SHRI BHAVNAGAR DASHASHRIMALI KANTHIBANDH (VAISHNAV) VANIK GNATI,BHAVNAGAR vs. THE CIT(EXEMPTION), AHMEDABAD

आदेश आदेश/O R D E R आदेश आदेश

PER MAKARAND V.MAHADEOKAR, AM: These two appeals by the assessee are directed against separate orders passed by the Commissioner of Income Tax (Exemption), Ahmedabad [hereinafter referred to as “CIT(E)”] dated 23.09.2023 and 06.12.2024 under section 12AB of the Income Tax Act, 1961 [hereinafter referred to as “the Act”]. Since the issues involved in both appeals pertain to the same assessee, arise out of connected proceedings, and involve a common question regarding grant of registration under section 12AB of the Act, both appeals were heard together and are being disposed of by way of this consolidated order for the sake of convenience and brevity.

2. Condonation of Delay 2.1 At the threshold, it is observed that there is a delay in filing the appeal in before us. As per the Registry report, there is a delay of 417 days in filing the appeals. The assessee, however, in its application for condonation of delay supported by a duly notarised affidavit, has stated that the delay is 424 days, caused due to bona fide reasons and circumstances beyond the assessee’s control.

1. 2.3 During the course of hearing, the Learned Departmental Representative did not raise any serious objection to the condonation request.

2.4 We have carefully considered the rival submissions and perused the reasons assigned by the assessee in the condonation petition. It is well settled that the power to condone delay under section 253(5) of the Income- tax Act, 1961, is to be exercised in a liberal and justice-oriented manner so as to advance substantial justice rather than to defeat it on technical grounds.

2.5 The Hon’ble Supreme Court in Collector, Land Acquisition v. Mst. Katiji & Others [(1987) 167 ITR 471 (SC)] laid down the guiding principles governing condonation of delay, holding that when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have a vested right in injustice being done because of a non-deliberate delay. The Apex Court further observed that there is no presumption that delay is occasioned deliberately, or on account of mala fides, and that a litigant does not stand to benefit by lodging an appeal belatedly.

2.6 Similarly, in N. Balakrishnan v. M. Krishnamurthy [(1998) 7 SCC 123], the Hon’ble Supreme Court explained that the length of delay is not material; acceptability of the explanation is the only criterion. If the explanation does not smack of mala fides or is not put forth as part of a dilatory strategy, the court must show utmost consideration to the suitor.

Applying these settled principles, we find that the reasons assigned by the assessee are bona fide, reasonable, and sufficiently demonstrate that the delay occurred due to a chain of events beyond its control. The assessee’s conduct shows diligent pursuit of remedies, first by filing a fresh application under section 12AB invoking the CBDT Circular, and thereafter by promptly filing appeals upon rejection of that application. The delay, therefore, stands covered by the principle enshrined in section 14 of the Limitation Act, 1963, which provides for exclusion of time spent in bona fide proceedings before an authority having no jurisdiction, when computing limitation for a subsequent proceeding.

2.7 In our opinion, where the assessee had pursued registration under section 12AB through multiple applications owing to procedural misunderstanding, a charitable institution’s right to seek registration should not be defeated on account of technical or procedural lapse if bona fide intent and charitable character are evident.

2.8 In view of the above discussion, we are satisfied that the delay in filing the present appeals was not deliberate or wanton but was due to bona fide reasons and continuous pursuit of remedies. The same deserves to be condoned in the interest of substantial justice. Accordingly, the delay of 417 days (as computed by the Registry) in filing both appeals is hereby condoned, and the appeals are admitted for adjudication.

3.1 The assessee is a registered public charitable trust which was granted provisional registration under section 12AB(1)(ac)(vi) vide order in Form No. 10AC dated 13.01.2022, valid for assessment years 2022–23 to 2024–25. Subsequently, the assessee filed an application in Form No. 10AB dated 16.03.2023 seeking conversion of provisional registration into regular registration under section 12AB(1)(ac)(iii) of the Act. The said application was examined by the learned CIT(E), Ahmedabad, who, after issuing notices dated 18.07.2023 and 19.08.2023 and considering the reply of the assessee dated 18.08.2023, passed an order dated 23.09.2023 rejecting the assessee’s application for registration under section 12AB.

