Advaya Educational And Charitable Trust Vs CIT (ITAT Bangalore)
Low Charitable Spending May Invite Questions, Not Instant Rejection—CIT(E) Must Examine Evidence & Hear Trust u/s 12AB: Bangalore ITAT
The Bangalore ITAT has held that an application for registration u/s 12AB cannot be rejected merely because the CIT(E) considers the expenditure on charitable activities to be low compared with the donations received. Before drawing an adverse conclusion, the CIT(E) must examine the trust’s documents, verify whether activities have commenced, confront the trust with the proposed adverse inference & provide an effective opportunity of hearing.
The Tribunal further held that rejection of an earlier application does not create a statutory bar against filing a fresh application, particularly where charitable activities have subsequently commenced.
Trust’s Objects & Provisional Registration
Advaya Educational and Charitable Trust was established on 30.06.2020 with the object of supporting children from migrant communities, irrespective of caste, creed or language.
Its activities were aimed at providing education, nutrition, healthcare & welfare support, preventing school dropouts & eradicating child labour.
The trust was granted provisional registration under the charitable trust provisions, valid from AY 2022-23 to AY 2024-25. It was also granted provisional approval u/s 80G(5) on 08.02.2022.
For regular registration, the trust filed Form 10AB on 30.06.2024.
First Application Rejected Without Effective Hearing
The CIT(E) issued a letter dated 08.10.2024 calling for the trust deed, financial statements, activity report & other details.
The trust claimed that it physically submitted the documents on 21.11.2024 because the concerned officer was on leave. It produced the Department’s acknowledgment before the Tribunal.
The documents included the provisional registration certificate, trust deed, ITR acknowledgments, audited financial statements, current-year provisional accounts, bank account details, activity reports, brochures, photographs, list of trustees & rental agreement.
However, the CIT(E) rejected the application on 16.12.2024. The trust contended that no specific show-cause notice proposing rejection was issued & no effective hearing was granted.
The rejection was substantially based upon the perceived mismatch between donations received & amounts classified as expenditure on charitable activities. The CIT(E) concluded that the charitable spending appeared insufficient.
Fresh Applications Meet the Same Closed Door
Acting on professional advice, the trust filed a fresh application u/s 12AB on 27.11.2025 & an application u/s 80G on 28.11.2025.
In the fresh proceedings, it responded to notices & furnished details on 18.12.2025 and 22.01.2026. It also complied with show-cause notices issued in March 2026.
Nevertheless, by orders dated 30.03.2026, the CIT(E) rejected both applications. He held that the first rejection dated 16.12.2024 had not been challenged & had therefore attained finality. Approval u/s 80G was consequently refused for want of a valid registration u/s 12AB.
The trust filed appeals against all three orders.
Delay in Challenging First Rejection Condoned
The appeal against the first rejection was delayed by approximately 467 days.
The trust explained that it was newly established & managed by persons not fully conversant with the procedural requirements of the Income-tax Act. It did not receive proper professional guidance about the necessity of filing an appeal.
It bona fidely believed that the appropriate remedy was to cure the concerns by filing a fresh application. Only when the second application was rejected on the ground that the first order had not been appealed against did it understand that an appeal was necessary.
The Tribunal found sufficient cause for the delay. Since the trust had pursued an alternative remedy under a bona fide but mistaken understanding & gained nothing from delaying the appeal, the delay was condoned.
Figures Themselves Showed Activities Had Commenced
The verification report recorded receipt of donations of ₹7.13 lakh for AY 2022-23, ₹30.72 lakh for AY 2023-24, ₹11.57 lakh for AY 2024-25 & ₹12.99 lakh for the year ended 31.03.2025.
It also showed expenditure of ₹65,743 for AY 2022-23, ₹10.48 lakh for AY 2024-25 & ₹11.80 lakh for the year ended 31.03.2025.
The Tribunal observed that it was difficult to understand how these figures could support a conclusion that the trust had not commenced any activity.
Even if the CIT(E) entertained doubts about the quantum, classification or genuineness of expenditure, he was required to confront the trust with those concerns & conduct a proper examination. No such meaningful exercise had been undertaken.
The application could not be rejected without determining whether activities had actually been carried on & whether those activities were genuine and consistent with the trust’s objects.
Fresh Application Was Legally Maintainable
The Tribunal rejected the reasoning that the second application was barred because the earlier rejection had not been challenged.
If a trust had not commenced its activities when the first application was decided, it could apply again once activities commenced. The Income-tax Act contains no prohibition against a fresh application in such circumstances.
Every fresh application must be independently examined to determine whether the statutory conditions are satisfied. An earlier rejection cannot mechanically substitute the inquiry required from the registering authority.
