SHANTABEN BHAICHAND UGARC HAND MEHTA DIGAMBAR JAIN VATSALYA SHALA,MEHSANA vs. CIT(EXEMPTION), AHMEDABAD

This batch of appeals forms part of a larger batch of appeals which were heard together. These 31 appeals were preferred by similarly placed charitable trusts and institutions as their respective application filed for seeking registration/renewal of registration under Section 12A/12AB of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] and/or approval under Section 80G(5) of the Act was rejected by the Learned Commissioner of Income-Tax (Exemptions) [hereinafter referred to as ‘the CIT(E)’]. Since similar grounds arising from similar factual matrix were raised in the present appeals, the same were listed and heard together; and are, therefore, being disposed by way of a common order. Delay of 400 days in filing ITA No.711/AHD/2026 is condoned taking into consideration the explanation offered by the Assessee and the judgment of Hon’ble Supreme Court in the case of Collector, Land Acquisition, Anantnag & Another v. Mst. Katiji& Others [1987 (2) SCR 387]

We have heard the Learned Authorised Representatives of the Assessee as well as the Learned Departmental Representatives appearing before us physically or in virtual mode. We have perused the impugned order and the grounds raised in each appeal. We have taken note of the number of notice of hearings/opportunities given to the Assessee before rejection of the application as well as the stated reasons for rejection. We have also given thoughtful consideration to the common contentions raised on behalf of the Assessee(s) as well as the submissions advanced by the Learned Departmental Representatives appearing before us.

Before dealing with the issues raise in the present batch of appeals, we deem it appropriate to briefly refer to the Section 12AB of the Act and the registration procedure prescribed therein.

Section 12AB of the Act was introduced by the Finance Act, 2020 to replace the registration procedure under Section 12AA of the Act. However, due to COVID-19 Pandemic, Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 was enacted which deferred effective operation to 01/04/2021. Subsequent amendments were made to Section 12AB of the Act by way of Finance Act - 2023, Finance (No. 2) Act - 2024 and Finance Act – 2025; to further refine the process of registration.

A perusal of the provisions contained in Section 12AB of the Act shows that the scheme of registration and renewal of registration contained in Section 12AB of Act provides for the registration and periodic renewal of registration of charitable trust and institutions desirous of claiming benefit of Section 11/12 [income of charitable/religious trusts] and/or Section 80G [Donations] of the Act. It can be inferred that the aforesaid provisions were enacted to minimize misuse of the aforesaid exemption/deduction provisions while at the same time safeguarding the interest of the organizations carrying out bonafide charitable activity. The registration process requires, inter alia, verification of activities, compliance checks, and linkage with permanent account number to ensure transparency.

For effective operation of the scheme contained in Section 12AB of the Act, both, the Assessee as well as the Concerned Tax Authority (i.e. The Principal Commissioner of Income Tax), has been assigned distinct responsibilities to balance the statutory compliance involved with the fairness in the registration/renewal process. The Assessee, being a charitable or religious trust or institution, must apply for registration/approval in the prescribed form; furnish the founding documents; and demonstrate that its activities are genuine and aligned with its stated charitable objects. It is clear that all the supporting documents and details are required to be furnished by the Assessee upfront along with the application in prescribed form. On the other hand, the Concerned Tax Authority is required to examine the application; call for further documents/clarification; verify the genuineness of activities; and pass a reasoned order within the prescribed period (not exceeding six month). It has been specified that before refusing or cancelling the registration, the Concerned Tax Authority is required to provide to the applicant ‘a reasonable opportunity of being heard’.

Having considered the rival submissions and on perusal of the material on record, we find that a common feature in the appeals before us is that one or both the parties before us have failed to discharge their respective responsibilities/obligations. Bare perusal of the impugned order(s) shows the application(s) filed by the Assessee(s) were not accompanied by the relevant supporting documents. At the same time, the application(s) were rejected by the Concerned Tax Authority without granting ‘a reasonable opportunity of being heard’ to the Assessee.

