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Facts
The assessee, Hridaykunj Foundation Trust, applied for registration under Section 12A(1)(ac)(iii) and approval under Section 80G(5)(iii) of the Income-tax Act. The CIT(E) rejected both applications and cancelled the provisional registration, citing the assessee's failure to provide necessary documentation and comply with notices.
Held
The Tribunal noted that the appeals were filed with significant delay due to the assessee's lack of knowledge of tax laws and procedures. The Tribunal condoned the delay subject to payment of costs. The Tribunal set aside the CIT(E)'s orders, remitting the matter back for fresh adjudication, emphasizing the principles of natural justice and granting the assessee a final opportunity to present their case.
Key Issues
Whether the rejection of the application for registration and approval by the CIT(E) was justified without providing adequate opportunity to the assessee, and whether the delay in filing the appeals should be condoned.
Sections Cited
12A(1)(ac)(iii), 80G(5)(iii), 12AB, 253(3)
AI-generated summary — verify with the full judgment below
Before: MS SUCHITRA RAGHUNATH KAMBLE & SHRI BIJAYANANDA PRUSETH
आदेश / O R D E R PER BIJAYANANDA PRUSETH, AM: These two appeals emanate from the order dated 09.10.2023 and 16.10.2023 passed by the learned Commissioner of Income-tax (Exemption), Ahmedabad [in short “CIT(E)”], wherein CIT(E) rejected assessee’s application filed in Form No.10AB u/s 12A(1)(ac)(iii) of the Income-tax Act (in short ‘the Act’) and also cancelled the provisional registration granted earlier. Since application for registration u/s 12A(1)(ac)(iii) was rejected, application for approval u/s 80G(5)(iii) of the Act was also rejected. The assessee is same and issues are related and, therefore, with the consent of both parties, the appeals are clubbed and heard together and are decided ITA Nos.332 & 333/SRT/2025 Hridaykunj Foundation Trust by a common order for the sake of convenience and brevity.
is taking as ‘lead’ case. 2. The grounds of appeal raised by assessee in ITA No. 332/SRT/2024 are as follows: “1. The learned CIT (Exemption) Ahmedabad, ought to have taken cognize of lack of knowledge about trust proceedings and its compliance by the trustees who are not much educated and new in the management of trust and there were no malafide intentions to contravene any provisions of law.
2. Active trustees were keeping indifferent health conditions and were not able to reach Ahmadabad on the appointed dates as on 11-08-2023 and 01-09-2023 with necessary details asked for by the CIT (Exemption) Ahmedabad.
3. Trustees and their professional were busy in preparation of accounts and audit report for the Financial Year 2022-23 as the same was new for them and declined to remain present before CIT (Exemption) Ahmadabad, without any malafide intention. Such ignorance of procedure, resulted in rejection of registration and may kindly be pardoned.
4. The learned CIT (Exemption), Ahmedabad, erred in rejecting the registration of the Trust as while granting registration to a Charitable Trust, as it was at commencement stage and power of Commissioner (Exemption), would be limited to aspect of exempting, whether or not, objects of are charitable in nature. As this aspect is not referred to, in the order of rejection, the registration may be granted in the interest of justice.
5. The learned CIT (Exemption), Ahmedabad, erred in not bringing on record, any finding that object of the Trust was not charitable in nature. On the facts and in the circumstances of the case, ought to have been granted to the Trust in right spirit of Section 12AB of the Act.
6. On the facts and in the circumstances of the case, it is prayed that the order of rejection of registration may kindly be set aside in the interest of justice.
7. The appellant may be permitted to modify, rectify and to withdraw any ground of appeal duly raised and to raise new grounds of appeal during the appellate proceedings.”
ITA Nos.332 & 333/SRT/2025 Hridaykunj Foundation Trust 3. The grounds of appeal raised by assessee in are as follows: “(1) The learned CIT (Exemption) Ahmedabad has erred in rejecting our application for approval 80G(5) in consequent to rejection of our registration application vide order dtd.09/10/23. (2) The learned CIT(Exemption) Ahmedabad, has erred in rejecting our application for Registration without considering the fact that if the trust is at commencement stage, Power of Commission (Exemption) would be limited to aspect of earning whether or not objects of trust are Charitable in nature. The trust has just commenced in the year 2022 under such initial year, it is inappropriate to reject the registration application is misuse of power. On the facts and in the circumstances of the case the trust may be granted registration so that it will get approval U/s. 80G(5) also. (3) The learned CIT (Exemption) Ahmedabad has erred in rejecting registration application has put the trust in Double Jeopardy as the trust has also suffered a loss of Approval U/s. 80G(5) which is necessary for raising funds to fulfil the object of Trust. On the facts and in the circumstances of the case the trust may be granted registration as well as approval U/s.80G(5) by setting aside orders under appeal to the file of CIT(Exemption Ahmedabad). The appellant may be allowed to rectify to modify to alter or to withdraw any grounds of appeal duly raised or to withdraw any grounds of appeal duly raised during the appellate proceedings.”
4. The appeals filed by the assessee are late by 446 and 439 days in terms of provisions of section 253(3) of the Act. The assessee has filed affidavits giving similar reasons for delays in filing both appeals before this Tribunal. In the affidavit, the assessee stated that the rejection order of registration of the Trust was passed on 09.10.2023 and the same was & 333/SRT/2025 Hridaykunj Foundation Trust received on 10.10.2023. The appeal was required to file on or before 09.12.2023. The trustees were not much conversant with trust laws as well as income-tax laws. The consultants were not properly advised the assessee-trust. During the relevant period, the trustee who looked after all activities of trust, was keeping indifferent health. No other trustee was aware of filling of appeal within 60 days. On the advice of new consultant, the assessee-trust filed appeal on 28.02.2025, which was delayed by 446 days. The assessee requested that the appeals may be condoned in the interest of justice and fair play.
