GDW Karya Foundation Vs CIT (Exemptions) (ITAT Bangalore)
Registration Rejected for “Low Activity”? ITAT Sends It Back – Opportunity Must Precede Denial
In the case of GDW Karya Foundation, the Bangalore ITAT dealt with rejection of registration u/s 12AB and consequential denial of 80G approval.
The Tribunal first condoned a delay of 181 days, accepting that the delay was caused due to illness of the Chartered Accountant handling the matter, and the assessee acted promptly once the issue came to light.
On merits, the CIT(Exemptions) had rejected the registration on the ground that:
- The trust received donations but spent very little, and
- Therefore, activities were not genuinely commenced.
However, before the ITAT, the assessee explained that:
- It had commenced charitable activities, including medical relief.
- Funds were accumulated through Form 10 for future projects due to large-scale expenditure requirements.
- Donations were tied to specific grant agreements.
The ITAT found a critical flaw in the CIT(E)’s approach:
- Though reliance on AO’s report is permissible, CIT(E) must independently examine and confront the assessee with adverse findings.
- Opportunity of hearing and reasoned decision are mandatory, especially in registration matters.
Since this was not properly done, the Tribunal:
- Set aside the rejection,
- Restored the matter to CIT(E) for fresh consideration, and
- Directed the assessee to demonstrate genuineness of activities, expenditure, and accumulation purpose.
The 80G issue was also restored as consequential.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
