2024 (1) TMI 1386 - HC - Income Tax

HC Upholds ITAT Decision: Trust's Registration u/s 12AA Requires Fair Hearing, Remands for Fresh Review.

The HC upheld the ITAT's order, dismissing the Revenue's appeal under Section 260A of the Income Tax Act, 1961. The Tribunal had set aside the CIT ... Refusal to grant approval u/s 12AA - ex parte order passed by the CIT (Exemptions) without giving an opportunity of being heard to the respondent – Trust - denial of principle of natural justice - Tribunal setting aside the order under Section 12AA to the file of the CIT (ExeMption) - HELD THAT- CIT (Exemptions) passed the ex parte order without giving an opportunity of hearing to present his case in detail and only two notices of hearing were issued to the respondent – assessee out of which only one was not complied with, the Tribunal, therefore, in the interest of justice, has set aside the order of rejection passed by the CIT (Exemptions) and remanded the matter for fresh consideration after giving an opportunity of hearing to the respondent – assessee. In view of the above findings recorded by the Tribunal, we are of the opinion that no questions of law much less any substantial question of law would arise from the impugned order of the Tribunal as the matter is restored to the CIT (Exemptions) to pass a fresh de novo order. Issues:- Appeal filed by Revenue under Section 260A of the Income Tax Act, 1961 challenging the order of the Income Tax Appellate Tribunal.- Validity of setting aside the order under Section 12AA of the Income Tax Act by the Tribunal.- Compliance with notices and requirements for registration of Trust under Section 12AA.- Consideration of substantial questions of law proposed by the Revenue.- Observations made by the CIT (Exemptions) regarding non-compliance with documentation for registration.- Tribunal's decision to set aside the rejection order and remand the matter for fresh consideration.- Lack of substantial questions of law arising from the Tribunal's order.Analysis:The case involves an appeal by the Revenue challenging the order of the Income Tax Appellate Tribunal under Section 260A of the Income Tax Act, 1961. The substantial questions of law proposed by the Revenue pertain to the setting aside of the order under Section 12AA of the Income Tax Act. The Tribunal's decision to remand the matter for fresh consideration after setting aside the rejection order by the CIT (Exemptions) is a key issue in this case. The respondent, a Trust, had filed an application for registration under Section 12AA of the Act, but the CIT (Exemptions) rejected the application citing non-compliance with documentation requirements.The CIT (Exemptions) observed that the Trust failed to submit various essential documents, including registration copies, financial statements, ID proofs, and other necessary details. The CIT (Exemptions) emphasized the importance of verifying the genuineness of the Trust's activities and its alignment with the stated objectives, as mandated by Section 12AA. Citing a Supreme Court judgment, the CIT (Exemptions) highlighted the need for documentary evidence to establish the Trust's activities' authenticity and alignment with its objectives.The respondent Trust appealed before the Tribunal, arguing that they were not given a fair opportunity to present their case and provide the required documents. The Tribunal, considering the lack of compliance with notices and the importance of due process, set aside the rejection order and directed a fresh consideration after providing an opportunity of hearing to the Trust. The Tribunal emphasized the importance of procedural fairness and the right to be heard before a decision affecting the Trust's registration status is made.In its final decision, the High Court upheld the Tribunal's order, dismissing the Revenue's appeal. The Court found that no substantial questions of law arose from the Tribunal's decision, as the matter was remanded for fresh consideration by the CIT (Exemptions) after providing the Trust with a fair opportunity to be heard. The Court emphasized the importance of procedural fairness and the need for proper consideration of all relevant documents and submissions before making a decision on the Trust's registration under Section 12AA of the Income Tax Act.