On the other hand, the learned Commissioner of Income-tax - Departmental Representative (ld. CIT-DR) for the revenue submitted that the Tribunal may decide the case, as it things fit.
We have heard both parties and perused the materials available on record. We find that the delays in filling both appeals are 446 and 439 days, was neither intentional nor deliberate. The delays in filling both appeals were primarily due to the assessee’s lack of knowledge about the provisions of the Income-tax Act. The assessee-trust was unaware that there was an option to file an appeal before the Tribunal. The learned Authorized Representative (ld. AR) submitted that the delay has happed for the first time. Though the reasons are not fully convincing, we condone the delay in the interest of justice subject to payment of cost of Rs.10,000/- by the appellant to ‘Prime Minister National Relief Fund’.
ITA Nos.332 & 333/SRT/2025 Hridaykunj Foundation Trust 7. The brief facts of the case are that the assessee filed an application for registration/incorporation in Form No.10AB u/s 12A(1)(ac)(iii) of the Act. The CIT(E) issued notices on 11.08.2023 and 01.09.2023. He has discussed legal background of Rules 12A(1)(ac), 17A(1), 17A(2) along with section 12AB of the Act. He noted that the date of application for registration for approval in Form No.10AB u/s 12A(1)(ac)(iii) of the Act was 06.04.2023 and the date of provisional approval was 31.03.2023 for the period from AY 2023-2024. The applicant had neither filed any submission/details nor sought any adjournment. The CIT(E) relied on the decisions of Hon’ble Supreme Court in case of CIT vs. Dawoodi Bohra Jamat, in Civil Appeal No.2492 of 2014 and M/s New Nobel Educational Society, in Civil Appeal No.3795 of 2014. The CIT(A) has thereafter observed that due to failure of assessee to file documentary evidences, he was unable to be satisfied about (i) genuineness of the activities of the institution, (ii) that the activities of trust or institution are in consonance with the objects of the trust or institution and (iii) that other laws material for the purpose of achieving objects are complied with. The CIT(E) rejected the application filed in Form 10AB for approval sub-clause (iii) of clause (ac) of sub-section (1) of section 12A of the Act and also cancelled the provisional registration.
Aggrieved by the order of CIT(E), the assessee filed appeal before the Tribunal. The learned Authorized Representative (ld. AR) only notices were & 333/SRT/2025 Hridaykunj Foundation Trust issued with a short period of 20 days. As the case has been decided without considering the merit of the case, the matter may be set aside to the file of CIT(E) for considering the case on merit. The ld. AR of the assessee submitted that the ex parte order by CIT(E) is clearly violative of the principles of natural justice. He, therefore, requested that in the interests of justice, one more opportunity should be given to the assessee to plead its case on merit before the CIT(E).
On the other hand, the learned Commissioner of Income-tax - Departmental Representative (ld. CIT-DR) for the revenue did not have any objection if the matter is restored to the CIT(E) for fresh adjudication.
We have heard both parties and perused the materials available on record. The CIT(E) issued two notices on 11.08.2023 and 01.09.2023 but there was no compliance from the assessee. The CIT(E) has observed that the assessee-trust failed to file documentary evidence to enable him to satisfy about the genuineness of the activities of the trust and whether the activities are in consonance with the objects of the trust. The ld. AR has contended before us that the assessee is ready to submit all details and evidence needed by the CIT(E) and one more opportunity may be given to the assessee. We find that assessee could not pursue its case before the CIT(E) by filing necessary evidence and documents. We are of the view that one more opportunity should be given to the assessee to file relevant documents/evidences and to plead its case on merit before the CIT(E). It is ITA Nos.332 & 333/SRT/2025 Hridaykunj Foundation Trust settled law that principles of natural justice require that the affected party is granted sufficient opportunity of being heard to contest its case. Therefore, without delving much into the merits of the case, in the interest of justice, we set aside the order of CIT(E) and remit the matter to the file of CIT(E) with a direction to pass de novo order in accordance with law after granting adequate opportunity of hearing to the assessee. The assessee is directed to be more vigilant and diligent and to furnish all the details and explanations as needed by the CIT(E) by not seeking adjournment without valid reasons. With these directions, the grounds of appeal
are allowed for statistical purposes.
11. In the result, appeal of the assessee is allowed for statistical purpose.
12. In this appeal, the CIT(E) has issued two notices of hearing, i.e., on 16.10.2023 and 23.09.2023 respectively, but the assessee had not filed any submission. Hence, relying upon the decision in case of Dawoodi Bohra Jamat (supra) and New Nobel Educational Society (supra), he rejected the application in Form No.10AB for approval u/s 80G(5)(iii) of the Act and provisional approval was also cancelled. We have already set aside the order of CIT(E) in rejecting application for registration u/s 12AB(1)(ac)(iii) of the Act. Hence, following the reasons given in ITA No.332/SRT/2025 (supra), the order of CIT(E) is also set aside and remitted to the file of CIT(E) for fresh adjudication after granting reasonable and sufficient opportunity of being heard to the appellant. For statistical purposes, this appeal of the assessee is also treated as allowed. 13. In the result, appeal of the assessee is allowed for statistical purposes. 14. In the combined result, the appeals filed by the assessee are allowed for statistical purposes. Order is pronounced under provision of Rule 34 of ITAT Rules, 1963 on 11/08/2025.