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2025 (5) TMI 272 - AT - Income TaxDenial of claim of exemption u/s 12AA as well as u/s 80G on account of non-compliance by the assessee - HELD THAT - The Bench was of the view that the Ld. CIT(A) had denied the claim of exemption u/s 12AA as well as u/s 80G of the Act on account of non-compliance by the assessee. Therefore in the interest of justice it was considered imperative that the assessee may be granted another opportunity to file its submission in response to the notice issued by the Ld. CIT (Exemption) for justifying the genuineness of the activities and claim of approval. Appeals filed by the assessee are allowed for statistical purposes.
The core legal questions considered by the Appellate Tribunal in this matter relate to the denial of registration under sections 12AA(1)(ac)(iii) and 80G(5) of the Income Tax Act, 1961, specifically:
1. Whether the assessee was provided adequate opportunity by the Commissioner of Income Tax (Exemption) to submit necessary documents and comply with procedural requirements for registration under sections 12AA and 80G. 2. Whether the assessee's inability to furnish documents within the stipulated timeframe, due to lack of legal assistance and procedural constraints, justifies reconsideration of the registration denial. 3. Whether the assessee has established compliance with the statutory and procedural criteria under sections 12AA(1)(ac)(iii) and 80G(5) by submitting requisite documentation demonstrating continuous engagement in social and charitable activities. 4. Whether cancellation of registration would adversely affect the assessee's ability to carry out its stated charitable objectives. 5. Whether the assessee is entitled to a personal hearing and an opportunity to submit supporting documents before final orders are passed under sections 12AA and 80G. Issue-Wise Detailed Analysis 1. Adequacy of Opportunity Provided by the CIT (Exemption) The relevant legal framework mandates that before denying registration under sections 12AA and 80G, the assessing authority must provide the applicant a reasonable opportunity of being heard and to submit all necessary documents. The principles of natural justice and procedural fairness require that the assessee be given a fair chance to establish eligibility. The Court noted that the CIT (Exemption) had passed orders denying registration due to non-compliance by the assessee, primarily on account of failure to submit requisite documents within a limited timeframe. The assessee contended that the timeframe was insufficient and procedural constraints prevented timely compliance. The Tribunal observed that the denial of registration without providing adequate opportunity to the assessee to submit documents and respond to queries would be contrary to principles of natural justice. The Tribunal emphasized that the assessee should be given a chance to justify the genuineness of its activities and compliance with statutory requirements. Accordingly, the Tribunal set aside the orders of the CIT (Exemption) and remanded the matter for fresh consideration after granting the assessee an opportunity of being heard and allowing submission of documents. 2. Impact of Lack of Legal Assistance and Procedural Constraints The assessee submitted that it faced difficulties in procuring suitable legal consultancy within the limited period provided by the CIT (Exemption), which hindered proper and timely submission of documents. The Tribunal recognized that legal and procedural complexities in securing registration under sections 12AA and 80G require adequate time and assistance. While the legal framework does not mandate provision of legal assistance by the department, the Tribunal acknowledged that procedural fairness entails reasonable accommodation of genuine difficulties faced by applicants. The Tribunal found merit in the assessee's submission that lack of legal guidance and the restricted timeframe impacted its ability to comply. This factor reinforced the Tribunal's decision to remand the matter for fresh consideration with an opportunity for the assessee to submit all relevant documents and explanations. 3. Compliance with Statutory Criteria under Sections 12AA(1)(ac)(iii) and 80G(5) Sections 12AA and 80G of the Income Tax Act provide for registration of entities engaged in charitable and social activities, subject to satisfaction of prescribed conditions including genuineness of activities and adherence to objectives. The assessee asserted that all necessary documents establishing eligibility under both sections were now available and ready for submission. It emphasized continuous engagement in social and charitable work aligned with its stated objectives since inception. The Tribunal noted that the CIT (Exemption) had denied registration on grounds of non-compliance without fully examining the merits of the assessee's activities due to procedural lapses. The Tribunal held that the genuineness of activities and compliance with statutory criteria must be examined on the basis of complete submissions and evidence. The remand directs the CIT (Exemption) to consider the assessee's submissions afresh, evaluate the documentation, and determine eligibility in accordance with law. 4. Effect of Cancellation of Registration on Charitable Activities The assessee contended that cancellation of registration would disrupt its efforts to serve the community and fulfill its charitable purposes. This argument underscores the practical implications of denial of registration, which affects the entity's ability to claim tax exemptions and receive donations eligible for tax benefits. While the Tribunal did not directly adjudicate on this point, it implicitly recognized the importance of ensuring that genuine charitable entities are not unduly deprived of registration due to procedural deficiencies. The remand for fresh consideration with opportunity to submit documents serves to protect the assessee's interests in continuing its charitable work. 5. Right to Personal Hearing and Submission of Supporting Documents The assessee requested a personal hearing and opportunity to submit all supporting documents before final orders under sections 12AA and 80G are passed. The Tribunal affirmed that the principles of natural justice require that the assessee be given a fair opportunity to present its case. The Tribunal observed that the CIT (Exemption) had not provided such an opportunity before denying registration. In the interest of justice, the Tribunal directed that the assessee be granted a personal hearing and allowed to file its submissions and documents in response to queries raised by the CIT (Exemption). Significant Holdings The Tribunal held: "In the interest of justice, it was considered imperative that the assessee may be granted another opportunity to file its submission in response to the notice issued by the Ld. CIT (Exemption) for justifying the genuineness of the activities and claim of approval." It further ruled that both orders of the CIT (Exemption) denying registration under sections 12AA and 80G are set aside and remanded for fresh consideration after granting the assessee an opportunity of being heard and seeking replies to queries in accordance with law. The core principles established include:
In conclusion, the Tribunal allowed both appeals for statistical purposes, remanding the matters to the CIT (Exemption) for fresh adjudication in line with the directions issued.
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