Section 12AA Registration, Discrepancies in Trust Documents: ITAT Directs Re-adjudication

Sangli Kutch Jain Seva Samaj Vs CIT (ITAT Pune)

Introduction: The Income Tax Appellate Tribunal (ITAT) Pune recently addressed an appeal filed by Sangli Kutch Jain Seva Samaj against the rejection of its application for registration under Section 12AA of the Income Tax Act. The crux of the matter revolves around discrepancies found in the documents submitted for trust registration.

Detailed Analysis:

1. Background of the Appeal:

• Sangli Kutch Jain Seva Samaj filed an appeal challenging the rejection of its application for registration under Section 12AA by the Commissioner of Income Tax (Exemption), Pune (CIT(E)).
• The rejection was based on discrepancies found in the documents submitted for trust registration.

2. Condonation of Delay:

• The appeal was initially time-barred by 19 days.
• The assessee filed a condonation petition along with an affidavit explaining the delay.
• The ITAT, considering the reasons provided, condoned the delay, allowing the appeal to be heard on merits.

3. Reasons for Rejection by CIT(E):

• The CIT(E) scrutinized the trust’s application and called for details to verify the genuineness of activities and compliance with relevant laws.
• Discrepancies were noticed, prompting the issuance of a notice to the assessee for clarification.
• The assessee failed to respond to the notice, leading the CIT(E) to presume the lack of explanation for the discrepancies and subsequently reject the application.

4. ITAT’s Observations:

• The ITAT acknowledged the rejection as a result of discrepancies in the documents submitted for trust registration.
• Emphasized the societal welfare aspect underlying trust registration provisions, aligning with the Directive Principles of State Policy.
• Highlighted the non-penal nature of Income Tax laws, emphasizing their welfare-oriented nature.

5. ITAT’s Decision:

• The ITAT deemed it a case where the rejection resulted from a lack of supporting evidence.
• Considering the welfare orientation of tax laws and in the interest of justice, the ITAT provided the assessee with a final opportunity to submit relevant details before the CIT(E).
• The order of the CIT(E) was set aside, and the matter was remitted back for re-adjudication, ensuring compliance with the principles of natural justice.

Conclusion: In a significant decision, ITAT Pune allowed the appeal of Sangli Kutch Jain Seva Samaj for statistical purposes, directing re-adjudication by the CIT(E) on trust registration discrepancies. The decision underscores the welfare nature of tax laws and emphasizes providing opportunities for genuine cases to rectify deficiencies and avail benefits. The re-adjudication process aims to ensure a fair and just outcome in accordance with the principles of natural justice. Parties involved are advised to act based on this order pronounced on October 17, 2023.

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 29.06.2023 as per the grounds of appeal on record.

2. The only grievance of the assessee in this appeal is the rejection of application for registration u/sec. 12AA of the Act by the Department.

3. At the outset, we observe that this appeal is time barred by 19 days and the assessee has filed an affidavit along with condonation petition for the said delay. We have gone through the contents of such affidavit and condonation petition, and find that, the reasons for delay of 19 days in filing the present appeal cannot be attributed to any deliberate or intentional conduct of the assessee, if any, and/or completely driven by circumstances only. Ld.DR did not have any objection for condoning this delay. Considering these facts on record, we condone the delay of 19 days and accordingly, the present appeal is heard on merits.

4. At the time of hearing, none appeared for the assessee. The submissions of the ld. DR and the materials/documents on record are

5. We observe from the order of the ld. CIT(E) that the assessee had filed application for grant of registration u/sec. 12AA of the Act before the Department as per the requisite form and as per the various prescribed procedures for such application. The said application was perused by the ld. CIT(E), and in order to verify the genuineness of the activities and whether the assessee is complying with the relevant laws for the time being in force while doing activities as per its objects, certain details were called for from the assessee. The assessee was to submit compliance by 30/03/2023. Thereafter, the assessee submitted the details in response to the said notice, and on perusal of those details/documents various discrepancies were noticed by the Department. That, another notice was issued to the assessee asking for clarification regarding these discrepancies and to submit compliance by 27/06/2023, however, to this notice, the assessee neither submitted any explanation nor availed the opportunity of being heard, and it was presumed, accordingly, by the ld. CIT(E) that the assessee has nothing to say regarding the discrepancies pointed out and resultantly, the application for grant of registration under 12AA filed by the assessee was rejected.

6. 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 present 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 adjudicate denovo as per law complying with the principles of natural justice. Grounds of appeal of the assessee stands allowed for statistical purpose.

7. In the result, appeal of the assessee is allowed for statistical purposes.

Order pronounced in open Court on 17^th October, 2023.