RAGHU NATH RAI MEMORIAL EDUCATIONAL CHARITABLE TRUST REGD,MOHALI, PUNJAB vs. CIT(EXEMPTIONS),, CHANDIGARH

ITA 884/CHANDI/2026Status: DisposedITAT Lucknow28 September 2026AY 2027-2810 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the matter required fresh examination by the CIT(E) as crucial documents, including OTS documents, correspondence with the bank, SARFAESI Act notices, financial assistance details from specified persons, confirmations, bank statements, fund-flow statements, and books of account, were not before the CIT(E). The Tribunal observed that while the CIT(E) noted substantial loans and advances and borrowings from trustees, the assessee's explanation regarding the use of these funds for settling bank liabilities and the introduction of personal funds by trustees to protect the institution needed verification. The Tribunal clarified that the introduction of personal funds by specified persons to protect the institution, if verified, would not constitute a valid ground for denial of registration. It also noted the assessee's submission that advances were interest-free, which was significant. The Tribunal set aside the impugned order and restored the matter to the CIT(E) for a fresh, reasoned, and speaking order after affording an adequate opportunity of hearing and examining all submitted documents. The Tribunal explicitly stated that it had not expressed any opinion on the merits of the controversy.

What were the facts?

The assessee, Raghu Nath Rai Memorial Educational Charitable Trust, filed appeals against the orders of the Commissioner of Income Tax (Exemptions) (CIT(E)) dated March 10, 2026, rejecting their applications for registration under Section 12A(1)(ac)(ii) and renewal of registration under Section 12AB for Assessment Year 2022-23 (ITA No. 883/Chd/2026) and Assessment Year 2027-28 (ITA No. 884/Chd/2026). The CIT(E) rejected the applications primarily on the grounds of unsatisfactory financial propriety and prudence, citing substantial secured loans, borrowings from trustees and related parties, significant assets under 'Loans & Advances', and an increase in trust funds. The assessee contended that these financial activities were to repay secured bank loans under a One Time Settlement (OTS) scheme and that funds were introduced by trustees and related persons to protect the institution.

What were the issues?

1. Whether the CIT(E) erred in rejecting the assessee's application for registration under Section 12A(1)(ac)(ii) read with Section 12AB, on grounds of financial impropriety and lack of genuineness of financial transactions, despite the assessee's explanation that these were for settling bank loans and protecting the institution? 2. Whether the CIT(E) erred in rejecting the application for approval under Section 80G solely because registration under Section 12AB was not granted, without independently examining the merits? Assessee's Contentions: - The rejection of registration under Section 12AB was mechanical and non-speaking. - The financial transactions were to repay secured bank loans under an OTS scheme and to protect the institution. - Funds introduced by trustees and related parties were interest-free and for the institution's survival. - The CIT(E) failed to appreciate that the assessee already had valid registrations under Section 12AB and Section 12A(1)(ac)(i). - The order was passed without affording a reasonable opportunity of being heard. - The rejection of Section 80G approval was unjustified as it was based solely on the denial of 12AB registration. Revenue's Contentions: - The Revenue relied on the order of the Ld. CIT(E).

Which sections of the Income-tax Act were involved?

Section 12A(1)(ac)(ii),Section 12AB,Section 12A,Section 80G,Section 2(15),Section 12AB(4)

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Heard together (2 matters)

ITA No. 883 /Chd/ 2026
ITA No. 884 /Chd/ 2026

Read from the judgment's own cause title. This page is filed under one of them.

आयकर अपीलीय अिधकरण,च"ीगढ़ "ायपीठ “बी” , च"ीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH HEARING THROUGH: PHYSICAL MODE "ी लिलत कुमार, "ाियक सद" एवं "ी िवजय वमा" , लेखा सद" BEFORE: SHRI. LALIET KUMAR, JM & SHRI. VIJAY VARMA, AM आयकर अपील सं./ ITA No. 883 /Chd/ 2026 िनधा"रण वष" / Assessment Year : 2022-23 Raghu Nath Rai Memorial Educational बनाम The CIT(E)

Charitable Trust Chandigarh 1025 Sector, Sector 71, Mohali-160071, Punjab "ायी लेखा सं./PAN NO: AAATR6500J अपीलाथ"/Appellant ""थ"/Respondent आयकर अपील सं./ ITA No. 884 /Chd/ 2026 िनधा"रण वष" / Assessment Year : 2027-28 Raghu Nath Rai Memorial Educational बनाम The CIT(E)

Charitable Trust Regd Chandigarh 1025 Sector, Sector 71, Mohali-160071, Punjab "ायी लेखा सं./PAN NO: AAATR6500J अपीलाथ"/Appellant ""थ"/Respondent िनधा"रती की ओर से/Assessee by : Shri Parikshit Aggarwal, C.A राज" की ओर से/ Revenue by : Smt. Geetinder Mann, CIT DR सुनवाई की तारीख/Date of Hearing : 03/09/2026 उदघोषणा की तारीख/Date of Pronouncement : 28/09/2026 आदेश/Order PER VIJAY VARMA, A.M: Both the above appeals have been filed by the Assessee against the respective orders of the Ld. CIT Exemptions, Chandigarh each dt. 10/03/2026. 2. Si

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