ITAT Sets Aside 80G Rejection, Cites Gross Violation of Natural Justice in Charitable Trust [Read Order]

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) has quashed the rejection order passed by the Commissioner of Income Tax (Exemption), [CIT(E)], denying approval under Section 80G(5)(iii) of the Income Tax Act, 1961, to the assessee Trust. The Bench found that the assessee was not given a fair opportunity to respond, constituting a serious breach of natural justice.

Secret Charitable Trust, a public charitable trust registered under the Gujarat Public Trust Act, 1950, was granted registration under Section 12AA and provisional approval under Section 80G(5)(iii) in September 2023. As required under the Income Tax Act, the Trust subsequently filed Form 10AB seeking final approval under Section 80G(5)(iii).

The CIT(E) issued a detailed notice on September 14, 2024, asking for supporting documents, to which the Trust responded on November 23, 2024. However, a show-cause notice was issued late in the evening on December 29, 2024, precisely at 6:26 PM, asking for a reply by 5:00 PM the next day. The assessee argued that less than 24 hours’ notice during a peak compliance period severely hindered its ability to respond effectively.

The CIT(E) concluded in its order that the Trust had religious objects within its deed and therefore did not qualify for 80G approval, holding it to be a “charitable-cum-religious” institution, which, according to the department, violated Section 80G(5)(ii).

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Challenging this, the Trust contended that the order was rushed and unjust. They submitted that the Trust's activities were predominantly charitable, and even composite trusts are not automatically excluded from Section 80G benefits. They emphasised that the CIT(E) not only issued an unreasonably timed notice but also failed to evaluate the detailed reply submitted on November 23, 2024.

The Tribunal found merit in the appellant’s arguments. The bench observed that issuing a show-cause notice with a response time of less than 24 hours, especially during the period of ITR and audit filings, is grossly inadequate and a clear breach of the principles of natural justice.

The Tribunal comprises Sanjay Garg(Judicial Member) and Makarand V. Mahadeokar (Accountant Member). Also noted that the CIT(E) appeared not to have given due consideration to the reply dated November 23, 2024, and the documentary evidence placed on record. The ITAT ruled that this omission compounded the procedural lapse, rendering the rejection order unsustainable.

Asserting that a fair hearing is the cornerstone of any quasi-judicial process, the Tribunal set aside the said order dated December 30, 2024. The matter was remanded back to the CIT(E) with a clear direction to provide the Trust with a reasonable opportunity to present its case and for the authority to adjudicate the matter afresh, based on merits. As a result, the appeal was allowed for statistical purposes,

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