Madival Community Foundation Vs CIT (Exemptions) (ITAT Bangalore)
ITAT Bangalore: Rejection of Section 12AB Registration Set Aside for Breach of Natural Justice — Matter Remanded to CIT(E) (M/s. Madival Community Foundation)
The Bangalore Bench of the ITAT allowed the assessee’s appeal for statistical purposes and set aside the order of the Commissioner of Income Tax (Exemptions), Bangalore, which had rejected the application for final registration under Section 12AB.
The assessee-society had been granted provisional registration on 31.12.2021 and subsequently applied for final registration. The CIT(E) rejected the application on two grounds: (i) that a trustee had withdrawn substantial funds allegedly not utilised for the trust’s objects, and (ii) that the trust was formed for the benefit of a particular community (“Madiwal”).
The Tribunal noted that the assessee had furnished bylaws, audited financial statements, bank statements, lease and rental agreements, and explained that the withdrawals by the trustee were reimbursements for expenses incurred (including payments to BBMP for approvals) towards construction of a hostel in furtherance of the trust’s objects. It was also observed that the objects were charitable and for the benefit of the public at large, and mere reference to a community name did not make it a community-specific trust.
Crucially, the ITAT held that the CIT(E) passed the rejection order without issuing a proper show-cause notice or granting an effective opportunity of hearing, in violation of principles of natural justice and the mandatory requirement under Section 12AB(1)(b)(ii)(B).
Accordingly, the Tribunal set aside the impugned order and remanded the matter to the CIT(E) to decide the application afresh on merits after granting reasonable opportunity of being heard and considering the assessee’s explanations. The appeal was allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
