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Facts
The assessee, Ladhabapa Charitable and Welfare Trust, filed an application for permanent registration under Section 12AB of the Income-tax Act, 1961. The Commissioner of Income Tax (Exemption) rejected the application, citing non-compliance with notices and failure to provide documentary evidence.
Held
The Tribunal noted that the rejection was based on non-compliance of notice and referred to several case laws. It was held that Section 13 of the Income-tax Act is applicable at the assessment stage, not the registration stage, and that the Commissioner must distinguish between registration requirements and benefit claims. The Tribunal also noted that registration is not a prerequisite for claiming benefits under Sections 11 and 12.
Key Issues
Whether the rejection of the assessee's application for permanent registration under Section 12AB was justified, and if the principles of natural justice were followed.
Sections Cited
Section 12AB, Section 80G (5), Section 13, Section 12A, Section 11, Section 12
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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: DR. ARJUN LAL SAINI, AM. &
आदेश / O R D E R
PER DINESH MOHAN SINHA, JM:
Captioned appeal filed by the Assessee against order passed by the Ld. Commissioner of Income Tax (Exemption), Ahmedabad (in short Ld. CIT (E)) dated 13.11.2 Ld. CIT (E) rejected the application of the assessee in Form No. 10AB of the act u/s 80G (5) of the Income Tax Act, 1961 (in short ‘The Act’).
Grounds of Appeal
raised by the assessee as follows:
1. The learned CIT(E) erred in rejecting the appellant's application for permanent registration under Section 12AB of the Income-tax Act, 1961.
2. The rejection of the application is contrary to the facts of the case and the documentary evidence furnished, which establishes: a. The genuineness of the trust. b. The consonance of its activities with its stated charitable purposes.
3. The CIT(E) failed to comply with the principles of natural justice by basing the rejection solely on alleged non-receipt of replies, despite: a. Notices not being properly served at the registered address or via email as required under the law. b. Evidence of submission of responses by the appellant being available.
4. The reliance on Section 13 of the Income-tax Act to reject the application is misplaced, as this section applies only during assessment proceedings and not at the registration stage.
5. The rejection was arbitrary and contrary to the objectives of Section 12AB, which emphasize assessing the genuineness of activities and charitable purpose rather than technical lapses or assumptions.
6. The appellant may please by allowed to add further grounds of the appeal and/or allowed to amend, alter, delete, change and/or raise further grounds during the pendency of these proceedings.
Facts of the Case o The appellant, Ladhabapa Charitable and Welfare Trust, is a charitable organization registered under the Bombay Public Trust Act, 1950, as of 22nd May 2002, bearing Registration No. E/6672-RAJKOT, and has been undertaking public charitable activities ever since. o The appellant filed an application for permanent registration under Section 12AB of the Income-tax Act, 1961, using Form No. 10AB. Temporary registration was granted earlier, bearing registration No. AAATL2581KE20231 Dt 22-02-2024 and the trust fully complied with its conditions during its validity period.
That the assessee has filed an application The present application for registration of the trust has been filed in Form 10AB under sub-caluse (iii) of clause (ac) of sub- section (1) of Section 12A of the income tax act 1961.
Notices were issued dated 28/08/2024 and 18/10/2024, requesting to furnish details or documents in support of the application. The applicant has neither filed any submission nor sort any adjournment in this case.
The present application filed in Form No.10AB sub-clause (iii) of clause (ac) of sub-section (1) of section 12A of the Income Tax Act, 1961 is rejected and also your provisional registration stands cancelled. However, the applicant/assessee has failed to file documentary evidences in support of the application.
Genuineness of the trust and its activities. Consonance of its objectives with its charitable purpose. Last three years of audited financial statements for amount applied KYC details of all the trustees It was also requested to kindly allow the benefits of Circular No. 7 of 2024 we had enclosed a copy of the said circular. circular-7-2024.pdf Copies of these submissions, along with proof of activities, are enclosed herewith for reference.
That the assessee has filed an appeal against the order passed by Ld. CIT (E) on 13/11/2024 before the Tribunal.
(i) During the course of argument, the Ld. AR submitted that the assessee has already filed detailed application before the CIT Appeal without considering the detail the CIT Appeal has rejected the application on the ground that notice has not been replied by the assessee. The rejection order is erroneous as it presumes that notices were served properly and disregards the evidence submitted by the trust.