The explanation offered on behalf of the Assessee is that the Assessee was not confronted with the defect or deficiency in the application. Whereas, the Revenue has taken a position that the notice(s) were issued and the Assessee(s) had failed to respond to the same and has, resultantly, failed to establish that their activities were genuine charitable activities. Therefore, as per the Learned Departmental Representatives the rejection order were warranted. Conversely, the Learned Authorised Representatives defended their respective positions by broadly contending (a) non-service of notice - on account of various reasons, or (b) lack of knowledge of issuance of notice; or (c) lack of sufficient opportunity/time to respond to notice. The common contention being that, in effect, the Assessee was denied an effective opportunity of being heard and the common plea being that the matters be restored back to the file of the Learned CIT(E) for fresh adjudication.

It would be pertinent to note that perusal of record shows that since the applications were required to be disposed off in a time bound manner within the specified period (not exceeding 6 months), in some cases the Tax Authority did not have sufficient time to await compliance by the Assessee(s).Therefore, the application(s) were rejected without granting any further notice/opportunity to the Assessee. The aforesaid rejection resulted in cancellation of the provisional registrations, if any, and also rejection of application for approval under Section 80G(5) of the Act (since holding a valid registration under Section 12A/12AB of the Act was a condition precedent to grant of such approval).

The above, in our view, resulted in unintended consequences to the extent the charitable organization otherwise undertaking genuine charitable activities lost the benefit of the exemption/deduction provisions on account of failure to compete successfully the registration/renewal procedure contained in Section 12AB of the Act. We have already noted hereinabove that the registration/renewal procedure contained in Section 12AB of the Act could not be completed successfully since both the sides before us had failed to discharge their respective responsibilities/obligations in terms of the provisions contained in Section 12AB of the Act. At times, the aforesaid failure was for reasons beyond the respective control of the parties. We are of the view that in the prevailing facts and circumstances, interest of justice would be served and rights of Assessee as well as Revenue would stand protected in case another opportunity is granted to the Assessee to make out a case of registration/renewal or grant of approval. Therefore, we set aside the impugned rejection order(s) passed in each of the captioned appeals with the following directions: (a) The Assessee is directed to forthwith place on record of Learned CIT(E) the correct postal and email address for communication of notices/order and take necessary steps for updating the same in ITBA Portal (b) The Assessee is directed to place before the Learned CIT(E) all the documents/details in support of the application and respond to the requisition made or queries raised by the Learned CIT(E) without seeking unnecessary adjournments (c) The Learned CIT(E) is directed to adjudicate the applications afresh after granting the Assessee a reasonable opportunity of being heard and after taking into consideration the supporting documents/details furnished by the Assessee (d) It is clarified that in case the Assessee fails to comply with the above directions; or fails to co-operate during the proceedings; or fails to furnish proper reply/submission/supporting documents; the Learned CIT(E) would be at liberty to adjudicate the application on the basis of material on record and as per law. (e) In case of application seeking approval under Section 80G of the Act, the Assessee is directed to place before the Learned CIT(E) the status of registration under Section 12AB of the Act and the Learned CIT(E) is directed to take the same into consideration.

With the above directions, the impugned order(s) passed by the Learned CIT(E) in the captioned matters is set aside and the grounds raised by the Assessee in their respective appeals are allowed for statistical purposes without returning any findings on merits.

In result, in terms of paragraph 11 and 12 above, the captioned appeals preferred by the respective Assessee challenging the order rejecting application filed under Section 12AB/80G of the Act are allowed for statistical purposes. Order pronounced on 12.08.2026. (Dr. B.R.R. Kumar) Judicial Member

""थ"/ The Respondent. 3. संबंिधतआयकरआयु"/ Concerned CIT 4. आयकरआयु"(अपील) / The CIT(A) 5. िवभागीय"ितिनिध, आयकरअपीलीयअिधकरण/ DR, ITAT, 6. गाड"फाईल /Guard file. आदेशानुसार/BY ORDER, उप/सहायकपंजीकार (Dy./Asstt.