Re-adjudication for 12AB Registration Denial is mandated by ITAT
Fact and issue of the case
The batch of six appeals are filed by different Assessees as against the separate orders dated 27-09-2022 (ITA No. 473/Ahd/2022), 26-09-2022 (ITA Nos. 477/Ahd/2022), 23-092022 (ITA No. 481 & 484/Ahd/2022), & 26-09-2022 (ITA Nos. 482 & 483/Ahd/2022) passed by the Commissioner of Income Tax (Exemption), Ahmedabad (in short ‘CIT(E)’) rejecting the registration u/s. 12AB of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).
Since the solitary issue is denial of registration u/s. 12AB of the Act, which are identical in all the above appeals, the same are disposed of by this common order for the sake of convenience.
First we take up ITA No. 481/Ahd/2022 is taken as the lead case. The brief facts of the case is that the assessee filed application u/s. 12AB of the Act on 31.03.2022 in Form No. 10AB under Rule 17A of the Income Tax Rules, 1962. The Ld. CIT(E) issued a notice dated 16-07-2022 through ITBA on the e-mail id given by the assessee, requesting to furnish detailed note on the activities carried out by the trust, as well as certain details/documents as mentioned therein. As there was no response, three more opportunities were provided to the assessee by issuing notices on 03-08-2022, 07-09-2022 and 15-09-2022 directing the assessee to furnish the details called for.
However Ld. CIT(E) found the submissions filed by the assessee does not contain complete details/documents, such as detailed note on the nature of activities and projects, the details of main charitable/religious undertaken in the last 3 years, details of application of funds, details of other laws material for the purpose of achieving objects and compliance thereof, whether any commercial activities are undertaken, details of donations received and given and not filed undertaking u/s. 2(15) , 11(5), 13(1)(c) & 13(3) of the Act, undertaking regarding adherence towards all the requirements of law as are material for the purpose of its objects as enumerated in the Trust Deed. Therefore following Principle of natural Justice, final opportunity was given to the assessee by issuing another notice on 15-09-2022 by the Ld. CIT(E). However in response to the said notice neither the assessee furnished any details nor sought any adjournment. Therefore Ld. CIT(E) constrained to dispose of the application for registration u/s. 12AB of the Act on the basis of material available on record and rejected the application filed in Form No. 10AB for the registration u/s. 12AB of the Act observing as follows:
Inspite of numerous opportunities and specific requisitions, the applicant has not submitted the requisite details. The applicant has submitted audited accounts for F.Y. 2019-20 only. Therefore, no verification of the objects as per the trust deed with the activities carried out during F.Y. 2020-21 and F.Y. 2021-22, if any could be made. Thus, the genuineness of the activities does not get established in previous two financial years. Section 12AB makes, it very clear that before granting registration under this section, the Commissioner has to satisfy himself about the genuineness of the activities of the trust or institution and also he has to verify that these activities are in consonance with the objects of the trust or institution. Further, he has to ensure that other laws material for the purpose of achieving objects are complied. Reliance in this regard is also placed on the judgment delivered by the Hon’ble Supreme Court in the case of Commissioner of Income-tax, Ujjain Vs Dawoodi Bohara Jamat Civil Appeal No. 2492 of 2014.
Further opportunity as per the provisions of sub-clause (b)(ii)(B) of clause (1) of section 12AB was granted vide letter dated 15/09/2022 but the assessee again did not respond, thereby implying it was no objection on rejection of its application and cancellation of its registration.
As discussed above, the applicant has failed to file documentary evidences to enable me to satisfy about the genuineness of its activities and to verify these activities are in consonance with its objects.
Looking to the above facts, I am unable to arrive at the satisfaction of the genuineness of the activities. Hence, the application filed in Form No. 10AB for the registration u/s. 12AB of the I.T. Act, 1961, is rejected.”