(ii) On the contrary Ld. DR relied on the order of CIT (E) as there was Non-compliance of notice. The assessee should be levied a cost on their negligent action in response to notice issued by Ld. CIT (E), Ahmedabad.
8.A. We have heard argument of both the parties and perused all the material available on record. It is pertinent to note that Ld. CIT(E) has rejected the application of the assessee on the ground of Non-Compliance of notice The Ld. AR has relied on following Case Laws: (i)
Hon’ble ITAT Rajkot Sunni Hanfi Momin Pir Masayakhi Madresah Yatimiyah Vs. CIT (Exemption), Ahmedabad It was categorically held that the provisions of section 13 would be attracted only at time of assessment and not at the time of grant of registration. The relevant finding of the Hon'ble High court at para 8 of his order is as under: "8. Thus, very premise for the Commissioner to come to the conclusion that the objects of the trust were confined for the benefit of a religious community is incorrect. Thereafter to suggest that the activities were carried out only for such purposes would be entering in the realm of granting exemptions in terms of section 13 of the Act, which would be task of the Assessing Officer to be undertaken at the time of assessment on the basis of material that may be brought on record."
& 744/Mum/2025 Hon’ble ITAT Mumbai “D” Bench Dedhia Music Foundation Vs. CIT (Exemption) While deciding the Hon'ble ITAT observed that: 11. It can be noticed from the provisions of sec. 12AB(4) of the Act, the registration already granted either provisionally or permanently may be cancelled by Ld. CIT(E), if he is satisfied that one or more specified violations have taken place. If he is not satisfied so, he may refuse to cancel the registration granted u/s 12AB of the Act. The expression "specified violation" is defined in the Explanation. It can be noticed that the said definition is not an "inclusive definition", since it starts the expression "For the purposes of this sub-section, the following shall mean "specified violation"". Hence, it is an exhaustive definition. Consequently, if there is any violation other than those stated in the Explanation, then the Ld. CIT(E) shall not get power to cancel the registration.
(iii) (Guj-HC) (2014) 221 Taxman 75 Hon’ble Gujarat High Court CIT, Rajkot-II Vs. Leuva Patel Seva Samaj Trust Having thus heard the learned counsel for the revenue, we are of the opinion that the question whether the trust is created or established for the benefit of any particular religious community or caste would be relevant when the income of the trust is being assessed and the question whether such income should be excluded from the total income of the trust in terms of section 11 of the Act. Insofar as section 12AA of the Act is concerned, the Commissioner had to take a decision if the trust fulfilled necessary requirements of registration as provided under section 12A of the Act. A Division Bench of this Court in the case of Shantagauri Ramniklal Trust v. CIT [1999] 239 ITR 528, in this context, observed as under : "While considering an application for registration of a trust, the Commissioner must also make a clear distinction between the requirement of registration and the requirement for claiming tax benefit. The latter question falls squarely to be considered by the Assessing Officer. Section 12A neither makes registration of trust as condition precedent for claiming benefit under sections 11 and 12 read with section 13, nor registration obviates enquiry into the conditions envisaged under section 13 by the Assessing Officer before the tax benefit can be allowed. Mere filing of application for registration of the trust is enough to claim benefit of its income under sections 11 and 12 and jurisdiction to the Assessing Officer to enquire into that claim, which also includes question as to who are the beneficiaries of trust. On other conditions being fulfilled, the exemption must follow whether registration is accorded or not." In view of the above conclusive opinion of a Division Bench of this Court, we do not see any reason to interfere. Tax Appeal is, therefore, dismissed.
8.B. That the assessee has not complied with notice issued by the CIT (E) dated 28/08/2024 and 18/10/2024. Because of the negligent act on the part of the assessee for non-compliance of notice, we put a cost of Rs. 2000 on the assessee to be deposited with PM relief fund within 10 days from today and the copy of the receipt is to be placed on record. Because of no response to notice as asked for by the Ld. CIT (E) could not verify i. Genuineness of the activities of the trust or institution. ii. That the activities of trust or institution are in consonance with the objects of the trust or institution. iii. That other laws material for the purpose of achieving objects are complied with. In the view of the above facts and circumstances of the case and in the interest of Justice we remit the matter back to the file of Ld. CIT (E) with a direction to decide the application of the assessee as per law. We further direct to the assessee to comply with the terms of notice and file all relevant details/documents if any required by Ld. CIT (E) for disposal of this case.
In the result the appeal filed by the assessee is allowed for Statistical purpose.
Order pronounced in the open court on 01/ 07/2025.