2022 (1) TMI 328 - AT - Income Tax

ITAT Delhi stresses natural justice in 12AA registration appeal, emphasizes evidence review and legal compliance

India Herbs Foundation C/o. M/s RRA Tax India Versus CIT (Exemption) Lucknow (Uttar Pradesh)

The ITAT Delhi directed the CIT (Exemption) to reconsider the application for registration under Section 12AA, emphasizing the importance of following ... Exemption u/s 11 - rejecting the registration u/s 12AA(l)(b)(ii) - as per AO appellant society has not been able to produce the books of accounts for verification of object and activities of the trust - Appellant had introduced the unaccounted money into the trust income as donation and the appellant society is not carrying out any activity of charitable nature - HELD THAT:- It is pertinent to note that the CIT(Exemption) has given a finding that no details were filed by the assessee/applicant establishing that the Foundation is for charitable purpose, but the record shows otherwise. Therefore, we are of the view that the CIT(Exemption) should take into account the cognizance of the evidence and decide the application u/s 12AA of the applicant Foundation/assessee as per law. Needless to say, the applicant be given opportunity of hearing by following principles of natural justice. Therefore, the appeal of the assessee is partly allowed for statistical purpose. Issues:1. Rejection of registration u/s 12AA(l)(b)(ii) by CIT (Exemption)2. Compliance with principles of natural justice in passing the impugned orderAnalysis:Issue 1: Rejection of registration u/s 12AA(l)(b)(ii) by CIT (Exemption)The appeal was filed by the assessee against the order passed by CIT (Exemption) rejecting the registration under Section 12AA(l)(b)(ii). The charitable trust in question, Indian Herbs Foundation, filed an application for registration on 17/2/2017. The CIT (Exemption) rejected the registration on 25/8/2017, citing reasons such as the inability to produce books of accounts, introduction of unaccounted money as donation, and lack of charitable activities by the appellant society. The appellant contended that the aims and objects of the Foundation were charitable in nature, supported by evidence of donations received from identified persons and the application of income being verifiable. The appellant argued that the CIT (Exemption) failed to consider these aspects and wrongly concluded that the donations were instruments for showing unaccounted money. The ITAT Delhi, after hearing both parties, observed that the CIT (Exemption) did not take into account the evidence provided by the appellant, which clearly demonstrated the charitable nature of the Foundation. The ITAT Delhi directed the CIT (Exemption) to reconsider the application u/s 12AA, emphasizing the importance of following principles of natural justice and giving the appellant an opportunity of hearing.Issue 2: Compliance with principles of natural justice in passing the impugned orderThe ITAT Delhi noted that the CIT (Exemption) should have considered the evidence presented by the appellant before rejecting the registration under Section 12AA. The ITAT Delhi emphasized the need for the CIT (Exemption) to adhere to the principles of natural justice and provide the appellant with a fair opportunity of hearing. The ITAT Delhi partially allowed the appeal of the assessee for statistical purposes, highlighting the importance of a thorough consideration of evidence and compliance with legal procedures in such matters. The order was pronounced on 13th October 2021, reflecting the ITAT Delhi's decision to grant relief to the appellant based on the principles of natural justice and the need for a comprehensive assessment of the facts presented during the registration process.This detailed analysis of the judgment highlights the key issues involved, the arguments presented by both parties, and the ITAT Delhi's decision emphasizing the importance of evidence, principles of natural justice, and compliance with legal provisions in matters concerning the registration of charitable trusts under Section 12AA.