ITAT Trust’s 12A Registration Application After Short Notice Period Violated Natural Justice

ITAT Restores Trust’s 12A Registration Application After Short Notice Period Violated Natural Justice

The assessee applied for Form 10AB seeking registration under Section 12A(1)(ac)(iii) of the Income Tax Act. The CIT (Exemption) issued a notice through the ITBA portal asking for clarifications and documents. The assessee, however, failed to respond. The CIT(E) rejected the application and cancelled its provisional registration under Section 12AB, citing failure to verify the genuineness of activities as required under Section 12AB(1)(b)(i).

The assessee appealed, arguing that the time allowed for compliance was unreasonably short, contrary to the CBDT’s Standard Operating Procedure mandating at least 15 days. It relied on the High Court’s ruling in Dauphin Travel Marketing Pvt. Ltd. v. ITO, where insufficient response time was held to violate principles of natural justice. The assessee also contended that the lapse occurred due to its Chartered Accountant’s preoccupation, but it was now ready to submit the required documents.

Issue Raised: Whether rejection of the trust’s application for registration under Section 12A and cancellation of provisional registration under Section 12AB were valid when the assessee was given insufficient time to comply with notices.

ITAT’s Decision: The Tribunal allowed the appeal for statistical purposes, remanding the matter to the CIT(E) for fresh adjudication. It held that in the interest of justice, the assessee must be given one final opportunity to submit the required details before the authority.

The tribunal held that although the CIT(E) had issued notices, the compliance period provided was contrary to the CBDT SOP, which requires a minimum of 15 days. It observed that denying the assessee reasonable time to respond was against the very object of Section 12A, which is to support charitable institutions in obtaining tax benefits for genuine activities. Referring to Dauphin Travel Marketing Pvt. Ltd., the Tribunal held that such short deadlines violated natural justice and fair play. Therefore, it directed the CIT(E) to grant one last opportunity for compliance, warning the assessee to avoid seeking adjournments, and authorized the CIT(E) to pass an appropriate order in case of further default.

To Read Full Judgment, Download PDF Given Below