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Facts
The assessee applied for registration of the trust under Section 12A(1)(a) of the Income-tax Act, 1961. The CIT(E) issued notices for details of activities and further information. The assessee failed to comply with a show cause notice, leading to the rejection of the application and cancellation of provisional registration.
Held
The Tribunal held that the assessee's failure to respond to the show cause notice was due to it being sent to the junk folder of their email. Considering this as a sufficient cause and an undertaking from the assessee, the matter was restored to the CIT(E) for fresh consideration.
Key Issues
Whether the cancellation of provisional registration by the CIT(E) was justified given the assessee's explanation for non-compliance with the show cause notice.
Sections Cited
12AB, 12(1)(ac)(vi), 12A(1)(a), 12AB(1)(b)i), Rule 17(2)
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Income Tax Appellate Tribunal, MUMBAI BENCH “B” MUMBAI
Before: SHRI AMIT SHUKLA & SHRI OM PRAKASH KANT
This appeal by the assessee has been preferred against order dated 05.03.2024 passed by the Ld. Commissioner of Income-tax (Exemption), Pune [in short ‘the Ld. CIT(E)’] for assessment year 2023-24, raising following grounds:
Shreevasaird Swetamber Murtipujak Shreevasaird Swetamber Murtipujak 2 Tapagachh Jain Sang
The Ld. Hon'ble CIT Exemption, Pune, erred in law and in facts by The Ld. Hon'ble CIT Exemption, Pune, erred in law and in facts by The Ld. Hon'ble CIT Exemption, Pune, erred in law and in facts by passing an order dated passing an order dated 05.03.2024 for cancellation of the provisional 05.03.2024 for cancellation of the provisional registration granted on 24/09/2021 under section 12AB read with registration granted on 24/09/2021 under section 12AB read with registration granted on 24/09/2021 under section 12AB read with section 12(1)(ac)(vi)of the Income Tax Act, 1961 without appreciating the section 12(1)(ac)(vi)of the Income Tax Act, 1961 without appreciating the section 12(1)(ac)(vi)of the Income Tax Act, 1961 without appreciating the fact that: a) The assesse could not reply to the final show cause notic a) The assesse could not reply to the final show cause notic a) The assesse could not reply to the final show cause notice dated 23.02.2024 as the same was automatically transferred to dated 23.02.2024 as the same was automatically transferred to dated 23.02.2024 as the same was automatically transferred to Junk Folder instead of normal Inbox.. Junk Folder instead of normal Inbox.. b) The assesse had in the previous reply furnished a point by b) The assesse had in the previous reply furnished a point by b) The assesse had in the previous reply furnished a point by point detailed and point detailed and comprehensive reply along with documentary along with documentary evidences and this time they c evidences and this time they could not merely due to the fact that ould not merely due to the fact that the assesse was not in receipt of the notice. the assesse was not in receipt of the notice. 2) The Ld. CIT erred in passing order of cancellation of registration 2) The Ld. CIT erred in passing order of cancellation of registration 2) The Ld. CIT erred in passing order of cancellation of registration without appreciating the fact that the Trust was granted registration for without appreciating the fact that the Trust was granted registration for without appreciating the fact that the Trust was granted registration for all the previous assessment y all the previous assessment years. 3) The Ld CIT had erred in passing order of cancellation of registration by 3) The Ld CIT had erred in passing order of cancellation of registration by 3) The Ld CIT had erred in passing order of cancellation of registration by holding that the objects of the trust were found to be for the benefit of a holding that the objects of the trust were found to be for the benefit of a holding that the objects of the trust were found to be for the benefit of a specific religious community without appreciating the fact that the objects specific religious community without appreciating the fact that the objects specific religious community without appreciating the fact that the objects of The Trust caters to of The Trust caters to all the sections of the society regardless of any all the sections of the society regardless of any caste, creed or religion. caste, creed or religion.
