B.D. Bansal Vs A.O. (Exemption) (ITAT Amritsar)
The assessee filed appeals before the Income Tax Appellate Tribunal, Amritsar Bench, challenging the order dated 18.03.2026 passed by the Commissioner of Income Tax (Exemption), Chandigarh, rejecting its application for registration in Form 10AB under Section 12A(1)(ac)(ii) of the Income Tax Act, 1961, and the consequential rejection of approval under Section 80G.
The assessee contended that the impugned order was bad in law because no proper show cause notice specifying the proposed grounds of rejection or adverse inference had been issued, resulting in a violation of the principles of natural justice. It was further argued that the Commissioner wrongly equated the absence of charitable activities with lack of genuineness, a test which, according to the assessee, was not contemplated under the Act.
The record showed that the application for renewal of registration under Section 12AB had been rejected on the ground that the assessee failed to establish the genuineness of its activities. The Commissioner observed that the trust’s income consisted of interest earned on bank fixed deposits, which had been accumulated over the years without being applied for charitable purposes. The order further recorded that there was no evidence of application of income towards relief of the poor, education, medical relief, or advancement of any other object of general public utility, and therefore the conditions for availing exemption were not satisfied.
Before the Tribunal, the assessee submitted that provisional registration had been granted on 04.06.2023 in Form 10AC for Assessment Years 2024-25 to 2026-27. During the registration proceedings, the Commissioner had sought copies of the trust deed and evidence of actual charitable activities, including supporting photographs, bills and newspaper cuttings. In response, the assessee furnished the trust deed, financial statements and income tax returns for the preceding three years.
The assessee further submitted that no further show cause notice was issued before rejecting the application. Referring to the financial statements for the years ending 31 March 2018, 31 March 2019 and 31 March 2020, it was argued that the Commissioner’s finding of absence of charitable activity was factually incorrect. According to the assessee, although its income was derived from bank interest, the financial statements reflected charitable expenditure in the form of donations to the poor, educational expenses, medical expenses and relief to the poor. It was therefore contended that the conclusion that no charitable activities had been undertaken resulted from an improper appreciation of the factual record.
The assessee also argued that rejection of registration without issuing a show cause notice violated the principles of natural justice. It requested an adequate opportunity to explain its case and produce documentary evidence before the Commissioner. It further submitted that the conditions for registration stood satisfied since the trust’s objects were charitable, charitable activities had been carried out, though on a small scale, there was no specified violation, and Rule 17A had been fully complied with.
The Departmental Representative relied upon the order of the Commissioner.
After considering the rival submissions and the material on record, the Tribunal held that the Commissioner had reached an incorrect satisfaction without taking into consideration the financial statements available on record. The Tribunal also found that the assessee had not been afforded an opportunity to explain its case with supporting documentary evidence and that rejection and cancellation of registration without issuance of a show cause notice violated the principles of natural justice.
Accordingly, in the interest of justice, the Tribunal remanded the matter to the Commissioner of Income Tax (Exemption) for fresh consideration of the application for registration. The Commissioner was directed to provide the assessee with an opportunity to substantiate its case by producing evidence and photographs and to decide the application afresh after hearing the assessee. The appeal relating to registration under Section 12AB was allowed for statistical purposes.
With respect to the appeal challenging rejection of approval under Section 80G, the Tribunal observed that the rejection was consequential to the rejection of registration under Section 12AB. Since the registration matter had been remanded, the Tribunal also remanded the Section 80G application to the Commissioner for fresh consideration in tandem with the application under Section 12A. Consequently, both appeals were allowed for statistical purposes.
Appellant Represented by: Sh. Lakshay Bansal, CA
FULL TEXT OF THE ORDER OF ITAT AMRITSAR
This appeal is filed by the assessee against the order of the Ld CIT (E), Chandigarh, dated 18/03/2026, rejecting the application for registration dated 27/02/2026 filed by the assessee in Form 10AB, u/s 12A(1)(ac)(ii) of the Income Tax Act 1961 (henceforth the Act).