ITAT’s Decision
The Tribunal quashed the first rejection order dated 16.12.2024 & directed the CIT(E) to examine the documents already submitted and adjudicate the application u/s 12AB afresh. It expressly stated that a proper opportunity of hearing is mandatory.
Since the original registration application was restored, the second appeal seeking the same registration became infructuous & was dismissed.
The application u/s 80G was also restored to the CIT(E), to be considered in accordance with law after the registration u/s 12AB is decided. Thus, the Tribunal did not itself grant registration or 80G approval.
Author’s Comments
Registration proceedings cannot be reduced to an arithmetic comparison between donations & one accounting head labelled “charitable expenditure”. Programme expenses may appear under administrative or indirect heads, requiring examination of their true nature.
The order also recognises that genuine charitable activity may evolve over time. An initial failure or rejection cannot become a permanent statutory disqualification where the Act creates no such embargo.
In short, the CIT(E) may question how charity was spent—but cannot reject the trust merely because the spreadsheet looked less charitable than expected, without first hearing the story behind the figures.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, BANGALORE BENCH
01. These are the three appeals filed by the Adavaya Educational and Charitable Trust against various orders.
02. ITA No. 2225/Bangalore/2026 is filed against the order dated 16 December 2024 passed by the Commissioner of Income Tax (Exemption), Bengaluru (the learned CIT – E), which rejected the assessee’s application in Form No. 10 AB, dated 30 June 2024, for registration under section 12 AB of the Income Tax Act, and cancelled the registration already granted to the assessee.
03. ITA No. 2254/Bangalore/2026 is filed against the order dated 30 March 2026 passed by the CIT (Exemption), wherein the assessee’s application in Form No. 10 AB, dated 28 November 2025, for approval under section 80 G of the Income Tax Act was rejected.
04. ITA No. 2253/Bangalore/2026 is filed by the assessee against the order dated 30 March 2026 passed by the learned CIT (Exemption), wherein the assessee’s application in Form No. 10 AB, dated 27 November 2025, for registration under section 12 AB was rejected.
05. The Assessee has raised the following grounds of appeal:
ITA 2225/Bang/2026:
1. Invalidity of the Impugned Order
The order dated December 16, 2024, passed by the learned Commissioner of Income Tax (Exemptions) rejecting the Appellant’s application for registration under section 12AB of the Income-tax Act, 1961 is bad in law, arbitrary, contrary to the facts on record, passed without appreciation of the material furnished by the Appellant, and is therefore liable to be set aside.
2. Violation of Principles of Natural Justice
The impugned order is vitiated for violation of the principles of natural justice and the statutory mandate of Section 12AB(1)(b)(ii)(B) of the Act, inasmuch as:
a) no specific Show Cause Notice proposing rejection of the application was issued;
b) the Appellant was not put to notice of the adverse observations forming the basis of rejection;
c) no effective opportunity of personal hearing was granted prior to passing the impugned order; and
d) the relevant column relating to grant of hearing opportunity in the impugned order itself has been left blank, demonstrating non-compliance with the statutory requirement of a personal hearing, before passing an adverse order.
3. Improper Scope of Enquiry under Section 12AB
The learned Commissioner of Income Tax (Exemptions) erred in law in travelling beyond the limited scope of enquiry permissible under section 12AB of the Act by examining the quantum and pattern of expenditure, instead of restricting the enquiry to the charitable objects of the Trust and the genuineness of its activities.
4. Failure to Appreciate Charitable Objects and Genuine Activities
The learned Commissioner failed to appreciate that the Appellant Trust is engaged in genuine charitable activities aimed at supporting and empowering children from migrant communities through education, nutrition, healthcare, and welfare initiatives, which squarely fall within the ambit of “charitable purpose” as defined under section 2(15) of the Act.
5. Erroneous Reliance on Quantum of Expenditure
The learned Commissioner erred in concluding that the Appellant had not undertaken sufficient charitable activities merely on the basis of the expenditure reflected in the financial statements, without bringing any cogent material on record to establish that the activities carried on by the Trust were non-genuine or not in accordance with its stated charitable objects.
6. Misappreciation of Financial Statements and Expense Classification
The learned Commissioner failed to appreciate that several programme-related expenses incurred towards charitable activities were grouped under “Indirect Expenses” or “Administrative Expenses” in the financial statements, though in substance such expenses were incurred wholly and exclusively for furtherance of the Trust’s charitable objects, including:
a) Provision of nutritious meals, snacks, and groceries for children;
b) educational support for children;
c) healthcare and hygiene support for children and their families;
7. Failure to Appreciate Supporting Evidence Furnished
The learned Commissioner erred in ignoring the detailed submissions, expense classification statements, vouchers, photographs, activity reports, books of account, and supporting records furnished by the Appellant during the course of proceedings, which clearly established the genuineness of the activities carried on by the Trust.
