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Facts
The appellant, a charitable trust, applied for registration under Section 12AB and approval under Section 80G. The CIT(Exemption) rejected both applications based on the report of the jurisdictional Assessing Officer, citing unsatisfactory financial statements and the religious nature of some trust objects. The trust appealed these rejections.
Held
The Tribunal held that the CIT(Exemption) failed to provide the appellant with an opportunity for a hearing before relying on the Assessing Officer's report and did not apply independent judgment. The rejection of registration under Section 12AB violated principles of natural justice and the provisions of the Act.
Key Issues
Whether the CIT(Exemption) correctly rejected the applications for registration under Section 12AB and approval under Section 80G without adhering to principles of natural justice and without independent application of mind.
Sections Cited
12AB, 80G
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Income Tax Appellate Tribunal, “A” BENCH: BANGALORE
Before: SHRI PRASHANT MAHARISHI & SHRI SOUNDARARAJAN K.
IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH: BANGALORE BEFORE SHRI PRASHANT MAHARISHI, VICE PRESIDENT AND SHRI SOUNDARARAJAN K., JUDICIAL MEMBER & 2704/ Bangalore/ 2025 Assessment year : 2025 -26 Hoshahallyraya Trust Vs. The Commissioner of Income tax No. 22 4th model House Street Exemption Basavangudi Bangalore, Bangalore 560004 PAN: AACTH6531K APPELLANT RESPONDENT Appellant by : None Respondent by : Shri Shivanand Kalakeri CIT(DR)(ITAT), Bengaluru. Date of hearing : 24.02.2026 Date of Pronouncement : 30.03.2026 O R D E R
Per Prashant Maharishi, Vice President
1. The Appellant has submitted two appeals before this Tribunal challenging the orders issued by the respondent in relation to applications filed in Form No. 10AB dated 30 September 2024, seeking registration under Section 12AB of the Income Tax Act, 1961 (the Act), as well as approval under Section 80G(5) of the Act. These applications were rejected by orders dated 25 March 2025.
Briefly facts shows that Appellant is charitable trust constituted by the registered deed dated 20th May 2022 with objects to establish and support educational and vocational institutions, grant scholarships to poor students, and conduct charitable activities including anna dasoha. Appellant filed application in form number 10 AB on 30th September 2024 seeking registration under section 12AB of the Income Tax Act, 1961.
The learned Commissioner of Income Tax [Exemption] Bengaluru [ CIT [Exemption]] as per order dated 25th of March 2025 in form 10AD rejected the application. Reasons for rejection were that the financial statement shows expenditure which are not satisfactory for the purpose of conducting charitable activities by the trust and secondly the object also include teaching of Veda and Upanishads and spreading of Sanatan Dharma which indicate towards religious nature of the trust. Therefore, he did not grant the registration. Rejection was based on the recommendation of the jurisdictional Assessing Officer who verified the details and held so.
Similarly, simultaneously Appellant also filed an application in form number 10 AB on 30th September 2024 seeking registration under section 80G [5] of the act. The learned CIT exemption also rejected the same in form number 10AD on 25th of March 2025 stating that the 12 AB registration is rejected and therefore there is no reason to grant their recognition u/s 80G [5] of the act. He also gave his own reason in the order.
Aggrieved by both the orders, Appellant has filed these appeals. The appeals were called for hearing on 24th February 2026 on which date none appeared on behalf of the Appellant.
The learned CIT departmental representative submitted that the matter may be restored to the file of the learned Commissioner of Income Tax exemption as the application made is a rejected by CIT [Exemption] without giving any finding but merely following the report of the jurisdictional Assessing Officer.
We have carefully considered the contention of the learned departmental representative. The facts clearly shows that Appellant filed an application in form number 10 AB on 30th September 2024 for registration under section 12AB of the Income Tax Act. The CIT exemption assigned the case to the jurisdictional Assessing Officer for verification. The jurisdictional Assessing Officer issued letters and notices to the Assessee. On the basis of submission made by Appellant, the range head and the jurisdictional Assessing Officer did not recommend for registration and reasons mentioned in the report were given to be that (i) on perusal of the information submitted of the financial statement as on 31st of March 2023 and 31st of March 2024 clearly shows that the Appellant has incurred small expenditure of ₹ 98,160/- and also received small donation of ₹ 1,04,370/-. In the income and expenditure account for the year ended on 31st of March 2024 there is a miniscule expenditure of Rs. 39,045/-. Thus, the Assessing Officer held that financial statements do not appear
satisfactory for the purpose of conducting charitable activities by the trust. (ii) secondly it was also stated that Appellant has applied for form number 10 AB as a charitable trust which object also include teaching of Vedas and Upanishads and spreading of Sanatan Dharma which indicate towards religious nature of the trust and therefore registration under section 12 AB of the act was not recommended. The Ld. CIT exemption in paragraph number one produced the inquiry report of the jurisdictional Assessing Officer and in paragraph number 2 has in one line categorically held that the registration application under section 12 AB is rejected and registration cancelled.
