SHREE SURATI MODH GANCHI GNATI JILLA NANPURA PANCH,SURAT V. CIT (EXEMPTION), AHMEDABAD

ITA 1088/SRT/2024

AI Insights

The case involves Shree Surati Modh Ganchi Ganati Jilla Nanpura Panch, a trust, appealing against the decision of the Commissioner of Income-tax (Exemption), Ahmedabad, which rejected the trust's application for renewal of approval under section 80G(5) of the Income Tax Act, 1961. The Commissioner had previously rejected the application citing that the trust had incurred religious expenditure exceeding 5% of its total income in the financial years 2017-18 and 2018-19. The trust contested this decision, arguing that it had not exceeded the prescribed limit in the last three financial years and that the Commissioner had not adhered to the procedural requirements under Rule 11AA of the Income Tax Rules.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 472203 (ITAT-SURAT)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2024-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVINDER SINDHU
• Assessee Lawyers: MITISH MODI; AKSHAY MODI
• Keywords: Principle of natural justice; Charitable institution
• Section: 12A; 80G

Judgement Text

" आयकर अपीलीय अिधकरण, सूरत Ɋायपीठ, सूरत IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.1088/SRT/2024 (Hybrid processing hearing) Shree Surati Modh Ganchi Ganati Jilla Nanpura Panch, Surat, 1-1937, Jamrukh Gali, Nanpura, Surat-395 001 [PAN : AABTS 2889 N] बनाम Vs Commissioner of Income-tax (Exemption), Ahmedabad, Room No.609, 6th Floor, Aayakar Bhawan (Vejalpur), Near Sachin Tower, 100 Foot Ring Road, Anandnagar- Prahladnagar Road, Ahmedabad-380 015 अपीलाथŎ/Appellant ŮȑथŎ /Respondent िनधाŊįरती की ओर से /Assessee by Shri Mitish Modi, CA & Shri Akshay Modi, CA राजˢ की ओर से /Revenue by Shri Ravinder Sindhu– CIT-DR सुनवाई की तारीख/Date of hearing 21.01.2025 उद ्घोषणा की तारीख/Date of pronouncement 03.02.2025 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by assessee is directed against the order of Ld. Commissioner of Income-tax(Exemptions)-Ahmedabad [for short to as “Ld.CIT(E)] dated 27.09.2024 in rejecting approval of fund under section 80G(5) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). The assessee has raised following grounds of appeal: “(1) The learned CIT(Exemptions), Ahmedabad’s order under third proviso clause (b) sub-clause(B)(1) below Section 80G(5) of the I.T. Act, 1961 is contradictory to law and facts of the case and hence, liable to be quashed or annulled in toto. ITA No.1088/SRT/2024 Shree Surati Modh Ganchi Gnati Jilla Nanpura Panch, 2 (2) On the facts and in the circumstances of the case as well in law, the learned CIT(Exemptions), Ahmedabad has erred in rejecting the application for renewal of approval u/s 80G(5) of the Act and also erred in cancelling the provisional approval granted u/s 80G(5) of the Act and hence, the order passed under third proviso Clause (b) sub-clause (B)(1) below Section 80G(5) of the I.T. Act, 1961 by the CIT(E) being without jurisdiction, bad in law, invalid, illegal and hence, liable to be struck down. (3) On the fact and in the circumstances of the case as well in law, the learned CIT(Exemptions) rejecting the application for renewal of approval u/s 80G(5) of the Act has grievously failed to see and appreciate that the appellant-trust was not doing any religious activity but eh appellant-trust’s objects are charitable in nature as provided u/s 2(15) of the Act and hence, the action of the CIT(E) to invoke sub-section (5B) of Section 80G of the Act for the alleged expenditure of religious nature exceeding 5% of the total income being arbitrary, perverse, conjectural, baseless, unwarranted of facts, without jurisdiction, is liable to be quashed. (4) On the facts and in the circumstances of the case as well in law, the learned CIT(Exemptions) has grievously failed to see and appreciate in the right, proper and lawful perspectives the documentary evidences, materials, statements of accounts, information, etc., furnished before him to satisfy himself about the genuineness of the activities exclusively for charitable purposes carried out by the appellant-trust and in