Kapadwanj Kelavani Mandal, Kapadwanj V. The Commissioner Of Income Tax (Exemption), Ahmedabad

ITA 84/AHD/2023

AI Insights

The case involves M/s. Kapadwanj Kelavani Mandal, an educational trust, appealing against the decision of the CIT (Exemption), Ahmedabad, which rejected their application for registration under section 12AB of the Income-tax Act, 1961. The rejection was primarily based on adverse observations made by the statutory auditors regarding the maintenance of accounts. The tribunal found that the principles of natural justice were not adhered to, as the assessee was not given an opportunity to respond to the specific concerns raised by the auditors before the rejection of their application. Consequently, the matter was remanded back to the CIT(Exemption) for a fresh evaluation.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 131392 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 07-08-2023
• Assessment Year: misc
• Appeal Filed On: 07-02-2023
• Other Referred Cases: CIT, Ujjain v. Dawoodi Bohra Jamat, New Noble Education Society
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: REJECTING ITS
• Keywords: Principle of natural justice; Capital receipt
• Section: 12A

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH ,AHMEDABAD Before: Shri Ramit Kochar, Accountant Member And Ms. Madhumita Roy, Judicial Member M/s. Kapadwanj Kelavani Mandal, Dakor Road Kapadwan j-38 7620, Gujarat PAN: AAAT K3348M (Appellant) Vs The CIT (Exemption), Ro om No . 609, Floo r-6, Aayak ar Bhawan (Vejalpur), Nr Sachin Tower, 100 Ft Road, An andn agar- Prahaladnagar Road, Ah med abad-3800 15, Gu jarat (Resp ondent) Asses see b y : CA M s. Arti Shah, A. R. Revenue by : Shri Kamlesh Makw ana, CIT-D. R . Date of hearing : 08-08 -2 023 Date of pronouncement : 08-08 -2 023 आदेश /ORDER PER : RAMIT KOCHAR, ACCOUNTANT MEMBER:- This appeal in ITA No. 84/Ahd/2023 for Assessment Year : N.A. arises from the order dated 31 st December, 2022 passed by ld. CIT ITA No. 84/Ahd/2023 Assessment Year : N.A. I.T.A No. 84/Ahd/2023 A.Y. N.A. Page No. Kapadwanj Kelavani Mandal v. CIT (Exemption) 2 (Exemption) in DIN and Notice No. ITBA/EXM/F/EXM45/2022-23/ 1048382440(1) , rejecting application filed by the assessee in Form No. 10AB seeking registration u/s. 12AB of the Income-tax Act,1961. 2. The Grounds of appeal raised by assesse in memo of appeal filed with Income Tax Appellate Tribunal, Ahmedabad in ITA No. 84/Ahd/2023 (Assessment Year: N.A.) ,reads as under:- “1. The Ld Commissioner of Income Tax (Exemptions), Ahmedabad has gravely erred in law and on facts and circumstances by passing order for rejection of application in Form No. 10AB, as required u/s. 12A(1)(ac)(v), for registration u/s. 12AB, holding that the Appellant has failed to submit requisite details to enable the Commissioner of Income Tax (Exemption) to arrive at the satisfaction of genuineness of the activities of the Appellant 2. The Ld. Commissioner of Income Tax (Exemption), Ahmedabad has erred in law as well as on facts by not properly appreciating and considering, that the Appellant is existing as society registered and carrying on educational activities since 1940 and is registered u/s 12A in 1974 and has also been granted registration by order in Form No. 10AC dated 28.05.2021 from AY 2022-23 to 226-27, however, fresh application in Form No 10AB as per Section 12A(1)(ac)(v), for registration has been made due to reason that the Appellant has adopted certain modifications in the objects which have been approved by the Hon’ble Charity Commissioner, Gujarat State, Ahmedabad 3. The Ld. Commissioner of Income Tax (Exemption), Ahmedabad has erred in law and on facts, in as much as , before holding that he is unable to arrive at the satisfaction of genuineness of the activities of the Appellant, he has not properly appreciated and considered, all the detailed information and explanations and documentary evidences, including audited financial statements, submitted as required from the Appellant as well elaborate written I.T.A No. 84/Ahd/2023 A.Y. N.A. Page No. Kapadwanj Kelavani Mandal v. CIT (Exemption) 3 submissions made by the Appellant, explicitly showing that at present the Appellant is running various institutions imparting education from pre-primary, primary, secondary and up to higher secondary levels as well as in college levels for arts, commerce and science faculties and audited financial statements also clearly showing pattern of income and expenditure directly related to educational activities of the Appellant. 