Trust wins appeal after registration rejection overturned for violating natural justice principles under section 12AB

The ITAT Raipur allowed the assessee's appeals against CIT(E)'s rejection of registration under section 12AB and cancellation of provisional registration. The CIT(E) had rejected the application citing that the trust's undertakings did not fall within charitable activities and noting zero income/expenditure during the relevant year. The ITAT held that CIT(E) failed to provide clarity on how the trust's activities fell outside charitable purposes and did not afford the assessee opportunity to rebut allegations regarding charitable activities and fund sources, violating natural justice principles. The matter was remanded to CIT(E) for fresh consideration of applications under sections 12AB and 80G(5), requiring proper examination of the trust's objects, genuineness of activities, and compliance with other laws before passing a speaking order.

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Issues:
Application for registration u/s 12AB and 80G(5) of the Income Tax Act rejected by CIT(E) without proper consideration of documents and response submitted by the assessee. Allegations of inability to prove charitable activities and unverifiable source of funds. Lack of specific comments on the establishment of the society for charitable purposes. Violation of principles of natural justice.

Analysis:

The appeals were filed by a charitable trust against the rejection of its application for registration u/s 12AB and 80G(5) of the Income Tax Act by the Commissioner of Income Tax (Exemption). The grounds of appeal raised common issues related to the rejection of the application and the subsequent cancellation of provisional registration. The trust contended that the rejection was unjustified and lacked proper consideration of the trust's charitable activities and compliance with legal requirements.

The trust had submitted necessary details and responses to the CIT(E) but they were not deemed satisfactory. The CIT(E) rejected the application without providing clear reasons for how the trust's activities did not qualify as charitable. The trust argued that it had submitted documents showing zero income and expenditure due to donations for the construction of a building, which were not considered as income. The trust also highlighted its charitable activities, focusing on education for deaf and dumb children.

The trust's representative argued that the CIT(E) failed to assess the trust's objectives and activities properly and did not provide an opportunity for the trust to address the allegations against it. The CIT-DR supported the CIT(E)'s decision. However, the ITAT found that the rejection lacked clarity and violated principles of natural justice. Citing a judicial pronouncement, the ITAT concluded that the CIT(E) should have evaluated the trust's objectives, activities, and compliance with the law before making a decision.

Consequently, the ITAT allowed the appeals and directed the CIT(E) to reconsider the trust's application for registration u/s 12AB and 80G(5) of the Act. The trust was to be given a fair opportunity to present its case in the reconsideration process, ensuring compliance with principles of natural justice.

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