Briefly stated, facts of the case are that the assessee applied Briefly stated, facts of the case are that the assessee applied Briefly stated, facts of the case are that the assessee applied before the CIT(E), Pune before the CIT(E), Pune for registration of the trust in registration of the trust in prescribed form No. 10AB under clause prescribed form No. 10AB under clause (iii) of section 12A(1)(a) of f section 12A(1)(a) of the Income-tax Act, 1961 (in short ‘the Act’). The Ld. CIT(E) called tax Act, 1961 (in short ‘the Act’). The Ld. CIT(E) called tax Act, 1961 (in short ‘the Act’). The Ld. CIT(E) called for detail of activities of the trust which were responded by the for detail of activities of the trust which were responded by the for detail of activities of the trust which were responded by the assessee. Subsequently, after verification of the details filed by the assessee. Subsequently, after verification of the details filed by the assessee. Subsequently, after verification of the details filed by the assessee, another notice wa another notice was issued on 23.02.2024 s issued on 23.02.2024 and called for further information, which were not complied by the assessee. which were not complied by the assessee. Thereafter, the Ld. CIT(E) issued a final show cause notice Thereafter, the Ld. CIT(E) issued a final show cause notice Thereafter, the Ld. CIT(E) issued a final show cause notice proposing as why the provisional registration granted u/s 12AB of proposing as why the provisional registration granted u/s 12AB of proposing as why the provisional registration granted u/s 12AB of the Act might not be cancelled the Act might not be cancelled. The said show cause notice was . The said show cause notice was issued through e-portal as well as through e portal as well as through e-mail. However, same mail. However, same
Shreevasaird Swetamber Murtipujak Shreevasaird Swetamber Murtipujak 3 Tapagachh Jain Sang was not complied and therefore, the Ld. CIT(E) rejected the was not complied and therefore, the Ld. CIT(E) rejected the was not complied and therefore, the Ld. CIT(E) rejected the application of the assessee seeking permanent registration and application of the assessee seeking permanent registration and application of the assessee seeking permanent registration and cancelled the provisional registrat cancelled the provisional registration granted u/s 12AB of the Act. ion granted u/s 12AB of the Act. The relevant finding of the Ld. CIT(E) is reproduced as under: The relevant finding of the Ld. CIT(E) is reproduced as under: The relevant finding of the Ld. CIT(E) is reproduced as under:
“2.2 On verification of the details submitted by the assessee in response to 2.2 On verification of the details submitted by the assessee in response to 2.2 On verification of the details submitted by the assessee in response to the said notice and the documents submitted along with the application, the said notice and the documents submitted along with the application, the said notice and the documents submitted along with the application, various discrepancies were noticed. Another notice was then issued to the discrepancies were noticed. Another notice was then issued to the discrepancies were noticed. Another notice was then issued to the assessee on 23/02/2024 and the discrepancies were duly communicated assessee on 23/02/2024 and the discrepancies were duly communicated assessee on 23/02/2024 and the discrepancies were duly communicated to it as reproduced below : to it as reproduced below : "i) Trust deed copy furnished is not authentic. Furnish the "i) Trust deed copy furnished is not authentic. Furnish the "i) Trust deed copy furnished is not authentic. Furnish the authenticated copy of trust deed b authenticated copy of trust deed bearing the seal of Charity earing the seal of Charity Commissioner. Commissioner. ii) The objects of the trust deed / MoA are found to be for the ii) The objects of the trust deed / MoA are found to be for the ii) The objects of the trust deed / MoA are found to be for the benefit of a particular religious community viz. Jain Community benefit of a particular religious community viz. Jain Community benefit of a particular religious community viz. Jain Community and not for public at large. and not for public at large. (iii) In respect of activity note, kindly furnish details In respect of activity note, kindly furnish details viz. date and In respect of activity note, kindly furnish details place of each activities carried out by your trust, details of place of each activities carried out by your trust, details of place of each activities carried out by your trust, details of beneficiaries, how they were identified, etc.. beneficiaries, how they were identified, etc.. * (iv) You were specifically requested vide the initial notice itself to * (iv) You were specifically requested vide the initial notice itself to * (iv) You were specifically requested vide the initial notice itself to furnish the supporting credible evidence in respect of acti furnish the supporting credible evidence in respect of acti furnish the supporting credible evidence in respect of activities undertaken. However, you have not furnished the same. Thus, you undertaken. However, you have not furnished the same. Thus, you undertaken. However, you have not furnished the same. Thus, you have failed to comply with the provisions of section 12AB(1)(b)i) of have failed to comply with the provisions of section 12AB(1)(b)i) of have failed to comply with the provisions of section 12AB(1)(b)i) of the Income Tax Act, 1961. In absence of any such tangible material the Income Tax Act, 1961. In