3.2 Thereafter, the assessee again filed a fresh application in Form No. 10AB dated 30.06.2024 under the same provision [section 12A(1)(ac)(iii)], claiming that it was eligible to apply afresh within the extended period prescribed by CBDT Circular No. 07 of 2024 dated 25.04.2024. This subsequent application came to be rejected by the CIT(E), Ahmedabad, vide order dated 06.12.2024, on the ground that the earlier rejection dated 23.09.2023 had attained finality and that the present application was not maintainable, as the said Circular No. 07/2024 was not applicable to the facts of the case.

3.3 Both these orders, one rejecting the application on merits and another rejecting the subsequent application as non-maintainable, have been challenged before us by way of two separate appeals. 3.4 The grounds raised by the assessee are as follows:

Grounds in ITA No. 134/Ahd/2025:

1. Learned CIT(E) has erred in law and on the facts of the case in rejecting the Registration u/s 12AB of the Act.

2. Learned CIT(E) has erred in law and on the facts of the case in invoking the provisions of S.13(1)(b) of the Act for rejecting the Application. Grounds in 1. Learned CIT(E) has erred in law and on the facts of the case in rejecting the Registration u/s 12AB of the Act.

3.6 The CIT(E) further examined the applicability of Explanation 2 to section 13(1) relied upon by the assessee, which provides that a trust or institution created for the benefit of Scheduled Castes, Scheduled Tribes, backward classes, women, or children shall not be deemed to be created for the benefit of a particular religious community or caste. The CIT(E) found that no material was placed to show that the “Dashashrimali Kanthibandh (Vaishnav) Vanik Gnati” community fell within any of these categories, and therefore, the said Explanation was inapplicable.

3.7 Relying on the decisions of the Hon’ble Supreme Court in CIT v. Palghat Shadi Mahal Trust (2002) 120 Taxman 889 (SC) and CIT v. Dawoodi Bohra Jamat (2014) 43 taxmann.com 243 (SC), the CIT(E) held that even where a trust pursues charitable purposes but restricts the benefit to members of a particular religious community or caste, the provisions of section 13(1)(b) are attracted. Consequently, the learned CIT(E) held that the assessee was not eligible for registration under section 12AB and cancelled the earlier provisional registration granted under section 12AB vide Form No. 10AC dated 13.01.2022.

3.8 The second impugned order dated 06.12.2024 was passed by the same CIT(E) rejecting the assessee’s fresh application in Form No. 10AB filed on 30.06.2024. n this order, the CIT(E) recorded that the earlier application under section 12A(1)(ac)(iii) had been rejected on 23.09.2023, and the provisional registration stood cancelled. Upon examination, the CIT(E) found that the present application was merely a repetition of the earlier request and hence non-maintainable. The CIT(E) noted that the assessee had placed reliance on CBDT Circular No. 07 of 2024 dated 25.04.2024, claiming that the said Circular allowed trusts whose applications were rejected before 30.09.2023 to reapply within the extended time limit of 30.06.2024. However, according to the CIT(E), the said Circular covered only cases of procedural defects or non-compliance during transition from provisional to regular registration and not those cases where the earlier rejection was on merits after detailed examination.

3.9 Both appeals came up for hearing together as they pertain to the same assessee and involve the interlinked issues concerning grant of registration under section 12AB. The learned Authorised Representative (AR) appeared on behalf of the assessee and filed a paper book containing copies of the trust deed and other relevant documents.

3.10 It was submitted that the CIT(E) rejected the application solely on the ground that the objects of the assessee-trust are primarily intended for the benefit of a particular caste or religious community, namely Kanthibandh (Vaishnav) Vanik Gnati, invoking section 13(1)(b) of the Act. The AR contended that such an approach is impermissible at the stage of registration under section 12A/12AB, as the provisions of section 13(1)(b) are relevant only at the stage of assessment when exemption under section 11 is to be examined, and not at the stage of grant or renewal of registration.

