Loading judgment…
Facts
The assessee, Dr. Ambareesh Foundation, applied for registration under Section 12AB of the Income Tax Act, 1961. The application was delayed, and the CIT(E) rejected it citing insufficient substantiation of activities, lack of donor details for a significant donation, and unverified beneficiaries of smaller amounts. The assessee contended they were not given a proper opportunity to be heard on these specific grounds.
Held
The Tribunal held that the order rejecting the registration was not legally sustainable as the assessee was not provided with a reasonable opportunity to be heard on the specific grounds cited for rejection, which were not communicated prior to the denial. The matter was thus restored to the CIT(E) for reconsideration.
Key Issues
Whether the CIT(E) followed the due process by providing a reasonable opportunity of hearing to the assessee before rejecting the registration application under Section 12AB based on grounds not previously communicated.
Sections Cited
12AB
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH: BANGALORE
Before: SHRI PRASHANT MAHARISHI & SHRI SOUNDARARAJAN K.
Per Prashant Maharishi, Vice President
1. This appeal is filed by Dr. Ambareesh Foundation (the assessee/appellant/trust) against the order issued by The Commissioner Of Income Tax (Exemption), Bangalore (The ld. CIT(E)) dated 28 June 2025, in Form No. 10AD, which refused to Dr Ambareesh Foundation V CIT (Ex), Bangalore Page 2 of 5 grant registration to the trust under section 12AB of the Income Tax Act, 1961.
The assessee submitted Form No. 10 AB on 31 December 2024. This was after the deadline of 30 September 2024; however, an application for condonation of delay was also filed. The ld. CIT (E) indicated that no activities were conducted during the year, although the trust received a donation of ₹ 20 lakhs intended for building construction. Details regarding the donor were not provided. Additionally, the assessee reported assistance to three individuals, each receiving ₹ 50,000, but it could not be verified whether these beneficiaries were underprivileged. Based on their names, they may be doctors, sportspersons, or social workers. Furthermore, no substantiating evidence was furnished to demonstrate charitable activities or the allocation of income to charitable purposes.
The assessee is dissatisfied with the order and has filed an appeal before this tribunal. The authorized representative, Smt Jyothi Anumolu, advocate, contended that the CIT (Exemption) failed to provide an adequate opportunity for a hearing regarding the matters leading to the rejection of the assessee's registration application. She asserted that the trust received funds as the Government of Karnataka provided the donation. Additionally, the assessee maintained proper documentation regarding recipients, including a comprehensive list of activities, their purposes, and the names of beneficiaries. These expenditures were incurred in furtherance of the trust's objectives. She Dr Ambareesh Foundation V CIT (Ex), Bangalore Page 3 of 5 also stated that subsequently, a show cause notice was issued by the CIT (Exemption) on 21 May 2025, to which the assessee responded on 29 May 2025, addressing each query in detail. She emphasized that the assessee submitted complete books of accounts, bank statements, and audit reports to the CIT (Exemption). Nevertheless, instead of conducting an inquiry, the CIT (Exemption) promptly issued an order rejecting the trust’s registration request. She contended that, as these matters were not previously communicated to the assessee, they should not have been grounds for denial of registration. Furthermore, she referred to Section 12AB of the Act, underscoring that the assessee should have been afforded an opportunity for a hearing prior to the rejection of its application.
The CIT DR strongly supported the impugned n order, stating that while the assessee was given a hearing notice on 21 May 2025, the reply revealed that the trust's activities included reward/ donation to sportspersons, social activities, and doctors, who are not considered underprivileged. Additionally, the assessee failed to provide a list of donors for the ₹ 20 lakhs received, and these details were missing from their response.
After thoroughly evaluating the competing arguments and reviewing the orders issued by the learned CIT (Exemption), it is evident that the CIT (Exemption) has explicitly stated in paragraphs 5–8 of his order that the activities conducted by the assessee are insufficiently substantiated to warrant registration of the trust. Additionally, he Dr Ambareesh Foundation V CIT (Ex), Bangalore Page 4 of 5 noted the assessee's failure to provide details regarding the donor who contributed ₹ 20 lakhs, as well as clarification about the recipients of ₹ 50,000 each—whether they are doctors, sportspersons, or social activists—which does not establish them as underprivileged persons. Consequently, the application for registration was rejected.
However, upon examination of the notice issued by the CIT (Exemption) on 21 May 2025, it is clear that the grounds for rejection were not referenced therein. Moreover, the assessee's reply dated 29 May 2025 addressed all seventeen points raised by the CIT (Exemption), yet none of the issues cited for rejection were previously presented to or discussed with the assessee.
According to Section 12AB(1)(b)(ii)(B), if the CIT (Exemption) is unsatisfied with the trust’s objectives, the authenticity of its activities, or compliance with statutory requirements, an order must be passed only after providing the assessee with a reasonable opportunity to be heard. In this instance, no such opportunity was afforded, rendering the order legally unsustainable.
Considering the facts, we restore the assessee’s appeal to the file of the learned CIT (Exemption). The assessee is directed to regard the impugned order issued as show cause notice and furnishing the required information. Upon review, and after providing the assessee with an opportunity to be heard, the learned CIT (Exemption) shall Dr Ambareesh Foundation V CIT (Ex), Bangalore Page 5 of 5 reconsider and decide the matter of granting registration to the assessee under section 12AB of the Act.
In the result appeal filed by the assessee is allowed for statistical purposes. Pronounced in the open court on this 30th day of March, 2026.