TAKSHILA EDUCATION SOCIETY,GURGAON vs. CIT (EXEMPTIONS), CHANDIGARH, CHANDIGARH

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ITA 4705/DEL/2026Status: DisposedITAT Delhi23 September 2026AY 2026-20274 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the rights of natural justice of the assessee were violated as the impugned order under section 12AB(1)(b)(ii) was passed without providing an adequate opportunity of being heard. The Tribunal noted that the CIT(E) had drawn unilateral conclusions without affording the appellant an opportunity to be heard. The right to an adequate opportunity of being heard is a fundamental right in all judicial and quasi-judicial proceedings. Recognizing that no litigant benefits from the non-prosecution of their case, and in the interest of justice, the Tribunal decided to remit the matter back to the file of the Ld. CIT(E) for re-adjudication de novo, in accordance with law, and by passing a speaking order. The assessee was directed to comply with all statutory notices. The appeal was allowed for statistical purposes.

What were the facts?

The assessee, Takshila Education Society, filed an appeal against the order dated 13.03.2026 passed by the Commissioner of Income Tax (Exemption), Chandigarh, under section 12AB(1)(b)(ii) of the Income Tax Act, 1961. The CIT(E) had denied registration to the assessee, observing that it was not carrying out substantial charitable activities itself but was merely letting out its school building to another entity, thereby earning rental income. The assessee was absent during the hearing before the ITAT. The Revenue, represented by the CIT-DR, relied on the order of the lower authorities and highlighted the CIT(E)'s findings regarding the commercial exploitation of property.

What were the issues?

1. Whether the denial of registration under section 12AB(1)(b)(ii) by the CIT(E) was justified on the grounds that the assessee was not carrying out substantial charitable activities by itself but was merely letting out its property, amounting to commercial exploitation? Assessee's contentions: The assessee did not present any arguments as they were absent during the hearing. However, their grounds of appeal alluded to a violation of principles of natural justice. Revenue's contentions: The Revenue, relying on the order of the CIT(E), argued that the assessee was not engaged in genuine charitable activities as required under section 12AB of the Act. The CIT(E) had noted that the assessee's role was limited to receiving rental income, while the actual educational activities were conducted by another entity. This was considered commercial exploitation of property, and therefore, the conditions for registration under section 12AB were not fulfilled.

Which sections of the Income-tax Act were involved?

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

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCHES, ‘A’ NEW DELHI

Before: SHRI ANUBHAV SHARMA

Pronounced: 23.09.2026

आयकर अपीलीय अिधकरण, िद�ी पीठ�, नई िद�ी INCOME TAX APPELLATE TRIBUNAL, DELHI BENCHES, ‘A’ NEW DELHI BEFORE SHRI ANUBHAV SHARMA, JUDICIAL MEMBER AND SHRI AMITABH SHUKLA, ACCOUNTANT MEMBER ITA 4705/DEL/2026 िनधा�रण वष�/Assessment Year: 2026-2027) TAKSHILA EDUCATION CIT (EXEMPTIONS), SOCIETY CHANDIGARH HNO 777 SEC 17 , DEFENCE ROOM NO.1, 5TH FLOOR, C R COLONY, GURGAON-122011, Vs. BUILDING, HIMALAYA MARG, HARYANA SECTOR 17-E CHANDIGARH-160017, अपीलाथ� Appellant ��थ� Respondent

Permanent Account Number of Assessee: AAATT5423E

अपीलाथ� �ारा/Appellant represented by: None ��थ� �ारा/Respondent represented by: Shri Rajore Satish Chandra Ramsevak, CIT-DR सुनवाई की तारीख / Date of conclusion of hearing: 24.06.2026 घोषणा की तारीख / Date of pronouncement: 23.09.2026 आदेश / ORDER PER AMITABH SHUKLA, AM This appeal filed by the Assessee is directed against the order of Ld. Commissioner of Income Tax (Exemption), Chandigarh, dated 13.03.2026 passed under section 12AB(1)(b)(ii) of the Act. The word ‘Act’ herein this order would mean Income Tax Act, 1961.

2.

The assessee was called absent.

3.

The ld. DR while relying upon the order of the lower authorities, took us through the factual matrix of the case. It was submitted that the ld. CIT(E) has denied the registration to the appellant as she had noted that appellant was not carrying any substantial charitable activity by itself and was rather engaged in commercial exploitation of its property. Attention was invited to the following extract of the order of the ld. CIT(E):

“…5. The submission of the assessee has been carefully considered. However, the explanation is not acceptable. It is observed that the applicant itself is not carrying out any educational activity. Instead, it has merely let out the school building to another entity which is running the school and the applicant society is earning rental income from the property. 6. The mere act of letting out property and earning rental income, without the applicant itself carrying out educational or other charitable activities, cannot be regarded as carrying out genuine charitable activities. The role of the applicant society appears limited to receiving rental income from the property while the actual educational activities are being conducted by another entity. Thus, the applicant has failed to demonstrate that it is itself engaged in genuine charitable activities as required under section 12AB of the Act. 7. In view of the above facts and circumstances, it is established that the applicant is not carrying out any substantial charitable activity by itself but merely letting out property to another entity which amounts to commercial exploitation of property. Therefore, satisfaction regarding the genuineness of the activities of the applicant society and the conditions prescribed under section 12AB are not fulfilled. Accordingly, the present application filed in Form u/s 12A(1)(ac)(ii) of the Act is rejected for the reasons discussed above. This rejection shall also supersede any registration granted u/s 12AB of the Act by any authority at any earlier time.” 4. We have noted that the rights of natural justice of the assessee have been violated in as much as the impugned order u/s 12AB(1)(b)(ii) dated 13.03.2026 has been passed without giving adequate opportunity of being heard. The appellant has also in its grounds of appeal extracted hereinabove alluded towards violation of its principals of natural justice. The fact of ex-parte order of CIT(E) is evident from the conclusion drawn by her in her order to reject assessee’s application. We have also noted that the ld. CIT(E) has drawn unilateral conclusions and has not afforded the appellant opportunity of being heard before drawing adverse conclusions. Right of adequate opportunity of being heard is basic right of every litigant and is in violable in all judicial/quasi-judicial proceedings. We are conscious that no litigant gains by non-prosecution of its case. In the interest of justice, we remit the matter back to the file of Ld. CIT(E) for re-adjudication de novo, in accordance with law and by passing a speaking order. The assessee shall be bounden to comply with all the statutory notices and any non-compliance would be adversely viewed. Accordingly, the appeal of the assessee is allowed for statistical purposes.

5.

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

Order pronounced in the open court on 23rd September, 2026.

Sd/- Sd/- [ANUBHAV SHARMA] [AMITABH SHUKLA] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 23.09.2026 Shekhar Copy forwarded to: 1. Appellant 2. Respondent 3. PCIT

4.

CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi,

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