fulfilment of all the conditions laid down under sub-section (5) of Section 80G of the Act and hence, the CIT(E)’s action not to grant the approval u/s 80G(5) of the Act being arbitrary, subjective, prejudicial, is without jurisdiction, bad in law and not justified and therefore, the order passed under third proviso clause (b) sub-clause (B)(1) below Section 80G(5) of the I.T. Act, 1961 is liable to be struck down. (5) On the facts and in the circumstances of the case as well in law, the learned CIT(Exemptions) ought to have found from the authentic, speaking and genuine documents, statement of accounts, etc., furnished on 30.07.2024 and 26.09.2024 in response to notices issued/served upon the appellant-trust that during the FY 2017-18 and 2018-19, the appellant-trust had not incurred expenditure of a religious nature exceeding 5% of its’s total income and therefore, the rejection of the application for the renewal u/s 80G(5) of the ITA No.1088/SRT/2024 Shree Surati Modh Ganchi Gnati Jilla Nanpura Panch, 3 Act invoking sub-section (5B) of Section 80G of the Act, without brought in any specific instances suggesting the activity of the appellant-trust are religious in nature, is without jurisdiction, bad in law and illegal and thus, liable to be quashed. (6) On the facts and in the circumstances of the case as well in law, the learned CIT(Exemptions) has erred in passing the order under third proviso clause-(b) sub-clause (B)(1) below Section 80G(5) of the I.T. Act, 1961, without first serving the show cause notice upon the appellant-trust and therefore, the proceedings concluded with the order appealed against passed by the CIT(E) has resulted into pure violation of principles of natural justice and thus, liable to be struck down. (7) Your appellant further reserves it’s right to add, alter, amend or modify any of the aforesaid grounds before or at the time of hearing of the appeal.” 2. Rival submission of both the parties heard and record perused. The Ld. Authorized Representative (Ld.AR) of the assessee submits that assessee is a “trust” created in the year 1937 i.e., prior to enactment of Bombay Public Trust Act, 1050. The assessee-trust is registered with Charitable Commissioner, Vadodara vide registration No.A-4, Surat. The assessee is having valid registration under section 12A/12AB of the Act allowed vide order dated.03.03.2020. In view of new provisions inserted by Finance Act, 2020, the assessee-trust filed application for registration of trust under section 12(a) of the Act on 02.08.2021 and after due consideration assessee was allowed registration under section 12AB on 23.09.2021, which is valid upto assessment years 2022-23 to 2026-27. The assessee applied for approval of trust in a prescribed form 10AD vide application dated 06.03.2024, along with application the assessee furnished required details. The Ld.CIT(E) issued show cause notice dated 04.07.2024, copy of show cause notice is placed on record at page No.79 of Paper Book. In the show cause notice, Ld. CIT(E) required ITA No.1088/SRT/2024 Shree Surati Modh Ganchi Gnati Jilla Nanpura Panch, 4 expenditure related with the religious purpose incurred for last three financial years i.e. for AY 2021-22, 2022-23 & 2023-24. In reply, assessee furnished all required details assessee also stated that activities of assessee-trust are in consonance with object of the trust. The assessee also furnished photograph showing the genuineness of such activities. The assessee stated that assessee-trust registered under section 12A from 1974 copy of registration was furnished. The Ld.CIT(E) after considering the submission of assessee held that earlier application of approval was rejected on 11.03.2020 wherein it was noted that assessee incurred religious expenditure over and above the prescribed limit of 5% as define in Section 80G(5B) in financial years 2017-18 and 2018-19. The Ld.CIT(E) on the basis of aforesaid observation held that assessee is not established for charitable purpose nor its activities are genuine and rejected application under section 80G(5). 