2025 (7) TMI 742 - AT - Income Tax

Trust registration denial overturned for wrong section application under 12A without form 10A requirement

Sri Maheswari Dharmsala Versus CIT (Exemptions), Kolkata

ITAT Kolkata set aside CIT(Exemption) order denying registration under section 12A(1)(ac)(iii) for non-filing of form 10A. The tribunal held that as an ... Denial of registration u/s 12A(1)(ac)(iii) - non-filing of form 10A (to get provisional registration) - HELD THAT:- Since the assessee was an old Trust, it ought to have applied u/s 12A(1)(ac)(i) of the Act and there was no need to apply for provisional registration and as per clause (a) of the Proviso below sub-section (2) of section 12A, the provisions of sections 11 and 12 would have applied from the assessment year from which the trust was earlier granted registration. Hence, the Bench was of the view that in the interest of justice and fair play and considering the facts and circumstances of the case that the rejection of application was made on account of non-compliance made by the assessee, another opportunity may be provided to the assessee. Hence, the order of the CIT(Exemption) cancelling the provisional registration and denying the final registration is hereby set aside and the matter is remanded back to him for deciding the application afresh. Appeal filed by the assessee is allowed for statistical purposes. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Tribunal in this appeal are:Whether the delay in filing the appeal against the order of the Ld. CIT (Exemption) rejecting registration under section 12A(1)(ac)(iii) of the Income Tax Act, 1961, can be condoned despite being barred by limitationRs.Whether the rejection of the assessee's application for registration under section 12A(1)(ac)(iii) on the ground of non-filing of Form 10A (provisional registration) and consequent non-issuance of Form 10AC (certificate) was justifiedRs.Whether non-filing of Form 10A, which was a newly inserted requirement, amounted to a valid ground for denial of registration under section 12A, especially when the assessee had previously held registration under section 12AA and 80G orders valid in perpetuityRs.Whether the assessee, being an old trust with registration granted since 1991, was required to apply for provisional registration under section 12A(1)(ac)(iii) or could have applied under section 12A(1)(ac)(i), and the legal consequences thereofRs.Whether the order of rejection and cancellation of provisional registration by the Ld. CIT (Exemption) was sustainable in law, considering the facts and submissions made by the assesseeRs.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Condonation of Delay in Filing AppealRelevant legal framework and precedents: The limitation period for filing appeals before the Income Tax Appellate Tribunal (ITAT) is prescribed under the Income Tax Act, 1961. Courts have consistently held that delay in filing an appeal can be condoned if sufficient cause or reasonable explanation is shown.Court's interpretation and reasoning: The Tribunal examined the affidavit and application for condonation of delay filed by the assessee. The delay of 13 days was attributed to lack of awareness about procedural requirements, absence of knowledgeable personnel in the trust, and reliance on auditor and tax advisor's guidance.Key evidence and findings: The assessee's affidavit detailed the chronology of events, including the filing of Form 10A for section 80G(5) but not for section 12A due to unawareness, and the subsequent delay in engaging a qualified professional to prepare and file the appeal.Application of law to facts: The Tribunal found the reasons for delay to be reasonable and sufficient cause preventing timely filing. The delay was unintentional and arose from genuine procedural confusion and lack of expertise.Treatment of competing arguments: No adverse submissions were noted against condonation. The Tribunal gave due weight to the explanation provided.Conclusion: The delay in filing the appeal was condoned, and the appeal was admitted for adjudication.Issue 2: Validity of Rejection of Registration under Section 12A(1)(ac)(iii) on Grounds of Non-filing of Form 10A and Non-issuance of Form 10ACRelevant legal framework and precedents: Section 12A(1)(ac)(iii) mandates registration for charitable trusts to avail exemption. Form 10A is required for provisional registration, and Form 10AC is the certificate issued post provisional registration. Amendments effective from 1st April 2020 introduced new procedural requirements, including filing of Form 10A for registration.Court's interpretation and reasoning: The Tribunal scrutinized the Ld. CIT (Exemption)'s order rejecting the application on the basis that the assessee did not file Form 10A, which is a prerequisite for issuance of Form 10AC. The Ld. CIT (Exemption) held that non-submission of replies to queries and absence of Form 10AC rendered the genuineness of the trust's activities unestablished.Key evidence and findings: The assessee had filed Form 10AB within the extended due date and submitted various documents including audited accounts. However, Form 10A was not filed due to unawareness, and consequently, Form 10AC was not issued. The assessee had previously held registration under section 12AA and 80G orders valid in perpetuity since 1991 and 1992 respectively.Application of law to facts: The Tribunal noted that the non-filing of Form 10A was a technical lapse arising from new procedural requirements. The trust had maintained