MILITARY LITERATURE FESTIVAL ASSOCIATION,PUNJAB vs. COMMISSIONER OF INCOME TAX(EXEMPTIONS), CHANDIGARH

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ITA 1170/CHANDI/2026Status: DisposedITAT Chandigarh03 August 2026AY 2027-287 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the rejection was premature and violated principles of natural justice. It restored the matters to the CIT(Exemptions) for a fresh adjudication after granting the assessee an effective opportunity to present all documents.

What were the facts?

The assessee, a charitable institution, applied for registration under Section 12AB and approval under Section 80G. The CIT(Exemptions) rejected both applications for non-compliance with a show cause notice, without examining the merits of the case.

What were the issues?

Whether the CIT(Exemptions) was justified in rejecting the applications for registration and approval solely on the grounds of non-furnishing of information without granting a further effective opportunity to the assessee.

Which sections of the Income-tax Act were involved?

Section 12AB,Section 80G

AI-generated summary — verify with the full judgment below

आयकर अपीलीय अिधकरण,च�ीगढ़ �ायपीठ “बी” , च�ीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH HEARING THROUGH: HYBRID MODE �ी लिलत कुमार, �ाियक सद� एवं �ी मनोज कुमार अ�वाल, लेखा सद� BEFORE: SHRI. LALIET KUMAR, JM & SHRI. MANOJ KUMAR AGGARWAL, AM आयकर अपील सं./ ITA No.1159 & 1170/Chd/ 2026 िनधा�रण वष� / Assessment Year : 2022-23 & 2027-28 Military Literature Festival बनाम The CIT(Exemptions) Association Chandigarh Room No. 12 At Sainik Sadan, Mohali-Phase-10, Mohali, Punjab- 160062 �ायी लेखा सं./PAN NO: AAGAM8310C अपीलाथ�/Appellant ��थ�/Respondent िनधा�रती की ओर से/Assessee by : Smt. Shruti Khandelwal, Advocate for Shri Parikshit Aggarwal, C.A राज� की ओर से/ Revenue by : Smt. Kusum Bansal, Pr. CIT, DR सुनवाई की तारीख/Date of Hearing : 16/07/2026 उदघोषणा की तारीख/Date of Pronouncement : 03/08/2026 आदेश/Order PER LALIET KUMAR, J.M: Since the issue involved in both the appeals is interconnected and arises out of the same set of facts, these appeals were heard together and are being disposed of by this consolidated order for the sake of convenience.

2.

The assessee, Military Literature Festival Association, is a charitable institution. It filed an application in Form No.10AB on 30.09.2025 seeking registration under section 12AB of the Income-tax Act, 1961. Simultaneously, the assessee also filed an application seeking approval under section 80G of the Act.

3.

The Ld. CIT (Exemption), while processing the application under section 12AB, examined the Form No.10AB and the accompanying documents and noticed certain discrepancies. Accordingly, a detailed show cause notice dated 10.02.2026 was issued calling upon the assessee to furnish various documents and explanations. The assessee was required to furnish, inter alia, the details regarding application of

2 corpus funds from Assessment Year 2023-24 onwards along with documentary evidence demonstrating that the corpus donations had been utilized in accordance with the directions of the donors. The assessee was further required to reconcile the differences between the figures reported in Form No.10BB and the audited Income and Expenditure Account, explain the differences, and furnish complete copies of Form FC-4 for the relevant assessment years. The notice also specifically mentioned that the queries were being raised to enable the prescribed authority to verify the nature of the charitable activities and the genuineness thereof.

4.

According to the Ld. CIT (Exemption), despite service of the aforesaid notice through the registered e-mail addresses and the Income-tax portal, the assessee neither furnished any reply nor sought any adjournment. On the basis of such alleged non-compliance, the Ld. CIT (Exemption) observed that the assessee was not interested in pursuing its application and that in the absence of the requisite documents and explanations, it was not possible to examine either the objects of the institution or the genuineness of its activities. The Ld. CIT (Exemption), while relying upon various judicial precedents dealing with dismissal for non-prosecution and the principle that law assists only the vigilant, ultimately rejected the application for registration under section 12AB by holding that the application was deficient in factual evidences owing to non-submission of the requisite details.

5.

Consequent upon the rejection of registration under section 12AB, the Ld. CIT (Exemption) also rejected the application seeking approval under section 80G by observing that in the absence of registration under section 12AB, one of the statutory conditions prescribed under section 80G(5) remained unfulfilled and, therefore, the application under section 80G could not be considered on merits.

3 6. Aggrieved against both the orders, the assessee has preferred the present appeals before the Tribunal.

7.

The Ld. AR submitted that the impugned orders deserve to be set aside as the same have been passed in violation of the principles of natural justice. It was submitted that although the Ld. CIT (Exemption) has proceeded on the assumption that the assessee had failed to respond to the show cause notice, the assessee was prevented by sufficient cause from furnishing the requisite details within the prescribed time.

7.1 It was argued that the rejection of registration under section 12AB is not founded upon any finding regarding the charitable objects of the institution or the genuineness of its activities but merely on account of alleged non-furnishing of information. According to the Ld. AR, the Ld. CIT (Exemption) ought to have granted one more effective opportunity before rejecting the application, particularly when the consequence of such rejection is denial of the statutory registration required for carrying on charitable activities.

7.2 The Ld. AR further submitted that the assessee is in possession of all the documents called for by the Ld. CIT (Exemption), including details regarding corpus fund utilisation, reconciliation statements, audited financial records and other supporting evidences, and the assessee is prepared to furnish the same if one more opportunity is granted.

