SHRI SHYAM LALIT FOUNDATION, RAIPUR,RAIPUR V. COMMISSIONER OF INCOME TAX (EXEMPTION), BHOPAL, BHOPAL

ITA 466/RPR/2024

AI Insights

The case involves Shri Shyam Lalit Foundation, a Section 8 company, which sought permanent registration under section 12AB of the Income Tax Act, 1961, after initially receiving provisional registration. The Commissioner of Income Tax (Exemption), Bhopal, rejected their application and cancelled the provisional registration, citing insufficient evidence of commenced activities. The foundation appealed against this decision, arguing that they were not given a reasonable opportunity to present their case and that the cancellation was unjustified. The Tribunal found that the CIT(E) had not provided a fair hearing before rejecting the application and cancelling the registration, leading to the decision to remand the case for re-evaluation.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 106809 (ITAT-RAIPUR)
• Duration Of Justice: 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2024
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Next Hearing Date: 21-11-2024
• Assessment Year: misc
• Appeal Filed On: 25-10-2024
• Other Referred Cases: Raieev Kumar Gupta vs CIT, CIT vs Maniunatha Cotton & Ginning Factory, Symbyosys Integrated Solutions P. Ltd. vs ITO, CIT vs SSA's Emerald Meadows, Major Kumar Agrawal vs CIT, CIT vs Samson Perinchety
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S.L.ANURAGI
• Assessee Lawyers: R. B. DOSHI
• Keywords: Set aside; Opportunity of being heard; Principle of natural justice; Cancellation of registration
• Section: 11; 12A; 13; 12

Judgement Text

"आयकर अपीलीय अिधकरण, रायपुर Ɋायपीठ, रायपुर IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR ŵी रिवश सूद, Ɋाियक सद˟ एवं ŵी अŜण खोड़िपया, लेखा सद˟ क े समƗ । BEFORE SHRI RAVISH SOOD, JM & SHRI ARUN KHODPIA, AM आयकर अपील सं. / ITA No: 466/RPR/2024 (िनधा[रण वष[ Assessment Year: N/A) Shri Shyam Lalit Foundation, 409, 4th Floor, Harshit Corporate, Amanaka, Raipur, C.G., 492001 v s Commissioner of Income Tax (Exemption), Bhopal PAN: ABLCS7970A (अपीलाथŎ/Appellant) . . (ŮȑथŎ / Respondent) िनधाŊįरती की ओर से /Assessee by : Shri R. B. Doshi, CA राजˢ की ओर से /Revenue by : Shri S. L. Anuragi, CIT-DR सुनवाई की तारीख / Date of Hearing : 21.11.2024 घोषणा की तारीख/Date of Pronouncement : 25.11.2024 आदेश / O R D E R Per Arun Khodpia, AM: The captioned appeal is instituted by the assessee, directed against the order of Commissioner of Income Tax-Exemption, Bhopal [in short “Ld. CIT(E)”], dated 29.08.2024, rejecting the application of assessee filed in Form No. 10AB for grant of registration u/s 12AB under the new Provisions of Income Tax Act, 1961. 2. The grounds of appeal raised by the assessee are as under: 1. “Ld. CIT(Exemption) erred in cancelling provisional registration and was not justified in refusing to grant final registration to the 2 ITA No. 466/RPR/2024 Shri Shyam Lalit Foundation vs. CIT(E), Bhopal appellant without appreciating the facts of the case properly. The appellant is entitled for registration u/s 12AB. The rejection and cancellation order passed by Ld. CIT (Exemption) u/s 12AB(1)(b)(ii)(B) is arbitrary, illegal and not justified\". (Amended on 20.11.2024) 2. The appellant reserves the right to amend, modify or add any of the ground/s of appeal. 3. Briefly stated, the assessee Shri Shyam Lalit Foundation, Raipur have filed an application in prescribed Form No. 10AB for granting of registration u/s 12AB of the Act, however, the application so filed by the assessee has been rejected by the Ld. CIT(E), Bhopal, observing as under: The assessee has applied in Form IOAB for registration u/s 12AB under the new provision of Income Tax Act, 1961. Consequently, opportunity letters were issued to the assessee and various documents/details were called for; to process the said application and to verify the objects and activities of the assessee. The assessee has submitted requisite details/information/documents, which have been perused and placed on record. 2. On perusal of record, it is found that the assessee is a Section 8 Company registered under the Companies Act, 2013 on 29th September, 2023 with the Registrar of Companies under Ministry of Corporate Affairs. After registration With the MoCA the company obtained provisional registration u/s 12A(ac)-item (A) of the Income Tax Act on 16.11.2023 for the period from A.Y. 2024-25 to A.Y. 2026-27. 