Pushtiseva Foundation Vs CIT (ITAT Bengaluru)
Summary: The ITAT Bengaluru considered the assessee’s appeal for A.Y. 2024-25 against the order dated 06/03/2026 of the Addl./JCIT(A)-3, Bengaluru. The assessee, a charitable institution originally registered under section 12AA and approved under section 80G, was required to obtain registration under section 12AB under the amended registration regime. According to the assessee, it inadvertently filed Form No. 10AB on 28/06/2024 instead of Form No. 10A, resulting in rejection of its application by the CIT(E) on 23/12/2024. A Coordinate Bench had subsequently, by order dated 04/08/2025 in ITA No. 1227/Mum/2025, set aside that rejection and restored the registration proceedings to the CIT(E), permitting a fresh application in Form No. 10A. The CIT(E) thereafter granted registration under section 10(23C) on 17/04/2026. Meanwhile, CPC, Bengaluru, by intimation under section 143(1) dated 23/12/2025, denied exemption under section 11 and computed income at Rs.2,10,87,780/-.
The CIT(A) treated the assessee’s appeal concerning denial of section 11 exemption as infructuous because the registration issue under section 12AB had been restored to the CIT(E). The Tribunal held that this approach was incorrect. Proceedings concerning registration under section 12AB and an appeal arising from an intimation under section 143(1) operate under separate statutory jurisdictions. Although the ultimate decision concerning registration would materially affect the assessee’s entitlement to exemption under section 11, pendency of the registration proceedings could not extinguish the statutory appeal against the section 143(1) intimation. The CIT(A) was required to adjudicate that appeal with reference to the relevant legal and factual position.
At the same time, the Tribunal declined to simply delete the adjustment, observing that entitlement to exemption under section 11 depended upon fulfilment of the statutory conditions, including the applicable registration requirement. It therefore set aside the disallowance and restored the matter to the Assessing Officer for fresh consideration after taking into account the CIT(E)’s order passed pursuant to the Tribunal’s earlier directions and other conditions relevant for A.Y. 2024-25. The AO was specifically directed not to reject the exemption merely because registration proceedings were pending when the return was processed under section 143(1), and to provide adequate opportunity of hearing. The revised grounds were accordingly allowed for statistical purposes and the assessee’s appeal stood allowed for statistical purposes.
Cases Discussed
- Vishranthi Trust – ITA No. 1227/Mum/2025, order dated 04/08/2025 – The Coordinate Bench had set aside the rejection of the assessee’s registration application and restored the matter to the CIT(E), permitting the assessee to file the proper Form No. 10A for fresh examination of registration in accordance with law.
FULL TEXT OF THE ITAT JUDGMENT/ORDER
Present appeal is filed by the assessee against the order dated 06/03/2026 passed by the Ld. Addl./JCIT(A)- 3, Bengaluru [hereinafter referred to as “the Ld.CIT(A)”] for A.Y. 2024-25 on the following revised grounds of appeal:-
“1. GROUND NO.1: VIOLATION O F PRINCIPLE OF NATURAL JUSTICE:
1.1. On the facts and in the circumstances of the case and in law, the CIT(A) has erred in passing the impugned order without granting the personal hearing through video conferencing as specifically and duly requested by the Appellant.
1.2. The Appellant prays that the impugned order; being in violation of the principles of natural justice and without providing a reasonable opportunity of being heard, be held as bad in law and quashed. WITHOUT PREJUDICE TO ABOVE,
2. GROUND NO. 2: DENIAL OF EXEMPTION U/S 11 OF THE ACT: 2.1. On the facts and circumstances of the case and in law, the ld. CIT(A) erred in prematurely dismissing the appeal as infructuous without adjudicating the issue of denial of exemption u/s. 11 of the Act. 2.2. The Appellant prays that the exemption u/s. 11 of the Act be granted and the impugned order to be set aside and quashed.
2.3. Alternatively, the Appellant prays that the matter be restored to the file of CIT(A) to adjudicate the issue after the order of CIT(E) is passed pursuant to the directions of the Hon’ble Tribunal vide its order dated August 04, 2025.
WITHOUT PREJUDICE TO ABOVE AND IN THE ALTERNATIVE,
3. GROUND NO 3: DENIAL OF REDUCTION OF EXPENDITURE INCURRED FROM GROSS RECEIPT OF THE CURRENT YEAR: 3.1. On the facts and circumstances of the case and in law, the ld. CIT(A) erred in not adjudicating the ground relating to computation of income, including reducing the expenditure incurred by it against the gross receipt of the current year.
3.2. Assuming without admitting that the Appellant is not entitled to exemption u/s. 11, the expenditure incurred by the Appellant ought to be reduced while computing the income of the Appellant, even otherwise, on a commercial principle.
3.3. The Appellant praystha t ld. AO be directed to reduce the expenditure incurred during the year while computing the income.
GENERAL:
The Appellant craves leave to add, alter, amend, withdraw or vary all or any of the above grounds of appeal either before or at the time of hearing of this appeal.”
3. Brief facts of the case are as under:–
The assessee is a charitable institution which was originally registered u/s 12AA and was also enjoying approval u/s 80G of the Act. Consequent to the amended regime governing registration of charitable institutions, the assessee was required to obtain registration u/s 12AB of the Act. It is the case of the assessee that, while seeking re- registration, it inadvertently filed Form No. 10AB on 28/06/2024 instead of Form No.10A. The application was thus rejected by the Ld.CIT(E) vide order dated 23/12/2024. Aggrieved by the rejection, the assessee preferred an appeal before this Tribunal.
