Facts of the Case

The assessee, Shrimad Dayanand Shiksha Samiti, Bhilwara, filed applications seeking registration under Section 12AA of the Income-tax Act and approval under Section 80G. These applications were initially rejected by the CIT (Exemption) vide orders dated 31.07.2019. On appeal, the ITAT Jaipur Benches, vide order dated 03.09.2020, restored both applications to the file of the CIT (Exemption) for fresh examination and disposal in accordance with law. After restoration, the CIT (Exemption) again rejected the applications vide order dated 07.06.2024 on the grounds of non-genuineness of activities and non-registration under the Rajasthan Public Trust Act, 1959. The application under Section 80G was also rejected consequentially. Aggrieved, the assessee filed appeals before the Tribunal, resulting in the second round of litigation.

Issues Involved

Whether the CIT (Exemption) was justified in rejecting the applications under Sections 12AB and 80G on the grounds of non-genuineness of activities and non-registration under the Rajasthan Public Trust Act, whether the assessee was afforded adequate opportunity to comply with the notices issued after remand, and whether the matters deserved to be restored for fresh adjudication in the interest of natural justice.

Petitioner’s Arguments

The assessee contended that upon restoration by the ITAT in the first round, the scope before the CIT (Exemption) was limited to verification of self-attested or self-certified documents already on record and grant of registration. It was argued that the CIT (Exemption) exceeded jurisdiction by calling for extensive details and rejecting the applications. Alternatively, the assessee submitted that due to a mistaken understanding of the remand directions, required details were not furnished and requested that one more opportunity be granted to place all relevant documents on record.

Respondent’s Arguments

The Revenue submitted that the remand order of the ITAT clearly directed the CIT (Exemption) to examine the issues afresh and decide the applications in accordance with law. It was contended that despite multiple notices and opportunities, including detailed show cause notices, the assessee failed to furnish essential documents to establish genuineness of activities, regulatory approvals, financial statements, and compliance with the Rajasthan Public Trust Act. However, the Revenue did not object to restoration of the matters if the Tribunal deemed it appropriate in the interest of justice.

Court Order / Findings

The ITAT Jaipur held that the earlier remand by the Coordinate Bench did not dispense with the requirement of verification by the CIT (Exemption) and that the assessee was required to comply with the notices issued. The Tribunal observed that the assessee repeatedly failed to furnish the information sought, including financial statements, regulatory approvals, fee structure, salary details, and proof of registration under the Rajasthan Public Trust Act, which prevented the CIT (Exemption) from verifying the genuineness of activities. However, considering the peculiar facts, the mistaken belief of the assessee regarding the scope of remand, and the request made before the Tribunal for one final opportunity, the Tribunal held that the ends of justice would be met by restoring both applications to the file of the CIT (Exemption) for fresh adjudication. The Tribunal directed that the assessee be permitted to file self-attested or self-certified copies of all relevant documents for verification.

Important Clarification

The Tribunal clarified that while charitable registration requires verification of genuineness of activities and statutory compliance, matters should be decided on merits after granting effective opportunity. Non-compliance arising from misunderstanding of remand directions, where admitted and sought to be rectified, warrants restoration for fresh adjudication in the interest of natural justice.

Final Outcome

Both appeals filed by the assessee were allowed for statistical purposes. The orders passed by the CIT (Exemption), Jaipur rejecting the applications under Sections 12AB and 80G were set aside, and the matters were restored to the file of the CIT (Exemption) for decision afresh after granting another opportunity of being heard to the assessee and permitting submission of all relevant documents.

Link to Download Order- https://www.mytaxexpert.co.in/uploads/1768995051_SHRIMADDAYANANDSHIKSHASAMITIBHILWARA2.pdf 

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