ARHAMGACHCHH STHANAKVASI JAIN SAMPRADAY TRUST,AHMEDABAD V. COMMISSIONER OF INCOME TAX (EXEMPTION), AHMEDABAD

ITA 409/AHD/2025

AI Insights

The case involves the Arham Gachchh Sthanakwasi Jain Sampraday Trust, which appealed against the decision of the CIT (Exemptions) denying its application for regular registration under section 12A(1)(ac)(iii) of the Income Tax Act, 1961. The CIT (Exemptions) had earlier granted provisional registration but later found that the trust's activities were primarily benefiting a specific community, which led to the rejection of the application for regular registration. The Tribunal found procedural irregularities in the handling of the trust's application, particularly the inadequate time given to respond to the show cause notice, and thus set aside the CIT's decision, remanding the matter for a fresh examination.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 783541 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 21-02-2025
• Other Referred Cases: Rahim Saib Hiriyur Hyder Ali v. NFAC [2022] 145 taxmann.com 116 (Karnataka), Uday Desai HUF v. NFAC [2021] 132 taxmann.com 117 (Bombay), CIT (Exemption) v. Vimalnath Jain Swetamber Mandir Trust [2025] 174 taxmann.com 63 (Chhattisgarh), Shree Mahavideh Charitable Trust v. CIT (Exemption) [2025] 174 taxmann.com 540 (Surat-Trib.), Gohilwad Vankar Samaj Seva Trust v. CIT (Exemption) [2025] 173 taxmann.com 263 (Ahmedabad-Trib.)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R. P. RASTOGI
• Assessee Lawyers: KAMAL BHAMBHANI
• Keywords: Set aside; Opportunity of being heard; Principle of natural justice; Charitable institution; Procedural lapse

Judgement Text

" आयकर अपीलीय अिधकरण, अहमदाबाद \u0011ायपीठ “B“,अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD ] ] BEFORE DR. BRR KUMAR, VICE PRESIDENT AND SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER आयकर अपील सं /ITA No.409/Ahd/2025 िनधा \u000fरण वष\u000f /Assessment Year : NA Arhamgachchh Sthanakvasi Jain Sampraday Trust 1, Paras Chambers, Opp. Sagar Hotel Nr. Ujala Circle, Sarkhej Ahmedabad – 382 210 बनाम/ v/s. The CIT (Exemption) Vejalpur 380 015 \u0013थायी लेखा सं./PAN: AAETA 9012 C (अपीलाथ\u0017/ Appellant) (\u0018\u0019 यथ\u0017/ Respondent) Assessee by : Shri Kamal Bhambhani, AR Revenue by : Shri R.P. Rastogi, CIT-DR सुनवाई की तारीख/Date of Hearing : 12/08/2025 घोषणा की तारीख /Date of Pronouncement: 04/11/2025 आदेश/O R D E R PER SIDDHARTHA NAUTIYAL, JM: The present appeal has been preferred by the Assessee against the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘CIT(A)’] dated 24/12/2024 passed u/s.250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). 2. The assessee has raised the following grounds of appeal: 1. The grounds of appeal mentioned hereunder are without prejudice to one another 2. The Commissioner of Income Tax (Exemption) (hereinafter referred to as the “Ld.CIT(E”) erred on facts as also in law by not granting registration under section Printed from counselvise.com ITA No.409/Ahd/2025 Arhamgachchh Sthanakvasi vs. CIT (E) AY : NA 2 12A(1)(ac)(iii) of the Income-tax Act, 1961 by not providing proper opportunity of being heard to the appellant trust. 3. Ld. CIT(E) on facts as also in law in by not granting registration under section 12A(1)(ac)(iii) of the Income-tax Act, 1961 by stating that the appellant trust is working for the benefit of particular caste or community without considering the audit report and trust deed on record. The order of Ld.CIT(E) is baseless and totally unwarranted under the circumstances and facts of the appellant’s case and deserves to be quashed and therefore may kindly be quashed.” 3. The brief facts of the case are that Arham Gachchh Sthanakwasi Jain Sampraday Trust (the assessee “trust”) filed an application in Form No. 10AB on 27.06.2024 under section 12A(1)(ac)(iii) of the Act, seeking regular registration, pursuant to the earlier provisional registration granted on 28.05.2021 in Form No. 10AC under sub-clause (vi) of clause (ac) of sub- section (1) of section 12A, which was valid from A.Y. 2022-23 to A.Y. 2024- 25. On receipt of the said application, the CIT (Exemptions) issued a notice dated 28.08.2024 asking the assessee / trust to furnish requisite documents and details. Upon examination of the documents submitted by the assessee / trust, the CIT (Exemptions) noted that the objects of the trust, as stated in its trust deed and memorandum, were confined to the benefit of the Sthanakwasi Jain Community and not for the general