ITAT Restores Trust’s 12AB Registration Application: Finds Rejection Based Solely on Procedural Lapse, Violates Principles of Natural Justice [Read Order]

The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) set aside an order passed by the Commissioner of Income Tax (Exemption) [CIT(E)], which had rejected the registration application of Shree Rikhavdevji & Kunthunathji Prabhu Jain Swetamber Murtipujak Padhi, and simultaneously cancelled its provisional registration under Section 12AB of the Income Tax Act, 1961. The Tribunal held that the denial, based solely on procedural non-compliance, without examining the genuineness of the Trust’s activities, amounted to a serious lapse of natural justice.

The assessee Trust, engaged in religious and charitable activities in Gujarat’s Sabarkantha district, had been granted provisional registration in Form 10AC valid for Assessment Years 2022–23 to 2024–25. The Trust had filed an application for regular registration in Form 10AB under Section 12A(1)(ac)(iii) of the Act.

The CIT(E) issued multiple notices seeking details and supporting documents. While the assessee submitted a partial response on July 5, 2024, it allegedly failed to comply with the final notice dated August 2, which required submission by August 8, 2024. Due to this, the CIT(E) passed an ex parte order, rejecting the Trust’s registration application and cancelling its existing provisional registration, citing non-compliance with statutory notices.

Stay Updated with the Latest Audit Report Formats & Audit Trials Requirements!, Click Here

The assessee appealed to the Tribunal with a delay of 49 days. An application for condonation of delay, supported by an affidavit, explained that the impugned order was received via email, but remained unnoticed due to an internal oversight, as the accountant had not been regularly monitoring the registered email.

It was only on a later date that the Trust became aware of the order and promptly sought legal counsel; a subsequent appeal was filed. The tribunal accepted this explanation and condoned the delay, observing that the lapse was bona fide and not deliberate.

The assessee, through its Authorised Representative (AR), requested the Tribunal to remand the matter back to the CIT(E), seeking one more opportunity to comply with the document requirements. The Departmental Representative(DR) did not object to this contestation raised by the assessee.

After considering submissions from both sides, the Tribunal found that the CIT(E) had not made any findings on the genuineness of the Trust’s activities or its compliance with the charitable objectives in its constitution. Instead, the rejection was procedural, based on the non-submission of certain documents. The Bench asserted that the assessee should have been given a fair and reasonable opportunity to rectify deficiencies before being subjected to such a harsh consequence as cancellation of registration.

The ITAT, finding merit in the assessee’s submissions, set aside the CIT(E)’s order and remanded the matter to the files of CIT(E) for fresh adjudication, directing the assessee to cooperate fully and furnish all necessary documents in support of its application. As a result, the appeal was allowed for statistical purposes.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates