THE BARODA LAKKAD PITHA PUNCH PROPERTY BARODA,VADODARA V. THE CIT(EXEMPTION), AHMEDABAD

ITA 1710/AHD/2024

AI Insights

The case involves The Baroda Lakkad Pitha Punch Property, a public charitable trust, which appealed against the decisions of the CIT(Exemption) rejecting its applications for registration under section 12AB and approval under section 80G(5) of the Income-tax Act. The CIT(Exemption) had rejected these applications based on discrepancies in the trust's name across different documents and the absence of recorded charitable activities in the financial statements. The Tribunal found that the CIT(Exemption) had not adequately considered the explanations and evidence provided by the trust and had not granted a fair opportunity of hearing. Consequently, the Tribunal set aside the CIT(Exemption)'s orders and remanded the matter for fresh consideration.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 398099 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: misc
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DURG A DUTT
• Assessee Lawyers: SAMIR PARIKH
• Keywords: Condonation of delay; Set aside; Opportunity of being heard; Additional evidence; Gift; Principle of natural justice; Charitable institution
• Section: 11; 12AA; 12A; 12; 80G

Judgement Text

"आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण,अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ ‘D’ अहमदाबाद। अहमदाबाद। अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD ] ] BEFORE MS.SUCHITRA R. KAMBLE, JUDICIAL MEMBER AND SHRI MAKARAND V.MAHADEOKAR, ACCOUNTANT MEMBER ITA No.1709 and 1710/Ahd/2025 Asstt.Year : - The Baroda Lakkad Pitha Punch Property Baroda, Madan Zampa Road Lakkad Pitha, Vadodara. PAN : AAATT 1775 F Vs. CIT(Exemption) Anandnagar Ahmedabad. (Applicant) (Responent) Assessee by : Shri Samir Parikh, AR Revenue by : Shri Durga Dutt, CIT-DR सुनवाई क तारीख/Date of Hearing : 04/06/2025 घोषणा क तारीख /Date of Pronouncement: 05/06/2025 आदेश आदेश आदेश आदेश/O R D E R PER MAKARAND V.MAHADEOKAR, AM: These two appeals by the assessee are directed against two separate orders passed by the Commissioner of Income Tax (Exemption), Ahmedabad [hereinafter referred to as \"CIT(Exemption)\"], both dated 27.07.2024, whereby the learned CIT(Exemption) rejected the assessee’s application for registration under section 12AB of the Income-tax Act, 1961 [hereinafter referred to as \"the Act\"] and also the assessee’s application for approval under section 80G(5) of the Act. Since both appeals arise from common facts and pertain to the same assessee and since the legal issues involved are interconnected, ITA No.1709 and 1710 /Ahd/2024 2 they were heard together and are being disposed of by way of this consolidated order. Condonation of delay 2. At the outset, it is noted that there is a delay of one day in filing the appeals against the orders passed by the CIT(Exemption). The assessee has filed an application for condonation of delay explaining the circumstances, stating that the delay was on account of bereavement in the family of the managing trustee. Having considered the explanation, which is supported by a death certificate, and finding the cause to be reasonable and bona fide, the delay of one day is condoned in the interest of substantial justice. Facts of the Case 3. The assessee is a public charitable trust, originally established on 05.12.1952 under the name “Baroda Lakadpitha Panch Property” and registered with the Charity Commissioner, Baroda under the Bombay Public Trusts Act. Subsequently, vide order dated 20.03.2013 passed by the Joint Charity Commissioner, Vadodara, a revised Scheme of Administration was approved, and the name of the trust was reflected as “The Vadodara Timber Merchant Association (Vadodara Lakadpitha Panch Property),” while continuing under the same trust registration number. The assessee filed an application for registration under section 12AB of the Act on 24.01.2024 in Form No. 10AB under item (B) of sub-clause (vi) of clause (ac) of ITA No.1709 and 1710 /Ahd/2024 3 sub-section (1) of section 12A. On the same day, the assessee also filed a separate application in Form No. 10AB seeking approval under section 80G(5), under sub-clause (B) of clause (iv) of the first proviso to section 80G(5), stating that the trust had not claimed exemption under section 11 or section 12 in any preceding year. 4. The CIT(Exemption), after issuing notices and granting opportunities of hearing on 24.04.2024, 30.04.2024, 08.07.2024, and 22.07.2024, rejected both applications by separate orders dated 27.07.2024. In the order rejecting the application under section 12AB, the CIT(Exemption) recorded that the name of the assessee appearing in the PAN database, namely “The Baroda Lakkad Pitha Punch Property,” did not match the name appearing in the trust registration certificate and Scheme of Administration, namely “The Vadodara Timber Merchant Association.” The explanation furnished by the assessee that the difference arose due to translation from Gujarati to English (e.g., “Vadodara” as “Baroda,” “Lakkad Pitha” as “Timber Merchant”) was not accepted in the absence of corroborative evidence or documentary rectification at the time of adjudication. Although the assessee subsequently filed updated PAN documents after the order, the same was not available before the CIT(Exemption) when the order was passed. Further, the CIT(Exemption) noted that although the assessee had claimed to have conducted charitable activities such as skill training, educational assistance, free distribution of ITA No.1709 and 1710 /Ahd/2024 4 notebooks, and ambulance donation to another trust, these activities were not reflected in the audited accounts. The financial statements showed no identifiable expenditure attributable to such activities. The assessee stated that all such charitable functions were sponsored directly by donors, and hence no accounting entries were recorded. However, the CIT(Exemption) held that in the absence of donor confirmations, payment records, or corresponding entries in books, the genuineness of the activities remained unsubstantiated. Accordingly, the CIT(Exemption) concluded that the assessee failed to satisfy the conditions laid down under section 12AB(1)(b)(ii), including (i) genuineness of activities, (ii) consistency of activities with declared objects, and (iii) compliance with applicable laws, and therefore, the application for registration under section 12AB was rejected. 5. In the separate order rejecting the application for approval under section 80G(5), the CIT(Exemption) recorded that the Scheme of Administration approved by the Joint Charity Commissioner, Vadodara, dated 20.03.2013, included objects such as “giving gifts for materials in temples” and “to do religious and charitable activity.” It was held that these objects are of a religious nature and fall within the prohibition contained in Explanation 3 to section 80G(5), which provides that “charitable purpose” shall not include any purpose the whole or substantially the whole of which is of a religious nature. The assessee argued that these clauses were generic, not directed toward any particular religious community, and that no actual ITA No.1709 and 1710 /Ahd/2024 5 religious expenditure had been incurred. It was further submitted that the use of the word “religious” in the objects clause did not render the trust religious, and that in any case, section 80G(5B) permits up to 5% of total income to be applied for religious purposes without disentitling the trust. 6. The CIT(Exemption), however, rejected these arguments and held that section 80G(5B) only permits expenditure of a religious nature within the 5% threshold, but does not permit trusts having religious objects to qualify for approval. It was further held that even a single religious object in the trust deed renders the trust ineligible under the main provision of section 80G(5). The CIT(Exemption) relied on some judicial precedents and concluded that the presence of composite or dual religious- cum-charitable objectives violated the express conditions of section 80G(5) read with Explanation 3, and accordingly, the application for approval was liable to be rejected. 7. Aggrieved by the orders of CIT(Exemption), the assessee has filed the present appeals before us raising following grounds of appeal: In ITA No. 1709/Ahd/2024 1. The learned Hon. CIT Exemption is not correct in rejecting registration u/s 12A of the Income Tax Act. 2. The trust is requesting you to allow the appeal of Appellant for non granting registration by Hon. CIT Exemption. 3. Alternatively appeal is allowed by set aside the order and matter referred back to the desk of Hon. CIT Exemption for reconsideration. ITA No.1709 and 1710 /Ahd/2024 6 4. Appellant Craves leave to add, alter or amend any of the grounds of Appeal mentioned above, either at or before the time of hearing. In ITA No. 1710/Ahd/2024 1. The learned Hon. CIT Exemption is not correct in rejecting approval u/s 80G of the Income Tax Act. 2. The trust is requesting you to allow the appeal of Appellant for non granting registration by Hon. CIT Exemption. 3. Alternatively appeal is allowed by set aside the order and matter referred back to the desk of Hon. CIT Exemption for reconsideration. 4. Appellant Craves leave to add, alter or amend any of the grounds of Appeal mentioned above, either at or before the time of hearing. 8. During the course of hearing before us the Authorised Representative (AR) appearing on behalf of the assessee submitted that the assessee is a public charitable trust registered with the Charity Commissioner since 1952 and has been engaged in carrying out charitable activities as per its objects. It was submitted that the trust continues to exist with the same legal identity and registration number, and the reference to name differences in PAN, trust registration certificate, and scheme of administration is purely due to linguistic translation between English and Gujarati. The AR invited attention to the order dated 20.03.2013 passed by the Joint Charity Commissioner, Vadodara, approving a revised Scheme of Administration, wherein the name of the trust has been reflected as \"The Vadodara Timber Merchant Association (Vadodara Lakadpitha Panch Property)\". It was explained that while the PAN database reflected the earlier English version of ITA No.1709 and 1710 /Ahd/2024 7 the name as “The Baroda Lakkad Pitha Punch Property,” there was no change in the trust’s legal entity. In fact, pursuant to the communication issued by the Income Tax Department, the assessee has already filed Form 49A and obtained a corrected e- PAN reflecting the updated name. A copy of the revised PAN and proof of rectification request were submitted along with an application for additional evidence dated 05.05.2025. 