4. The Ld. Commissioner of Income Tax( Exemption), Ahmedabad has erred in law and on facts as well as in not properly appreciating and considering the circumstances of the case of the Appellant by very heavily, rather solely, relying on letter died 13.09.2021 by statutory auditor, addressed to Management of the Appellant and submitted after completion of audit and after handing over the audited financial statements to Management of the Appellant and which letter is normal communication of general experience and observations during conducting audit procedure, even though the statutory auditor has in that letter, clearly stated that general experience and observations have been reasonably satisfactory and further clarified that there are not any adverse observations that would require modification of audited statements and Auditor's opinion thereon. 5. The Ld Commissioner of Income Tax (Exemption), Ahmedabad has erred in law and on facts, by not only on very heavily, rather solely, relying on letter dated 13.09.2021 by statutory auditor, addressed to Management of the Appellant, but has also erred in assuming, only on basis of that letter, that accounts of the Appellant is not giving true and fair picture of its income, corpus donation, general donation, gross amount of donation/income, revenue vs. capital receipts and capitalization of expenses, and therefore, the genuineness of the activities of the Appellant, with reference to objects of the Appellant, could not be ascertained/verified and moreover such assumption has been made without calling for any information or explanations from the Appellant and also without making any inquiry or investigation in that regard. 6. The Appellant prays that the Ld. Commissioner of Income Tax (Exemption), Ahmedabad may kindly be directed to grant registration to the Appellant. I.T.A No. 84/Ahd/2023 A.Y. N.A. Page No. Kapadwanj Kelavani Mandal v. CIT (Exemption) 4 7. The appellant reserves the right to add, alter, amend and/or withdraw any of the above Grounds of Appeal.” 3. The brief facts of the case are that the assessee filed an application for registration of the trust u/s. 12AB of the Income-tax Act,1961(hereinafter called “the Act”) electronically, on 30 th June, 2022 in Form No. 10AB under Rule 17A of Income Tax Rules, 1962(hereinafter called “the Rules”). The ld. CIT(E) issued notice to the assessee on 7 th November, 2022, sent through ITBA on email to the assessee trust , with a request to furnish detailed note on the activities actually carried out by the trust as well as certain details/documents, in order to carry out inquiry as is required under the provisions of section 12AB of the Act. The assesse did not furnish any details in compliance to notice dated 07.11.2022 issued by ld. CIT(E). The ld. CIT(E) , keeping in view principles of natural justice, issued further notices dated 30 th November, 2022 and 12 th December 2022, to the assesse trust. The assessee filed reply on 19 th December, 2022 in response to the notices issued by ld. CIT(Exemption). The ld. CIT(Exemption) observed that the assesse has submitted audited accounts for financial years 2019- 2020, 2020-2021 and 2021-22 along with the report / comments of the statutory auditor. The ld. CIT(E) observed that the statutory auditor is consistently advising the assesse for proper maintenance of its accounts and has made certain significant/exhaustive observations regarding various shortcoming / discrepancies/anomalies in relation to the maintenance of the accounts by the assessee. The ld. CIT(E) observed that these observations are serious in nature and suggests that even statutory auditor is not able to I.T.A No. 84/Ahd/2023 A.Y. N.A. Page No. Kapadwanj Kelavani Mandal v. CIT (Exemption) 5 ascertain the correct income and other financial’s of the assessee. The ld. CIT (Exemption) observed that the statutory auditors have given adverse observations which are serious in nature, some of the statutory auditor’s observations/comments were reproduced by ld. CIT(E) in its order as detailed hereunder:- "v. It has been observed that in some of the institutions, several grants and corresponding expenses have been capitalized. We advise that the actual nature of such accounts be reviewed, and such grants and expenses be written off to revenue items, where the application of the grants has not resulted in the creation of the capital asset. Where capital assets have been created, the nature of the grant should still be reviewed to ensure that the no revenue grants have been capitalized. vi It has been noticed that the grouping of the ledger heads is not consistent. Some institutions have accounts of statutory liabilities, eg. EPF contribution, professional tax, etc. grouped under Current Assets or separate ledgers have been created under Incomes and Expenses Hence, the classification of accounting ledger needs to be reviewed thoroughly to ensure that they are appropriately segregated into revenue and capital nature as well as a proper classification of assets and liabilities. viii. It has also come to our notice that there is no clear distinction in the accounts among Corpus Funds and General Funds. We wish to reiterate that the Corpus Funds are capital receipts and there should be no credits to those funds other than designated corpus donation. In respect of any donations not specifically designated as corpus donation by the donor, all such donations should be taken to income of the current year. The management may prepare a memorandum register of donors and the purpose for which such donations have been received. ix. We have observed that the management has a practice of accruing interest to certain earmarked funds. Such accrued interest had been I.T.A No. 84/Ahd/2023 A.Y. N.A. Page No. Kapadwanj Kelavani Mandal v. CIT (Exemption) 6 added to the interest income of the trust, when, in essence, it is merely an accrual entry without any actual income to the trust. It is advised that if the management intends to continue this practice, such notional entries should be maintained separately from the actual incomes and expenses, since such entries unduly inflate the incomes appearing in the financial statements. For the presentation of audited financial statements for F.Y. 2020-21, such entries have been ignored, to the extent identifiable, to show the actual interest income of the trust. x. We have also observed that there were certain expenses and/or other debits which had been recorded in income accounts, including donation accounts. Such practice should be discontinued as it may convey an attempt to reduce the reported gross income. No expenses should be debited in income accounts. Further, there should strictly not be any debits to donation accounts, except dishonored instruments. xi. In respect of intra-group balances, it is strongly recommended that the position of intra-group balances should be reconciled at the end of every year. Where differences, other than bank reconciliation differences, are observed, it indicates an accounting anomaly. Further, it has also been noticed that some intra-group transfers have been credited directly into fund accounts. Intra-group transactions should be treated separately and not included into income, expense or fund accounts.” Thus, from the above observations of the statutory auditors, the ld. CIT(E) observed that even the statutory auditors were of the opinion that the accounts of the assessee are not giving true and fair picture of its income, corpus donation, gross amount of donation/income , revenue v. capital receipts and capitalization of expenses. The ld. CIT(E) observed that these observations were submitted by the statutory auditor to the assesse , and the assesse has itself submitted the aforesaid statutory auditor’s report before ld. CIT(E) by uploading online along with its application for registration . The I.T.A No. 84/Ahd/2023 A.Y. N.A. Page No. Kapadwanj Kelavani Mandal v. CIT (Exemption) 7 ld. CIT(E) observed that no explanation/ reconciliation/rebuttal was submitted by the assesse in response to adverse comments/observations by the statutory auditors and also in response to explanation called by ld. CIT(E). Thus, the ld. CIT(E) was of the view that in the absence thereof of an explanation / reconciliation/ rebuttal by the assesse, the genuineness of the activities of the assesse with reference to its objects could not be ascertained , which led ld. CIT(E) to reject application filed in Form No. 10AB by the assesse for grant of registration u/s 12AB of the 1961 Act. The ld. CIT(E) relied upon the judgment and order of Hon’ble Supreme Court in the case of CIT , Ujjain v. Dawoodi Bohra Jamat , in Civil Appeal No. 2492 of 2014, and also the judgment and order of Hon’ble Supreme Court in the case of New Noble Education Society in Civil Appeal No. 2014, while rejecting application of the assessee for grant of registration u/s 12AB of the 1961 Act. 4. Aggrieved by the decision of ld. CIT(E) rejecting application of the assessee for grant of registration u/s 12AB, the assessee has now filed