2. The grounds of appeal taken by the assessee in the memorandum of appeal in form 36 are as follows:
“1. That the impugned order passed by the Id. CIT(E) is bad in law and liable to be quashed, as no proper show cause notice specifying any proposed ground of rejection or adverse inference was issued, thereby violating the principles of natural justice.
2. That the Id. CIT(E) has erred in law in rejecting the application by incorrectly equating absence of activities with lack of genuineness, thereby applying a test not contemplated under the Act and rendering the impugned order unsustainable.”
3. The facts emerging from records are that the application for renewal of registration u/s 12AB filed by the assessee, has been rejected on the allegation that the assessee has failed to establish the genuineness of activities. It has been observed that income of the trust is out of interest from banks on fixed deposits and the said interest income is being accumulated over the years, without any application of the same for charitable purpose and in absence of any evidence of application of income for the relief of poor, education, medical relief, or for advancement of any other objects of general public utility, the requisite conditions for availing exemptions are not satisfied.
3.1 Before the tribunal the Ld AR of the assessee submits that provisional registration of the trust was granted on 04/06/2023, (in form 10AC) for the period Asst year 2024-25 to Asst year 2026-27. In course of registration proceedings the assessee has replied to the questions raised by the Ld. CIT(E) dated 27/02/2026 calling for copy of trust deed and evidence of actual charitable activity carried out by way of supporting photographs, copies of bills, paper cutting etc. against which the assessee filed copies of trust deed along with financials and copies of ITR for last three years.
4. The Ld. AR further submitted that, no further cause notices has been issued by the Ld. CIT (E) and the application for registration has been rejected on the ground of absence of charitable activity being actually carried out. Drawing reference to the financials placed on record for the year ending 31st March 2018, March 2019, and March 2020 , the Ld AR of the assessee submitted that the observation of the Ld CIT ( E ) is factually incorrect , in as much , the income of the trust is from bank interest and charitable activity by way of donations made to poor, education expenses and medical expenses, relief to the poor, are all reflected in the financials and as such the observation of NIL charitable activity is not correct and the rejection is based on improper appreciation of factual evidence .
4.1 He further submitted that no show cause notice has been issued by the Ld. CIT (E), before rejection and cancellation of registration, which is against the principles of natural justice and he prayed for proper opportunity of hearing and explaining his case before the Ld. CIT (E).
4.2 Before concluding the Ld AR submitted that in the instant case the prima facie conditions of registration are fully satisfied, because the objects are charitable in nature, the genuineness of carrying out of charitable activities (though in small volume) cannot be denied and there is no specified violation in the case and there is full compliance of Rule 17A, in the instant case and as such he prayed for adequate relief.
5. The Ld. DR relied on the order of the Ld. CIT (E).
6. We have heard the rival submission and the materials on record and we find that the Ld. CIT (E) has arrived at an incorrect satisfaction without taking into cognizance the financials on record and has not allowed an opportunity to the assessee to explain with documentary evidences and the rejection and cancellation of registration without an issue of SCN is violative of the principles of natural justice.
7. As such in the interest of justice we remand the matter back to the Ld. CIT (E) to consider the application for registration afresh and allow an opportunity to the assessee to prove his case with evidences and photographs, to the satisfaction of the Ld. CIT (E), and to plead his case forthwith.
8. In the result the appeal of the assessee is allowed for statistical purpose.
ITA 561 / ASR / 2026
9. This appeal is filed by the assessee against the rejection of the application of approval u/s 80G, which is consequential to rejection of registration u/s 12AB of the Act 61.
10. Our observation in ITA 560/ ASR/ 2026 applies mutatis mutandis 10.1 Since we have remanded the matter back relating to registration u/s 12A, we also remand this matter back to the Ld. CIT (E) for consideration with the application afresh in tandem with the application u/s 12A.
11. In the result both the appeals are allowed for statistical purpose.
Order pronounced on 30.07.2026 in the Open Court
