Vivek Mission Charitable Trust Vs CIT (ITAT Amritsar)
Amritsar ITAT: 12AB Registration Cannot Be Rejected on Inspector’s Adverse Report Without Giving Trust Opportunity to Rebut-Running Medical Facility Is Itself Charitable Activity
The assessee-trust was engaged in running an eye hospital and applied for registration by filing Form 10AB. The CIT(E), Chandigarh rejected the application on the premise that the trust was allegedly charging fees from patients but had failed to furnish details of such fees, OPD register/list of patients and list of donors.
A significant basis for rejection was a physical enquiry report prepared by the Income-tax Inspector. According to the report, a medical shop named “Gopal Medical Store” was operating from the hospital premises and selling medicines and intra-ocular lenses at market rates. The report also suggested that consolidated charges were collected from patients towards medicines, hospital beds and professional charges, whereas the audited financial statements reflected only donations.
The trust strongly disputed these findings. It contended that the hospital provided treatment without collecting anything from patients, with the entire expenditure being met from donations. It further explained that Gopal Medical Store was an independent third-party entity having no connection with the trust. The trust produced photographs showing the hospital, beds and patients undergoing treatment, newspaper reports and financial records to establish its charitable activities.
More importantly, the CIT(E) had relied upon the Inspector’s adverse report without furnishing the report or the adverse material to the trust and without giving it an opportunity to rebut the findings.
The ITAT observed that the fact that the trust was actually carrying on a medical facility could not be denied, and running such medical facility was itself a charitable activity. At the same time, the allegation that charges were being collected from patients was specifically denied by the assessee.
The Tribunal held that the CIT(E)’s action in rejecting registration on the basis of information contained in the Inspector’s report without giving the assessee an opportunity to rebut that material violated the principles of natural justice.
Accordingly, the matter was remanded to the CIT(E) for fresh consideration of the 12AB registration application, keeping in view the charitable activities actually carried on by the trust. The assessee was also directed to furnish all documentary evidence supporting its case and cooperate with the fresh proceedings.
Key takeaway: CIT(E) cannot reject Section 12AB registration by relying upon an Income-tax Inspector’s adverse physical-verification report collected behind the trust’s back. If such material is proposed to be used against the applicant, the report must be confronted and a meaningful opportunity to rebut it must be provided. Further, the actual running of a medical facility is itself a recognised charitable activity.
FULL TEXT OF THE ORDER OF ITAT AMRITSAR
