Charitable trust's s.12AB registration bid rejected for missed email notices; order set aside for lack of fair hearing

Rejection of registration under s. 12AB on the ground of non-compliance with notices and consequent inability of the authority to satisfy itself about charitable objects and genuineness of activities was examined for violation of natural justice. The Tribunal accepted affidavit-based explanation that the responsible office-bearer was posted at a remote location without internet access and therefore could not receive emailed notices, constituting bona fide reasonable cause for non-response. Holding that the applicant was effectively denied reasonable opportunity of hearing, the Tribunal set aside the rejection order and remanded the application to the CIT(E) for fresh consideration; the appeal was allowed for statistical purposes.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether rejection of the application for registration under section 12AB for non-compliance with notices, in the circumstances explained by the assessee, was in breach of the principles of natural justice.

1.2 Consequentially, whether the matter warranted remand to the Commissioner of Income-tax (Exemption) for fresh consideration of the application under section 12AB.

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2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of rejection of section 12AB registration for non-compliance and alleged breach of natural justice

Legal framework (as noticed and applied by the Tribunal)

2.1 The Tribunal noted that registration under section 12AB is to be granted in terms of section 12AB(1)(b) only after the authority is satisfied about: (i) the objects of the trust or institution, (ii) genuineness of its activities, and (iii) compliance of any other law for the time being in force, as are material for achieving its objects.

2.2 The assessee had applied for provisional registration under section 12AB by filing Form 10AC in terms of section 12A(1)(ac)(vi).

Interpretation and reasoning

2.3 The Tribunal recorded that the assessee is a long-standing charitable trust established in 1963, registered under the Bombay Public Trusts Act, 1950, running multiple recognised educational institutions, largely serving economically and socially weaker sections, and also operating a school in a remote border area of Ladakh. The trust is registered for CSR activities, holds approval under section 80G, and is recognised under the Minority Act.

2.4 The Commissioner (Exemption) had issued notices seeking information in connection with the application under section 12AB, but there was no compliance, leading to rejection of the application on the ground that satisfaction regarding objects, genuineness of activities and compliance with other laws could not be recorded as mandated by section 12AB(1)(b).

2.5 Before the Tribunal, the assessee produced a paper book and an affidavit from its General Secretary explaining that, during the relevant period, he was at the Turtuk Valley School in Ladakh, an extremely remote border region with no internet connectivity, which prevented him from accessing emails containing the notices and thus from responding to the Commissioner (Exemption).

2.6 The Tribunal accepted this explanation as bona fide and constituting a "reasonable cause" for non-compliance with the notices. On that factual foundation, the Tribunal held that the assessee had, in effect, been deprived of a reasonable opportunity of being heard before adverse action was taken on its application.

2.7 On this basis, the Tribunal held that rejection of the application, without affording an effective and real opportunity to respond in the peculiar circumstances explained, amounted to a breach of the principles of natural justice.

Conclusions

2.8 The rejection of the assessee's application for registration under section 12AB solely on account of non-response to notices, without considering the reasonable cause demonstrated for such non-compliance, was held to be vitiated by violation of the principles of natural justice.

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Issue 2: Necessity and scope of remand to the Commissioner (Exemption)

Interpretation and reasoning

2.9 Having found a breach of natural justice, the Tribunal considered it appropriate to set aside the order of the Commissioner (Exemption) and restore the matter for fresh adjudication, so that the statutory satisfaction under section 12AB(1)(b) may be properly arrived at on consideration of all relevant material.

2.10 The Tribunal directed that, in the remand proceedings, an adequate and reasonable opportunity of hearing be afforded to the assessee to furnish requisite documents and submissions in support of its application.

2.11 At the same time, the Tribunal directed the assessee to remain diligent and co-operative in the set-aside proceedings, recognising that the opportunity now afforded should be utilised responsibly.

2.12 The Tribunal expressly refrained from expressing any opinion on the merits of the assessee's eligibility for registration under section 12AB, so as not to prejudice the fresh determination by the Commissioner (Exemption).

Conclusions

2.13 The impugned order rejecting registration under section 12AB was set aside and the application was restored to the file of the Commissioner (Exemption) for de novo consideration in accordance with law after granting adequate opportunity of hearing, with no finding rendered on the substantive merits of the claim for registration.

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