8. Failure to Appreciate Procedural Circumstances
The learned Commissioner failed to appreciate that the Appellant had physically submitted the required documents before the Department through the inward section owing to the concerned officer being on leave, and despite such compliance, no further clarification or opportunity was granted before passing the impugned order.
9. Order Based on Irrelevant and Extraneous Considerations
The learned Commissioner erred in rejecting the application on irrelevant and extraneous considerations, surmises, and conjectures, without recording any finding that the objects of the Trust were non-charitable or that the activities carried on by the Appellant were not genuine.
10.Prayer
The Appellant therefore prays that this Hon’ble Tribunal may be pleased to:
a) Set aside the impugned order dated December 16, 2024 passed by the learned Commissioner of Income Tax (Exemptions);
b) Direct the learned Commissioner of Income Tax (Exemptions) to grant registration under section 12AB of the Act; or alternatively, remand the matter for fresh adjudication after granting adequate opportunity of being heard; and
c) Pass such other or further order(s) as this Hon’ble Tribunal may deem fit in the facts and circumstances of the case.
d) Condone the delay in filing this appeal within time.
11.Liberty to Add or Amend Grounds
The Appellant craves leave to add, alter, amend, modify, or withdraw any of the above grounds at the time of or before the hearing of the appeal.
ITA 2253/Bang/2026:
1. Invalidity of the Impugned Order
The order dated March 30, 2026 passed by the Ld. CIT(E) rejecting the Appellant’s second application for registration under section 12AB of the Income-tax Act, 1961 is bad in law, arbitrary, contrary to the facts on record, passed without appreciation of the material furnished by the Appellant, and is therefore legally unstable and liable to be set aside.
2. Rejection without Examination on Merits
The Ld. CIT(E)erred in rejecting the Appellant’s application solely on the ground that the earlier rejection order dated December 16, 2024 had attained finality, without examining the present application on merits as mandated under section 12AB(1)(b)(i) of the Act.
The Ld. CIT(E)failed to appreciate that the statutory enquiry at the stage of registration is confined to examination of the charitable objects of the Trust and the genuineness of its activities.
The application could not have been rejected merely on the basis of the earlier order without conducting such examination.
3. Mechanical Reliance on Earlier Order without Independent Satisfaction
The impugned order has been passed without proper application of mind and is based solely on a mechanical reliance upon the earlier rejection order dated December 16, 2024, without recording any independent finding regarding the objects of the Trust or the genuineness of its activities.
In the absence of any adverse finding that the activities of the Appellant are not genuine or are not carried out in accordance with its objects, rejection of registration is unsustainable in law.
4. Non-Consideration of Material Demonstrating Genuine Activities
The Ld. CIT(E) erred in ignoring the detailed submissions, financial statements, supporting vouchers, expense classification statements, books of account, activity reports, and other supporting material furnished by the Appellant demonstrating that the Trust had undertaken genuine charitable activities in furtherance of its stated charitable objects.
The Ld. CIT(E) failed to bring any cogent material on record to establish that the activities of the Appellant were non-genuine or not carried out in accordance with its objects.
5. Unjustified Rejection of the Fresh Application Owing to Procedural Defects in the First Order
The Ld. CIT(E) failed to consider that the first rejection order dated December 16, 2024, was passed in gross violation of the principles of natural justice without issuing any statutory Show Cause Notice (SCN).
Since the first order was a procedural nullity, the Appellant chose the remedy of filing a fresh application with comprehensive documentation instead of immediately preferring an appeal against the earlier order. The subsequent application could not have been rejected merely on the ground that the Appellant had not preferred an appeal against the earlier procedurally defective order.
The appeal filed challenging the order rejecting the 12AB registration is presently pending adjudication before this Hon’ble Tribunal.
6. Impugned Order Contrary to Law and Facts
The impugned order is arbitrary, unjustified, contrary to law, and has resulted in denial of the Appellant’s statutory rights under section 12AB of the Act despite the Appellant satisfying the conditions prescribed under the Act for grant of registration.
7. Liberty to Add or Amend Grounds
The Appellant craves leave to add, alter, amend, modify, or withdraw any of the above grounds at the time of or before the hearing of the appeal.
ITA 2254/Bang/2026:
1. Mechanical Rejection of 80G Approval Based Solely on a Void 12AB Order
That the Ld. CIT(E) erred both on facts and in law by rejecting the application for approval under Section 80G(5)(iii) solely as a consequence of the rejection of the registration application under Section 12AB.