an appeal before the Tribunal . The ld. counsel for the assessee CA Smt. Arti Shah submitted at the outset that the assessee was established in 1940. It was registered under the Societies Registration Act, 1860 , bearing No. 1042 of 1940-41. Registration Certificate is enclosed at Page 56/PB. The assesse also got Registered as Public Trust under the Bombay Public Trust Act, 1950 on 27.07.1954, and was registered in Register of Public Trusts at Kaira F-28 ( Certificate placed at Page 57/PB).. The ld. Counsel for the assesse further submitted that the assesse was granted registration by CIT, Ahmedabad u/s 12A(a) on 17 th December, 1974(Page 114 /Paper Book). It was submitted that the assesse is in the field of education , and is running educational I.T.A No. 84/Ahd/2023 A.Y. N.A. Page No. Kapadwanj Kelavani Mandal v. CIT (Exemption) 8 institutions. It is the say of ld. Counsel for the assesse that scheme for proper management and administration of the assesse bearing number 29/2022 was filed by the assessee with Charity Commissioner , Ahmedabad, Gujarat on 28/03/2022 (Page 10-29/PB) . It is claimed by ld. Counsel for the assessee that the Charity Commissioner has duly approved the said scheme on 12.05.2022 (Paper Book 48-55/PB). There were modification in object clause pursuant to aforesaid scheme for proper management and administration of the assessee. Earlier the objects were mainly educational, but now it included other charitable objects relating to relief of the poor, sports, culture and yoga, medical relief, preservation of environment and monuments , places , objects of artistic and historical interest and also any other objects of general utility in addition to education. It was submitted by ld. Counsel for the assesse that the assessee filed an online application in Form No. 10AB on 30.06.2022 with department for grant of registration u/s.12A(1)(ac)(v) of the 1961 Act, which became necessitated owing to aforesaid modification in the object clause. The said application was rejected by ld. CIT(E) on 31.12.2022 It was submitted by ld. Counsel for the assesse that ld. CIT(E) rejected the assessee’s application for grant of registration u/s 12AB mainly because that the statutory auditors have given some general observations/comments to the management for improvement, which report of the statutory auditor is an internal document of the management which inadvertently was filed online by filing application for registration u/s. 12AB of the Act. Our attention was drawn to the order passed by ld. CIT(E). It was also submitted that the assessee was never confronted by ld. CIT(Exemption) about the reliance being placed on said document/report of the statutory auditor to reject assessee’s application for I.T.A No. 84/Ahd/2023 A.Y. N.A. Page No. Kapadwanj Kelavani Mandal v. CIT (Exemption) 9 registration u/s. 12AB of the Act, otherwise the assesse would have given detailed reply explaining its stand and proving that its activities of running educational institution is charitable in nature and are genuine activities of education being persued by the assessee.It is the say of ld. Counsel for the assesse that no notice/SCN was issued by ld. CIT(E) that the department is going to rely on this statutory auditors report to deny registration to the assesse u/s 12AB , and the assesse was never asked to give its explanations w.r.t. comments/observation made by the statutory auditors in their report. It was submitted that this was the statutory auditor’s report to management for improvements in the maintenance of accounts , and it was an internal management document which was erroneously uploaded by the assesse on the income tax website/portal while filing application for registration in Form No. 10AB for grant of registration u/s 12AB . It was submitted that the principles of natural justice were not adhered to by ld. CIT(E), and the assessee was never confronted by ld. CIT(Exemption) that assessee’s registration u/s. 12AB will be rejected by department based upon the statutory auditor’s observation/comment in their report, otherwise the assesse would have given proper and detailed reply to prove that its activities are genuine being charitable in nature . It was submitted that the assessee is running 15 educational institutions. Thus, it is claimed that the assessee was condemned unheard. It was submitted that in any case these auditor’s observations//comments are merely advice to the management by the statutory auditor , and does not prove that the activities of the assesse are not