Income Tax Act Section 12AB Appeal: Delayed Filing Accepted, Trust Registration Requirement Waived, Case Remanded for Further Review

The Tribunal addressed an appeal regarding registration under section 12AB of the Income Tax Act. Despite a 250-day delay in filing, the Tribunal condoned the delay subject to Rs. 1000 cost payment. It rejected the requirement of Rajasthan Public Trust Act registration as a precondition for Income Tax Act registration. The case was remanded to CIT(E) for fresh consideration, providing the appellant an opportunity to rectify Form 10AB deficiencies and demonstrate activity genuineness.

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The core legal questions considered by the Tribunal in this appeal are:

• Whether delay in filing the appeal against the order rejecting registration under section 12AB of the Income Tax Act, 1961, can be condoned.
• Whether registration under the Rajasthan Public Trust Act, 1959, is a mandatory precondition for registration under section 12AB of the Income Tax Act.
• Whether the application for registration under section 12AB was rightly rejected on grounds of incomplete Form 10AB and non-genuineness of activities.

Delay in Filing Appeal and Condonation

The appellant filed the appeal after a delay of 250 days beyond the prescribed limitation period. The appellant's counsel explained that the delay arose due to incorrect legal advice received, which suggested first obtaining registration under the Rajasthan Public Trust Act before filing the appeal. The application for condonation of delay was supported by an affidavit of the President of the appellant institution; however, the affidavit was defective as it lacked the deponent's signature and proper verification clause.

The Tribunal noted the absence of an affidavit from the concerned advocate who gave the advice, which would have substantiated the reason for delay. Despite these deficiencies, considering the nature of the case and the date of incorporation of the trust (26.06.2014), the Tribunal exercised discretion to condone the delay subject to payment of costs of Rs. 1000/- to the Prime Minister's National Relief Fund. This reflects the principle that procedural lapses may be excused in appropriate cases to enable substantive adjudication on merits.

Requirement of Registration under Rajasthan Public Trust Act, 1959

The impugned order had rejected the application partly on the ground that the appellant was not registered under the Rajasthan Public Trust Act, 1959. The Tribunal referred to a coordinate bench decision which held that registration under the Rajasthan Public Trust Act is not an essential requirement for registration under section 12AB of the Income Tax Act. This precedent effectively nullified this ground of rejection, establishing that statutory registration under state public trust laws is not a precondition for claiming exemption under the Income Tax Act.

Incomplete Form 10AB and Genuineness of Activities

The other two grounds for rejection were that the Form 10AB submitted was incomplete and that the genuineness of the appellant's activities was in question. The CIT(Exemption) had issued show cause notices to the appellant to remedy the deficiencies in the application and provide requisite details. The appellant did not respond to these notices.

In absence of compliance, the CIT(E) was constrained to reject the application. The appellant did not dispute the failure to furnish the required information but requested that the matter be remanded for fresh consideration with an opportunity to be heard. The department did not oppose this request.

The Tribunal, therefore, set aside the impugned order and restored the application to the file of the CIT(E) with directions to decide afresh after affording the appellant a reasonable opportunity of hearing, in accordance with law. The Tribunal also mandated that the costs imposed for delay be deposited before the CIT(E) prior to recommencement of proceedings.

Significant Holdings and Principles

The Tribunal held:

"For the purposes of registration of such institutions under section 12AB of the Income Tax Act, registration under Rajasthan Public Trust Act, 1959 is not one of the essential requirements."

"Considering the date of incorporation of the trust, and the issues involved, delay in filing the appeal is condoned subject to costs."

"In absence of compliance by the applicant to show cause notices regarding deficiencies in Form 10AB, the CIT(E) had no option but to dispose of the application."

"The application is restored to the file of Learned CIT(E) with direction for decision afresh after affording reasonable opportunity of being heard to the applicant, in accordance with law."

The Tribunal emphasized the importance of procedural fairness by directing fresh consideration with an opportunity for the applicant to respond. It also clarified that statutory registration under state public trust laws is not a prerequisite for claiming exemption under the Income Tax Act, thus removing a significant hurdle for charitable institutions seeking registration under section 12AB.

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