absence of any such tangible material the Income Tax Act, 1961. In absence of any such tangible material in respect of proof of activities being carried o in respect of proof of activities being carried out it is not possible to ut it is not possible to arrive at any conclusion about the genuineness of activities and arrive at any conclusion about the genuineness of activities and arrive at any conclusion about the genuineness of activities and also to ascertain as to whether the activities are in line with the also to ascertain as to whether the activities are in line with the also to ascertain as to whether the activities are in line with the objects of the trust / institution. objects of the trust / institution. (v) Furnish the financial statements for FY. 2020 (v) Furnish the financial statements for FY. 2020-21, 2021 21, 2021-22 and 2022-23. Also furnish the copies of bills/invoices of expenses done 23. Also furnish the copies of bills/invoices of expenses done 23. Also furnish the copies of bills/invoices of expenses done on activities by your trust. From financial statement of earlier on activities by your trust. From financial statement of earlier on activities by your trust. From financial statement of earlier years, years, years, it it it is is is seen seen seen that that that all all all expense expense expense are are are done done done on on on administration/establishment rather than activities/object of the administration/establishment rather than activities/object of the administration/establishment rather than activities/object of the trust, please explain." please explain." 2.3 The assessee was requested to show cause as to why the application The assessee was requested to show cause as to why the application The assessee was requested to show cause as to why the application should not be rejected and why the registration granted under section should not be rejected and why the registration granted under section should not be rejected and why the registration granted under section 12AB of the Income Tax Act, 1961 should not be cancelled. The assessee 12AB of the Income Tax Act, 1961 should not be cancelled. The assessee 12AB of the Income Tax Act, 1961 should not be cancelled. The assessee was also given opportunity was also given opportunity of being heard vide the said notice. of being heard vide the said notice. The assessee was specifically informed that in the event of failure to comply by assessee was specifically informed that in the event of failure to comply by assessee was specifically informed that in the event of failure to comply by the due date, the application shall be liable to be rejected and the the due date, the application shall be liable to be rejected and the the due date, the application shall be liable to be rejected and the registration shall also be liable to be cancelled. The compliance to registration shall also be liable to be cancelled. The compliance to registration shall also be liable to be cancelled. The compliance to the said
Shreevasaird Swetamber Murtipujak Shreevasaird Swetamber Murtipujak 4 Tapagachh Jain Sang notice was due on 01/03/2024. The notice was duly served on the notice was due on 01/03/2024. The notice was duly served on the notice was due on 01/03/2024. The notice was duly served on the assessee through e assessee through e-portal and email. However, the assessee neither portal and email. However, the assessee neither submitted explanation to the show cause notice till date nor availed the submitted explanation to the show cause notice till date nor availed the submitted explanation to the show cause notice till date nor availed the opportunity of being heard. opportunity of being heard.
3. Since, the 3. Since, the assessee has not furnished any explanation to the assessee has not furnished any explanation to the discrepancies communicated to it, it is presumed that the assessee has discrepancies communicated to it, it is presumed that the assessee has discrepancies communicated to it, it is presumed that the assessee has nothing to say in the matter. nothing to say in the matter.
Considering the above facts discussed in the show notice and 4. Considering the above facts discussed in the show notice and 4. Considering the above facts discussed in the show notice and discrepancies noticed and also that the a discrepancies noticed and also that the assessee has not complied with ssessee has not complied with the provisions of section 12AB(1)(b)i) of the Income Tax Act, 1961 as well the provisions of section 12AB(1)(b)i) of the Income Tax Act, 1961 as well the provisions of section 12AB(1)(b)i) of the Income Tax Act, 1961 as well as the provisions of Rule 17(2) of Income Tax Rules, 1962 in spite giving as the provisions of Rule 17(2) of Income Tax Rules, 1962 in spite giving as the provisions of Rule 17(2) of Income Tax Rules, 1962 in spite giving sufficient opportunities, the undersigned is unable to draw any sufficient opportunities, the undersigned is unable to draw any sufficient opportunities, the undersigned is unable to draw any satisfactory conclusion about the genuineness, conclusion about the genuineness, of activities of the of activities of the assessee and compliance of requirements of any other law for the time being in force and compliance of requirements of any other law for the time being in force and compliance of requirements of any other law for the time being in force by the assessee as are material for the purpose of achieving its objects. by the assessee as are material for the purpose of achieving its objects. by the assessee as are material for the purpose of achieving its objects.