Aggrieved against this rejection order, the assessee is in appeal before us raising the following Grounds of Appeal:
The Commissioner of Income Tax (Exemption) Ahmedabad has eared in Law and on facts, in rejecting the application in form 10AB U/S 12AB of the Income Tax Act, 1961, on non-satisfaction of genuineness of the activities of the trust. 2 The CIT(Exemption) has eared in law, in over-looking and in summarily rejecting and not considered, the tangible material submitted during the proceeding u/s 12AB of Income Tax Act. 1961. 3 Your appellant crave, leave to add, alter, & or to emend modify substitute all or any ground of appeal before final hearing if necessity so arise.
At the time of hearing of the present appeal, the Ld. Counsel for the assessee Mr. Biren Shah filed a Paper Book running to 46 pages enclosing the notice issued by Ld. CIT(E) and online reply with annexures uploaded by the assessee on 16-08-2022, enclosing Registration Certificate, Trust Deed, Audit Report for the Assessment Years 2019-20, 2020-21 and 2021-22 and detailed letter on the various queries raised by the Ld. CIT(E). However without looking into the submissions made by the assessee, the Ld. CIT(E) denial the registration u/s. 12AB of the Act. Therefore the Ld. Counsel pleaded one more opportunity be given to the assessee before the Ld. CIT(E), so that the assessee undertake to file all the requisite documents or evidences in support of the case, for grant of registration under Section 12AB of the Act.
Per contra, the Ld. CIT-DR Shri Sudhendu Das appearing for the Revenue submitted that Ld. CIT(E) as per Section 12AB of the Act to conduct an enquiry about the activities of the Trust and to verify the objects as per the Trust Deed and genuineness of the activities of the trust and satisfaction the same only grant registration u/s. 12AB of the Act. Though the Ld. CIT(E) provided opportunities to the assessee as per the statutory provision, the assessee failed to submit the complete details. Hence the rejection of registration of the trust is valid in law. However considering the Paper Book filed by the assessee which contain the details of Audit report for three Assessment Years 2018-19, 2019-20 and 2020-21 and various other documents and partial reply filed by the assessee and in compliance to Principle of Natural Justice, the matter may be set aside back to the file of Ld. CIT(E) for consideration of the above documents and pass fresh orders on merits.
Observation of the court
We have given our thoughtful consideration and perused the materials available on record. Admittedly, the assessee vide its reply letter dated 16-08-2022 furnished details about the registration certificate, trust deed and Audit Report for three assessment year and further details. However we find that the Ld. CIT(E) has not contravented exact deficiency in the documents submitted by the assessee and exact nature of clarification, explanation required from the assessee, but rejected the registration application u/s. 12AB of the Act. Further the assessees are existing and carried the objects enumerated in the trust for long time.
Therefore considering the facts and circumstances of the case, in order to prevent miscarriage of justice, we find it fit and proper to provide one more opportunity of being heard to the assessee in support of its case for registration of the trust u/s. 12AB of the Act. Therefore we dispose of this appeal by restoring this issue to the file of the Ld. CIT(E) with a direction upon him to provide further opportunity of being heard to the assessee and consider the documents, evidences which the assessee would file as per the notice issued by the Ld. CIT(E). Upon considering the entire set of documents and upon affording an opportunity of being heard to the assessee, the Ld. CIT(E) to dispose of the application for grant of registration of the Trust under Section 12AB of the Act with a speaking order. Needless to say if the assessee fails to co-operate with the Ld. CIT(E) as directed hereinabove, the Ld. CIT(E) would be at liberty to pass orders strictly in accordance with law.
In the result, the appeal filed by the Assessee is hereby allowed for statistical purposes.
Since the issue in other ITA Nos. 473/Ahd/2022, 477/Ahd/2022 and ITA Nos. 482 to 484/Ahd/2022 are identical of the above case wherein the assessee undertaken to file required details before Ld. CIT(E), the decision rendered in ITA No. 481/Ahd/2022 shall also apply mutatis mutandis in all other 5 appeals.
In the combined result, the appeals filed by the Assessees are allowed for statistical purposes.
Order pronounced in the open court on 25-08-2023
In the result, appeal of the assessee is allowed and ruled in favour of the assessee