Registration under section 12A(1)(ac)(iii) remanded for fresh decision after earlier rejection of Form 10AB application

ITAT Pune allowed the appeal partly, setting aside the order of CIT (Exemption), Pune rejecting the assessee's application in Form 10AB for registration under section 12A(1)(ac)(iii). Without examining the merits, ITAT held that, in the interest of justice, the matter should be remanded for fresh consideration after providing reasonable opportunity of hearing. CIT (Exemption) was directed to decide the registration application afresh in accordance with law, while the assessee was directed to comply with all notices and furnish requisite documents and information, failing which CIT (Exemption) would be at liberty to pass an appropriate order as per law.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether rejection of the application for registration under clause (iii) of section 12A(1)(ac) of the Income-tax Act and cancellation of provisional registration under section 12AB r.w.s. 12A(1)(ac)(vi), on the ground of non-compliance with the second notice and alleged violation of section 12AB(1)(b)(i) and Rule 17A(2), was justified in view of principles of natural justice.

1.2 Whether the denial of approval under section 80G(5) of the Income-tax Act should be sustained where the matter of registration under section 12A(1)(ac)(iii) is remanded for fresh adjudication and the 80G approval is consequential to such registration.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of rejection of registration under section 12A(1)(ac)(iii) and cancellation of provisional registration under section 12AB

Legal framework (as discussed)

2.1 The Tribunal noted that the registration application was filed in Form No. 10AB under clause (iii) of section 12A(1)(ac). The Commissioner (Exemption) examined compliance with section 12AB(1)(b)(i) and Rule 17A(2) of the Income-tax Rules while considering the genuineness of activities and compliance with other laws, and cancelled provisional registration earlier granted under section 12AB r.w.s. section 12A(1)(ac)(vi) on perceived non-compliance with notice.

Interpretation and reasoning

2.2 The Tribunal recorded that the assessee had complied with the first notice dated 09.08.2024 by furnishing the information called for.

2.3 The second notice dated 27.11.2024, issued on finding discrepancies in the earlier information, was admittedly not responded to by the assessee. The assessee contended that the notice was missed by the office bearers and, in absence of knowledge of the notice, compliance could not be made.

2.4 The core contention of the assessee before the Tribunal was that, even if there was non-compliance with the second notice, the Commissioner (Exemption) ought to have afforded at least one more opportunity of hearing before rejecting the registration application and cancelling the provisional registration.

2.5 The Tribunal, considering the totality of facts and "in the interest of justice", accepted that another reasonable opportunity ought to have been granted and expressly chose not to enter into the merits of the registration or the genuineness of activities at this stage.

Conclusions

2.6 The order of the Commissioner (Exemption) rejecting the registration application in Form No. 10AB under section 12A(1)(ac)(iii) and cancelling the provisional registration granted under section 12AB r.w.s. section 12A(1)(ac)(vi) was set aside.

2.7 The matter was remanded to the Commissioner (Exemption) for de novo adjudication of the registration application strictly in accordance with law and facts, after providing reasonable opportunity of hearing to the assessee.

2.8 The assessee was directed to comply with all notices and to produce requisite documents/information in support of the registration application, failing which the Commissioner (Exemption) would be at liberty to pass an appropriate order as per law.

Issue 2: Denial of approval under section 80G(5) and its consequential nature

Interpretation and reasoning

2.9 The appeal against denial of approval under section 80G(5) arose from the order of the Commissioner (Exemption) refusing approval on the assessee's application in Form No. 10AB.

2.10 The Tribunal observed that the issue of grant of approval under section 80G(5) is consequential to the grant of registration under section 12A(1)(ac)(iii).

2.11 Since the issue of registration under section 12A(1)(ac)(iii) was remanded for fresh adjudication, the Tribunal considered it appropriate, "in the interest of justice", to remit the 80G(5) approval issue also to the Commissioner (Exemption) for de novo consideration.

Conclusions

2.12 The order denying approval under section 80G(5) was set aside as a consequential matter.

2.13 The issue of grant of approval under section 80G(5) was remanded to the Commissioner (Exemption) for fresh adjudication, in line with and consequent upon the decision on registration under section 12A(1)(ac)(iii).

2.14 Both appeals were treated as partly allowed for statistical purposes, with no adjudication on merits at this stage.

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