2025 (4) TMI 1425 - AT - Income Tax

Charitable Organization Wins Appeal, Gains Chance to Rectify Documentation Gaps Under Section 12AB Income Tax Act

Shri Sthankvasi Jain Sangh Versus CIT (Exemption), Bhopal

The SC/Tribunal examined an appeal challenging the rejection of a charitable organization's registration under Section 12AB of the Income Tax Act. The ... Rejection of Grant of registration u/s 12AB - Assessee contended that “Impugned Order” of Ld. CIT(E) is in violation of principles of natural justice and is therefore bad in law, illegal and not proper - HELD THAT:- AR fairly conceded that no doubt donation details were sought by Ld. CIT(E) at the material time but since the same were not available at the material time it could not be supplied however the same are available now and if this Tribunal is pleased to set aside the impugned order then in the proposed remand proceedings before CIT(E) they would submit the same without any demur. Revenue did not strongly oppose the contention of the Ld. AR and finally left it to this Tribunal to take appropriate call on this issue in accordance with law. In rejoinder Ld. AR submitted that they indeed regret non compliance on part of the assessee but asserted that in Audit Report donation amount could be seen as having been received through normal banking channels. The assessee has now compiled the details and that they are ready to submit the same. In the premises “impugned order” is set aside as and by way of remand on denova basis. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Tribunal in this appeal include:Whether the rejection of the appellant's application for regular registration under Section 12AB of the Income Tax Act, 1961, due to alleged non-submission of requisite documents and details, was legally valid and justified.Whether the principles of natural justice were violated in the issuance of the impugned order rejecting the registration application and cancelling the provisional registration.Whether the appellant's subsequent offer to furnish the outstanding details of donations and other required information after the impugned order justifies setting aside the order and remanding the matter for fresh consideration.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Validity of rejection of registration application under Section 12AB due to non-submission of documentsRelevant legal framework and precedents: Registration under Section 12AB of the Income Tax Act is mandatory for charitable entities to avail exemption benefits. The procedure involves submission of Form 10AB along with requisite documents as per prescribed guidelines. The assessing authority (CIT Exemption) is empowered to accept or reject the application based on compliance with documentary requirements. The principles of natural justice and procedural fairness are implicit in such administrative actions.Court's interpretation and reasoning: The Tribunal noted that the impugned order rejected the application on grounds including non-submission of donor addresses, corpus fund supporting documents, and details of subscriptions shown in the Income & Expenditure accounts. However, the appellant contended that the details of subscriptions were provided to the best of their understanding, and confirmation regarding corpus donations was available and could be submitted if allowed.Key evidence and findings: The appellant's submissions included documentary evidence of subscription details with receipt numbers, dates, and donor names, albeit not in a prescribed format, as none was specified. Additionally, the appellant pointed to the audit report evidencing receipt of donations through banking channels. The appellant's inability to access the portal initially due to technical issues and subsequent delayed submission of documents was also noted.Application of law to facts: The Tribunal observed that the rejection was premised on non-compliance with document submission requirements but did not consider the appellant's willingness and ability to furnish the missing details subsequently. The absence of a prescribed format for subscription details and the appellant's bona fide efforts to comply weighed in favor of reconsideration.Treatment of competing arguments: The Revenue did not strongly oppose the appellant's contention and left it to the Tribunal's discretion to decide the matter in accordance with law. The appellant acknowledged the non-compliance but expressed readiness to submit complete details if the matter was remanded.Conclusions: The Tribunal concluded that the rejection of the application solely on the ground of non-submission of documents, where the appellant was willing to comply and had provided substantial information, was not just. It was appropriate to allow the appellant an opportunity to furnish the required details and have the application reconsidered afresh.Issue 2: Violation of principles of natural justice in passing the impugned orderRelevant legal framework and precedents: Principles of natural justice require that no order affecting rights or interests be passed without giving the affected party an opportunity to be heard and to present their case fully. In administrative proceedings under the Income Tax Act, this principle mandates adequate notice and reasonable opportunity to comply with requirements before adverse orders are passed.Court's interpretation and reasoning: The appellant contended that the impugned order was passed without proper opportunity to submit complete details, especially given the initial portal access issues. The Tribunal considered whether the appellant was denied a fair chance to comply with the document requisition.Key evidence and findings: The appellant received multiple notices requesting documents and responded with available information. The delay in submission was attributed partly to technical difficulties. The appellant's undertaking during the hearing to submit all requisite details if the matter was remanded was significant.Application of law to facts: The Tribunal found that the impugned order's rejection and cancellation of provisional registration without allowing the appellant to furnish complete details violated the principles of natural justice. The appellant was not afforded a final opportunity to comply before adverse action was taken.Treatment of competing arguments: The Revenue did not dispute the appellant's claim of willingness to comply and did not oppose remand. This indicated tacit acknowledgment of procedural infirmity in the impugned order.Conclusions: The Tribunal held that the impugned order was liable to be set aside on grounds of violation of natural justice, and the matter required fresh consideration after giving the appellant an opportunity to submit complete details.Issue 3: Appropriateness of remanding the matter for fresh considerationRelevant legal framework and precedents: Remand is a recognized remedy where procedural lapses or incomplete facts warrant reconsideration by the original authority. The appellate authority may set aside and remit the matter for de novo adjudication to ensure just and fair outcome.Court's interpretation and reasoning: The Tribunal weighed the appellant's undertaking to furnish all required documents and the absence of strong opposition from the Revenue. It found that remanding the matter would serve the ends of justice and allow proper adjudication on merits.Key evidence and findings: The appellant's readiness to submit details and the audit report confirming receipt of donations through banking channels were relevant. The appellant's explanation of portal issues and delayed compliance was accepted as sufficient cause.Application of law to facts: The Tribunal applied the principle that procedural fairness and substantive justice require the appellant to be given a fair opportunity to comply and have the registration application reconsidered.Treatment of competing arguments: The Revenue's non-opposition to remand facilitated the Tribunal's decision to set aside and remit the matter.Conclusions: The Tribunal remanded the matter to the CIT (Exemption) for fresh adjudication after the appellant submits all requisite details, thereby ensuring compliance with procedural and substantive requirements.3. SIGNIFICANT HOLDINGSThe Tribunal's key legal reasoning and core principles established include:'We are of the considered opinion that since Ld. AR has under taken before us that the assessee would file all requisite details of donations as requisitioned by CIT (E) it would be just fair and convenient and in the interest of ends of justice that impugned order be set aside and matter be remanded back to file of CIT(E) to pass a fresh order on denovo basis after assessee has submitted all details as sought.'The Tribunal emphasized that rejection of registration applications under Section 12AB must be based on substantive non-compliance and not on procedural technicalities where the applicant is willing and able to comply.It reaffirmed the requirement of adherence to principles of natural justice, mandating that the applicant be given adequate opportunity to furnish documents before adverse orders are passed.Final determinations on each issue were:The impugned order rejecting the registration application and cancelling provisional registration was set aside as legally unsustainable.The matter was remanded to the CIT (Exemption) for fresh consideration on a de novo basis after the appellant submits all requisite details.The appeal was allowed for statistical purposes, underscoring that the substantive rights of the appellant require fair adjudication.