public at large. In light of the above observation, a show cause notice dated 14.12.2024 was issued, pointing out that several objects—such as promoting the Sthanakwasi Jain religion, arranging for medicines and care of Jain monks, and publishing literature related to Jainism—were for the benefit of a particular religious community. The trust was, therefore, called upon to furnish evidence to demonstrate that it had not incurred expenditure for the benefit of any particular caste or community, failing which its application for registration would be rejected and its provisional registration cancelled in terms of clause Printed from counselvise.com ITA No.409/Ahd/2025 Arhamgachchh Sthanakvasi vs. CIT (E) AY : NA 3 (d) of the Explanation to section 12AB(4). In response, the applicant filed a reply on 17.12.2024, contending that it was a charitable-cum-religious trust. It was submitted that the charitable activities, such as educational assistance, medical relief, and aid to the poor, were undertaken for the general public without discrimination of caste or religion, whereas the religious activities were confined to the Jain community. The trust also furnished details of its expenditure for Financial Years 2020-21 to 2023-24 to demonstrate that it was engaged in charitable activities such as education, medical relief, and relief of poverty for the public at large. The CIT (Exemptions), however, did not find the explanation satisfactory. The CIT (Exemptions) noted that although the assessee / trust had shown expenses under the heads of education, medical relief, and poverty relief, no corroborative documentary evidence such as bills or vouchers was produced to establish that these expenses were not incurred for the benefit of the Sthanakwasi Jain Community. Moreover, the breakup of such expenditure was not provided, and the audited accounts did not clarify the beneficiaries of these charitable activities. The CIT (E) held that the applicant had failed to discharge the onus of proving that its activities were directed towards the general public and not confined to a particular community. On a detailed examination of the trust deed, the CIT (E) observed that many of the trust’s objectives—such as propagation of the Jain faith, care of Jain monks, and promotion of the study of Jainism—were inherently restricted to the benefit of the Sthanakwasi Jain Community, even though certain other activities were charitable in nature. Therefore, the CIT (Exemptions) held that the trust’s charitable activities were not for the benefit of the public at large, but primarily confined to a specific religious community. In light of these findings, the CIT (Exemptions) held that the assessee / trust had failed to prove that it was carrying out activities for the Printed from counselvise.com ITA No.409/Ahd/2025 Arhamgachchh Sthanakvasi vs. CIT (E) AY : NA 4 benefit of the general public and that its charitable objects were not confined to a specific religious community. The Commissioner held that granting registration in such circumstances would amount to a violation under section 12AB(4)(d) of the Act. Accordingly, the application filed in Form No. 10AB under section 12A(1)(ac)(iii) of the Act was rejected, and the provisional registration earlier granted under Form No. 10AC was cancelled. 4. The assessee/trust is in appeal before us against the order passed by CIT(Exemptions) dismissing the appeal of the assessee. 5. The Ld. Counsel for the assessee submitted that that the order of the CIT(E) suffered from gross procedural irregularity and violation of principles of natural justice, as the show cause notice was issued on 14.12.2024 at 6:10 PM, allowing the trust barely three days—until 17.12.2024—to respond. It was submitted that the trust could not reasonably be expected to produce voluminous evidentiary documents within such a short time frame. In support, the ld. counsel for the assessee reliance placed reliance on the decisions in Rahim Saib Hiriyur Hyder Ali v. NFAC [2022] 145 taxmann.com 116 (Karnataka), where a two-day response period was held to be violative of natural justice, and Uday Desai HUF v. NFAC [2021] 132 taxmann.com 117 (Bombay), where a one-day response period was similarly held to be inadequate and the order was quashed on that ground. The counsel further submitted that the CIT(E) erred both on facts and in law in concluding that the trust was working for a particular caste or community. It was submitted that the appellant is a