Non-speaking, cryptic, and mechanical Income Tax Order by quasi-judicial authorities is Invalid: ITAT rules in Favour of Lions Club [Read Order]

The Income Tax Appellate Tribunal (ITAT) of the Hyderabad bench set aside the order which was passed by the income tax quasi-judicial authority as being non-speaking, cryptic and mechanical. The tribunal remitted the order against the Lions Club of Khammam Charitable Trust for reconsideration.

Lions Club of Khammam Charitable Trust, the assessee trust is directed against the order passed by the Commissioner of Income-Tax (Exemption), [“CIT (Exemptions)”], Hyderabad, dated 19.03.2025, wherein the latter had declined the application filed by the assessee trust for permanent registration/approval under section 12AB of the Income-tax Act, 1961 (‘the Act’).

The assessee trust was constituted by a trust deed dated 21.04.2012 with the aims and objects of relief to the poor, create and foster a spirit of understanding among the people to promote principles of good governance and good citizenship etc. The assessee trust was granted provisional registration under Section 12A(1)(ac)(iii) of the Act in “Form 10AC”. Subsequently, the assessee trust applied for permanent under section 12AB.

The CIT(Exemption), Hyderabad issued notices dated 03.12.2024 and 07.02.2025 seeking further details. In compliance, the assessee trust responded vide its reply dated 17.02.2025 (uploaded on 19.02.2025) and furnished the documents/information called for.

However, the CIT(Exemption), Hyderabad, vide the impugned order dated 19.03.2025 in “Form 10AD”, rejected the application for registration filed by the assessee trust under Section 12AB of the Act. The CIT(Exemption), though observed in his order that the assessee trust had furnished only partial information, but he failed to specify what particular information was not provided.

It was though concluded that the activities carried out by the assessee trust were not commensurate with the objects of the trust, and hence, not in accordance with the requirements of Section 12AB of the Act, but there is no whisper in his order about any such activity of the assessee trust which was not commensurate with its objects.

It was evident that the impugned order is a non-speaking order. The CIT(Exemption) has not brought on record any finding or material analysis to substantiate how and in what manner the activities of the trust were not in accordance with the stated objectives. Nor has he articulated which information was missing, despite the assessee trust furnishing a detailed reply along with supporting documents.

The two member bench of Ravish Sood, Judicial Member And Madhusudan Sawdia, Accountant Member held that non-speaking, cryptic, and mechanical orders passed by quasi-judicial authorities are not sustainable in law. The CIT(Exemption), while disposing off the application filed by the assessee trust for permanent registration under Section 12AB of the Act was expected to provide a reasoned order and specific findings after considering the material on record.

The tribunal set aside the order and the matter is restored to the file of the CIT(Exemption), Hyderabad with a direction to pass a fresh speaking and reasoned order in accordance with law.

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