust had taken benefit of Circular No. 7/2024 and made application u/s 80G(5)(iii) of the Act on 06.03.2024, which was decided on merit and a rejection order was passed on 27.09.2024. The ld. CIT(E) observed that the activities carried out by the applicant were not found to be in accordance with the object and the questions of genuineness is not fully established. The ld. CIT(E) did not accept the reply of the applicant on certain grounds, which is reproduced at pages 6 to 8 of the order. The appellant submitted that the appeal filed before the ITAT against the 80G rejection was decided in favour of the applicant and, hence, 12A cancellation proceedings should be dropped. The ld. CIT(E) held that the pendency of appeal or decision does not bar proceedings u/s 12AB(4) of the Act. The grounds of rejection under 80G are distinct from registration u/s 12A of the Act. The appellant had failed to 2025-26 Shri Surati Modh Ganchi Gnati Jilla Nanpura Panch demonstrate genuineness of activities and alignment with its stated objects, as required u/s 12AB of the Act. He also held that no stay has been granted by the ITAT and hence, administrative action under the law remains valid and justified. Therefore, he held that there is clear violation of clause e(i) of Explanation to sub- section (4) of section 12AB of the Act and, accordingly, he cancelled the registration.
Aggrieved by the order of ld. CIT(E), the assessee-trust filed appeal before this Tribunal. The learned Authorized Representative (ld. AR) submitted a paper book containing various details including the order of ITAT setting aside the order of CIT(E) to his file to consider application for approval of the fund u/s 80G(5) of the Act, if the assessee has fulfilled the requisite conditions of approval of funds. The appeal of the assessee was allowed for statistical purpose. Copy of the ITAT order is enclosed at pages 32 to 37 of the paper book. The ld. AR has also enclosed the income and expenditure statement for the year ending 31.03.2023 and submitted that there was no expenditure of religious nature. He submitted that apart from the rent, taxes and cesses, the only other expenditure was Rs.64,526/- towards relief of the poor and mess/tiffin services. He further submitted that the ld. CIT(E) has not considered the detailed written submission filed on 24.10.2024, which is at pages 19 to 27 of the paper book. He submitted that the order was passed without considering the merit of the case. Therefore, the order passed by ld. CIT(E) is clearly violative of the principles of natural justice and accordingly, the matter may be set aside to the file of ld. CIT(E) in the interests of justice. The ld. AR 2025-26 Shri Surati Modh Ganchi Gnati Jilla Nanpura Panch also submitted that the appellant is ready to file all the details apart from the submissions, which have already been made before the ld. CIT(E) to decide the case on merit. He also submitted that the issue regarding approval of 80G(5) of the Act has been set aside to the file of the ld. CIT(E) and this issue may also be set aside for fresh consideration.
On the other hand, the learned Commissioner of Income-tax - Departmental Representative (ld. CIT-DR) for the revenue supported the order of ld. CIT(E). He, however, did not have any objection if the matter is restored to the file of ld. CIT(E).
We have heard both parties and perused the materials available on record. We have also carefully perused the order of the ITAT wherein appeal of the assessee trust was allowed for statistical purpose on the issue of approval u/s 80G(5) of the Act. The ITAT has held that there is no finding of ld. CIT(E) as to whether any amount was spent for religious purposes in the last three financial years. We also find that no specific show cause notice was issued by the ld. CIT(E) before cancelling the registration earlier granted to the assessee. Be that as it may, the assessee had filed elaborate details along with written submission, which does not seem to have been considered by the ld. CIT(E) before cancelling the registration. It is settled law that principles of natural justice requires that the affected party is granted sufficient opportunity of being heard to plead its case. Therefore, without delving into the merits of the case, the order of ld. CIT(E) is set aside and the matter is restored to his file for fresh consideration after granting adequate and reasonable opportunity of being heard to the appellant. The