NERALU FOUNDATION,BANGALORE vs. CIT(EXEMPTIONS), BANGALORE, BANGALORE

PER SHRI WASEEM AHMED, ACCOUNTANT MEMBER: These two appeals filed at the instance of the assessee are directed against the separate order of the learned Commissioner of Income Tax (Exemption)- Bangalore (hereafter Ld. CIT-E) under section 12AB(1)(b) and section 80G(5) of the Income Tax Act, 1961 (hereafter the Act).

First, we take up the appeal of the assessee in ITA No. 2829/Bang/2025 2. The interconnected issue raised by the assessee is that the Ld. CIT-E erred in rejecting the application for registration under section 12AB of the Act without properly appreciating the transactions and material facts regarding the charitable activity carried out by it.

4.1 From the financial statement for the year ending 31st March 2022, the Ld. CIT- E observed that the assessee trust has claimed expenditure toward the object being payment of Rs. 1.5 lakh to Sparsh Trust on 25th March 2022 and Rs. 40000 for medical relief. On verification of bank statements, the Ld. CIT-E found that on 25th March 2022 there were no payments to Sparsh Trust but Rs. 1.5 lakh was withdrawn from the bank through a self-cheque. Accordingly, the Ld. CIT-E held that the claim of payment of Rs. 1.5 lakh on 25th March 2022 to Sparsh Trust toward furtherance of the object is not supported by the bank. Hence, the application for registration was rejected vide order dated 26th March 2025 holding that the activity of the assessee is not charitable.

4.1 After the rejection of the application vide order dated 26th March 2025, the assessee filed a fresh application in Form-10AB as on 31st March 2025. The ld. CIT-E, without going into the details of the fresh application, held that the previous application for the same period was rejected by his office. The assessee did not file an appeal against that order. Hence, the ld. CIT-E order dated 25-03-2025 reached finality. Accordingly, the fresh application was also rejected vide order dated 24th September 2025.

8.1 The assessee thereafter filed Form No. 10AB on 25.09.2024 seeking regular registration and furnished, among other documents, financial statements for F.Ys. 2021-22, 2022-23 and 2023-24. While examining the financial statements for F.Y. 2021-22, the learned CIT(E) noticed that the assessee had claimed expenditure of Rs. 1,50,000/- stated to have been paid to Sparsh Trust towards its objects. On verification of the bank statement, the learned CIT(E) noticed that the amount of Rs. 1,50,000/- had been withdrawn through a self-cheque. On this basis, the learned CIT(E) doubted the payment to Sparsh Trust and concluded that the activities of the assessee were not charitable. Consequently, the application was rejected vide order dated 26.03.2025.

8.2 Thereafter, the assessee filed a fresh application in Form No. 10AB on 31.03.2025. The learned CIT(E), however, did not examine the fresh application on its own merits and rejected the same mainly on the ground that the earlier application for the same period had already been rejected and the assessee had not challenged that order in appeal. According to the learned CIT(E), the earlier order had attained finality. Accordingly, the fresh application was rejected vide order dated 24.09.2025.

8.3 On consideration of the facts, we are unable to sustain the approach adopted by the learned CIT(E). In the earlier application, the financial statements placed before the learned CIT(E) related to F.Ys. 2021-22 to 2023-24. However, in the fresh application, the assessee has relied upon the financial statements for F.Ys. 2022-23 to 2024-25. Thus, the financial period/ years, forming the basis of the fresh application is not entirely the same as that was considered while disposing of the earlier application. This distinction assumes significance because the transaction which was doubted by the learned CIT(E) in the earlier proceedings pertained only to F.Y. 2021- 22. It was the payment of Rs. 1,50,000/- claimed to have been made to Sparsh Trust in that year which led to the rejection of the earlier application. However, F.Y. 2021- 22, does not form part of the three financial years relied upon by the assessee in support of the fresh application. Therefore, the rejection of the earlier application based upon a transaction pertaining to F.Y. 2021-22 could not, by itself, be treated as sufficient reason for rejecting the fresh application without examining the financial statements and activities relating to the subsequent years.

8.4 We further find it relevant that the assessee had also claimed payments made to Sparsh Trust towards its objects in the subsequent F.Ys. 2022-23 and 2023-24. However, no infirmity has been pointed out by the learned CIT(E) in respect of such subsequent payments. This aspect also requires consideration while examining the genuineness of the activities of the assessee. When payments to the same trust towards the stated charitable objects were made in the subsequent years and no defect was noticed in those transactions, the transaction pertaining to F.Y. 2021-22 ought to have been examined in its proper factual context instead of treating the earlier adverse finding as conclusive for the fresh application.