charitable-cum- religious trust, wherein the charitable activities—such as providing education, medical relief, and aid to the poor—are open to the general public Printed from counselvise.com ITA No.409/Ahd/2025 Arhamgachchh Sthanakvasi vs. CIT (E) AY : NA 5 irrespective of caste, creed, or religion, whereas the religious activities are incidental and confined to the Jain community. The trust deed clearly sets out 25 objects, of which objects nos. 1 to 7 and 19 to 21 relate to the Jain community, while objects nos. 8 to 18 and 22 to 25 pertain to general charitable purposes such as establishing libraries, granting scholarships, organizing medical camps, providing tiffin services for poor patients, promoting non-violence, and protecting animals. It was submitted that the majority of the objects (15 out of 25) are purely charitable in nature and directed towards public welfare. It was further contended that the Ld. CIT(E) failed to appreciate that the trust had not incurred any expenditure of religious nature in any of the financial years under consideration, as clearly evidenced from the audited accounts for F.Ys. 2020-21 to 2023-24. The mere use of the words “Sthanakwasi Jain Community” or references to religious objects in some clauses of the trust deed cannot by itself justify denial of registration. The Ld. Counsel relied on several judicial precedents supporting this position, including CIT (Exemption) v. Vimalnath Jain Swetamber Mandir Trust [2025] 174 taxmann.com 63 (Chhattisgarh), where the High Court held that a trust having both charitable and religious purposes is entitled to registration under section 12AA; Shree Mahavideh Charitable Trust v. CIT (Exemption) [2025] 174 taxmann.com 540 (Surat- Trib.), where the Tribunal held that mere reference to religion in a few objects does not render a trust non-charitable when no religious expenditure is incurred; and Gohilwad Vankar Samaj Seva Trust v. CIT (Exemption) [2025] 173 taxmann.com 263 (Ahmedabad-Trib.), which held that for trusts created prior to 01.04.2021, the applicability of section 13(1)(b) is a matter for assessment and not for denying registration under section 12AB of the Act. 5.1. Accordingly, the counsel submitted that the order of the CIT Printed from counselvise.com ITA No.409/Ahd/2025 Arhamgachchh Sthanakvasi vs. CIT (E) AY : NA 6 (Exemptions) was erroneous, arbitrary, and contrary to law, as it was passed without granting reasonable opportunity of hearing and without proper appreciation of the trust’s charitable activities. It was argued that the CIT(E) had failed to distinguish between mixed charitable and religious objects and had mechanically concluded that the trust worked for a particular community. The appellant, therefore, prayed that the impugned order rejecting registration under section 12A(1)(ac)(iii) be quashed, and that the matter be remanded back to the CIT(E) for fresh adjudication after providing a proper and reasonable opportunity of being heard. 6. In response, Ld. DR placed reliance on the observations made by CIT(Appeals) in the appellate order. 7. We have heard the rival contentions and perused the material on record. The brief facts, as emanate from the record, are that the assessee trust, Arham Gachchh Sthanakwasi Jain Sampraday Trust, filed an application in Form No. 10AB on 27.06.2024 under section 12A(1)(ac)(iii) of the Act seeking regular registration, following the earlier provisional registration granted on 28.05.2021 in Form No. 10AC under section 12A(1)(ac)(vi). The said application was rejected by the Ld. CIT (Exemptions) on the ground that the trust’s activities and objects were allegedly confined to the benefit of the Sthanakwasi Jain Community and not for the benefit of the general public. Consequently, the CIT (Exemptions) cancelled the provisional registration and declined to grant regular registration under section 12A(1)(ac)(iii). We find from the records that the show cause notice dated 14.12.2024 was issued by the Ld. CIT (Exemptions) at 6:10 PM, calling upon the assessee to furnish its reply by 17.12.2024 at 5:16 PM, thereby granting only a period of three days to respond to the notice. The assessee submitted that it was not Printed from counselvise.com ITA No.409/Ahd/2025 Arhamgachchh Sthanakvasi vs. CIT (E) AY : NA 7 practically possible to furnish detailed evidence, including documentary corroboration and activity reports, within such a short period. The limited time granted to the assessee, in our considered view, did not