9. The learned AR also filed detailed written submissions, which were taken on record. On the question of genuineness of activities, the AR submitted that the learned CIT(Exemption) has proceeded on an erroneous premise by treating the absence of recorded expenditure in the audited accounts as conclusive evidence of absence of charitable activity. It was explained that many charitable initiatives undertaken by the trust such as training programs, educational aid in the form of notebooks, and the donation of an ambulance to a charitable medical institution were carried out with the support of donors who directly incurred the expenses. The trust acted as facilitator and coordinator of these activities, but the amounts were not routed through its books, which explains the absence of such entries in the audited financials. However, photographs, donor correspondences, and trustee resolutions evidencing such activities were submitted before the lower authorities. 10. The AR further submitted in writing that the trust has not claimed any exemption under sections 11 or 12 of the Act in any previous year and has filed returns of income for the preceding ITA No.1709 and 1710 /Ahd/2024 8 three assessment years, notwithstanding the fact that the gross receipts were below the taxable limit. The audited financials for financial years 2017–18 to 2022–23 were also filed, which demonstrate that the income was modest and fully applied to charitable purposes. It was, therefore, urged that the statutory conditions prescribed under clause (vi)(B) of section 12A(1)(ac) were duly satisfied. 11. As regards the second appeal pertaining to the rejection of approval under section 80G(5) of the Act, the AR, by way of written submission, submitted that the dominant and operative objects of the assessee trust are charitable in nature, covering activities such as education, medical relief, public welfare, and social development. The AR submitted that the trust has not incurred any expenditure toward religious purposes since its inception, and there is no record of the trust having undertaken activities such as running a temple or religious establishment. The reference in the Scheme of Administration dated 20.03.2013 to “giving gifts for materials in temples” is of general and ancillary nature and does not constitute a principal or core object of the trust. It was further submitted that the trust deed, in addition to the impugned clause, contains several explicitly charitable objects, such as Running schools, hostels, and libraries, providing scholarships and financial aid, arranging medical camps, laboratories, and ambulance services and developing crematory facilities for the public benefit. The AR strongly contended that merely because one of the clauses refers to religious terms, the entire deed cannot be treated as religious in ITA No.1709 and 1710 /Ahd/2024 9 character. In support, reliance was placed on various judicial pronouncements. It was also pointed out that the audited accounts filed before the CIT(Exemption) for financial years 2017–18 to 2022–23 reveal no expenditure whatsoever on religious purposes. In fact, the trust has neither claimed any exemption under section 11 or 12 nor engaged in activities that attract the bar under Explanation 3. Accordingly, the trust qualifies for relief under section 80G(5B) as well, which permits incidental religious expenditure up to 5% of total income. However, even this provision has not been invoked in the assessee’s case, since there is no actual religious outgo reflected in the books. The AR submitted that the impugned order proceeds on a misinterpretation of the objects clause and fails to adopt the \"substance over form\" approach mandated by judicial discipline. The CIT(Exemption) has erred in concluding that the trust is not established solely for charitable purposes, despite the overwhelming documentary evidence to the contrary. The AR, therefore, prayed that the order passed under section 80G(5) be set aside and that the assessee be granted the approval sought. In the alternative, it was requested that the matter be remanded to the CIT(Exemption) for fresh consideration after examining the evidentiary materials now placed on record. 12. The learned Departmental Representative (DR) strongly supported the orders passed by the learned CIT(Exemption) in both proceedings under section 12AB and section 80G(5) and submitted that the impugned orders are reasoned, lawful, and passed in accordance with the provisions of the Act. The DR ITA No.1709 and 1710 /Ahd/2024 10 specifically invited the attention of the Bench to paragraphs 8 and 10 of the order rejecting registration under section 12AB, and paragraphs 8.1 to 10 of the order rejecting approval under section 80G(5) and submitted that the CIT(Exemption) has recorded categorical findings demonstrating non-compliance with statutory conditions by the assessee. 