2025 (6) TMI 1112 - AT - Income Tax

Trust's E-Filing Compliance Challenged: Tribunal Offers Last Chance to Rectify Registration, Imposes Procedural Costs

In this case, the Tribunal addressed a trust's registration and 80G approval rejection due to non-compliance with e-filing notices. Despite initial ... Rejection of registration u/s 12A and rejection of approval u/s.80G(5) - CIT(E) was not satisfied about genuineness of the activities of the trust and also about whether the activities of the trust were in consonance with the objects of the trust - HELD THAT:- The assessee Trust has submitted that the it is prepared to file all required documents before CIT(E) for registration and, therefore, requested to set aside the matter back to the file of CIT(E) for granting registration. The explanation of the assessee that communication was not received on the email can’t be accepted as no evidence was brought on record in this respect. It has been admitted that the trustees were unaware of technical procedures and not well-versed with the e-filing portal and, therefore, had inadvertently failed to respond to the notices. We don’t find it as a reasonable explanation for non-compliance before the CIT(E). When the assessee had e-filed its application, it can’t take a plea that it was unaware of the procedure. Therefore, we deem it fit to impose a cost of Rs. 5,000/- on the assessee, payable to the Income Tax Department within two weeks from the date of receipt of copy of this order. 1. ISSUES PRESENTED and CONSIDERED- Whether the rejection of registration of the trust under Section 12A(1)(ac)(iii) of the Income Tax Act, 1961, by the Commissioner of Income Tax (Exemption) (CIT(E)) was justified, given the assessee's failure to respond to notices seeking additional information and documents.- Whether the subsequent rejection of approval under Section 80G(5) of the Act, which is contingent upon registration under Section 12A, was appropriate.- Whether the assessee was afforded a reasonable opportunity of being heard before the CIT(E) and whether procedural fairness was observed.- Whether the explanation offered by the assessee regarding non-receipt of notices via email and lack of familiarity with the e-filing portal is a valid ground to set aside the order and grant another opportunity.- Whether imposition of costs on the assessee is warranted in the circumstances.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Validity of rejection of registration under Section 12A(1)(ac)(iii)Relevant legal framework and precedents: Section 12A of the Income Tax Act governs the registration of trusts or institutions seeking exemption under the Act. Registration is a prerequisite for claiming exemption for income derived from charitable activities. The CIT(E) has the authority to grant or reject registration based on satisfaction regarding genuineness and conformity of activities with the stated objects of the trust. The procedural requirement includes providing the assessee an opportunity to submit clarifications or documents when called upon.Court's interpretation and reasoning: The Tribunal noted that the assessee had filed the application for registration electronically but failed to respond to two notices dated 27.08.2024 and 16.10.2024 issued by the CIT(E) seeking additional details and documents. The CIT(E) rejected the registration due to non-compliance and doubts about the genuineness of the trust's activities.Key evidence and findings: The assessee did not submit any documents or explanations in response to the notices and did not seek any adjournments before the CIT(E). The assessee's explanation before the Tribunal was that the notices were not communicated via email and that the trustees were unfamiliar with the e-filing portal.Application of law to facts: The Tribunal held that since the application was e-filed by the assessee, it was incumbent upon the assessee to be aware of the procedural requirements, including monitoring communications via the e-filing portal. The lack of response to notices without valid proof of non-receipt was not acceptable. The Tribunal found the explanation of ignorance of technical procedures and non-receipt of notices unsubstantiated and unreasonable.Treatment of competing arguments: While the assessee argued for procedural unfairness and lack of opportunity to be heard, the Tribunal emphasized the absence of any request for adjournment or submissions before the CIT(E) and the failure to comply with the notices. The Tribunal balanced the need for procedural fairness with the responsibility of the assessee to comply with statutory requirements.Conclusions: The rejection of registration under Section 12A by the CIT(E) was justified based on non-compliance. However, considering the assessee's willingness to submit documents and clarify the position, the Tribunal deemed it appropriate to allow one more opportunity to the assessee to comply with the requirements.Issue 2: Rejection of approval under Section 80G(5)Relevant legal framework: Section 80G(5) approval is contingent upon prior registration under Section 12A. Without registration, approval under Section 80G cannot be granted.Court's interpretation and reasoning: The Tribunal noted that since the registration under Section 12A was rightly rejected, the approval under Section 80G(5) was also rejected by the CIT(E). However, as the Tribunal ordered reconsideration of the registration application, the approval under Section 80G(5) also needed to be reconsidered after the registration issue is resolved.Application of law to facts and conclusions: The Tribunal set aside the rejection of approval under Section 80G(5) and directed it to be re-adjudicated after the registration issue under Section 12A is decided.Issue 3: Procedural fairness and opportunity of hearingRelevant legal principles: Principles of natural justice require that an assessee be given a reasonable opportunity of being heard before adverse orders are passed. Communication of notices and opportunity to respond are essential procedural safeguards.Court's interpretation and reasoning: The Tribunal observed that the assessee claimed non-receipt of notices via email and lack of awareness of the e-filing portal. However, no evidence was produced to substantiate non-receipt. The Tribunal held that since the application was e-filed, the assessee was expected to monitor communications and comply with procedural requirements.Application of law to facts: The Tribunal concluded that the assessee was not denied opportunity of hearing as no request for adjournment or submission was made before CIT(E). The failure to respond was attributable to the assessee's inaction rather than any procedural lapse on the part of the department.Treatment of competing arguments: The Tribunal rejected the assessee's plea of ignorance and non-receipt of notices as a reasonable excuse for non-compliance.Conclusions: While procedural fairness was maintained, the assessee's failure to comply warranted the initial rejection. However, the Tribunal exercised discretion to allow a further opportunity to cure the default.Issue 4: Imposition of costs on the assesseeRelevant principles: Costs may be imposed on parties who cause unnecessary delay or fail to comply with procedural requirements without reasonable cause.Court's reasoning: The Tribunal found the assessee's explanation for non-compliance unsatisfactory and deemed the failure to respond as avoidable. Therefore, to discourage such conduct, a cost of Rs. 5,000/- was imposed on the assessee payable to the Income Tax Department.Conclusions: The cost imposition was justified as a measure to ensure compliance and discourage negligence.3. SIGNIFICANT HOLDINGS'The explanation