ITAT: Provisional Registration Can’t Be Cancelled Without a Fair Hearing

The Assessee Foundation, registered under Section 8 of the Companies Act in 2017, was granted provisional registration under Section 12AB on 30.11.2022 for AYs 2023-24 to 2025-26. The trust applied for regular registration under Section 12A(1)(ac)(ii) via Form 10AB on September 18, 2023, which was within the statutory timeline. In response to notices issued by the CIT (Exemption), the trust submitted replies, including its reasons for not conducting charitable activities yet, citing donor hesitancy pending 80G approval.

The CIT (Exemption), however, rejected the application on 28.03.2024 and simultaneously cancelled the provisional registration, citing the absence of charitable activities in prior years, the non-genuine nature of operations, and insufficient documentation. Aggrieved, the assessee challenged the order before the ITAT.

Issue Raised: Whether the rejection of registration under Section 12A and cancellation of provisional registration were justified in the absence of charitable activities during the initial years.

ITAT’s Decision: The ITAT held that the CIT (Exemption) had prematurely rejected the application without considering the factual context, including the pending commencement of activities and submissions already filed by the trust. It found that the opportunity for full and fair consideration of documents was not afforded to the assessee.

In the interest of natural justice, the Tribunal remanded the matter back to the CIT(Exemption) to reconsider the application and documents afresh. The appeal was allowed for statistical purposes only, with directions for proper adjudication.

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