3.11 In support of this contention, the AR placed strong reliance on the recent judgment of the Hon’ble Gujarat High Court in Commissioner of Income Tax (Exemptions) v. Jamiatul Banaat Tankaria [(2024) 168 taxmann.com 35 (Guj.)]*, wherein the Hon’ble Court categorically held that section 13(1)(b) cannot be invoked while considering an application for registration under section 12A/12AB. The High Court observed that the scope of enquiry by the Commissioner at the registration stage is limited to examining (i) the genuineness of the trust or institution and its activities, and (ii) whether such activities are being carried out in accordance with its declared objects. The question of denial of exemption under section 11 on the ground of applicability of section 13(1)(b) arises only during assessment, and not at the stage of registration.

3.12 The AR further contended that even if one or more of the assessee’s stated objects appear to benefit a particular section or group, the overall charitable intent and activities of the trust cannot be disregarded. It was urged that the Commissioner is required to consider the dominant purpose and genuine charitable character of the institution as a whole. Unless there is evidence to show that the trust’s income is applied exclusively for the benefit of a specific religious community to the exclusion of others, registration cannot be denied at the threshold. The AR also placed reliance on the decision of the Hon’ble Supreme Court in CIT v. Dawoodi Bohra Jamat [(2014) 43 taxmann.com 243 (SC)], wherein the Apex Court upheld the registration of a trust having composite charitable and religious objects. The Court clarified that the mere presence of religious activities does not disentitle a trust from registration, and that the provisions of section 13(1)(b) are to be examined only during assessment proceedings.

3.13 The AR further submitted that this very Tribunal has, in a recent decision in the case of Gohilwad Vankar Samaj Seva Trust v. CIT (Exemption), Ahmedabad in applied the above judicial principles and directed the CIT(E) to grant registration under section 12AB. It was held that invoking section 13(1)(b) at the registration stage is premature and contrary to law, and that the genuineness of activities and charitable intent are the only parameters for consideration at this stage.

3.14 The AR emphasised that the assessee-trust has been in existence for several decades, registered under the Bombay Public Trusts Act, 1950, and engaged in charitable and religious activities such as providing relief to poor and needy members of society, educational assistance, medical aid, and social welfare activities. There is no finding by the CIT(E) that the assessee is engaged in any activity which is non-genuine or contrary to its declared objects. Hence, the rejection of registration is purely on a misconceived interpretation of section 13(1)(b).

3.15 It was, therefore, submitted that the CIT(E)’s order rejecting the assessee’s application under section 12AB deserves to be quashed, and the CIT(E) be directed to grant registration to the assessee. Alternatively, it was prayed that the matter may be restored to the file of the CIT(E) with a direction to re-examine the assessee’s application afresh in the light of the binding judicial precedents and without invoking section 13(1)(b) at this stage.

3.16 The learned Departmental Representative (DR) supported the impugned order passed by the learned CIT(E) and relied upon the reasoning recorded therein. The DR drew our attention to the object clauses of the assessee-trust as contained in the trust deed and submitted that most of the objectives are confined to the welfare and benefit of a particular community, as specifically noted by the learned CIT(E). It was further contended that the membership of the trust is also restricted to persons belonging to that particular community, thereby indicating that the activities are not meant for the public at large but for a restricted class of beneficiaries. The learned DR, therefore, submitted that the order of the learned CIT(E) rejecting registration under section 12AB is justified in law, being in consonance with the statutory requirement that the trust must exist for charitable purposes of general public utility and not for the benefit of a particular religious community or caste.

3.17 In reply, the learned Authorised Representative (AR) of the assessee controverted the above contentions and submitted that the learned CIT(E) erred in drawing conclusions solely on the basis of the object clauses without ascertaining the nature of the actual activities carried out by the trust. It was submitted that although certain objects may refer to a specific community, the overall objectives are general in nature and intended for public charitable purposes falling within the ambit of section 2(15) of the Act. The AR contended that the learned CIT(E) failed to verify whether, in fact, any activities were restricted to a particular community or whether the benefits were confined to a limited group. It was further argued that the genuineness of the trust’s activities and its charitable character ought to have been examined independently, and rejection of registration merely on presumptive inference from the wording of the trust deed is not sustainable in law.