its existence and compliance over decades, and the rejection based solely on this technicality was considered harsh.Treatment of competing arguments: The Department relied on strict compliance with procedural requirements, emphasizing the necessity of Form 10A and Form 10AC for registration. The assessee argued that the non-filing was inadvertent and that all substantive documents proving genuineness were submitted.Conclusion: The Tribunal found merit in the assessee's contention that mere non-filing of Form 10A should not be a ground to deny registration, especially given the trust's long-standing existence and compliance history.Issue 3: Applicability of Provisional Registration under Section 12A(1)(ac)(iii) to an Old Trust and Alternative Application under Section 12A(1)(ac)(i)Relevant legal framework and precedents: The proviso to sub-section (2) of section 12A provides that trusts with existing registration may apply under section 12A(1)(ac)(i) without requiring provisional registration under section 12A(1)(ac)(iii). Sections 11 and 12 benefits apply from the assessment year from which earlier registration was granted.Court's interpretation and reasoning: The Tribunal observed that since the assessee was an old trust registered since 1991, the correct route was to apply under section 12A(1)(ac)(i) and not for provisional registration under section 12A(1)(ac)(iii). The Tribunal emphasized that the procedural misstep in applying for provisional registration was a factor contributing to the rejection.Key evidence and findings: The trust's long-standing registration and prior orders under sections 12AA and 80G were documented. The Tribunal noted that the provisions of sections 11 and 12 would apply from the year of original registration if the application was made under section 12A(1)(ac)(i).Application of law to facts: The Tribunal concluded that the assessee's application was misplaced and that the procedural error warranted reconsideration rather than outright rejection.Treatment of competing arguments: The Department maintained that procedural compliance was mandatory for provisional registration, while the assessee argued for leniency given the trust's history.Conclusion: The Tribunal directed that the matter be remanded to the Ld. CIT (Exemption) for fresh consideration, allowing the assessee to apply under the appropriate provision.Issue 4: Sustainability of Cancellation of Provisional Registration and Denial of Final RegistrationRelevant legal framework and precedents: The power to cancel provisional registration and reject final registration is subject to principles of natural justice and fair play. Courts and Tribunals have held that procedural lapses should not lead to denial of substantive rights without opportunity to be heard.Court's interpretation and reasoning: The Tribunal found that the Ld. CIT (Exemption) had rejected the application citing non-submission of replies to notices and non-filing of Form 10A, without granting an opportunity for further compliance.Key evidence and findings: The assessee had initially complied with notices but failed to respond to subsequent queries. The Tribunal noted the absence of any opportunity given to the assessee to rectify the omissions before rejection.Application of law to facts: The Tribunal emphasized the importance of providing an opportunity of hearing and allowing the assessee to submit required documents before rejecting the application and cancelling provisional registration.Treatment of competing arguments: The Department justified rejection on non-compliance, while the assessee sought remand for fresh opportunity.Conclusion: The Tribunal set aside the order of rejection and cancellation and remanded the matter for fresh adjudication after granting the assessee an opportunity to be heard and to file required details.3. SIGNIFICANT HOLDINGSThe Tribunal held:'Considering the facts and circumstances of the case that the rejection of application was made on account of non-compliance made by the assessee, another opportunity may be provided to the assessee.''The order of the Ld. CIT(Exemption) cancelling the provisional registration and denying the final registration is hereby set aside and the matter is remanded back to him for deciding the application afresh after granting another opportunity of being heard.''The assessee shall not seek unnecessary adjournments and shall file the required details, which shall be considered while deciding the application.'Core principles established include:Delay in filing appeals can be condoned if reasonable cause is demonstrated.Technical non-compliance such as non-filing of newly introduced forms should not lead to harsh consequences when the assessee has a long-standing history of compliance and genuineness.Old trusts with prior registration should apply under the correct provisions to preserve continuity of benefits.Natural justice requires that before rejecting applications and cancelling provisional registrations, the assessee must be given adequate opportunity to comply and be heard.Remand for fresh consideration is appropriate where procedural errors and non-compliance are curable and do not go to the root of genuineness.Final determinations:The delay in filing appeal was condoned and appeal admitted.The rejection of registration under section 12A(1)(ac)(iii) was set aside.The cancellation of provisional registration was quashed.The matter was remanded to the Ld. CIT (Exemption) for fresh adjudication after affording opportunity to the assessee.