3. Now, the assessee as applied for registration u/s 12A(1)(ac)(iii), as assessee has commenced its activities on 30.032024. The act mandates that the entity having provisional registration has to apply for permanent registration within 6 months of commencement of its activities. Section 12A(1)(ac)(iii) of the Act' reads as under: 3 ITA No. 466/RPR/2024 Shri Shyam Lalit Foundation vs. CIT(E), Bhopal 12A. 55 (1) The provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely:- (ac) notwithstanding anything contained in clauses (a) to (ab), the person in receipt of the income has made an application in the prescribed form and manner to the Principal Commissioner or Commissioner, for registration of the trust or institution- . . . (iii) where the trust or institution has been provisionally registered under section 12AB, at least six months prior to expiry of period of the provisional registration or within six months of commencement of its activities, whichever is earlier; 4. To verify the activities of the assessee, vide Point No. 4 of this office letter dated: 16.08.2024, details of the activities were sought as under: \"4. As per your submission, the company has started its activities from 30.03.2024, please provide a note on activities along with supporting documents/images, undertaken by your company since commencement of activities. 5. In response to the above queries, the assessee has submitted details of various activities proposed to be carried and has mentioned 02 activities which are mainly being carried out now. The activities claimed to be carried out by the assessee are mentioned below: \"a) Providing food to individuals in need, especially patients and their family members admitted to the government hospital. b) To facilitate the hospitals to carry out the treatment of poor people, by providing financial assistance to the hospital to enable the treatment of those in need. \" 6. However, the assessee has not submitted any details in respect of the beneficiaries of the above activities or any image or any documents which may endorse the claim of the assessee. 4 ITA No. 466/RPR/2024 Shri Shyam Lalit Foundation vs. CIT(E), Bhopal - Further, on perusal of bank account statement for the period from 08.12.2023 to 01.08.2024, submitted by the assessee company, it is found that there are only credit entries and no debit has been made to bear expenses on above claimed activities of the assessee. -In view of the above discussion, the claim of the assessee regarding commencement of activities is not found genuine and no activities are found to have been undertaken since incorporation of the Company on 29th September, 2023. Hence, the application of the assessee doesn't qualify the eligibility criteria prescribed in section 12A(1)(ac)(iii) as mentioned in Para 3 above. 7. ln view of the facts & reasons mentioned above, the application of the assessee in Form IOAB for grant of registration u/s 12AB is hereby rejected and the provisional registration/approval u/s 12AB issued in Form 10 AC vide URN No. ABLCS7970AE20231 Dated: 16.11.2023 granted by CPC is also cancelled as per the provisions of section 12AB(1)(b)(ii)(B) of the Act. 4. Aggrieved with the aforesaid order, the assessee assailing the decision of Ld. CIT(E), had carried the matter before us in the present appeal. 5. At the outset, before us, Shri R. B. Doshi, Authorized Representative (in short “Ld. AR”) on behalf of the assessee have submitted a written submission, the same is extracted as under: 5 ITA No. 466/RPR/2024 Shri Shyam Lalit Foundation vs. CIT(E), Bhopal Shri Shyam Lalit Foundation, Raipur ITA No. 466/RPR/2024 (Assessee) Ground no. 1 Submission of assessee 1. Objects contained in Memorandum of Association, at PN 13 of PB. 2. Commencement of activities i) Assessee received donation of Rs. 27,47,982/- on 30.03.2024. Details on PN 26 of PB. Entries in the bank statement at PN 27 of PB. ii) On receipt of donation, activities of assessee commenced. No activity can be started without funds and so receipt of fund tantamount to commencement of activities. iii) Funds received only on 30.03.2024, could not be utilized during FY 2023/24. 3. Ld. CIT(E) erred in concluding that activities had not commenced. Rejection of permanent registration not justified. 