4.1 On a perusal of the impugned order, it is evident that the learned CIT(E) has proceeded solely on the basis of certain clauses of the trust deed which refer to Kanthibandh (Vaishnav) Vanik Gnati. No independent examination has been made of the genuineness of the assessee’s activities or the manner in which its funds are being applied. The order nowhere records any finding that the assessee has, in fact, carried out its charitable or religious activities exclusively for the benefit of a particular community. It is a settled position of law that section 13(1)(b) cannot be invoked at the stage of granting registration under section 12A or 12AB. That provision becomes relevant only when exemption under sections 11 and 12 is claimed at the stage of assessment.

4.2 We also noted the reliance placed by the AR on the decision of the Co- ordinate Bench in Gohilwad Vankar Samaj Seva Trust v. CIT (Exemption), order dated 03.04.2025 wherein it was categorically held that the Commissioner cannot invoke section 13(1)(b) at the stage of registration. The Co-ordinate Bench in that case, after considering the judgments of the Hon’ble Gujarat High Court in CIT (Exemptions) v. Jamiatul Banaat Tankaria [2024] 168 taxmann.com 35 and CIT v. Bayath Kutchhi Dasa Oswal Jain Mahajan Trust (2017) 8 ITR-OL 494 (Guj), held that –

5. The above judgments will hold good to a Trust created before 01-04- 2021. Since the assessee has to first cross the hurdle of being eligible to exemption under section 11 by obtaining a certificate of registration under section 12A of the Act. Having crossed this hurdle then after the provisions of Section 13(1)(b) will get attracted whether the trust spended for the benefit of particular community, when the trust having

mixed objects in it. Therefore respectfully following the above judicial precedents, the grounds raised by the assessee is hereby allowed. The matter is restored to the file of Ld. CIT (Exemption) with a direction to grant Final Registration u/s. 12AB of the Act, after giving due opportunity of hearing to the assessee and in accordance with law.

4.3 At this juncture, we take note of the amended sections dealing with registration. Prior to 01.04.2021, registration of charitable and religious trusts was governed by sections 12A and 12AA. Under that regime the Commissioner’s power was limited to verifying the objects and genuineness of activities of the trust. There was no codified provision defining “specified violations” or authorising cancellation on that ground. Cancellation could be invoked only under section 12AA(3) upon finding that activities were not genuine or not in accordance with objects. However, the Finance Act, 2020, effective 01.04.2021, and later Finance Act, 2022, replaced this framework with section 12AB, introducing a completely new registration mechanism, including:

• Provisional registration and re-registration of existing trusts, and • A post-registration compliance regime under sub-section (4) defining “specified violations” that can trigger cancellation.

4.4 This amendment materially changed both the procedure and substance of the registration regime.

4.5 When the Co-ordinate Bench in Gohilwad Vankar Samaj Seva Trust observed that “The above judgments will hold good to a Trust created before 01-04-2021,” it was expressly acknowledging that the judicial precedents it had relied upon — such as Jamiatul Banaat Tankaria (168 taxmann.com 35 Guj), Bayath Kutchhi Dasa Oswal Jain Mahajan Trust (2017 8 ITR-OL 494 Guj), etc. were all rendered under the pre-amendment legal regime. Those decisions interpreted section 12AA (old law), not section 12AB (new law). Hence, the Co-ordinate Bench limited their binding force only to trusts created before 01-04-2021, because for such trusts, their rights and obligations arose under the earlier section 12AA and the new section 12AB and its Explanation defining “specified violations” would not retroactively govern their creation or initial registration.

4.6 This line draws a clear dividing line for applicability of precedents. Trusts created on or after 01-04-2021 will be governed by the amended provisions of section 12AB, especially sub-section (4). For these, the concept of “specified violations” now determines registration validity and cancellation. Earlier judicial interpretations cannot be blindly extended, since the statutory foundation itself has changed.

4.7 In the present case, the assessee-trust was incorporated on 08-03- 2022, i.e., after 01-04-2021. Therefore the precedents discussed in Gohilwad Vankar Samaj Seva Trust apply only in principle (on the nature of charitable activity), but not in full force, because the present assessee’s registration is governed by the post-amendment section 12AB(4) regime.

