Income Tax Appellate Tribunal orders fresh examination of registration and approval applications by Hasaniya Healthcare Sarvajanik Trust

Case Name:

Hasaniya Healthcare Sarvajanik Trust vs. The CIT (Exemptions), Ahmedabad

Key Takeaways:

1. The appeals were filed by Hasaniya Healthcare Sarvajanik Trust against the orders of the CIT (Exemptions) rejecting their applications for registration under Section 12AB (of Income Tax Act, 1961) and approval under Section 80G(5) (of Income Tax Act, 1961).
2. The trust was incorporated with the objective of providing medical relief without discrimination. They run a medical hospital called “Fatema Hospital” in Himatnagar.
3. The trust was granted provisional registration under Section 12AB (of Income Tax Act, 1961) for the assessment years 2021-22 to 2023-24. They subsequently filed an application for final registration and approval under Section 80G(5) (of Income Tax Act, 1961).
4. The CIT (Exemptions) issued a questionnaire to the trust regarding the grant of registration. The trust responded to the questionnaire but the CIT observed inconsistencies in the details filed by the trust.
5. Without giving the trust an opportunity to clarify the discrepancies, the CIT rejected the applications for registration and approval. The trust filed an appeal against these orders.
6. The trust explained that the delay in filing the appeal was due to a mistake by their Chartered Accountant, who believed that a fresh application was required after the rejection of the initial application.
7. The trust argued that the rejection of the applications was against the principles of natural justice as they were not given an opportunity to explain the discrepancies.
8. The Income Tax Appellate Tribunal condoned the delay in filing the appeals and observed that the contradictions in the application and subsequent replies were due to an inadvertent mistake by the trust’s staff.
9. The Tribunal concluded that the matter should be sent back to the CIT (Exemptions) for fresh examination and adjudication, giving the trust a fair opportunity to present its case on merits.
10. Both appeals were allowed for statistical purposes, and the orders were pronounced on October 30, 2023.

Case Synopsis:

This is an order from the Income Tax Appellate Tribunal, “D” Bench, Ahmedabad, in the case of Hasaniya Healthcare Sarvajanik Trust vs. The CIT (Exemptions), Ahmedabad. The order was pronounced on October 30, 2023.

The appeals were filed by the assessee (Hasaniya Healthcare Sarvajanik Trust) against the orders dated November 29, 2022, passed by the ld. CIT (Exemptions), rejecting the applications filed by the assessee for grant of registration under Section 12AB (of Income Tax Act, 1961) of the Income Tax Act and application seeking approval under Section 80G(5) (of Income Tax Act, 1961) of the Act.



The brief facts of the case are as follows:

The assessee is a charitable trust incorporated on November 6, 2020, with the objective of providing medical relief without any discrimination on the basis of caste, creed, or religion. The trust is running a medical hospital named “Fatema Hospital” in Himatnagar.

The trust was granted provisional registration under Section 12AB (of Income Tax Act, 1961) of the Act with effect from May 27, 2021, for AYs 2021-22 to 2023-24. The trust filed Form No.10AB on May 7, 2022, for seeking final registration under Section 12A(1)(ac)(iii) (of Income Tax Act, 1961) of the Act.

The trust also filed an application seeking approval under Section 80G(5) (of Income Tax Act, 1961) on May 9, 2022. The ld. CIT (Exemptions) issued a questionnaire to the assessee-trust on October 17, 2022, regarding the grant of registration under Section 12A(1)(ac)(iii) (of Income Tax Act, 1961). The trust responded to the questionnaire on November 7, 2022. However, the ld. CIT (Exemptions) observed certain inconsistencies in the details filed in Form No.10AB and the response filed by the assessee-trust.

Without giving the assessee-trust an opportunity to provide clarifications on the discrepancies, the ld. CIT (Exemptions) passed an order on November 29, 2022, rejecting the application for grant of registration under Section 12AB (of Income Tax Act, 1961) of the Act. The application seeking approval under Section 80G(5) (of Income Tax Act, 1961) was also rejected by the ld. CIT (Exemptions) on the same date.

The assessee filed an appeal against these orders, stating that there was a delay of 129 days in filing the appeal due to a mistake made by the Chartered Accountant of the assessee-trust. The Chartered Accountant mistakenly believed that a fresh application was required to be filed after the rejection of the application for regular registration. The delay was condoned by the Tribunal.

On the merits of the case, the assessee argued that the discrepancies in the information filed in Form No.10AB were due to a mistake made by the office of the Chartered Accountant. The trust clarified in subsequent replies that it was not involved in any activities in the nature of trade, commerce, or business. However, the ld. CIT (Exemptions) rejected the application without giving the assessee an opportunity to explain the contradictions.

The Tribunal observed that the discrepancies were due to an inadvertent mistake and that the ld. CIT (Exemptions) did not afford the assessee an opportunity to explain the contradictions. Therefore, the matter was sent back to the ld. CIT (Exemptions) for fresh examination and adjudication in accordance with the law.

In conclusion, both appeals filed by the assessee were allowed for statistical purposes, and the matter was sent back to the ld. CIT (Exemptions) for further examination and adjudication.

