NADIAD KHADAYTA SAMAJ,SURAT vs. CIT(EXEMPTION), AHMEDABAD

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ITA 485/SRT/2026Status: DisposedITAT Surat15 July 2026AY 2025-266 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the rejection was based on a technical and procedural defect without affording the assessee a reasonable opportunity to be heard. The Tribunal emphasized that principles of natural justice were violated.

What were the facts?

The assessee-trust applied for renewal of registration under Section 12A(1)(ac)(ii) of the Income Tax Act. The CIT(E) rejected the application as non-maintainable because the assessee had selected an incorrect clause in Form No. 10AB.

What were the issues?

Whether the CIT(E) erred in rejecting the registration application solely on a technical ground without providing an opportunity to the assessee to explain a procedural error.

Which sections of the Income-tax Act were involved?

Section 12A(1)(ac)(ii),Section 12AB

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “DB” BENCH, SURAT

Before: SHRI T.R SENTHIL KUMAR & SHRI NARENDRA PRASAD SINHA

For Appellant: Shri P M Jagasheth, CA
For Respondent: Shri Mukesh Jain, CIT-DR
Hearing: 20.05.2026Pronounced: 15.07.2026

PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:

This appeal is filed by the assessee against the order of Commissioner of Income Tax (Exemption), Ahmedabad, [in short “CIT(E)”], dated 13.013.2026 in the proceeding u/s 12A/12AB of the Income Tax Act.

2.

The brief facts of the case are that the assessee-trust filed an application in Form No.10AB u/s 12A(1)(ac)(ii) of the Act seeking renewal of registration. During the course of proceedings, the Ld. CIT(E) examined the maintainability of the application with reference to the provisions of section 12A(1)(ac)(ii) of the Act. The Ld. CIT(E) observed that the said

ITA No 485/Srt/2026, A.Y. 2025-26 Nadiad Khadayta Samaj Vs. CIT(E) 2 provision applies to a trust or institution already holding a valid registration u/s 12AB of the Act and the validity period of which is due to expire. According to the Ld. CIT(E), the assessee was not in possession of such registration and, therefore, did not satisfy the basic precondition for filing an application under the aforesaid clause. It was further observed that even if the assessee had inadvertently selected an incorrect clause while filing Form No.10AB, there was no power or facility available either under the Act or the ITBA system to alter the section selected by the applicant. Accordingly, the application was treated as non-maintainable and was rejected without examining the assessee's claim on merits.

3.

Aggrieved with the order of the Ld. CIT(E), the assessee is in appeal before us. The following grounds have been taken in this appeal:

1.

On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Exemption), Ahmedabad has erred in rejecting Application for grant of registration of trust u/s.12A(1)(ac)(ii) of the Income Tax Act, 1961. 2. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Exemption), Ahmedabad has erred in not granting adequate opportunity to hear and passed the order, hence, the principal of natural justice is not abide. 3. On the facts and in the circumstances of the case as well as the law on the subject, the appellant Trust is qualifying for registration u/s. 12A(1)(ac)(ii) of the Income Tax Act, 1961. 4. It is therefore prayed that the CIT(Exemption) should be directed passed u/s.12A(1)(ac)(ii) of the Income Tax Act, may please be set aside to the file of the CIT(Exemption) with appropriate direction. 5. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of the hearing of the appeal.

4.

Shri P M Jagasheth, the Ld. AR of the assessee submitted that the application had been rejected solely on account of a technical defect

ITA No 485/Srt/2026, A.Y. 2025-26 Nadiad Khadayta Samaj Vs. CIT(E) 3 arising from the selection of an incorrect provision in Form No.10AB. He contended that the assessee is a charitable trust and its substantive claim for registration ought not to be denied merely because of an inadvertent procedural error. It was argued that if the application was found to have been filed under a wrong clause, the assessee should have been afforded an opportunity to explain its position and pursue its claim under the appropriate provision of law. The Ld. AR accordingly prayed that the impugned order be set aside and the matter be restored to the file of the Ld. CIT(E) for fresh consideration

5.

Per contra, Shri Mukesh Jain, the Ld. CIT-DR, had no objection if the matter was set aside to the file of Ld. CIT(E) for allowing another opportunity to the assessee.