3.1. The Coordinate Bench of this Tribunal in ITA No. 1227/Mum/2025, vide order dated 04/08/2025, set aside the rejection order and restored the matter to the file of the Ld. CIT(E), directing that the assessee be permitted to file fresh application in Form No. 10A along with the requisite details and that the Ld.CIT(E) thereafter examine the registration afresh in accordance with law. The Ld.CIT(E), subsequently vide order dated 17/04/2026, granted registration under section 10(23C) of the Act. 3.2. In the meantime, CPC, Bengaluru pas sed the impugned intimation u/s. 143(1) dated 23/12/2025, denying the exemption claimed by the assessee u/s. 11 and computing its income at Rs.2,10,87,780/-.
Aggrieved, the assessee preferred an appeal against the said intimation before the Ld.CIT(A).
3.3. Before the Ld.CIT(A), the assessee raised alternative contention that, even assuming that exemption u/s 11 was not available, the entire gross receipts could not be brought to tax without allowing the expenditure incurred for earning/applying such receipts.
3.4. The Ld.CIT(A), while passing the impugned order observed that, since the question of registration u/s 12AB had already been restored by this Tribunal to the Ld.CIT(E), the First Appellate Authority did not have jurisdiction over the matter and, accordingly, treated the appeal concer ning denial of exemption u/s.11 as infructuous. The appeal was consequently dismissed. Aggrieved by the order passed by the Ld.CIT(A), the assessee is in appeal before this Tribunal.
4. The Ld.AR submitted that the Ld.CIT (A) erred in treating the appeal as infructuous. It was submitted that the proceedings relating to grant of registration u/s.12AB and the appeal arising from the intimation u/s. 143(1) operate in distinct fields. According to the Ld.AR, pending the proceedings before the Ld. CIT(E) could at best have a bearing on the ultimate allowability of exemption u/s 11, but could not result in extinguishment of the statutory appeal arising from the intimation passed u/s.143(1).
4.1. The Ld.AR further submitted that a specific request for Ld.CIT(A), which was declined. It was accordingly submitted that the impugned order passed by the Ld.CIT(A) be set aside.
4.2. The Ld. DR submitted that as the exemption ha s been granted to the assessee, it is incumbent to verify the exemption claimed by the assessee under section 11 of the Act. He thus submitted that the issue may me remitted for necessary verification. We have perused the submissions advanced by both sides in light of the record placed before us.
5. The short issue that arises for consideration is whether the appeal arising from the intimation passed u/s. 143(1), whereby exemption u/s. 11 was denied, could have been dismissed as infructuous merely because the issue of registration u/s. 12AB was pending consideration before the Ld. CIT(E) pursuant to the directions of this Tribunal.
5.1. It is undisputed that the earlier appeal before this Tribunal concerned rejection of the assessee’s application for registratio n u/s 12AB. Vide order dated 04/08/2025, the Coordinate Bench restored the registration proceedings to the file of the Ld.CIT(E) for fresh consideration after permitting the assessee to file the proper Form No.10A.
5.2. The present proceedings, on the other hand, arise out of the intimation passed u/s.143(1) for A.Y. 2024- 25 whereby the assessee’s claim of exemption u/s11 was denied and consequential.
5.3. In our considered opinion, merely because the question of registration was pending adjudication before the Ld. CIT(E), the statutory appeal against the intimation u/s. 143(1) did not become infructuous. The eventual decision of the Ld. CIT(E) would undoubtedly have a material bearing on assessee’s claim of exemption u/s 11. However, the pendency of such proceedings could not, by itself, result in dismissal of the appeal arising out of the intimation.
5.3. The jurisdiction vested in the Ld. CIT(E) to consider grant of registration u/s 12AB and the jurisdiction exercised by the Ld.CIT(A) in an appeal arising out of an intimation u/s 143(1) are separate statutory jurisdictions. The Ld.CIT(A) was, therefore, required to adjudicate the appeal before him having regard to the legal and factual position relevant to the assessment year under consideration. This in any way cannot justify sustaining the adjustment made in the intimation under section 143(1), nor could it furnish a valid basis for treating the assessee’s statutory appeal as infructuous.
5.4. At the same time we do not intend to delete the addition made under section 143(1) of the Act, it would otherwise mean tha t the assessee is, entitled to its claim of exemption under section 11. The entitlement to exemption under section 11 is necessarily dependent upon fu lfilment of the statutory conditions prescribed under Chapter III of the Act, including the requirement relating to registration under section 12AB. Since, at the relevant point of time, the registration proceedings had been restored by this Tribunal to th the issue relating to the consequential allowability of exemption could not have been finally adjudicated without taking into account the outcome of those proceedings.
5.5. The appropriate course, i n the facts of the present case, is therefore to set aside the impugned disallowance and restore the matter to the file of the Ld.AO for fresh consideration. The Ld.AO shall examine the assessee’s claim of exemption under section 11 afresh after taking int o consideration the order passed by the Ld.CIT(E) in the proceedings pursuant to the order of this Tribunal dated 04/08/2025, as well as the other conditions relevant to the claim for the year under consideration.
5.6. Needless to observe, the Ld.AO shall not proceed on the premise that the claim of exemption is liable to be rejected merely because registration proceedings were pending at the time of processing the return under section 143(1). The claim shall be examined in accordance with law, on the basis of the registration status ultimately obtaining and the statutory conditions applicable to A.Y. 2024- The assessee shall be afforded adequate opportunity of being heard before the claim is finally determined.
5.7. In view of the above, the disallowance of exemption under section 11 made while processing the return under section 143(1) is set aside and the matter is restored to the file of the Ld.AO for fresh adjudication in accordance with the directions contained herein.
Accordingly, the revised groun ds raised by the assessee are allowed for statistical purposes.
In the result, the appeal filed by the assessee stands allowed for statistical purposes.
Order pronounced in the open court on 07-09-2026.