FAQ:

Q1: What were the appeals filed by Hasaniya Healthcare Sarvajanik Trust about? A1: The appeals were filed against the rejection of the trust’s applications for registration under Section 12AB (of Income Tax Act, 1961) and approval under Section 80G(5) (of Income Tax Act, 1961).

Q2: What is the objective of Hasaniya Healthcare Sarvajanik Trust?

A2: The trust was incorporated with the objective of providing medical relief without discrimination based on caste, creed, or religion.

Q3: What is the name of the hospital run by the trust?

A3: The trust runs a medical hospital called “Fatema Hospital” in Himatnagar.

Q4: Why were the applications for registration and approval rejected?

A4: The applications were rejected due to inconsistencies and discrepancies in the details filed by the trust.

Q5: What was the reason for the delay in filing the appeals?

A5: The delay was due to a mistake by the trust’s Chartered Accountant, who believed that a fresh application was required after the rejection of the initial application.

Q6: What did the Income Tax Appellate Tribunal conclude?

A6: The Tribunal concluded that the matter should be sent back to the CIT (Exemptions) for fresh examination and adjudication, giving the trust a fair opportunity to present its case on merits.

These are appeals filed by the assessee against the orders dated 29.11.2022, passed by the ld. CIT (Exemptions), rejecting the applications filed by the assessee for grant of registration under Section 12AB (of Income Tax Act, 1961) and application seeking approval under Section 80G(5) (of Income Tax Act, 1961).

2. The brief facts of the case are that the assessee is a charitable trust incorporated on 06.11.2020. Thetrust was incorporated with the object of providing medical relief without any discrimination on the basis of caste, creed or religion. The trust is running a medical hospital at Himatnagar in the name of “Fatema Hospital”. The assessee trust was granted provisional registration under Section 12AB (of Income Tax Act, 1961) with effect from 27.05.2021 for AYs 2021-22 to 2023-24 by ld. CIT (Exemptions), Ahmedabad. The assessee- trust thereafter filed Form No.10AB on 07.05.2022 for seeking final registration under Section 12A(1)(ac)(iii) (of Income Tax Act, 1961). The assessee-trust also filed an application seeking approval of the trust under Section 80G(5) (of Income Tax Act, 1961) on 09.05.2022.

3. With respect to grant of registration under Section 12A(1)(ac)(iii) (of Income Tax Act, 1961), the assessee-trust was issued a questionnaire by ld. CIT(Exemptions) on 17.10.2022 which was responded to by the assessee-trust on 07.11.2022. The ld. CIT(Exemptions), Ahmedabad observed certain inconsistencies in the details filed in Form No.10AB and the response filed by the assessee-trust on 07.11.2022. According to the assessee, ld. CIT(Exemptions), without giving the assessee-trust an opportunity to give any clarifications with respect to the said discrepancies, passed an order dated 29.11.2022 in Form No.10AB of the Act, rejecting the application filed in From No.10AB for grant of registration under Section 12AB (of Income Tax Act, 1961). Further, the application of the assessee seeking approval of the trust under Section 80G(5) (of Income Tax Act, 1961) dated 09.05.2022 was also rejected by the ld. CIT(Exemptions) vide order dated 29.11.2022.

4. The assessee is in appeal before us against the aforesaid orders passed by the ld. CIT(Exemptions), Ahmedabad, rejecting the assessee’s application for grant of registration under Section 12A(1)(ac)(iii) (of Income Tax Act, 1961) and also assessee’s application seeking approval under Section 80G(5) (of Income Tax Act, 1961).

5. Before us, ld. Counsel for the assessee submitted that there is a delay of 129 days in filing of the present appeal, primarily on account of mistake committed by the concerned Chartered Accountant of the assessee-trust, who was assisting the assessee-trust in obtaining grant of registration under Section 12AB (of Income Tax Act, 1961) and Section 80G(5) (of Income Tax Act, 1961) before the ld. CIT(Exemptions), Ahmedabad. It was submitted that the trust initially filed application for provisional registration and thereafter filed application for regular registration; however, the application was rejected by ld. CIT(Exemptions) on account of certain discrepancies observed by him, vide order dated 29.11.2022. The ld. Counsel for the assessee filed affidavit of the concerned Chartered Accountant who stated that he was under the bona fide belief that upon rejection of application for grant of regular registration, a fresh application is required to be filed for seeking regular registration.

Accordingly, the assessee-trust, upon the advice of the concerned Chartered Accountant, again tried to apply for regular registration; however, the online functionality did not allow the assessee-trust to again file Form No.10AB, seeking fresh registration. However, later upon realizing the mistake, the concerned Chartered Accountant advised the assessee-trust to file appeal against the orders passed by ld. CIT(Exemptions) rejecting the application for grant of registration under Section 12AB (of Income Tax Act, 1961) and grant of deduction under Section 80G(5) (of Income Tax Act, 1961). Accordingly, it was submitted that the delay of 129 days in filing of the present appeal was due to the bonafide mistake of the Chartered Accountant of the assessee-trust and the application for condonation of delay has been filed, duly supported by affidavit of the Chartered Accountant, who has admitted that the aforesaid delay in filing of the present appeals was due to a bona fide mistake on his part.

