Dawat-e-Islami Hind Vs CIT (ITAT Varansi)
Varanasi ITAT Restores 12AB Registration Matter; Holds CIT(E) Must Confront Alleged ‘Specified Violations’ Before Rejecting Registration
The Varanasi ITAT set aside the order of the CIT(Exemption) rejecting the assessee’s application for regular registration under section 12AB and remanded the matter for fresh adjudication, holding that the principles of natural justice were violated as the assessee was never confronted with the alleged “specified violations” under section 12AB(4) before rejection of its application.
The CIT(E) had rejected the registration on the ground that the assessee, a public religious trust, had made substantial donations to other trusts whose objects were allegedly not identical to its own, treating such donations as “specified violations” under section 12AB(4). The CIT(E) also held that the trust deed did not authorise the assessee to make donations to other trusts.
The Tribunal found that the CIT(E)’s approach was unduly pedantic, observing that complete identity of every clause in the objects of the donor and donee trusts is not required. It held that if the objects of the donee trust are broadly aligned with those of the donor trust, donation towards furtherance of such similar objects constitutes valid application of income. The Tribunal also held that the CIT(E) was factually incorrect in observing that the trust deed contained no enabling clause for donations, noting that several clauses expressly empowered the trust to render assistance to other institutions pursuing similar objectives.
Since the assessee had not been issued any notice specifically alleging “specified violations” or given an opportunity to explain the donations before its registration was rejected, the Tribunal held that the order suffered from a breach of natural justice. It accordingly restored the matter to the CIT(E) with directions to specifically confront the assessee with the alleged violations, consider its explanation, and pass a fresh order in accordance with law. The appeal was allowed for statistical purposes
FULL TEXT OF THE ORDER OF ITAT VARANSI