constitute a reasonable opportunity of being heard as envisaged under law. It is a settled principle that any order passed without providing adequate opportunity to the assessee suffers from violation of the principles of natural justice. In this regard, we derive support from the judgment of the Hon’ble Karnataka High Court in Rahim Saib Hiriyur Hyder Ali v. National Faceless Assessment Centre [2022] 145 taxmann.com 116 (Karnataka), wherein it was held that granting only two days’ time to the assessee to furnish a reply to a show cause notice amounts to denial of reasonable opportunity and violates the principles of natural justice, thereby rendering the order unsustainable in law. Similarly, the Hon’ble Bombay High Court in Uday Desai HUF v. National Faceless Assessment Centre [2021] 132 taxmann.com 117 (Bombay) held that a notice allowing merely one day to respond could not be considered reasonable opportunity, and consequently, the order passed without such opportunity was liable to be quashed. The ratio of these judgments squarely applies to the facts of the present case, where the assessee was allowed only three days to furnish an elaborate explanation and evidentiary material in response to the show cause notice involving issues of factual complexity. Further, the Ld. CIT (Exemptions) appears to have rejected the assessee’s claim primarily on the basis of the language used in certain objects of the trust deed, without proper examination of the nature of actual activities undertaken by the trust or the evidence furnished along with the application. The contention of the assessee that it is a charitable-cum- religious trust and that a majority of its activities are charitable in nature, benefitting the public at large, requires detailed verification of records, Printed from counselvise.com ITA No.409/Ahd/2025 Arhamgachchh Sthanakvasi vs. CIT (E) AY : NA 8 financial statements, and activity reports. The CIT (Exemptions) ought to have afforded the assessee a reasonable and meaningful opportunity to substantiate its claim with appropriate documentary evidence before arriving at such adverse conclusions. In the light of the above judicial position and factual matrix, we are of the considered view that the order passed by the Ld. CIT (Exemptions) suffers from violation of the principles of natural justice, as the assessee was not granted sufficient opportunity to present its case on merits. The impugned order, therefore, cannot be sustained in its present form. Accordingly, we set aside the order of the Ld. CIT (Exemptions) dated 27.12.2024 and restore the matter to his file with a direction to re-examine the application of the assessee for registration under section 12A(1)(ac)(iii) of the Act afresh, after providing a proper and adequate opportunity of being heard and considering the evidences and submissions that the assessee may file in support of its claim. The CIT (Exemptions) shall pass a speaking order in accordance with law and after affording due opportunity to the assessee. 8. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the Open Court on 04/11/2025 at Ahmedabad. Sd/- Sd/- (DR. BRR KUMAR) VICE PRESIDENT (SIDDHARTHA NAUTIYAL) JUDICIAL MEMBER अहमदाबाद/Ahmedabad, िदनांक/Dated 04/11/2025 टी.सी.नायर, व.िन.स./T.C. NAIR, Sr. PS Printed from counselvise.com ITA No.409/Ahd/2025 Arhamgachchh Sthanakvasi vs. CIT (E) AY : NA 9 आदेश की #ितिलिप अ$ेिषत/Copy of the Order forwarded to : 1. अपीलाथ% / The Appellant 2. #&थ% / The Respondent. 3. संबंिधत आयकर आयु' / Concerned CIT 4. आयकर आयु' ) अपील ( / The CIT(Exemption), Ahmedabad 5. िवभागीय #ितिनिध , अिधकरण अपीलीय आयकर , राजोकट/DR,ITAT, Ahmedabad, 6. गाड\u000f फाईल / Guard file. आदेशानुसार/ BY ORDER, स&ािपत #ित //True Copy// सहायक पंजीकार (Asstt. Registrar) आयकर अपीलीय अिधकरण, ITAT, Ahmedabad 1. Date of dictation (word processed by H-JM on his computer) : 31.10.2025 2. Date on which the typed draft is placed before the Dictating Member. : 31.10.2025 3. Date on which the approved draft comes to the Sr.P.S./P.S : 4. Date on which the fair order is placed before the Dictating Member for pronouncement. : 5. Date on which fair order placed before Other Member : 6. Date on which the fair order comes back to the Sr.P.S./P.S. : 6/11/25 7. Date on which the file goes to the Bench Clerk. : 6/11/25 8. Date on which the file goes to the Head Clerk. : 9. The date on which the file goes to the Assistant Registrar for signature on the order. : 10. Date of Despatch of the Order : Printed from counselvise.com "