3. The Ld. AR of the assessee submits that object and activities were duly verified and accepted while allowing registration under section 12A/12AB of the Act. While considering the application for approval, the Ld.CIT(E) is to require if the condition prescribed under Rule 11AA(2)(g) are fulfilled or not. AS per clauses (g) of sub-rule (2) of 11AA, the Ld.CIT(E) cannot go beyond the accounts of three preceding years. The assessee furnished account of all three preceding years wherein there is no such violation. The assessee has not spent any amount for religious purpose in last three financial years. Thus, the order passed by Ld.CIT(E) is not in consonance with prescribed under Rule-11AA. The Ld. AR of the assessee submits that assessee is an old trust and having ITA No.1088/SRT/2024 Shree Surati Modh Ganchi Gnati Jilla Nanpura Panch, 5 provisional registration upto assessment year 2023-24, therefore appeal may be accepted and to allow approval under section 80G(5) of the Act. 4. On the other hand, Ld. Commissioner of Income-tax Departmental Representative (Ld.CIT-DR) for the Revenue submits that Ld.CIT(E) has passed a very categorical and detailed order and held that the earlier application under section 80G(5) was dismissed on the ground that the assessee has spent more than 5% of its income for religious purpose. The ld. CIT-DR of the revenue submits that he supports the order of ld. CIT(E). 5. We have considered the rival submissions of both the parties and have gone through order of lower authorities carefully. We find that there is no dispute that the assessee is having registration under section 12A/AB of the Act. For allowing approval of the fund, registration of assessee-trust under section 12A/AB is the primary condition. We find that while considering the application for approval, the Ld.CIT(E) has to satisfy himself if the condition prescribed under Rule 11AA(2)(g) are fulfilled or not. As per clause (g) of sub-rule (2) of 11AA,the Ld.CIT(E) has to examines if there is any violation or the assessee has spent any amount for religious purpose in last three financial years. There is no such finding of ld. CIT(E) about such violation of Rule 11AA(2)(g). On perusal of expenditure account, which is part of audit report filed before Charity Commissioner, we find that the assessee-trust has not incurred any expenses for religious purpose in last three financial year. There is no dispute that assessee-trust is an old trust and having provisional approval upto assessment year 2023-24. The assessee is already allowed registration under section 12A/AB. Thus, in our view the scope of inquiry of trust by the ld CIT(E) for ITA No.1088/SRT/2024 Shree Surati Modh Ganchi Gnati Jilla Nanpura Panch, 6 approval of the institution is to be confined only to the finding out whether prescribed conditions are fulfilled. In our view such conditions are primarily fulfilled by the assessee. If the ld CIT(E) intends to travel beyond three years expenditure as prescribed in Rule 11AA(g) he should have issued specific show cause notice to the assessee, which admittedly, is not issued. So far as other observation of ld CIT(E) that on occasion, similar application of assessee was rejected, we find that even for such grounds no specific show cause notice was issued to the assessee. Moreover, the assessee has applied afresh for approval and there is no legal bar in making fresh application for approval of funds, if the assessee subsequently fulfilled requisite condition of approval of funds. Considering the aforesaid discussions, restore the matter back to the file of the ld CIT(E) to allow approval under section 80G(5) to the assessee, if the assessee fulfilled all other conditions. 6. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 03/02/2025. Sd/- Sd/- (BIJAYANANDA PRUSETH) (PAWAN SINGH) लेखा सद˟/Accountant Member Ɋाियक सद˟/Judicial Member सूरत / Surat Dated: 03/02/2025 Dkp Outsourcing Sr.P.S* आदेश की Ůितिलिप अŤेिषत/ Copy of the order forwarded to :  अपीलाथŎ/ The Appellant  ŮȑथŎ/ The Respondent  आयकर आयुƅ/ CIT  िवभागीय Ůितिनिध, आयकर अपीलीय आिधकरण, सूरत/ DR, ITAT, SURAT  गाडŊ फाईल/ Guard File // True Copy // By order/आदेश से, सहायक पंजीकार आयकर अपीलीय अिधकरण, सूरत "