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2025 (4) TMI 981 - AT - Income TaxRejection of registration u/s 12A(1)(ac)(iii) and approval u/s 80G(5) - non-submission of audited financial statements and due to certain religious objects in the original trust deed respectively - HELD THAT - Assessee has now placed on record the audited financial statements for FYs 2021-22 2022- 23 and 2023-24 and a revised trust deed where the religious objects have been amended. The delay in filing the appeal is only 8 days and considering the bona fide reasons stated in the affidavit we condone the delay in the interest of justice. Since the additional documents (financial statements and modified trust deed) were not before the CIT(E) at the time of passing the orders and the CIT(E) has not examined these crucial documents we deem it appropriate to set aside the orders of the CIT(E) and restore the matter back to his file for fresh adjudication after considering the additional documents. Departmental Representative has not raised any objection in restoring both the matters back to the file of CIT(E) for want of verification of additional documents placed before us. Appeals of the assessee are allowed for statistical purposes.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal were: (a) Whether the Commissioner of Income Tax (Exemption) was justified in rejecting the application for registration under Section 12A(1)(ac)(iii) of the Income Tax Act, 1961, on the ground of non-submission of audited annual accounts for the relevant financial years. (b) Whether the rejection of the application for approval under Section 80G(5) of the Act was valid on the basis that the trust deed contained religious objects, thereby contravening Explanation 3 to Section 80G(5), which excludes entities with religious objectives from eligibility. (c) Whether the delay of 8 days in filing the appeals against these rejections should be condoned in light of the circumstances and explanations provided. (d) Whether the additional documents submitted post-rejection, including audited financial statements and a revised trust deed removing religious objects, should be considered, and the matter remanded for fresh adjudication. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of rejection under Section 12A(1)(ac)(iii) due to non-submission of audited accounts The relevant legal framework mandates that for registration under Section 12A, the applicant trust must furnish requisite documents, including audited financial statements, to establish the genuineness of its activities and compliance with statutory requirements. The CIT(E) issued multiple notices directing the assessee to submit audited accounts for FYs 2021-22, 2022-23, and 2023-24, which were not furnished, leading to rejection. The Tribunal noted the CIT(E)'s reliance on the absence of these crucial documents to verify the authenticity of the trust's activities. The non-submission constituted non-compliance with procedural requirements, justifying the initial rejection. However, the assessee subsequently placed the audited financial statements on record before the Tribunal and explained the failure to submit them earlier was due to administrative oversight and lack of technical expertise, relying on a part-time accountant who failed to respond to notices. The affidavits clarified that the delay was inadvertent and not deliberate, and that professional assistance had since been engaged. The Tribunal applied principles of natural justice and procedural fairness, recognizing that the documents now placed on record were material and essential for proper adjudication. Given that these documents were not before the CIT(E) at the time of rejection, the Tribunal found it appropriate to set aside the order and remit the matter for fresh consideration after examining the audited accounts. Competing arguments regarding procedural non-compliance were balanced against the assessee's bona fide explanation and the interests of justice, leading to condonation of delay and restoration of the matter. Issue 2: Validity of rejection under Section 80G(5) on account of religious objects in the trust deed Section 80G(5) permits approval for donations to charitable institutions, but Explanation 3 excludes trusts with religious objectives from eligibility. The CIT(E) rejected the application on the ground that the trust deed contained religious objects, relying on judicial precedents holding that even a single religious object disqualifies an entity. The assessee submitted a revised trust deed removing the religious objects and placed it on record before the Tribunal. The Tribunal noted that the CIT(E) had not examined this modified deed, and therefore the rejection was based on outdated material. The Tribunal emphasized that approval under Section 80G(5) must be considered on the basis of the current trust deed and relevant documents. The presence of religious objects in the original deed justified rejection, but the amended deed necessitated fresh examination. The Tribunal directed the CIT(E) to re-examine the application in light of the revised trust deed, providing the assessee an opportunity to be heard and to furnish all necessary documents. This approach balanced the statutory mandate excluding religious trusts with the principle that entities may amend their deeds to comply with legal requirements and seek approval accordingly. Issue 3: Condonation of delay in filing appeals The appeals were filed with an 8-day delay. The assessee's affidavits explained that the delay arose from lack of expertise and administrative mismanagement, not intentional neglect. The Tribunal considered the explanation reasonable and bona fide. Applying principles of equity and justice, the Tribunal condoned the delay, noting that the delay was minimal and the assessee had acted promptly upon realizing the error by engaging professional assistance. Issue 4: Consideration of additional documents and remand for fresh adjudication The Tribunal highlighted that the audited financial statements and revised trust deed were not before the CIT(E) at the time of the original orders. Since these documents were material to the determination of eligibility under Sections 12A and 80G(5), the Tribunal found it necessary to set aside the orders and remit the matters for fresh consideration. The Tribunal directed the CIT(E) to grant the assessee a reasonable opportunity of hearing and to consider the additional documents carefully before passing fresh orders. The assessee was also directed to cooperate fully in the remand proceedings. 3. SIGNIFICANT HOLDINGS The Tribunal held: "Since the additional documents (financial statements and modified trust deed) were not before the CIT(E) at the time of passing the orders, and the CIT(E) has not examined these crucial documents, we deem it appropriate to set aside the orders of the CIT(E) and restore the matter back to his file for fresh adjudication after considering the additional documents." It established the core principle that procedural non-compliance leading to rejection can be reconsidered if the applicant subsequently furnishes the required documents with a bona fide explanation, and that rejection based on outdated or unamended trust deeds must give way to fresh examination when amended deeds are produced. The Tribunal's final determinations were:
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