Paradise Sarv Kalyan Sansthan Vs CIT (Exemption) (ITAT Jaipur)
Summary: The Income Tax Appellate Tribunal, Jaipur Bench “B”, in Paradise Sarv Kalyan Sansthan Vs CIT (Exemption), allowed two appeals filed by a charitable trust challenging the rejection of its applications for registration under Section 12A and approval under Section 80G(5) of the Income-tax Act, 1961. The Tribunal held that the Commissioner of Income Tax (Exemption), Jaipur, had failed to provide a reasonable opportunity of hearing before rejecting the applications. Finding a violation of the basic principles of natural justice, the Tribunal set aside both rejection orders dated 3 February 2024 and remanded the applications for fresh adjudication.
The assessee, Paradise Sarv Kalyan Sansthan, claimed to be a charitable trust engaged in public welfare activities, including promotion of general public welfare, relief to the poor and medical relief to needy persons. On 23 September 2023, the trust submitted separate applications in Form No. 10AB. The first sought registration under the provision of Section 12A identified in the application, while the second sought approval under clause (ii) of the first proviso to Section 80G(5). Both applications were rejected by the CIT(E), leading to ITA No. 401/JPR/2024 and ITA No. 402/JPR/2024, respectively. Since the disputes involved common questions concerning the rejection procedure and opportunity of hearing, the Tribunal considered both appeals together.
In the registration proceedings, the CIT(E) rejected the application as infructuous on the ground that the trust was not already regularly registered under clause (i) or clause (iii) of Section 12AB. In the separate proceedings concerning approval under Section 80G(5), the CIT(E) observed that the assessee had failed to furnish the details and information required by notice dated 21 December 2023. The authority also referred to the absence of existing registration under the relevant clauses of the first proviso to Section 80G(5). On these grounds, the approval application was likewise rejected as infructuous. The assessee challenged both decisions primarily on procedural grounds rather than seeking an immediate determination of its substantive eligibility for registration or approval.
Before the Tribunal, the authorised representative submitted that the trust had not been afforded a reasonable opportunity to furnish the requisite documents and explanations. The assessee requested that the rejection orders be set aside and the applications restored to the CIT(E) for fresh consideration after providing an effective hearing. The Tribunal examined the impugned orders, particularly the tables appearing at their beginning in Form No. 10AD. Column 10 of those tables indicated that two opportunities had been afforded: one through notice dated 21 December 2023 fixing the matter for 29 December 2023, and another for 4 January 2024. However, paragraph 2 of each rejection order mentioned only the notice dated 21 December 2023 and contained no reference to any second notice.
The Tribunal considered this discrepancy material. It reasoned that, had a second notice actually been issued on or for 4 January 2024, its issuance would ordinarily have been mentioned in the body of the respective rejection order. The absence of such a reference created a significant inconsistency between the tabular hearing history and the narrative findings recorded by the CIT(E). The Tribunal therefore found that the assessee had not received a reasonable opportunity to justify its applications under Section 12A and Section 80G(5). The decision emphasised that the procedural fairness required in proceedings involving charitable trust registration and approval cannot be satisfied merely by recording hearing dates in a standard-form table where the accompanying order does not substantiate the actual issuance of notices.
The assessee also explained that its president had been unwell, preventing compliance with the notice dated 21 December 2023. Although no medical certificate was furnished to support this explanation, the Tribunal held that the absence of medical evidence did not assist the Revenue. Its conclusion was based independently on the failure to provide a reasonable opportunity of hearing. The Tribunal observed that, had such an opportunity been granted, the trust might have complied with the notices and furnished the required information. Accordingly, the Tribunal concluded that the basic principles of natural justice had not been followed.
Consequently, the Tribunal set aside both orders dated 3 February 2024 and remanded the matters to the CIT(E), Jaipur, for fresh decisions after providing a reasonable opportunity of hearing to the assessee. Both appeals were allowed. Importantly, the Tribunal did not direct the CIT(E) to grant registration under Section 12A or approval under Section 80G automatically, nor did it finally adjudicate the substantive eligibility of the trust. Its directions were confined to restoring the applications for fresh consideration in accordance with the requirement of procedural fairness. The decision reinforces the importance of maintaining consistent notice records and ensuring an effective hearing before rejecting applications filed by charitable institutions.
