2025 (6) TMI 974 - AT - Income Tax

Religious trust gets fresh chance after registration rejection due to email oversight under sections 12AB and 12A

Shri Naminath Jain Derasar Sardarpur Versus The Commissioner of Income Tax (Exemption) Ahmedabad

ITAT Ahmedabad allowed the appeal for statistical purposes regarding rejection of registration application u/s 12AB and cancellation of provisional ... Rejection of the application for registration u/s 12AB and the cancellation of provisional registration u/s 12A(1)(ac)(iii) - non compliance to CIT(A) notices issued to furnish the necessary documents and information - AR submitted that the assessee is a bona fide trust carrying on activities in accordance with the objectives of the trust and the non-compliance with the notices was not deliberate but occurred due to a genuine oversight as the email communication from the Department remained unnoticed by the accountant. HELD THAT:- Assessee is a religious trust engaged in some religious / charitable activities and was granted provisional registration under the Act. CIT(Exemption) recorded that the assessee failed to furnish the requisite documents, but did not discuss or evaluate the materials already available on record. There is no examination of the financial statements, no consideration of the stated objects of the trust, and no effort to verify the nature and genuineness of the activities undertaken by the assessee. It is a settled principle that every quasi-judicial authority is required to pass a reasoned and speaking order after due application of mind to the facts and documents on record. Mechanical rejection, without evaluating the merits of the case or examining the materials already filed, falls short of such requirement. Particularly in matters concerning registration under section 12AB, where the consequence affects the substantive rights of a charitable or religious trust, due process mandates that the competent authority consider the case on merits and not dismiss it solely on procedural default. In the present case, the CIT(Exemption) has not discharged this duty. There is no finding on the genuineness of activities, nor any determination of whether the objects of the trust are aligned with the requirements of section 2(15) of the Act. Thus, we find it appropriate and necessary to remit the matter for a fresh determination. Appeal filed by assessee is allowed for statistical purposes. 1. ISSUES PRESENTED and CONSIDERED- Whether the delay of 58 days in filing the appeal against the order of the Commissioner of Income Tax (Exemption) can be condoned under the principles governing limitation and delay condonation under the Income-tax Act, 1961.- Whether the rejection of the application for registration under section 12AB of the Income-tax Act, 1961, and the cancellation of provisional registration under section 12A(1)(ac)(iii) by the CIT(Exemption) was legally sustainable.- Whether the CIT(Exemption) was justified in rejecting the application solely on the ground of non-compliance with notices without considering the merits of the case and the materials already filed by the assessee.- Whether the matter should be remanded for fresh consideration with directions to the CIT(Exemption) to examine the application on merits and pass a reasoned and speaking order.2. ISSUE-WISE DETAILED ANALYSISCondonation of Delay in Filing AppealRelevant Legal Framework and Precedents: The limitation period for filing an appeal under section 253(3) of the Income-tax Act is prescribed, and the Courts have consistently held that a liberal and justice-oriented approach is to be adopted in condoning delay where the delay is not deliberate and does not prejudice the Revenue.Court's Interpretation and Reasoning: The Tribunal noted that the delay of 58 days was due to the assessee's email account being operated by an accountant who did not regularly check it, resulting in the order coming to the assessee's notice only after a significant time lapse. The delay was not deliberate but a bona fide procedural oversight.Key Evidence and Findings: An affidavit by the trustee explained the circumstances causing the delay. The Departmental Representative raised no objection to the condonation of delay.Application of Law to Facts: Applying the principle that delays caused by non-intentional and bona fide reasons should be condoned, and considering the absence of prejudice to the Revenue, the Tribunal condoned the delay.Treatment of Competing Arguments: The Revenue did not dispute the condonation, reflecting acceptance of the bona fide nature of the delay.Conclusion: Delay of 58 days in filing the appeal was condoned and the appeal admitted for adjudication on merits.Validity of Rejection of Application for Registration under Section 12AB and Cancellation of Provisional RegistrationRelevant Legal Framework and Precedents: Section 12AB of the Income-tax Act governs registration of charitable or religious trusts, which is critical for availing tax exemptions. Rule 17A(2) of the Income Tax Rules requires furnishing of requisite documents. It is a settled principle that quasi-judicial authorities must pass reasoned and speaking orders after due application of mind, especially in matters affecting substantive rights. Precedents emphasize that rejection solely on procedural grounds without examining merits is impermissible.Court's Interpretation and Reasoning: The Tribunal observed that the CIT(Exemption) rejected the application and cancelled provisional registration solely on the ground of non-compliance with notices issued for furnishing documents, without considering the documents already on record such as audited financial statements, trust deed, and other supporting materials. There was no examination of the genuineness of the trust's activities or alignment with the objectives under section 2(15) of the Act.Key Evidence and Findings: The assessee had submitted various documents along with Form 10AB. The impugned order did not discuss or evaluate these materials. The CIT(Exemption) failed to verify the nature and genuineness of activities undertaken by the trust.Application of Law to Facts: The Tribunal applied the principle that the competent authority must consider the case on merits and not dismiss it solely on procedural defaults, particularly where substantive rights of a charitable trust are involved. The absence of a reasoned order and failure to apply mind to the facts rendered the impugned order unsustainable.Treatment of Competing Arguments: The Departmental Representative conceded that the matter could be remanded for fresh consideration, indicating acknowledgment of procedural lapses.Conclusion: The impugned order was set aside, and the matter remanded to the CIT(Exemption) for fresh determination in accordance with law.Directions on RemandThe Tribunal directed the CIT(Exemption) to:a. Take into account all documents and materials already filed by the assessee along with Form 10AB;b. Call for any further clarification or evidence as may be necessary;c. Pass a reasoned and speaking order after granting the assessee a reasonable and effective opportunity of being heard.Additionally, the assessee was directed to actively participate in proceedings, respond to notices and furnish documents within prescribed timelines, with a warning that non-compliance may attract adverse inference.3. SIGNIFICANT HOLDINGS'It is a settled principle that every quasi-judicial authority is required to pass a reasoned and speaking order after due application of mind to the facts and documents on record. Mechanical rejection, without evaluating the merits of the case or examining the materials already filed, falls short of such requirement.''Particularly in matters concerning registration under section 12AB, where the consequence affects the substantive rights of a charitable or religious trust, due process mandates that the competent authority consider the case on merits and not dismiss it solely on procedural default.''Considering the explanation offered, the supporting affidavit, and the totality of circumstances, we are satisfied that the delay was not deliberate or due to inaction on the part of the appellant. It was caused due to a communication gap and subsequent procedural steps undertaken in good faith.'Core principles established include the necessity for reasoned and speaking orders by quasi-judicial authorities, the requirement to consider substantive merits over procedural technicalities in registration matters under section 12AB, and the adoption of a liberal approach in condoning delay where no prejudice is caused to the Revenue.Final determinations:- Delay in filing the appeal was condoned.- The impugned order rejecting registration and cancelling provisional registration was set aside for lack of due consideration of merits.- The matter was remanded with directions for fresh consideration in accordance with law and procedural fairness.