Similarly for application for approval under section 80G [5] of the Act. Appellant was granted an opportunity of hearing. Based on the financial statements for the year ended on 31st of March 2023, 31st of March 2024 and provisional annual accounts up to 8th January 2025 were verified and found that these are small expenditure for the Anna dasoha expenses, salary, purchase of groceries, gas, and fuel etc. Based on the above financial statements, the learned CIT exemption concluded that Appellant has not uniformly maintained books of accounts. For one year the Appellant has disclosed the donation in the income particulars whereas in the subsequent year it removed that income portion against the corresponding year and reported in the corpus account. The copies of the income and expenditure account were also analysed by the CIT exemption and held that Assessee is repeatedly mistaking in reporting the amounts in the financial statements. He also looked at the bank statement and tabulated the credits, debits, total donations, and total expenses from there in. He held that amount of donation shown did not match with the bank statement and further similarly for the expenses made by trust there is a huge margin between the claimed expenses and the total debit entries in the bank statement. Therefore, he held that it is evident that Assessee either received the donations from other than the banking channel or reported false amounts in the financial statement. Based on the above facts, he concluded that the Assessee is habitual defaulter in reporting the actuals in the financial statement in each year. Further Assessee failed to furnish the documentary evidence to support the claim. Accordingly, the application in form number 10 AB dated 30th September 2024 filed for approval under section 80G (5) of the act was also rejected by order dated 25th of March 2025.
It is evident that without obtaining registration under Section 12AB of the Income Tax Act, the Assessee cannot avail recognition under Section 80G. Accordingly, it is essential for the Assessee to first demonstrate eligibility for registration under Section 12AB of the Income Tax Act. In the issue revolves around whether the Assessee should receive registration under section 12AB of the act. The jurisdictional Assessing Officer's report cites two main reasons: firstly, that the trust’s objectives include teaching the Vedas and Upanishads along with promoting Sanatan Dharma, which points to the religious nature of the trust. However, section 12AB does not prohibit the registration of charitable trusts with religious aims as part of their objectives, making this second reason invalid and inconsistent
with the law. The first reason given by the assessing officer concerns the adequacy of the financial statements for supporting charitable activities. Upon reviewing these financial statements, it is noted that for the year ending March 31, 2023, the Assessee received ₹ 1,104,370/- in donations and spent ₹ 98,600/-; this expenditure covered salaries, groceries, gas, and fuel categorized under Anna Dasoha expenses. For the following year, ending March 31, 2024, overall expenses totaled ₹ 39,450/-, primarily administrative in nature. Therefore, the jurisdictional Assessing Officer concluded that the financial statements are not sufficiently satisfactory for conducting the trust’s charitable work.
The learned CIT (Exemption) is certainly authorised to obtain a report from the jurisdictional Assessing Officer. However, upon receiving such a report, it is incumbent upon the CIT (Exemption) to present its contents to the Assessee and provide an opportunity for hearing. Subsequently, the CIT (Exemption) must exercise independent judgement and make a fresh determination of the issue. In this instance, the CIT (Exemption), without due application of independent assessment, appears to have relied solely on the report provided by the jurisdictional Assessing Officer and summarily concluded that the Assessee is not entitled to registration under section 12AB of the Act.
We do not find that the Learned CIT exemption has followed the provisions of section 12 AB of the act which categorically says that if he is not of the view that Assessee should be granted registration under section 12AB of the act, first the opportunity of hearing should be given by him [not by the jurisdictional Assessing Officer] and there after pass a reasoned order for rejection.
In this case he has not followed the provision of the law while deciding the application for registration under section 12 AB of the act. We have also perused the order for rejecting recognition under section 80G of the act, where he has given detailed reasons for rejection of recognition, which are also relevant for registration of the trust under section 12 AB of the act.
In view of this fact, the order of the ld. CIT (exemption) not granting Assessee registration under section 12 AB of the act suffers from the defect of violation of the principles of natural justice as well as against the provisions of the act. In view of this, the order passed by the learned CIT exemption dated 25th of March 2025 rejecting the registration application for registration under section 12 AB of the act is not sustainable. Accordingly, same is set aside.
The learned CIT exemption is directed to grant the fresh opportunity of hearing based on the report of the jurisdictional Assessing Officer to give rebuttal, and thereafter, after application of his own mind, pass an order on its merit afresh. The Appellant is also directed to submit the necessary details on the issues raised by the jurisdictional Assessing Officer recommending refusal to give registration and the observation of the CIT Exemption in rejecting the recognition under section 80G of the act.
The next Appeal is for the purpose of granting recognition to the Assessee under section 80G of the Act. We find that unless Assessee is given registration under section 12 AB of the act, the application for recognition under section 80G could not have been decided. It is also true that the fate of the recognition under section 80G to the Appellant would be based on claim of the Assessee for registration under section 12 AB of the act.
As we have already restored the Appeal for registration under section 12 AB of the act to the ld. CIT exemption, we also restored the Appeal against the rejection of registration under section 80G of the act to CIT exemption, with a direction to the Assessee to submit the necessary details as commented by the ld. CIT exemption in that order. Thereafter the CIT (Exemption) may decide the issue of fresh.
In the result, we restore both the Appeals to the file of the learned CIT (exemption) with a direction to the Assessee, also, as indicated above.
We allow both the appeals for statistical purposes. Pronounced in the open court on this 30th day of March, 2026.