8.5 Even otherwise, we find that the payment pertaining to F.Y. 2021-22 was doubted principally because the amount of Rs. 1,50,000/- was withdrawn through a self-cheque. In our view, the mere fact that an amount was withdrawn through a self- cheque cannot, by itself, lead to the conclusion that the expenditure was not incurred for the stated charitable purpose. There is no prohibition merely against withdrawal of money through a self-cheque. What is relevant is whether the amount so withdrawn was actually applied towards the stated object of the trust.

8.6 If the learned CIT(E) had any doubt regarding the ultimate payment or utilisation of the amount, it was open to him to call upon the assessee to produce supporting evidence or to make an independent enquiry from Sparsh Trust regarding the receipt and utilisation of the amount. Without carrying out such verification or independent enquiry, the genuineness of the transaction could not be doubted merely because the banking entry showed withdrawal through a self-cheque. The mode of withdrawal and the ultimate application of the amount are two different aspects and the former, by itself, cannot conclusively determine the later.

8.7 The genuineness of the activities of a charitable trust has to be examined on the basis of the material available as a whole and the actual activities carried out by it. An isolated transaction may certainly be examined and, if necessary, verified in detail. However, an adverse conclusion regarding the charitable nature of the activities of the trust as a whole should not be drawn merely on the basis of the mode in which one amount was withdrawn, particularly when no independent enquiry was made regarding its actual utilisation and no similar infirmity was noticed in the payments made to the same Sparsh Trust in the subsequent financial years.

8.8 Further, once a fresh application was filed by the assessee along with financial statements relating to F.Ys. 2022-23 to 2024-25, the learned CIT(E) was required to examine the same in accordance with the applicable provisions of the Act. The mere fact that the earlier application had been rejected cannot substitute the examination of the material accompanying the fresh application, particularly when the financial years and the material placed for consideration were not entirely identical. The learned CIT(E) was required to examine the genuineness of the activities on the basis of the materials relevant to the fresh application and thereafter take a decision in accordance with law.

8.9 We further find it pertinent to refer the decision of a coordinate bench of this Tribunal in the case of D.R. Shanmukappa Charitable Trust vs. Commissioner of Income-tax (Exemptions) reported in [2026] 188 taxmann.com 81 (Bangalore - Trib.) in the identical facts. The said assessee trust had filed multiple applications in Form No. 10AB for registration u/s 12AB of the Act. The first application was rejected for non-compliance with notices and failure to furnish the required documents. The subsequent application was rejected on account of selection of an incorrect section code. Thereafter, further applications filed by the assessee were rejected by the learned CIT(E) as not maintainable on the ground that the earlier rejection orders had attained finality since no appeal had been filed against them. On appeal by the assessee, the Tribunal held that there is no bar or restriction under the Act preventing a trust from filing a fresh application in Form No. 10AB before the same authority merely because an earlier application had been rejected. On receipt of each application, the learned CIT(E) is required to examine the application and satisfy himself about the genuineness of the activities of the trust and compliance with the requirements of other laws which are materials for achieving its objects. The Tribunal further held that merely because the assessee had not preferred an appeal against the earlier rejection orders, it could not be permanently barred from exercising its statutory right to make a fresh application, provided it satisfies the conditions prescribed for registration u/s 12AB of the Act. The Tribunal specifically observed that there is no provision under the Act which provides that once an application for registration is rejected, the assessee can never again apply for registration before the same authority. The only consequence of filing a subsequent application is that, if registration is ultimately granted, its effective date would be governed by the latest application for registration and the assessee cannot claim registration retrospectively from the date of the earlier application. Accordingly, the Tribunal held that treating the subsequent application as non-est and void ab initio merely because the earlier rejection had attained finality was unjustified and bad in law. The matter was restored to the file of the learned CIT(E) for fresh adjudication in accordance with law after granting reasonable opportunity to the assessee to furnish the relevant documents, accounts, certificates and other records for establishing the genuineness of its activities and compliance with the applicable requirements of law. The relevant finding of coordinate bench of the Tribunal, in D.R. Shanmukappa Charitable Trust is extracted as under:

9.1 We are of the considered opinion that on receipt of an application for registration u/s. 12AB of the Act, the ld. CIT(E) shall call for such documents or information or make such inquiries as he/she thinks necessary in order to satisfy himself/ herself about- (A) the genuineness of activities of such institution or fund; and