5. In view of the above, the application In view of the above, the application filed by the assessee is hereby filed by the assessee is hereby rejected and the provisional registration granted on 24/09/2021 under rejected and the provisional registration granted on 24/09/2021 under rejected and the provisional registration granted on 24/09/2021 under section 12AB read with section 12A(1)(ac)(vi) of the Income Tax Act, 1961 section 12AB read with section 12A(1)(ac)(vi) of the Income Tax Act, 1961 section 12AB read with section 12A(1)(ac)(vi) of the Income Tax Act, 1961 is hereby cancelled. is hereby cancelled.”
Before us, the Ld. Counsel for the assessee submitted t Before us, the Ld. Counsel for the assessee submitted t Before us, the Ld. Counsel for the assessee submitted that the final show cause notice dated 23.02.2024 could not be responded final show cause notice dated 23.02.2024 could not be final show cause notice dated 23.02.2024 could not be for the reason that same was transferred to the same was transferred to the ‘junk folder junk folder’ of the e-mail box, rather than normal rather than normal ‘inbox’, therefore, the assessee could , the assessee could and file a comprehensive reply along with documentary not comply and file a comprehensive reply along with documentary and file a comprehensive reply along with documentary evidence. The Ld. counsel for the assessee given an undertaking evidence. The Ld. counsel for the assessee given evidence. The Ld. counsel for the assessee given before us that if matter is restored back to the Ld. CIT(E) if matter is restored back to the Ld. CIT(E), all the if matter is restored back to the Ld. CIT(E) notices shall be duly complied by the assessee. notices shall be duly complied by the assessee.
4. The Ld. Departm The Ld. Departmental Representative (DR) on the other hand ental Representative (DR) on the other hand objected for giving a further opportunity to the assessee. for giving a further opportunity to the assessee. for giving a further opportunity to the assessee.
We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the relevant material on record. The permanent registration sought by relevant material on record. The permanent registration relevant material on record. The permanent registration
Shreevasaird Swetamber Murtipujak Shreevasaird Swetamber Murtipujak 5 Tapagachh Jain Sang the assessee u/s 12A( the assessee u/s 12A(1)(a) of the Act has been rejected by the Ld. 1)(a) of the Act has been rejected by the Ld. CIT(E) due to non-compliance of the show cause notice issued by compliance of the show cause notice issued by compliance of the show cause notice issued by the Ld. CIT(E). Before us, the Ld. counsel for the assessee has the Ld. CIT(E). Before us, the Ld. counsel for the assessee has the Ld. CIT(E). Before us, the Ld. counsel for the assessee has explained the reasons for non explained the reasons for non-compliance as transfer of notice to as transfer of notice to junk folder of e-mail inbox mail inbox. In our opinion, there is a sufficient . In our opinion, there is a sufficient cause on the part of the assesse cause on the part of the assessee for not responding the notice e for not responding the notice dated 23.02.2024 issued by the Ld. CIT(E) issued by the Ld. CIT(E) and subsequent and subsequent show cause notice. Before us, the Ld. counsel for the assessee has given cause notice. Before us, the Ld. counsel for the assessee has given cause notice. Before us, the Ld. counsel for the assessee has given an undertaking on behalf of the assessee that if matter is restored ing on behalf of the assessee that if matter is restored ing on behalf of the assessee that if matter is restored back due compliance of the notices issued by the Ld. CIT(E) shall be due compliance of the notices issued by the Ld. CIT(E) shall be due compliance of the notices issued by the Ld. CIT(E) shall be made. In view of the undertaking and in the interest of substantial made. In view of the undertaking and in the interest of substantial made. In view of the undertaking and in the interest of substantial justice, we feel it appropriate to restore the matter back to the file of justice, we feel it appropriate to restore the matter back to justice, we feel it appropriate to restore the matter back to the Ld. CIT(E) for deciding the Ld. CIT(E) for deciding the matter afresh after taking into afresh after taking into consideration submission of the assessee. consideration submission of the assessee. Accordingly Accordingly, the grounds raised by the assessee are allowed for statistical purposes. raised by the assessee are allowed for statistical purposes. raised by the assessee are allowed for statistical purposes.
In the result, the appeal of the assessee is all In the result, the appeal of the assessee is all In the result, the appeal of the assessee is allowed for statistical purposes. statistical purposes.