genuine. It was reiterated that the assessee is running 15 educational institutions , and was established way back in 1940 . The assessee was granted registration u/s. 12A of the Act in the year 1974. She drew our I.T.A No. 84/Ahd/2023 A.Y. N.A. Page No. Kapadwanj Kelavani Mandal v. CIT (Exemption) 10 attention to the notice issued by the ld. CIT(E) on 7 th November, 2022(Page 89/PB), 30 th November, 2022(Page 90/PB)and 12 th December, 2022(Page 91-92/PB), and the replies filed by the assessee on 19 th December, 2022 before ld. CIT(Exemption) which are placed in the paper book /page nos. 92 to 207. She also drew our attention to the audited accounts for the financial years 2019-20, 2020-21 and 2021-22. It was submitted that the assessee’s activities are genuine and are charitable in nature . The assessee is running educational institutions . Thus, it is submitted by ld. Counsel for the assesse that the assesse is eligible for registration u/s 12AB of the 1961 Act. 4b. The ld. Departmental Representative Shri Kamlesh Makwana, CIT-DR submitted that principles of natural justice were duly adhered to as several opportunities were granted by ld. CIT(E) to the assesse. It was submitted by ld. CIT-DR that notices were issued by ld. CIT(E) to assessee, on 7 th November, 2022, 30 th November, 2022 and 12 th December, 2022. Thus, it was submitted by ld. CIT-DR that it cannot be said that principles of natural justice were not adhered to. The assesse did not responded to the initial notices and the reply was filed on 19.12.2022 There were adverse comments/observations by the statutory auditors of the assesssee about the working of the assessee , which adverse report of the statutory auditor was uploaded by the assesse itself online along with its application for registration u/s 12AB, which led to the rejection of application for registration u/s 12AB filed by the assessee. However, ld. CIT-DR fairly submitted that the matter can be set aside back to the file of ld. CIT(E) for re-adjudicating of the application dated 30.06.2022 filed by the assesse in form no. 10AB for grant of registration u/s 12AB of the 1961 Act. I.T.A No. 84/Ahd/2023 A.Y. N.A. Page No. Kapadwanj Kelavani Mandal v. CIT (Exemption) 11 4c. The ld. Counsel for the assessee CA Smt. Arti Shah submitted in rejoinder that the matter can go back to the file of ld. CIT(Exemption) for reconsideration afresh of the application filed by the assesse on 30.06.2022, for grant of registration u/s. 12AB of the Act. 5. We have heard rival contentions and perused the material on record. We have observed that the assessee has claimed that it was established in 1940, and was registered under the Societies Registration Act, 1860 , bearing No. 1042 of 1940-41. The assesse has also claimed that it got itself Registered as Public Trust under the Bombay Public Trust Act, 1950 on 27.07.1954, and was registered in Register of Public Trusts at Kaira F-28. The assessee has also claimed that it was granted registration by CIT, Ahmedabad u/s 12A(a) on 17 th December, 1974. It is also claimed that the assessee is in the field of education , and is running 15 educational institutions. It is claimed that the scheme for proper management and administration of the assesse bearing number 29/2022 was filed by the assessee with Charity Commissioner , Ahmedabad, Gujarat on 28/03/2022, which it is claimed was approved by Charity Commissioner on 12.05.2022. It is claimed that there were modification in object clause pursuant to aforesaid scheme for proper management and administration of the assessee. Earlier the objects were mainly educational, but now it is claimed that it included other charitable objects relating to relief of the poor, sports, culture and yoga, medical relief, preservation of environment and monuments , places , objects of artistic and historical interest and also any other objects of general utility in addition to education. It is claimed that the assessee filed an online application in Form No. 10AB on 30.06.2022 with department for grant of registration u/s.12A(1)(ac)(v) of the 1961 Act, which became I.T.A No. 84/Ahd/2023 A.Y. N.A. Page No. Kapadwanj Kelavani Mandal v. CIT (Exemption) 12 necessitated owing to aforesaid modification in the object clause. The said application was rejected by ld. CIT(E) on 31.12.2022 . We have observed that the ld. CIT(E) rejected the assessee’s application for grant of registration u/s 12AB mainly because that the statutory auditors have given some observations/comments with respect to working of