6.

We have carefully considered the facts of the case and the material available on record. The undisputed facts emerging from the record are that the assessee-trust had filed an application seeking regular registration under the provisions of section 12A(1)(ac)(ii) of the Income- tax Act, 1961. The said application came to be rejected by the Ld. CIT(Exemption) on the ground that the assessee had selected an incorrect clause while filing the prescribed form. It is further noticed that before rejecting the application, no effective opportunity was afforded to the assessee to explain the circumstances leading to such error or to clarify the correct clause under which the application was intended to be filed. In our considered opinion, the action of the Ld. CIT(Exemption) cannot be sustained for more than one reason.

7.

Firstly, the defect pointed out by the Ld. CIT(Exemption) is purely technical and procedural in nature. An inadvertent selection of a wrong

ITA No 485/Srt/2026, A.Y. 2025-26 Nadiad Khadayta Samaj Vs. CIT(E) 4 clause in Form No. 10A/10AB does not by itself determine the substantive eligibility of an assessee for registration. The authority is required to examine the true nature of the claim and the factual background of the application rather than reject the same solely on account of a curable procedural defect. Secondly, and more importantly, the impugned order has been passed without granting a reasonable opportunity of being heard to the assessee. Had such an opportunity been afforded, the assessee could have explained that the incorrect selection of the clause was merely a bona fide mistake and could have sought consideration of the application under the appropriate provision. The denial of such opportunity has resulted in violation of the principles of natural justice.

8.

It is a settled proposition of law that where an adverse order is proposed to be passed, particularly one having civil consequences, the affected party must be afforded an adequate and effective opportunity of presenting its case. The observance of principles of natural justice assumes even greater significance in proceedings relating to registration of charitable institutions, where rejection of an application may have serious consequences upon the assessee's entitlement under the Act. In the present case, the Ld. CIT(Exemption) has not examined the objects of the trust, the genuineness of its activities, or its compliance with the statutory requirements prescribed under section 12AB. The application has been rejected solely on account of the wrong selection of the clause in the prescribed form. In our view, such a technical defect ought not to have been made the sole basis for rejecting the application without first providing an opportunity to the assessee to explain and rectify the error.

ITA No 485/Srt/2026, A.Y. 2025-26 Nadiad Khadayta Samaj Vs. CIT(E) 5 9. Considering the totality of the facts and in the interest of substantial justice, the impugned order is set aside and the matter is restored to the file of the Ld. CIT(Exemption) with a direction to afford a reasonable and effective opportunity of being heard to the assessee, permit the assessee to explain the circumstances relating to the incorrect selection of the clause (if any) and, if found appropriate, treat the application under the correct statutory provision applicable to the facts of the case. Thereafter, the Ld. CIT(Exemption) shall examine the assessee's application for registration on merits in accordance with law, after considering the objects of the trust, the genuineness of its activities and compliance with the conditions prescribed under section 12AB of the Act. A reasoned and speaking order shall be passed after duly considering the material and explanations furnished by the assessee.

10.

In the result, the appeal of the assessee is allowed for statistical purposes.

Order pronounced in the Court on 15/07/2026 at Ahmedabad.

Sd/- Sd/- (T R SENTHIL KUMAR) (NARENDRA PRASAD SINHA) Judicial Member Accountant Member Dated – 15th July, 2026 (True Copy) Neelesh, Sr. P.S आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : अ�ेिषत 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A) 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण / DR, ITAT, 6. गाड� फाईल /Guard file. आदेशानुसार/BY ORDER, आदेशानुसार आदेशानुसार आदेशानुसार

ITA No 485/Srt/2026, A.Y. 2025-26 Nadiad Khadayta Samaj Vs. CIT(E)

पंजीकार (Dy./Asstt.Registrar) उप उप/सहायक उप उप सहायक सहायक पंजीकार सहायक पंजीकार पंजीकार आयकर आयकर अपीलीय आयकर आयकर अपीलीय अपीलीय अिधकरण अपीलीय अिधकरण अिधकरण, अहमदाबाद अिधकरण अहमदाबाद अहमदाबाद / ITAT, Ahmedabad अहमदाबाद

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