4.8 Thus, while the earlier decisions protect older trusts from denial of registration merely for community-based objects, a newly created trust (like the present one) is subject to statutory oversight under section 12AB(4), which allows cancellation later upon any “specified violation.”

4.9 Applying this legal framework to the facts of the present case, we observe that the CIT(E) has not verified whether the assessee has engaged in any activity benefiting only a particular community or caste. The order proceeds on assumptions without factual foundation.

4.10 Turning to the financial aspects, the record reveals that as on 31.03.2020, the assessee had shown unsecured loans under the head “Advances” amounting to Rs.58,69,000/-, and Fixed Deposits of Rs.66,62,679/-, while the Income and Expenditure Account reflected only Locker Rent of Rs.9,186/- as expenditure. The AR could not offer a satisfactory explanation for the same, though he submitted that no expenditure does not necessarily imply absence of activity. The learned CIT(E) has, however, not made any inquiry to verify the nature of these advances, deposits, or sources of funds. The satisfaction envisaged under section 12AB(1)(a) must be based on verification of records and not on mere assumption.

4.11 In view of the above discussion, we are of the considered view that the CIT(E) was not justified in rejecting the registration at the threshold. The correct course under the amended framework is to grant registration, provisional or otherwise, after examining genuineness of the trust and its declared objectives, and thereafter to monitor compliance through the mechanism of section 12AB(4). If, in future, any “specified violation” as defined in the Explanation to that section is detected, such as the application of income for the benefit of a particular community, the registration can be cancelled after due process.

4.12 Accordingly, while distinguishing the decision in Gohilwad Vankar Samaj Seva Trust (supra) on the basis of the statutory amendment introducing section 12AB(4) and its Explanation, we hold that the rejection of registration in the present case was premature and procedurally deficient.

4.13 The impugned order is therefore set aside, and the matter is restored to the file of the CIT(E) for fresh consideration in accordance with law. The learned CIT(E) shall: verify the financial statements and activities of the trust i. examine whether its objects are charitable within the meaning of ii. section 2(15) apply the amended framework of section 12AB(4) while evaluating iii. any potential “specified violation” and deal specifically with each of the judicial precedents relied upon by iv. the assessee’s Authorised Representative as cited in the preceding paras, giving cogent reasons for acceptance or distinction of each precedent.

4.14 For abundant clarity, we also direct that the restriction of membership to a particular community shall not, by itself, be treated as a conclusive ground for rejection. The CIT(E) shall focus on whether the trust’s activities are charitable in nature and whether its conduct falls within the permissible framework of section 2(15) and the conditions prescribed under section 12AB.

4.15 We now turn to the second appeal filed by the assessee. The facts, in substance, are identical to those in the earlier appeal. The assessee-trust in the second appeal (ITA No.135/Ahd/2025) was also denied registration under section 12AB of the Act by the learned CIT(E) on the grounds of non- maintainability.

4.16 Once the foundational order dealing with the assessee’s application for registration under section 12AB has been remanded for fresh adjudication, any subsequent or parallel appeal emanating from the same proceeding loses its independent existence.

4.17 The principle analogous to res judicata, though strictly speaking not applicable to income-tax proceedings, which are year-specific, operates to prevent multiplicity of litigation and inconsistent findings on the same set of facts and issues.

4.18 Since the original application for registration has already been restored to the file of the learned CIT(E) for fresh decision on merits, any separate adjudication in this appeal would not only result in duplication but may also prejudice the fair consideration of the matter by the authority in the remanded proceedings. The Tribunal, being a quasi-judicial body, ought not to simultaneously entertain multiple appeals arising from the same cause when the primary issue has already been remanded for reconsideration.

4.19 In view of the above, we hold that the present appeal is rendered infructuous and is dismissed as not maintainable, being covered by the decision in the first appeal. This dismissal is, however, without prejudice to the right of the assessee to pursue all submissions and judicial precedents before the learned CIT(E) in the remanded proceedings in accordance with law.

4.20 Before parting, it is clarified that nothing contained in this order shall be construed as an expression on the merits of the claim of the assessee and the learned CIT(E) shall decide the matter independently, uninfluenced by any observations made herein, except to the extent of legal directions issued.