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Facts
The assessee, Seth Ramswaroop Gupta Shiksha Samiti, applied for registration under Section 12AB of the Income Tax Act, 1961, which was rejected by the CIT (Exemption). The CIT(E) also cancelled the assessee's provisional registration, citing concerns about the dissolution clause in the trust deed and general non-compliance with the Act.
Held
The tribunal found that the CIT(E)'s order was based on surmises and conjectures, without sufficient reasoning or affording the assessee a proper opportunity of hearing. The tribunal remitted the matter back to the CIT(E) for a fresh decision after providing the assessee with an adequate opportunity to be heard.
Key Issues
The key legal issues were the rejection of registration under Section 12AB and the cancellation of provisional registration, primarily due to concerns about the trust's dissolution clause and alleged non-compliance with the Income Tax Act, as well as the violation of natural justice principles.
Sections Cited
Section 12AB, Section 40A(3)
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Income Tax Appellate Tribunal, AGRA BENCH, AGRA
Before: SHRI S. RIFAUR RAHMAN & SHRI SUNIL KUMAR SINGH
ORDER
PER SUNIL KUMAR SINGH, JUDICIAL MEMBER
This appeal has been preferred by the assessee against the order dated 30.06.2025 passed by Ld. CIT (Exemption), Bhopal on assessee’s application No. CIT (Exemption), Bhopal/2024-25/12AA/12029, wherein Ld. CIT(E) has rejected assessee’s application for its registration u/s 12AB of the Income Tax Act, 1961. Ld. CIT(E) has also rejected appellant’s provisional registration dated 14.10.2021.
The adjournment request of the assessee was rejected. Heard the parties through their Ld. Representatives and perused the records.
Briefly stating, assessee filed an application in form 10AB for the registration of appellant trust u/s 12AB of the Act, 1961 on 18.11.2024, which was to be filed by 30.06.2024. The delay caused in filing the application was Seth Ramswaroop Gupta Shiksha Samiti v CIT (Exemption), Gwalior condoned by Ld. CIT(E) and the matter was decided on merit, stating that the assets of the society may be used for personal/commercial gain in case of its dissolution.
Ld. AR for the appellant trust has submitted that the impugned order has been passed merely on the assumption that there is a scope of misutilization of funds accumulated on account of exemption in case of dissolution. Further, submitting that Ld. CIT(E) has wrongly mentioned the trust’s activities as contrary to the provisions of section 40A(3) of the Act, as this provision is applicable only for the computation of application of income only. Ld. AR has further argued that appellant asssesee was not afforded sufficient opportunity of hearing in compliance of the principles of natural justice. Prayed to allow the appeal.
Ld. DR has supported the impugned order.
We notice that despite, there being a dissolution clause at Para 19 of the trust deed, Ld. CIT(E) has assumed that there will be no restriction on the use of assets for charitable purpose because according to the dissolution clause, the management of all movable & immovable assets of the society will lie with a committee of ‘person’ chosen by the members of the society in the same General Body Meeting. Ld. CIT(E) has not made any adverse remarks that the trust’s activities were against its objects. The general remarks that the trust’s activities are not being carried out in accordance with provision of the Income Tax Act, are not supported with cogent and convincing reasons. We further notice that the provisional registration has also been cancelled without affording reasonable opportunity of hearing to assessee. We observe that in case, Ld. CIT(E) was of the view that there was any requirement of amendment in the dissolution clause of trust deed in accordance with law, the appellant would have been provided an opportunity to correct the same. The impugned order has thus been passed on surmises and conjectures and in flagrant violation of the principles of natural justice. We, therefore, remit the matter back to the file of Ld. CIT(E) with the direction to decide the matter afresh on merit in accordance with law after affording sufficient opportunity of hearing to the appellant assessee.