4. Cancellation of registration not justified i) Provisional registration granted on 16.1 1.2023. No change in the objects of assessee since then. On the basis of original objects, provisional registration granted. ii) No findings given by the Id. CIT(E) that the objects are no longer charitable. If the Id. CIT(E) alleged that activities were not commenced, it could not have resulted into cancellation of provisional registration, which was granted for AY 2024/25 to 2026/27. iii) Absolutely no reason given by the Id. CIT(E) for cancellation of provisional registration. iv) Sec. 12AB(4)(a) to (c) provides condition for cancellation of registration, no case made out that any condition existed. 5. Rejection and cancellation requires \"reasonable opportunity of hearing\" 6 ITA No. 466/RPR/2024 Shri Shyam Lalit Foundation vs. CIT(E), Bhopal i) Power to reject and to cancel registration contained in sec. 12AB(l)(b)(ii)(B). (ii) If application for permanent registration is rejected or if provisional registration is cancelled, law provides that such rejection/cancellation can be only \"after affording a reasonable opportunity of being heard\" iii) Only two notices dt. 04.07.2024 & 16.08.2024 issued by the Id. CIT(E). None of the notices provides opportunity to assessee to show cause why application be not rejected or why registration be not cancelled. iv) \"Reasonable opportunity\" means intended rejection/cancellation should be intimated to assessee who may have a chance to show cause to proposed action. Not intimating assessee of proposed action will amount to not affording reasonable opportunity. Reliance on: -  Raieev Kumar Gupta vs CIT (1980) 123 ITR 907. 911 (All.) Reasonable opportunity postulates that assessee should be intimated so that he may have a chance to show cause against proposed action.  CIT vs Maniunatha Cotton & Ginning Factory (2013) 359 ITR 565 (Kar.) Vide para 59, it was held that the person who is accused should be made to know the grounds on which proposed action is to be taken. Notice should specify the grounds which assessee has to meet. Vide para 60, it was held that if the notice contains one charge and the assessee is found guilty of another charge, is also not sustainable under the law.  Symbyosys Integrated Solutions P. Ltd. vs ITO (2020) 60 CCH 150 (Mum. Trib.), ITA no. 1166 & 1167/Mum/2019 dated 19.10.2020, para no. 9. v) Since no opportunity given to the assessee, not to talk of any reasonable opportunity of hearing, order of rejection and cancellation is bad in law, illegal and unsustainable. 7 ITA No. 466/RPR/2024 Shri Shyam Lalit Foundation vs. CIT(E), Bhopal vi) Reliance on decisions rendered in the context of penalty u/s 271(1)(c) which also postulates reasonable opportunity. 6. Consequences of not providing reasonable opportunity Reliance on cases decided in the context of penalty u/s 271 (l)(c) wherein penalty was cancelled for want of \"reasonable opportunity\". Reliance on: -  CIT vs SSA's Emerald Meadows in ITA No. 380/2015 dt. 23.11.2015 of Hon'ble Karnataka High Court relying upon Manjunathan against which SLP dismissed on 05.08.2016 vide (2016) 386 ITR 13 (St.)  Major Kumar Agrawal in ITA No. 124/RPR/2015 dc. 13.08.2018  CIT vs Samson Perinchety (2017) 392 ITR 4 (Bom.) 6. Based on aforesaid submissions, the main grievance raised before us was that, while disposing of the application in form no. 10AB, the assessee was not afforded with reasonable opportunity of being heard. To substantiate this contention, Ld. AR furnished, copies of notices issued by Ld. CIT(E) dated 04.07.2024 and 16.08.2024 advising the assessee to provide necessary details required for processing the application in form no. 10AB of the assessee. Copy of notices are culled out here under for better appreciation of the facts: 8 ITA No. 466/RPR/2024 Shri Shyam Lalit Foundation vs. CIT(E), Bhopal 9 ITA No. 466/RPR/2024 Shri Shyam Lalit Foundation vs. CIT(E), Bhopal 10 ITA No. 466/RPR/2024 Shri Shyam Lalit Foundation vs. CIT(E), Bhopal 11 ITA No. 466/RPR/2024 Shri Shyam Lalit Foundation vs. CIT(E), Bhopal 7. Reiterating the contents of the aforesaid notices, Ld. AR submitted that before rejecting the application of assessee in Form No. 10AB, Ld. CIT(E) have not afforded any opportunity by way of a show cause, as to why the application of the assessee is being rejected. It was the submissions that