the assessee, which are reproduced herein below: "v. It has been observed that in some of the institutions, several grants and corresponding expenses have been capitalized. We advise that the actual nature of such accounts be reviewed, and such grants and expenses be written off to revenue items, where the application of the grants has not resulted in the creation of the capital asset. Where capital assets have been created, the nature of the grant should still be reviewed to ensure that the no revenue grants have been capitalized. vi It has been noticed that the grouping of the ledger heads is not consistent. Some institutions have accounts of statutory liabilities, eg. EPF contribution, professional tax, etc. grouped under Current Assets or separate ledgers have been created under Incomes and Expenses Hence, the classification of accounting ledger needs to be reviewed thoroughly to ensure that they are appropriately segregated into revenue and capital nature as well as a proper classification of assets and liabilities. viii. It has also come to our notice that there is no clear distinction in the accounts among Corpus Funds and General Funds. We wish to reiterate that the Corpus Funds are capital receipts and there should be no credits to those funds other than designated corpus donation. In respect of any donations not specifically designated as corpus donation by the donor, all such donations should be taken to income of the current year. The management may prepare a memorandum register of donors and the purpose for which such donations have been received. ix. We have observed that the management has a practice of accruing interest to certain earmarked funds. Such accrued interest had been I.T.A No. 84/Ahd/2023 A.Y. N.A. Page No. Kapadwanj Kelavani Mandal v. CIT (Exemption) 13 added to the interest income of the trust, when, in essence, it is merely an accrual entry without any actual income to the trust. It is advised that if the management intends to continue this practice, such notional entries should be maintained separately from the actual incomes and expenses, since such entries unduly inflate the incomes appearing in the financial statements. For the presentation of audited financial statements for F.Y. 2020-21, such entries have been ignored, to the extent identifiable, to show the actual interest income of the trust. x. We have also observed that there were certain expenses and/or other debits which had been recorded in income accounts, including donation accounts. Such practice should be discontinued as it may convey an attempt to reduce the reported gross income. No expenses should be debited in income accounts. Further, there should strictly not be any debits to donation accounts, except dishonored instruments. xi. In respect of intra-group balances, it is strongly recommended that the position of intra-group balances should be reconciled at the end of every year. Where differences, other than bank reconciliation differences, are observed, it indicates an accounting anomaly. Further, it has also been noticed that some intra-group transfers have been credited directly into fund accounts. Intra-group transactions should be treated separately and not included into income, expense or fund accounts.” We have observed that the ld. CIT(E) issued three notices to the assessee viz. 07.11.2022 , 30.11.2022 and 12.12.2022 in response to assessee’s application for grant of registration u/s 12AB, asking assessee to furnish details/documents. The assessee duly replied to the said notices on 19.12.2022. The ld. CIT(E) rejected the application dated 30.06.2022 filed by the assessee for grant of registration u/s 12AB, by relying on the comments/observations of the statutory auditors as reproduced above, by holding that these are adverse comments by statutory auditors and from I.T.A No. 84/Ahd/2023 A.Y. N.A. Page No. Kapadwanj Kelavani Mandal v. CIT (Exemption) 14 these observations , it is evident that even the auditors were of the opinion that the accounts of the assesse are not giving true and fair picture of the income , corpus donation , general donation , gross amount of donation/ income, revenue v. capital receipts and capitalization of expenses. These observations/comments by way of report of statutory auditors were uploaded online by assesse itself while filing application for grant of registration u/s 12AB. The ld. CIT(E) has observed that no explanation was submitted by the assesse w.r.t. these observations/comments of the statutory auditors, while it is the say