2025 (4) TMI 324 - AT - Income Tax

Tax Exemption Challenge: Trust Wins Procedural Review, Secures Fresh Hearing Under Sections 12AB and 80G of Income Tax Act

IIMCAA Care Fund Versus Cit (Exemption), Delhi

The Tribunal found procedural flaws in the CIT(E)'s rejection of the Trust's applications under sections 12AB and 80G of the Income Tax Act. The case was ... Rejection of registration u/s 12A(1)(ac)(vi)-B and u/s. 80G(5)(iv) due to part submission of the details/ information to verify the genuineness of the activities, charitable objects and commencement of the activities charitable - HELD THAT:- We find that ld. CIT(E), Delhi has summarily rejected both the applications without discussing any of the merits as well as even without discussing the details of questionnaire which he wanted to be supplied by the assessee. Thus in this view of the matter, we are of the considered opinion that both the matters needs to be remitted back to the file of the Ld. CIT(E), Delhi. Ld. CIT(E), Delhi.Assessee’s appeals are allowed for statistical purposes. ISSUES PRESENTED and CONSIDEREDThe core legal issues considered in this judgment are:Whether the cancellation of the provisional registration under section 12AB of the Income Tax Act, 1961, was justified given the circumstances surrounding the Trust's activities and compliance with the application process.Whether the denial of approval under section 80G of the Income Tax Act, 1961, was appropriate in light of the Trust's status and the information provided.Whether the procedural conduct of the CIT(Exemption) in rejecting the applications without a detailed discussion of the merits and required documentation was appropriate.ISSUE-WISE DETAILED ANALYSIS1. Cancellation of Provisional Registration under Section 12ABRelevant legal framework and precedents: Section 12AB of the Income Tax Act governs the registration of trusts for tax exemption purposes. The section requires the trust to demonstrate genuine charitable activities and compliance with procedural requirements.Court's interpretation and reasoning: The Tribunal noted that the CIT(Exemption) rejected the application for registration under section 12AB due to the assessee's failure to provide complete details and documentation as requested. However, the Tribunal found that the CIT(E) did not adequately discuss the merits or the specifics of the questionnaire issued.Key evidence and findings: The Trust was newly constituted, and its first accounting year ended on 31.3.2023. The Trust argued that it was still in the initial stages of collecting funds and commencing activities. There was no allegation of misrepresentation of activities in the Trust Deed.Application of law to facts: The Tribunal determined that the CIT(E) should have considered the Trust's circumstances and the absence of any allegations of misrepresentation. The procedural shortcomings in the CIT(E)'s order warranted a reconsideration of the application.Treatment of competing arguments: The Tribunal acknowledged the Trust's argument that the CIT(E) did not apply his mind to the facts and failed to consider the provisional registration granted earlier.Conclusions: The Tribunal concluded that the matter should be remitted back to the CIT(E) for a fresh consideration, ensuring that the Trust is given an adequate opportunity to present its case.2. Denial of Approval under Section 80GRelevant legal framework and precedents: Section 80G of the Income Tax Act provides for tax deductions on donations to charitable trusts, subject to approval by the tax authorities. Approval requires evidence of genuine charitable activities and compliance with procedural requirements.Court's interpretation and reasoning: The Tribunal observed that the CIT(E) rejected the application for approval under section 80G due to the rejection of the section 12AB application. The Tribunal found that the CIT(E) did not provide a detailed discussion of the merits or the specifics of the questionnaire issued.Key evidence and findings: Similar to the section 12AB issue, the Trust was in its initial stages, and there was no allegation of misrepresentation. The Trust's activities and fund collection efforts were ongoing.Application of law to facts: The Tribunal determined that the CIT(E) should have considered the Trust's circumstances and the absence of any allegations of misrepresentation. The procedural shortcomings in the CIT(E)'s order warranted a reconsideration of the application.Treatment of competing arguments: The Tribunal acknowledged the Trust's argument that the CIT(E) did not apply his mind to the facts and failed to consider the provisional approval granted earlier.Conclusions: The Tribunal concluded that the matter should be remitted back to the CIT(E) for a fresh consideration, ensuring that the Trust is given an adequate opportunity to present its case.SIGNIFICANT HOLDINGSPreserve verbatim quotes of crucial legal reasoning: The Tribunal held, 'Ld. CIT(E), Delhi shall consider the issues raised in both the appeals, afresh, after giving adequate opportunity of being heard to the assessee and pass speaking orders, in accordance with law.'Core principles established: The judgment emphasizes the importance of procedural fairness and the need for tax authorities to provide detailed reasoning when rejecting applications for registration and approval under sections 12AB and 80G of the Income Tax Act.Final determinations on each issue: Both matters were remitted back to the CIT(E) for reconsideration, with directions to provide the Trust an opportunity to be heard and to pass detailed, reasoned orders.