FULL TEXT OF THE ORDER OF ITAT JAIPUR
These two appeals have been filed by the assessee, named above. These arise out of separate orders dated 03.02.2024 passed by Learned Commissioner of Income Tax (Exemption), Jaipur [hereinafter referred to as CIT(E) ].
Vide an order, application filed by the trust, in Form No. 10AB seeking registration under sub-clause (ii) of sub-section (1) of Section 12A of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) came to be rejected.
Vide separate order, another application in Form No. 10AB, seeking approval under clause (ii) of first proviso to sub-section (5) of section 80G of the Act, also came to be rejected.
Since common questions are involved, both the appeals have been taken up together and are being disposed vide common judgment.
2. Appellant-applicant claims itself to be a charitable trust working for public welfare activities like promotion and advancement of general public welfare, relief to the poor; and medical reliefs to the needy.
ITA No. 401/JPR/2024
3. Appellant is feeling aggrieved by order dated 03.02.2024 whereby its application presented on 23.09.2023 in Form No. 10AB seeking registration under sub-clause (ii) of sub-section (1) of Section 12A of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), has been rejected having become infructuous.
4. The impugned order came to be passed by Learned CIT(E), while observing that the applicant was already not regularly registered under clause (i) or (iii) of section 12AB of the Act.
ITA No. 402/JPR/2024
5. By way of this appeal, the appellant-trust has challenged order dated 03.02.2024 passed by the Learned CIT(E), whereby its application filed on 23.09.2023 in Form No. 10AB seeking approval under clause (ii) of first proviso to sub-section (5) of section 80G of the Act, has been rejected, while observing that the same had also become infructuous.
6. The reasons for rejecting the application, as per impugned order, is that the assessee failed to furnish details/information required vide notice dated 21.12.2023 and also because the applicant had already not got registered under clause (i) or (iii) of first proviso to section 80G(5) of the Act.
7. Hence, this appeal.
8. Arguments heard. Files perused.
9. In both appeals, the only submission put forth on behalf of the appellant trust is that no reasonable opportunity was granted by Learned CIT(E) to the applicant to furnish requisite details/information. The ld. AR for the assessee has, therefore, urged that the impugned orders be set aside and the matters may be remanded to the Learned CIT(E) for decision afresh, after providing reasonable opportunity to the appellant of being heard.
10. As is available from the impugned orders passed by Learned CIT(E), in particular, from the tables available in the very beginning of the orders, which are in Form No. 10AD, two opportunities were afforded to the applicant before rejection of the each application. As per contents of column 10 of this table, one opportunity was afforded vide notice dated 21.12.2023 issued for 29.12.2023. The other opportunity was granted for 04.01.2024.
However, in para 2 of each impugned order, there is mention about issuance of only one notice dated 21.12.2023, to the applicant and that too for 29.12.2023. In said paragraph of each impugned order, there is no mention regarding issuance of any other notice.
Had any second notice been issued on or for 04.01.2024, the date mentioned in column no. 10 of the above referred to table(s), it must have found mention in the text of the orders. But, as already mentioned, in para 2 of the impugned orders, there is no mention about issuance of any second notice.
11. In the given situation, we find that reasonable opportunity of being heard was not granted to the applicant-appellant to justify its claim as put forth in the respective application i.e. u/s 12A of the Act and sub-section (5) of Section 80G of the Act. Had reasonable opportunity been afforded, the applicant might have complied with notices. On behalf of the appellant, it has been submitted that the President of the applicant trust was not keeping good health, and as such, notice dated 21.12.2023 could not be complied with.
Although no medical certificate has been filed in support of this submission, in view of our observation that reasonable opportunity should have been granted to the applicant, before disposing of the applications, non production of medical certificate does not come to the aid of department.
We are of the considered view that this is a matter where the basic principles of natural justice have not been complied with.
Conclusion
12. For the foregoing discussion, we find that both the impugned orders i.e. one challenged by way of ITA No. 401/JPR/2024 and the other by way of ITA No. 402/JPR/2024 deserve to be set aside, and matter(s) need remanded to Learned CIT(E) for decision afresh, after providing reasonable opportunity to the applicant-appellant, of being heard.
Result
13. Consequently, both these appeals are allowed. While setting aside the impugned orders, the matters are remanded to Learned CIT(E), Jaipur for decision of the respective application afresh, after providing reasonable opportunity to the appellant-applicant, of being heard.
Order pronounced in the open court on 10/07/2024.
