2025 (3) TMI 1435 - AT - Income Tax

ITAT restores Section 12A registration and 80G approval matter to CIT(E) following CBDT Circular 7/2024 extension

The ITAT Pune rejected the assessee's application for registration under Section 12A and approval under Section 80G. However, considering a pending ... Rejecting the application for grant of registration u/s 12A and approval u/s 80G - HELD THAT:- We find since the order of the Tribunal setting aside the issue to the file of the Ld. CIT(E) is still pending and the assessee filed another appeal before the Tribunal on the basis of extension of due date for filing of Form 10A/10AB vide CBDT Circular No.7/2024, dated 25.04.2024, therefore, considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the Ld. CIT(E) with a direction to decide the issue afresh along with earlier order of the Tribunal setting aside the issue to his file. Appeals filed by the assessee are allowed for statistical purposes. ISSUES PRESENTED and CONSIDEREDThe primary legal issues considered in this judgment are:Whether the rejection of the application for registration under Section 12A of the Income Tax Act, 1961, by the CIT(Exemption) was legally justified.Whether the rejection of the application for approval under Section 80G of the Income Tax Act, 1961, was legally justified.Whether the principles of natural justice were violated due to insufficient opportunity for the assessee to present its case.Whether the additional evidence submitted by the assessee should be admitted under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963.ISSUE-WISE DETAILED ANALYSIS1. Rejection of Registration under Section 12ARelevant Legal Framework and Precedents: Section 12A of the Income Tax Act deals with the conditions for registration of a trust for availing tax exemptions. The CIT(Exemption) rejected the application based on perceived profit motives and non-compliance with the Right to Education Act, 2009.Court's Interpretation and Reasoning: The Tribunal noted that the CIT(E) inferred a profit motive and commercial elements in the trust's activities without sufficient evidence. The Tribunal highlighted the necessity for the CIT(E) to provide adequate opportunities for the assessee to address discrepancies.Key Evidence and Findings: The Tribunal observed that the CIT(E) failed to consider the surplus generated by the trust being applied towards charitable purposes and the creation of specific funds consistent with the trust's objectives.Application of Law to Facts: The Tribunal found that the CIT(E)'s decision was premature and lacked consideration of all relevant facts and submissions by the assessee.Treatment of Competing Arguments: The Tribunal considered the assessee's arguments regarding the application of surplus funds and compliance with the Right to Education Act, concluding that these were not adequately addressed by the CIT(E).Conclusions: The Tribunal decided to restore the issue to the CIT(E) for fresh adjudication, emphasizing the need for a comprehensive review of the facts and adherence to principles of natural justice.2. Rejection of Approval under Section 80GRelevant Legal Framework and Precedents: Section 80G pertains to the approval required for donations to be eligible for tax deductions. The rejection was contingent upon the non-availability of registration under Section 12A.Court's Interpretation and Reasoning: The Tribunal noted that the rejection of approval under Section 80G was directly linked to the rejection under Section 12A, and thus, the issue needed reconsideration in light of the latter's reevaluation.Key Evidence and Findings: The Tribunal observed that the CIT(E) did not fully appreciate the charitable activities carried out by the trust and its compliance efforts.Application of Law to Facts: The Tribunal found that the CIT(E) prematurely concluded the ineligibility for approval under Section 80G without a complete assessment of the trust's compliance and activities.Treatment of Competing Arguments: The Tribunal acknowledged the assessee's contentions regarding procedural compliance and the application of surplus funds, which were not sufficiently considered by the CIT(E).Conclusions: The Tribunal restored the issue to the CIT(E) for fresh adjudication, aligning it with the reconsideration of the Section 12A registration.3. Admission of Additional EvidenceRelevant Legal Framework and Precedents: Rule 29 of the Income Tax (Appellate Tribunal) Rules permits the admission of additional evidence if it is essential for rendering justice. The Tribunal considered precedents supporting this approach.Court's Interpretation and Reasoning: The Tribunal recognized the necessity of the additional evidence for a comprehensive evaluation of the trust's status and activities.Key Evidence and Findings: The Tribunal noted that the additional evidence, including school registration certificates and financials, was crucial for understanding the trust's operations and compliance.Application of Law to Facts: The Tribunal found a reasonable cause for the previous non-submission of these documents and deemed their consideration essential for justice.Treatment of Competing Arguments: The Tribunal considered the assessee's justification for the late submission and the potential impact of these documents on the outcome.Conclusions: The Tribunal allowed the admission of additional evidence under Rule 29, directing the CIT(E) to consider these documents in the fresh adjudication.SIGNIFICANT HOLDINGSCore Principles Established: The Tribunal emphasized the importance of providing adequate opportunities for the assessee to present its case and the necessity of considering all relevant evidence and submissions before reaching a decision.Final Determinations on Each Issue: The Tribunal restored both issues-registration under Section 12A and approval under Section 80G-to the CIT(E) for fresh adjudication, with directions to consider all evidence, including the newly admitted documents, and to adhere to principles of natural justice.