Case Law Details
Digambar Jain Saitwal Seva Mandal Vs CIT (ITAT Pune)
Introduction: A recent case at the Income Tax Appellate Tribunal (ITAT) Pune deals with the rejection of a trust’s application for registration under section 12AA of the Income Tax Act. The appeal, filed by Digambar Jain Saitwal Seva Mandal, stems from the rejection of their application by the Commissioner of Income Tax (Exemption), Pune (CIT(E)). The central issue revolves around the failure of the assessee to provide details and documentary evidence to establish the genuineness of their activities in line with the requirements for trust registration.
Detailed Analysis:
1. Background of the Case: Digambar Jain Saitwal Seva Mandal, a trust based in Pune, applied for registration under section 12AA of the Income Tax Act. This registration is essential for trusts involved in charitable activities to avail tax exemptions and benefits. The Commissioner of Income Tax (Exemption), Pune, received the application and initiated a verification process.
2. Request for Details and Documentary Evidence: To assess the genuineness of the trust’s activities and their compliance with the necessary legal requirements, the CIT(E) requested various details and documentary evidence from the trust. The trust was required to provide this information by June 6, 2023. Subsequently, another notice was issued on July 14, 2023, communicating discrepancies found in the provided information and setting a compliance deadline of July 20, 2023. Both notices were served to the trust electronically through e-portal and e-mail.
3. Lack of Compliance: The trust did not submit explanations or provide details to address the discrepancies pointed out by the CIT(E). Furthermore, they did not take the opportunity to be heard by the authorities. Consequently, the CIT(E) made an assumption that the trust had no response or clarification to offer, leading to the rejection of the trust’s application for registration under section 12AA.
4. Appeal and Request for Remand: The trust appealed the CIT(E)’s decision before the ITAT Pune. During the hearing, the trust’s authorized representative argued that they had submitted an adjournment petition on the second compliance date (July 20, 2023). They emphasized that the trust was willing to provide all necessary details and documentary evidence to clarify the discrepancies pointed out by the CIT(E). Consequently, they requested that the matter be remanded to the CIT(E) for re-evaluation.
5. ITAT Pune’s Decision: ITAT Pune recognized the importance of the provisions for trust registration under section 12AA and tax exemptions under section 80G, which aim to promote socio-economic welfare and charitable activities. These provisions align with the Directive Principles of State Policy in the Indian Constitution. Income tax laws are considered welfare legislations, and their objective is to enhance the welfare of society.
In light of these considerations and to uphold the principles of natural justice, ITAT Pune decided to remand the matter back to the CIT(E). This decision grants the trust one final opportunity to provide the necessary details and represent their case on its merits. The ITAT Pune set aside the CIT(E)’s order and directed a re-evaluation of the trust’s application.
Conclusion: The case of Digambar Jain Saitwal Seva Mandal vs. CIT(E) highlights the significance of trust registration for charitable activities and tax exemptions. It emphasizes the welfare-oriented nature of income tax laws. The decision by ITAT Pune to remand the matter back to the CIT(E) provides the trust with an additional opportunity to present their case and fulfill the requirements for trust registration under section 12AA. This action aligns with the principles of natural justice and aims to promote charitable activities that benefit society as a whole.
FULL TEXT OF THE ORDER OF ITAT PUNE
This appeal preferred by the assessee emanates from the order of Commissioner of Income Tax [Exemption], Pune (for short „CIT(E)‟, dated 26.07.2023 as per the following grounds of appeal:-
“1. The CIT Exemption:
i. erred in rejecting the application for registration in Form No.10AB under clause (iii) of section 12A(1)(ac) of the Income Tax Act, 1961 filed by the appellant on grounds that it had not furnished, within the appointed dated 20/07/2023, any explanation to the discrepancies communicated by show cause notice (SCN) dt. 14/07/2023.
ii. erred in presuming that the appellant had nothing to say in the matter and drawing an adverse conclusion about the genuineness of the Trust’s activities in line with the requirements of law.
2. The appellant pleads that the ex-parte order passed by the CIT Exemption at short notice without affording the appellant reasonable opportunity to make proper compliance has resulted in an order contrary to the fact and denial of justice.
3. The appellant prays that the matter be restored to the file of CIT Exemption, to be heard & decided in accordance with law.
4. The appellant pleads for directions allowing the appeal and craves leave to, add to, alter, amend, modify or withdraw any or all grounds of appeal.”
2. The solitary grievance of the assessee is that their application for registration u/sec.12AA of the Act had been rejected by the Department and it had also been contended by the assessee that without giving adequate opportunity, the case was dismissed by the ld.CIT(E).
3. That, on perusal of the order of the ld. CIT(E), it is observed that an application for registration u/sec. 12AA of the Act had been made by the assessee, and in order to verify the genuineness of the activities of the assessee and compliance to requirements of any other law for the time being in force by the applicant-trust, in pursuance to sec.12AA of the Act, various informations were asked from the assessee by the office of ld. CIT(E). These informations which were sought from the assessee have been enumerated in the said order of the ld. CIT(E) and are not repeated herein for the sake of brevity. The assessee had to submit all these details by 06/06/2023 and the said notice was duly served on the assessee through e-portal and e-mail. The assessee did submit the details as had been asked for, and after scrutinizing those details, various discrepancies were noticed. Another notice was issued on 14/07/2023 which communicated the said discrepancies and the assessee was asked to comply with this notice on 20/07/2023. This notice was also duly served through e-portal and e-mail. However, the assessee neither submitted explanation to the show-case notice nor availed the opportunity of being heard. Thereafter, the ld. CIT(E) held that since the assessee has not furnished any explanation or details regarding the discrepancies pointed out, therefore it was presumed that the assessee has nothing to say in the matter and resultantly, the application filed by the assessee for registration u/sec. 12AA of the Act was rejected by the Department.
4. At the time of hearing before us, ld.AR for the assessee submitted that on the second compliance date i.e. 20/07/2023 they had actually submitted an adjournment petition before the Department. Further, ld.AR submitted that only two opportunities have been given to the assessee, and they are willing to appear before the ld. CIT(E) with all details/documentary evidences and clarify the discrepancies pointed out and, therefore, prayed that the matter may be remanded to the file of ld. CIT(E). ld.DR did not raise any objection, if the matter would be remanded to the file of the ld.CIT(E).
5. We are of the considered view that it is a case where the application for registration of a trust was filed by the assessee, and for want of supporting evidences, the matter was rejected by the Department. It has to be appreciated that the purpose of the provisions for registration of trust u/sec. 12AA and granting of exemption u/sec. 80G, all these sections derives their spirit from the Directive Principles of State Policy enshrined in the Constitution of India. Since, the Govt. of India makes endeavor to provide welfare to one and all in the society at large and in view thereof the registration for public charitable trusts are given in order to ensure that through these charitable trusts benefits should flow to the entire society wherefrom various charitable activities, the entire society is benefited and the objectives of the Govt. of India in furtherance to the Directive Principles of State Policy are achieved. These provisions for the trust registration and granting of exemption u/sec. 80G enhance the socio economic welfare in the society. Furthermore, the Income Tax laws are welfare legislations and not penal in nature. Therefore, in the interest of justice and considering all the afore-stated observations, we are of the considered view that one final opportunity should be provided to the assessee to file the relevant details before the ld.CIT(E) and represent their case on merits. In view thereof, we set aside the order of the ld. CIT(E) and remit the matter back to his file with the aforesaid direction and the ld. CIT(E) shall re-adjudicate as per law complying with the principles of natural justice. Grounds of appeal of the assessee are allowed for statistical purposes.
6. In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in open Court on 11th October, 2023.