6. On merits, the ld. Counsel for the assessee submitted that the assessee is running a charitable hospital. However, due to the mistake of the office of the Chartered Accountant, there were certain apparent discrepancies in the information filed in Form No.10AB, wherein the concerned Chartered Accountant inadvertently stated that the assessee is carrying on activities in the nature of trade, commerce or business. However, in a subsequent reply to a questionnaire issued by ld. CIT(Exemptions), the assessee-trust submitted that it does not have any business undertaking under the provisions of Section 11(4) (of Income Tax Act, 1961) or 11(4A) (of Income Tax Act, 1961). Further, while giving undertaking in respect of compliance under Section 2(15) (of Income Tax Act, 1961), the assessee-trust gave an undertaking that the objects and activities of the trust does not involve carrying on any activities in the nature of trade, commerce, business etc.. Accordingly, it was submitted that ld. CIT(Exemptions), in view of the aforesaid discrepancies in the From No.10AB filed by the assessee-trust and the subsequent replies filed by the assessee-trust in response to questionnaires issued by ld. CIT(Exemptions), rejected the application for grant of registration under Section 12AB (of Income Tax Act, 1961), without confronting the assessee and without giving any opportunity of hearing to the assessee to give any explanation in respect of the above contradictions.

Accordingly, it was submitted that the order was passed by ld. CIT(Exemptions) against the principle of natural justice, without giving the assessee-trust of fair opportunity to present its case on merits and to give explanation with respect to discrepancies/contradictions between From No.10AB filed by the assessee-trust and the subsequent clarifications/ replies filed by the assessee. It was submitted that the ld. CIT(Exemptions) simply rejected the application filed by the assessee for grant of regular registration under Section 12AB (of Income Tax Act, 1961) and deduction under Section 80G(5) (of Income Tax Act, 1961), upon noticing the aforesaid discrepancies, which were submitted inadvertently by the staff of Chartered Accountant, assisting the assessee-trust and no opportunity was granted to the assessee to give any clarification/reply/justification in support of the aforesaid contradictions.

Accordingly, in light of the above facts, it was submitted that, in the interests of justice, the matter may be sent back to the file of ld. CIT(Exemptions), Ahmedabad for fresh examination/adjudication in accordance with law.

7. In response, ld. DR relied on the observations made by ld. CIT(Exemptions) while rejecting grant of approval under Section 12AB (of Income Tax Act, 1961) and under Section 80G(5) (of Income Tax Act, 1961).

8. On going through the facts of the instant case, we observe that the delay in filing of the present appeals was on account of bona fide mistake on the part of the concerned Chartered Accountant, which led to the delay in filing of the present appeals before us. Accordingly, looking into the facts of the instant case, in our considered view, it is a fit case for condoning the delay in filing of the instant appeals. Accordingly, looking into the facts of the present case, the delay in filing of the present appeals are hereby condoned.

9. On merits, we observe that there were certain apparent contradictions in Form No.10AB filed by the assessee-trust for grant of registration under Section 12AB (of Income Tax Act, 1961) and the subsequent replies filed by the assessee-trust in response to questionnaire issued by ld. CIT(Exemptions). On perusal of the facts of the case, it is observed that the same were on account of inadvertent mistake by the staff of the concerned Chartered Accountant, who, at the time of filing of Form No.10AB, incorrectly interpreted the medical store at the hospital run by the assessee-trust as “business” and accordingly submitted that the assessee is engaged in carrying out business activities. However, subsequently, in reply to questionnaire issued by the ld. CIT(Exemptions), the assessee-trust submitted that it is not involved in carrying out any activities in the nature of trade, commerce or business. The ld. CIT(Exemptions), Ahmedabad rejected the application filed by the assessee for grant of registration on the basis of the aforesaid contradictions in the application and replies filed by the assessee-trust. However, we observe that while rejecting the application for grant of registration, no opportunity was afforded to the assessee to give any explanation in support of the aforesaid discrepancies/contradictions and the ld. CIT(Exemptions) proceeded to summarily dismiss the applications of the assessee, without giving a fair hearing to the assessee to present its case on merits and to explain the contradictions/discrepancies. Accordingly, in the interests of justice, the matter is being restored to the file of the ld. CIT(Exemptions) to hear the matter afresh on merits with respect to application for grant of registration under Section 12AB (of Income Tax Act, 1961) and Section 80G(5) (of Income Tax Act, 1961) and pass appropriate order in accordance with law, after giving due opportunity of hearing to the assessee to present its case on merits.

10 In the result, both the appeals filed by the assessee are restored to the file of the ld. CIT(Exemptions), Ahmedabad with the aforesaid directions.

11. In the result, both the appeals of the assessee are allowed for statistical purposes.

Order pronounced in the open Court on 30/10/2023 at Ahmedabad.

Sd/-

(ANNAPURNA GUPTA)

ACCOUNTANT MEMBER

Sd/-

(SIDDHARTHA NAUTIYAL)

JUDICIAL MEMBER