Facts of the Case

The petitioner, Hunger Heroes, had initially obtained registration under Section 12A of the Income Tax Act on 18.11.2016 and was subsequently granted provisional registration on 28.05.2021 pursuant to statutory amendments effective from 01.04.2021.

In compliance with the amended provisions, the petitioner filed an application in Form 10AB seeking regular registration. The Commissioner of Income Tax (Exemption), Delhi issued multiple notices and queries, which were duly responded to by the petitioner.

Meanwhile, an assessment under Section 143(3) for AY 2020-21 was completed, wherein the Assessing Officer examined relevant financial documents and accepted the petitioner’s income as “nil”, granting exemption on the basis of charitable activities.

Despite this, the CIT (Exemption) rejected the petitioner’s Form 10AB application vide order dated 28.11.2022, effectively impacting its registration status.

Issues Involved

  1. Whether the rejection of the application under Section 12A(1)(ac)(v) without considering relevant assessment records was valid.
  2. Whether the CIT (Exemption) failed to consider material evidence, including the assessment order under Section 143(3).
  3. Whether the petitioner should be relegated to filing a fresh application or appeal instead of judicial intervention.

Petitioner’s Arguments

  • The petitioner contended that it had valid registration and had complied with all statutory requirements under the amended regime.
  • It was argued that detailed replies were furnished to all notices issued by the CIT (Exemption).
  • The assessment order under Section 143(3), wherein the petitioner’s charitable activities were accepted and income assessed as nil, was not considered by the authority.
  • The rejection order was therefore arbitrary and unsustainable in law.

Respondent’s Arguments

  • The Revenue submitted that only the application in Form 10AB was rejected and the existing registration under Sections 12A and 80G continued to remain valid.
  • It was argued that there was no violation of principles of natural justice.
  • The petitioner could alternatively file a fresh application or prefer an appeal before the Income Tax Appellate Tribunal under Section 253(1)(c).

Court’s Findings

  • The Court observed that the assessment order passed under Section 143(3), accepting the petitioner’s income as nil and recognizing its charitable activities, was a crucial piece of evidence.
  • It noted that the CIT (Exemption) failed to consider this material while passing the impugned order.
  • The Court held that ignoring such relevant material amounted to a serious flaw in the decision-making process.
  • The suggestion to file a fresh application was held to be inefficient and not an appropriate remedy in the circumstances.

Court Order

  • The impugned order dated 28.11.2022 was set aside.
  • The matter was remanded to the CIT (Exemption), Delhi for fresh adjudication.
  • The authority was directed to provide adequate opportunity of hearing and pass a reasoned (speaking) order.
  • Liberty was granted to the petitioner to challenge any adverse order in accordance with law.

Important Clarification

  • The Court clarified that the existing registration of the petitioner under Section 12A remained operative.
  • The decision emphasized that relevant assessment findings must be duly considered while deciding registration applications.
  • Filing a fresh application is not always an efficacious remedy when a detailed application is already pending.

Sections Involved

  • Section 12A(1)(ac)(v), Income Tax Act, 1961
  • Section 12A(b), Income Tax Act, 1961
  • Section 80G, Income Tax Act, 1961
  • Section 143(3), Income Tax Act, 1961
  • Section 142(1), Income Tax Act, 1961
  • Section 253(1)(c), Income Tax Act, 1961

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/59016122022CW166812022_190006.pdf

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