(B) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects. After satisfying himself/ herself about the genuineness of the activities and the compliance of such requirements of any other law for the time being in force by the trust or institution, the ld. CIT(E) shall pass an order in writing granting registration for a period of 5 years or if he/ she is not so satisfied, pass an order in writing rejecting such application and also cancelling the registration after affording reasonable opportunity of being heard. Thus, we are of the considered opinion that there is no such bar/restriction under the Act on the assessee trust in filing the application in form 10AB for granting registration u/s. 12AB of the Act before the same Authority subsequently if the assessee trust satisfy all the conditions for granting registration u/s 12AB of the Act. The ld. CIT(E) on receipt of the application on each occasion has to satisfy himself/herself only about the genuineness of the activities of the trust and the compliance of such requirements of any other law for the time being in force by the trust for granting registration. Merely because, the assessee trust had not preferred an appeal against the earlier orders dated 13.05.2024, 6.1.2025 & 23.9.2025 passed by ld.CIT(E), the assessee trust cant not be barred from exercising its statutory right subsequently before the same Authority if it fulfills the conditions as laid down for granting registration u/s 12AB of the Act. The only consequence of subsequent filing of application before the ld. CIT(E) will be the effective date of granting the registration which will ultimately be the date of the latest application. Thus, while entertaining the application in Form 10AB filed on 18.7.2025, the ld. CIT(E) cannot grant the registration effective from the date of original application i.e. 18.11.2023. Therefore, in our considered opinion treating the application filed in Form No.10AB on 20.1.2025 to be not maintainable as non-est and void-ab-initio is highly unjustified and bad in law as there are no such provisions under the Act that once the application for registration is rejected then the assessee can never apply for registration before the same Authority for ever. 9.2 Having held so, we are also of the considered opinion that as the assessee could not represent its case before the ld. CIT (Exemptions) by submitting the relevant documents/details required for registration u/s 12AB of the Act, and considering the request of the ld. A.R. of the assessee, we deem it fit and proper to remit the entire issue of registration to the file of ld. CIT (Exemptions) to decide afresh in accordance with law. Needless to say, a reasonable opportunity of being must be granted to the assessee. The assessee is also directed to produce all the relevant documents/ records/ accounts/ certificate/ reports to prove the genuineness of its activities and the compliance of such requirements of any other law for the time being in force. We make it clear that in case of further default, the assessee shall not be entitled for any leniency. It is ordered accordingly. 8.10 In view of the above facts and circumstances, we are of the considered opinion that the fresh application deserves examination on its own merits. At the same time, we are not expressing any final opinion regarding the genuineness of the payment of Rs. 1,50,000/- pertaining to F.Y. 2021-22 or the ultimate eligibility of the assessee for registration. If the learned CIT(E) considers the said transaction relevant for deciding the fresh application, he may verify the same by examining the supporting evidence to be furnished by the assessee and, if considered necessary, by making an independent enquiry from Sparsh Trust. The issue should thereafter be decided on the basis of the result of such verification and not merely on the ground that the amount was withdrawn through a self-cheque. Accordingly, in the interest of substantial justice, we set aside the impugned order dated 24.09.2025 and restore the matter to the file of the learned CIT(E) for fresh adjudication. The learned CIT(E) shall examine the fresh application along with the financial statements for F.Ys. 2022-23 to 2024-25 and other material to be furnished by the assessee. He shall examine the nature and genuineness of the activities of the assessee and whether such activities are being carried out in accordance with its stated objects. While doing so, the subsequent payments made to Sparsh Trust and the supporting evidence in respect thereof shall also be considered. The learned CIT(E) shall provide reasonable opportunity of being heard to the assessee and thereafter pass a speaking order in accordance with law, without being influenced merely by the rejection of the earlier application.

8.11 The assessee is also directed to cooperate with the proceedings and furnish all the information, books of account, vouchers, confirmations and other supporting documents as may be called for by the learned CIT(E). Accordingly, the grounds raised by the assessee are allowed for statistical purposes.

Coming to ITA No. 2830/Bang/2025

Order pronounced in the open court on 20th August, 2026

Sd/- Sd/- SANDEEP SINGH KARHAIL WASEEM AHMED JUDICIAL MEMBER ACCOUNTANT MEMBER Bangalore Dated: 20th August, 2026 Vms

Copy to: NERALU FOUNDATION, #45, AMMANA MANE, 2ND CRS KM SONNAPPA LYT, 1 KEREGUDDADAHALLI,ABBIGERE, NEAR RAINBOW SCHOOL,, BENGALURU-560090, KARNATAKA CIT(EXEMPTIONS), BANGALORE, UNITY BUILDING, 6TH FLOOR, MISSION 2 RD, BENGALURU-560027, KARNATAKA 3 THE PCIT / CIT, 4 THE D.R., ITAT, BANGALORE BENCH 5 GUARD FILE By Order

ASSISTANT REGISTRAR / I.T.A.T., BANGALORE