13. We have carefully considered the contentions advanced by the learned AR and the learned DR, perused the impugned orders passed by the learned CIT(Exemption), and examined the material available on record. The primary grievance of the assessee in both appeals is that the CIT(Exemption), while rejecting the applications, proceeded to do so without granting a fair and meaningful opportunity of hearing, particularly in respect of the submissions made regarding the mismatch in the name of the trust and the availability of updated documentation. It is the contention of the AR that the assessee had submitted its clarification regarding the mismatch in PAN name vis-à-vis the name in the trust deed, arising due to linguistic translation from Gujarati to English, and that a PAN correction application had already been made. It is further submitted that supporting material including photographs of charitable events, donor communications, and minutes of trustee meetings were offered but were not effectively considered. However, on scrutiny of the records and paper book, we find that the said documents, though referred to by the AR, were not placed on record either before the CIT(Exemption) or before us. The paper book is notably silent on such evidentiary support, and the trust’s reliance on bare ITA No.1709 and 1710 /Ahd/2024 11 assertions cannot, by itself, discharge the requirement of substantiating the genuineness of charitable activities. That being said, the orders passed by the CIT(Exemption) do reflect categorical findings to the effect that the assessee failed to comply with statutory conditions necessary for grant of registration and approval. In the order under section 12AB, the CIT(Exemption) has recorded that the financial statements from FY 2017–18 to FY 2022–23 reveal no expenditure traceable to charitable activities and that no verifiable documentary evidence was produced to establish the genuineness of claimed donor- sponsored programs. Likewise, in the context of section 80G(5), the CIT(Exemption) has observed that the trust’s Scheme of Administration contains objects that are religious in nature, and in the absence of any financial statements reflecting exclusive charitable expenditure or demonstrating adherence to the 5% threshold under section 80G(5B), the assessee could not be regarded as existing solely for charitable purposes. These findings are not lightly to be interfered with unless perverse or without basis. 14. At the same time, we are conscious of the settled principles laid down in judicial precedents, wherein it has been consistently held that the inquiry at the stage of registration or approval is confined to the assessment of objects and prima facie genuineness of activities, and not the actual quantification or application of funds which is subject to examination during regular assessment. Further, it has been judicially recognised that the presence of a single religious clause in a trust deed does ITA No.1709 and 1710 /Ahd/2024 12 not per se disentitle an institution from approval, provided that the trust is not found to be engaged in any actual religious activity or expenditure in violation of the governing thresholds under the Act. 15. We further observe that the CIT(Exemption), in both impugned orders, has not applied these settled interpretive principles while analysing the trust’s application. In the order under section 12AB, the rejection is primarily based on the absence of reported expenditure in the audited financials, without adequately appreciating the assessee’s explanation that its role was limited to facilitation of donor-supported charitable activity. No independent inquiry appears to have been made by the CIT(Exemption) to ascertain the genuineness of such activities, despite reference to photographs and donor records. Similarly, it has been emphasised that non-routing of donor- sponsored activities through books of account does not ipso facto negate the charitable nature of such acts, especially when the trust acts merely as an implementing or coordinating agency. These interpretive aids are relevant and must inform the re- examination of facts where the initial denial appears to have been grounded primarily in technical inconsistencies and lack of contemporaneous evidence. 16. Similarly, in the order under section 80G(5), the CIT(Exemption) has treated the presence of certain phrases such as “religious and charitable activities” and “giving gifts in temples” as conclusive of religious character, without ITA No.1709 and 1710 /Ahd/2024 13 undertaking a purposive reading of the trust deed in its entirety or examining whether such objects have ever been acted upon. The rejection appears to rest more on the form than on the substance of the trust’s functioning. In our view, such a formalistic approach is not consistent with the statutory mandate nor with the principles laid down by higher judicial fora. A meaningful evaluation of the trust’s conduct, its financials, and implementation of its stated objects is necessary before reaching a conclusion on whether it is entitled to approval or registration under the relevant provisions. 