of the assesse that this report of statutory auditor was an internal document for management and was erroneously uploaded on the income tax webportal while filing online application for grant of registration u/s 12AB. It is further the say of the assesse that this report is merely advisory in nature ,and carries suggestion by statutory auditors for improvement of working of the assesse. In any case, it was submitted that the ld. CIT(E) never confronted the assesse, before rejecting its application for registration u/s 12AB, that ld. CIT(E) is going to rely on this statutory auditor report to cause serious prejudice to the assessee by rejecting its application for registration u/s 12AB , otherwise it is claimed that the assesse would have given its reply that this statutory auditor report is merely an advisory in nature to improve upon working of the assesse, and does not reflect that the activities of the assesse are not genuine. The grave prejudice is caused to the assesse by rejection of its application for grant of registration u/s 12AB by ld. CIT(E) , who is running 15 educational institutions, and the same cannot be done lightly and that too without adhering to principles of natural justice . We have observed that the ld. CIT(E) never confronted the assessee with the fact that he is relying on these auditors observations/ I.T.A No. 84/Ahd/2023 A.Y. N.A. Page No. Kapadwanj Kelavani Mandal v. CIT (Exemption) 15 comments while rejecting application filed by the assesse for grant of registration u/s 12AB. We have observed that ld. CIT(E) never issued notice/SCN to assesse seeking explaination about the alleged adverse comments given by the statutory auditors w.r.t. working of the assesse in the statutory auditor report. The assesse has claimed that it came to know about the reliance placed by ld. CIT(E) on this auditor report to reject its application for registration u/s 12AB , only when the order of rejection was received. Nobody should be condemned unheard. Adherence to the Principles of natural justice and fair hearing are one of the most essential ingredients of robust judicial delivery system. The ld. CIT(E) has to come to conclusive finding after complying with principles of natural justice, that the activities of the assesse are not genuine and/or it does not comply with statutory requirements for grant of registration u/s 12AB as is mandated under law, before rejecting an application for grant of registration u/s 12AB. Under these facts and circumstances of the case and in the interest of justice, it will be fair and appropriate that the order of ld. CIT(E) be set aside and matter be restored back to the file of ld. CIT(E) for re-adjudication of application dated 30.06.2022 filed online by the assesse in Form No. 10AB for grant of registration u/s 12AB. Both the parties have also fairly submitted that the matter may be set aside and restored back to the file of ld. CIT(Exemption) for reconsidering the entire application filed by the assessee for grant of registration u/s. 12AB on merits in accordance with law. Under these facts and circumstances, we are setting aside the matter back to the file of ld. CIT(Exemption) for reconsideration of application filed by the assessee for grant of registration u/s. 12AB of the Act, on merits in accordance with law. We clarify that we have not commented on the merits I.T.A No. 84/Ahd/2023 A.Y. N.A. Page No. Kapadwanj Kelavani Mandal v. CIT (Exemption) 16 of the issue’s in this appeal, and all the contentions are kept open. The ld. CIT(E) shall readjudicate the application filed by the assesse for grant of registration u/s 12AB on merits and in accordance with law, uninfluenced by any of our observations in this order and after complying with principles of natural justice . The assessee on its part is directed to comply with directions of ld. CIT(Exemption) , and file all necessary and relevant details/documents called for by the ld. CIT(E), to enable ld. CIT(E) to decide application for registration u/s. 12AB of the Act. We order accordingly. 6. In the result, the appeal of the assessee in ITA No. 84/Ahd/2023 for assessment year : N.A. is allowed for statistical purposes. The order is pronounced on 08-08-2023 in the open Court on the conclusion of hearing in the presence of both the parties, and reduced to writing and signed on 16.08.2023 at Ahmedabad, Gujarat. Sd/- Sd/- (MADHUMITA ROY) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 16/08/2023 आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील य अ धकरण, अहमदाबाद