such action of Ld. CIT(E) found to be perverse and against the principle of natural justice, therefore, the matter is required to be revisited by the Ld. CIT(E), so that the assessee would have the sufficient opportunity to represent its case. It is further submitted by the Ld. AR that there was no reason assigned by the Ld. CIT(E), while cancelling the provisional registration u/s 12AB issued in Form No. 10AC dated 16.11.2023, valid up to AY 2026-27. Copy of provisional registration furnished before us, the same is extracted hereunder for the sake of clarity and information: 12 ITA No. 466/RPR/2024 Shri Shyam Lalit Foundation vs. CIT(E), Bhopal 13 ITA No. 466/RPR/2024 Shri Shyam Lalit Foundation vs. CIT(E), Bhopal 14 ITA No. 466/RPR/2024 Shri Shyam Lalit Foundation vs. CIT(E), Bhopal 8. Ld. AR further submitted that as per provisions of Section 12AB(1)(b)(ii)(B), the Ld. CIT(E) was required to provide opportunity to the assessee before rejecting the application for grant of registration u/s 12AB. Also, cancelling the provisional registration of the assessee, which was valid up to AY 2026-27, without any plausible reason was unfair and uncalled for. Provisions of Section 12AB(1)(b)(ii)(B) are extracted as under: 12AB(1)(b)(ii)…….. [(B) if he is not so satisfied, pass an order in writing,— (I) in a case referred to in sub-clause (ii) or sub-clause (iii) or sub-clause (v) of clause (ac) of sub-section (1) of section 12A rejecting such application and also cancelling its registration; (II) in a case referred to in sub-clause (iv) or in item (B) of sub-clause (vi) of sub-section (1) of section 12A, rejecting such application, after affording a reasonable opportunity of being heard;] 9. Backed with aforesaid submissions, it was the prayer that the order of Ld. CIT(E) is liable to be set aside. The cancellation of provisional registration of the assessee deserves to be reversed and the matter regarding application of assessee in Form 10AB may kindly be restored for re-adjudication. 15 ITA No. 466/RPR/2024 Shri Shyam Lalit Foundation vs. CIT(E), Bhopal 10. Ld. CIT DR representing the revenue, on the other hand vehemently supported the order of Ld. CIT(E). 11. We have considered the rival submissions, perused the material available on record and case laws relied upon by the Ld. AR. Admittedly in the present case, as emanating from the records available before us. It is explicitly clear that as per provisions of Section 12AB(1)(b)(ii)(B), reasonable opportunity of being heard was not afforded to the assessee in the present case, as there was no confrontation or opportunity was granted to the assessee before rejecting its application, therefore, in all fairness following the principle of natural justice, the matter needs to be restore back to the files of Ld. CIT(E) to revisit the application of assessee in Form 10AB and dispose of the same after provide reasonable opportunity of being heard to the assessee. The Provisional registration cancelled by the Ld. CIT(E) is also hereby restored, accordingly. 12. Needless to say, in set aside proceedings reasonable opportunity of being heard shall be provided to the assessee and the assessee is directed to co-operate in the set aside proceedings proactively. 13. In result, the emended ground no. 1 of the assessee in present appeal is partly allowed for statistical purposes. 16 ITA No. 466/RPR/2024 Shri Shyam Lalit Foundation vs. CIT(E), Bhopal 14. Ground No. 2 of the appeal is general and academic in nature, wherein no further arguments were advanced by the assessee, thus, dismissed as not pressed. 15. In result, appeal of the assessee is partly allowed for statistical purposes, in terms of our aforesaid observations. Order pronounced in the open court on 25/11/2024. Sd/- (RAVISH SOOD) Sd/- (ARUN KHODPIA) Ɋाियक सद˟ / JUDICIAL MEMBER लेखा सद˟ / ACCOUNTANT MEMBER रायपुर/Raipur; िदनांक Dated 25/11/2024 Vaibhav Shrivastav आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : आदेशानुसार/ BY ORDER, (Senior Private Secretary) आयकर अपीलीय अिधकरण, रायपुर/ITAT, Raipur 1. अपीलाथŎ / The Appellant- Shri Shyam Lalit Foundation 2. ŮȑथŎ / The Respondent-CIT(Exemption), Bhopal 3. आयकर आयुƅ(अपील) / The CIT(A), 4. The Pr. CIT, Raipur (C.G.) 5. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, रायपुर/ DR, ITAT, Raipur 6. गाडŊ फाईल / Guard file. // स×याǒपत Ĥित True copy // "