7.3 It was further argued that the rejection of approval under section 80G is merely consequential to the rejection of registration under section 12AB. Therefore, if the matter relating to registration under section 12AB is restored to the file of the Ld. CIT (Exemption), the issue relating to section 80G would also necessarily require fresh adjudication.

7.4 The Ld. AR, therefore, prayed that both the impugned orders be set aside and the matters be restored to the file of the Ld. CIT (Exemption) for fresh adjudication after granting an effective opportunity of hearing.

8.

Per contra, the Ld. Departmental Representative strongly relied upon the impugned orders passed by the Ld. CIT (Exemption). It was submitted that adequate opportunity had already been granted by issuance of the show cause notice calling for various documents and explanations. However, despite service of the notice, the assessee neither furnished the requisite information nor sought any adjournment.

8.1 The Ld. DR submitted that in the absence of the relevant documents, the Ld. CIT (Exemption) was unable to satisfy himself regarding the genuineness of the activities of the institution and was, therefore, fully justified in rejecting the application under section 12AB.

8.2 It was further submitted that once the application under section 12AB stood rejected, the consequential rejection of approval under section 80G was automatic in view of the statutory requirements contained in section 80G(5). Accordingly, it was prayed that both the impugned orders be upheld.

9.

We have heard the rival submissions, carefully perused the orders passed by the Ld. CIT (Exemption) and considered the material available on record.

9.1 The controversy before us is narrow. The application filed by the assessee under section 12AB has not been rejected on the ground that its objects are non- charitable or that its activities have been found to be non-genuine after examination of the material on record. Rather, the application has been rejected primarily because, according to the Ld. CIT (Exemption), the assessee failed to furnish the information called for in the show cause notice dated 10.02.2026.

9.2 Undoubtedly, while considering an application under section 12AB, the prescribed authority is empowered to call for such information as may be necessary to satisfy itself regarding the charitable objects and genuineness of the activities of the institution. At the same time, the proceedings under section 12AB are not adversarial assessment proceedings. The object of the proceedings is to ascertain whether the institution satisfies the statutory requirements for grant of registration. Such satisfaction has necessarily to be based upon a complete examination of the material which the institution may place before the authority.

9.3 In the present case, we find that the application has been rejected at the threshold for want of compliance. Although the Ld. CIT (Exemption) has observed that the notice was duly served and that the assessee failed to respond, we are of the considered opinion that, having regard to the nature of the proceedings and the serious consequences flowing from rejection of registration, one more effective opportunity deserves to be afforded to the assessee.

9.4 Registration under section 12AB is the very foundation upon which an institution claims exemption under the provisions of the Act. Rejection of such registration has far-reaching consequences affecting the functioning of the institution. Therefore, unless the conduct of the applicant demonstrates deliberate and persistent non-cooperation, the matter should ordinarily be decided on merits after examining the relevant records rather than on technical considerations relating to non-compliance.

9.5 The Hon'ble Courts have consistently held that procedural lapses should not defeat substantial justice where the matter can conveniently be decided on merits after affording adequate opportunity to the concerned party. The Tribunal, being the final fact-finding authority, is equally required to ensure that disputes are

6 adjudicated on their merits rather than terminated on account of procedural defaults, wherever the interest of justice so requires.

9.6 In the facts of the present case, we are satisfied that the ends of justice would be adequately met if the assessee is afforded one more effective opportunity to place all the relevant documents before the Ld. CIT (Exemption). We accordingly refrain from expressing any opinion on the merits of the claim of registration under section 12AB. Accordingly, the impugned order passed under section 12AB is set aside and the matter is restored to the file of the Ld. CIT (Exemption) for passing a fresh order in accordance with law. The Ld. CIT (Exemption) shall afford reasonable and effective opportunity of hearing to the assessee, consider all the documentary evidences, reconciliation statements, financial records and explanations that may be furnished, and thereafter pass a fresh, reasoned and speaking order strictly in accordance with law. Needless to say, the assessee shall fully cooperate in the remand proceedings and shall not seek unnecessary adjournments. In case of failure on the part of the assessee to comply with the notices issued during the remand proceedings, the Ld. CIT (Exemption) shall be at liberty to decide the matter on the basis of the material available on record.

9.7 Since the rejection of approval under section 80G is solely consequential to the rejection of registration under section 12AB and the impugned order under section 80G itself records that approval has been declined only because registration under section 12AB stood rejected, the very foundation of the order passed under section 80G no longer survives. Consequently, the impugned order under section 80G is also set aside and the matter is restored to the file of the Ld. CIT (Exemption) for fresh adjudication after deciding the application under section 12AB and in accordance with law. Accordingly, both the appeals are allowed for statistical purposes.

10.

In the result, both the above appeals are allowed for statistical purposes.

Order pronounced on 03/08/2026

Sd/- Sd/ मनोज कुमार अ�वाल लिलत कुमार (MANOJ KUMAR AGGARWAL) (LALIET KUMAR) लेखा सद�/ ACCOUNTANT MEMBER �ाियक सद� /JUDICIAL MEMBER AG आदेश की �ितिलिप अ�ेिषत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��थ�/ The Respondent 3. आयकर आयु�/ CIT 4. आयकर आयु� (अपील)/ The CIT(A) 5. िवभागीय �ितिनिध, आयकर अपीलीय आिधकरण, च�ीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File

BY ORDER, ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KENDRIYA SADAN, SECTOR-9A CHANDIGARH

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