17. We also find it necessary to comment upon the observation made by the CIT(Exemption) in paragraph 11 of the impugned order passed under section 12AB, wherein it is noted that the trust, having been in existence since 1952, had not applied for registration under the earlier provisions of section 12A or 12AA and had chosen to apply only under the amended regime through Form No. 10AB. In our considered view, this reasoning is neither relevant nor determinative for disposal of the present application. The statute, as amended and the accompanying circulars and procedural forms, provide for different routes and timelines for fresh and re-registration applications, and the assessee’s choice to avail a particular route at a later point of time cannot by itself be a ground for drawing adverse inference against it. The eligibility or otherwise for registration must be tested on the basis of statutory compliance with the conditions stipulated under section 12A(1)(ac) and section 12AB, and not on the timing or delay in opting for such registration under the earlier regime. The ITA No.1709 and 1710 /Ahd/2024 14 legislative intent is to enable registration for genuine charitable institutions that come forward to comply under the new scheme, even if they had not previously availed exemption. The CIT(Exemption)’s observation on this point, therefore, is not germane to the core issue and unduly prejudices the assessment of the trust’s eligibility on merits. 18. Having regard to the totality of facts and circumstances, we are of the considered view that the rejection of registration under section 12AB and of approval under section 80G(5) was premature, particularly in light of the assessee’s claim that it was not afforded a full and effective opportunity to present updated and corrected documents, including the revised PAN, as well as evidentiary materials to establish the charitable character of its activities. The requirement under law is not merely procedural compliance, but adherence to the principles of natural justice and fair hearing. In our considered opinion, these requirements were not adequately fulfilled. 19. Before we conclude, we deem it necessary to place on record our serious displeasure at the manner in which certain submissions were made on behalf of the assessee during the course of the proceedings. The Authorised Representative (AR), both during oral arguments and in written submissions, made specific assertions that photographs evidencing charitable activities, donor acknowledgments, trustee meeting records, and other supporting materials had been filed and were part of the record. However, upon careful examination of the paper book, it ITA No.1709 and 1710 /Ahd/2024 15 is evident that no such documents were submitted before us. This amounts to a misstatement of fact and reflects a casual approach on the part of the AR, particularly in a matter involving statutory adjudication under sections 12AB and 80G(5). Furthermore, the assertion that the rejection of approval under section 80G(5) was merely consequential to the rejection under section 12AB is also factually incorrect, as the CIT(Exemption) passed two separate and independently reasoned orders, with the rejection under section 80G(5) being primarily on the ground of religious character of certain stated objects in the Scheme of Administration. While such misstatements have unnecessarily burdened the record and consumed judicial time, we have refrained from imposing cost, bearing in mind that the assessee should not suffer adverse consequences for factual misrepresentations made by its authorised representative, particularly in the absence of any indication of mala fide intent or wilful default on the part of the assessee. However, we caution that such lapses must not be repeated, and we expect a higher standard of professional responsibility from those appearing before this Tribunal. 20. In view of the foregoing, and in the interests of justice, we set aside both impugned orders passed by the CIT(Exemption) and restore the matters to the file of the CIT(Exemption) for fresh adjudication. The assessee shall be at liberty to file a complete set of supporting documents, including the corrected PAN, trust registration certificates, Scheme of Administration, audited accounts, and any evidences in support of its charitable ITA No.1709 and 1710 /Ahd/2024 16 activities, within a period of six weeks from the date of receipt of this order. The CIT(Exemption) shall thereafter take a fresh and independent decision on the merits of both applications after examining all documents filed and after granting reasonable opportunity of being heard. The CIT(Exemption) shall also ensure that the issues are adjudicated strictly in accordance with law and uninfluenced by the conclusions drawn in the earlier orders now set aside. 21. In view of the above, both the appeals are allowed for statistical purposes. Order pronounced in the Court on 5th June, 2025 at Ahmedabad. Sd/- Sd/- (SUCHITRA R. KAMBLE) JUDICIAL MEMBER (MAKARAND V. MAHADEOKAR) ACCOUNTANT MEMBER Ahmedabad, dated 05/06/2025 "