That the Ld. CIT(E) failed to appreciate that the underlying order under Section 2AB is void ab initio, having been passed without issuing any statutory Show Cause Notice (SCN) or providing an opportunity of being heard to the Appellant in those proceedings.
That since the parent order under Section 12AB is a nullity due to gross violation of the principles of natural justice, the consequential rejection under Section 80G(5)(iii) built upon it automatically becomes unsustainable.
2. Interdependent Filings of Appeals to Restore the Statutory Foundation for 80G Approval
That while acknowledging that a valid Section 12AB registration is a statutory prerequisite for the grant of approval under Section 80G(5), the Appellant is simultaneously filing an appeal before this Hon’ble Tribunal against the rejection of the Section 12AB registration.
That because the foundational challenge to the Section 12AB order is now active and sub-judice before this Hon’ble Tribunal, the consequential Section 80G appeal is fully maintainable and ought to be adjudicated alongside or restored subject to the outcome of the Section 12AB appeal.
3. Unjustified Denial of Approval Based on a Non-Statutory Technical Bar
That the Ld. CIT(E) erred in holding that the 80G approval cannot be granted because the Appellant did not appeal the 12AB rejection Order dated December 16, 2024.
That the Ld. CIT(E) failed to appreciate that the current 80G application is tied to a fresh, validly filed second 12AB application, which he was legally bound to evaluate on its independent merits regarding the genuineness of objects and charitable activities.
4. General Relief Claimed
That the Appellant craves leave to add, amend, alter, delete, modify, or substitute any of the above grounds of appeal either before or at the time of the hearing of this appeal.
06. In short, the facts show that the assessee is a charitable trust registered on 30 June 2020, established with the object of supporting and empowering children from migrant communities, irrespective of caste, creed, or language of the region, by providing access to education, nutrition, and health care, with the objective of preventing school dropouts and eradicating child labour.
07. The assessee was granted provisional registration under section 12 A of the Act, and a registration certificate dated 20 October 2020 was issued, which was valid from assessment year 2022 – 23 to assessment year 2024 – 25. The assessee was also granted provisional registration under the provisions of section 80 G of the Act on 8 February 2022.
08. Subsequently, the assessee filed form No. 10 AB before the learned Commissioner of Income Tax (Exemption), Bangalore, on 30 June 2020, seeking regular registration under section 12 AB of the Act. During the hearing, it was found that the learned Commissioner issued a letter dated 8 October 2024 calling for certain details, such as the trust deed, financial statements, activity report, etc. The assessee submits that he physically filed those documents with his office on November 21, 2024, and that he also obtained the acknowledgement. However, the learned Commissioner of Income Tax (Exemption) passed an order on 16 December 2024, rejecting the application filed under section 12 AB of the Act without granting the assessee any effective opportunity of hearing. The assessee further claimed that no show cause notice was issued. However, the rejection order stated that the financial statements submitted by the assessee were examined, and it was observed that the assessee had recorded the receipt of donations of ₹ 713,380, against which expenses of ₹ 65,743 were booked towards charitable activities and other expenditure for assessment year 2022 – 23. For assessment year 2023 – 24, the major receipt in the form of donation was ₹ 1,372,946, against which the assessee had incurred an expenditure of only ₹ 600 and ₹ 29. For assessment year 2024 – 25, total donation receipts were ₹ 1,156,932, against which operating expenses were ₹ 1,047,792. The learned CIT exemptions was of the view that the amount spent towards charitable objects appeared to be low compared with the expenses, and therefore the application filed in form No. 10 AB was not recommended for approval. Accordingly, the order was passed on 16 December 2024, rejecting the assessee’s application.
09. Subsequently, the assessee was advised that a fresh application under section 12 AB could be filed to address the concerns raised in the earlier rejection order, and that it could be reconsidered on merit. Based on that advice, the assessee once again filed a fresh application in Form No. 10 AB, seeking registration under section 12 AB of the Act on 27 November 2025. The assessee also made a simultaneous application seeking approval under section 80 G of the Act on 28 November 2025.
10. During this hearing of the fresh application made by the assessee, a notice dated 3 December 2025 was issued, pursuant to which the assessee filed details on 18 December 2025 and again on 22 January 2026. A show cause notice was issued to the assessee on 7 March 2026 and 17 March 2026, and the assessee complied by furnishing several details.
11. However, on 30 March 2026, the learned CIT (Exemption) dismissed the assessee’s application, rejecting the registration under section 12 AB of the Act. Consequently, on the same date, the learned CIT (Exemption) also dismissed the assessee’s application for approval under section 80 G of the Act.
12. The reason for rejection was that the earlier order dated 16 December 2024, which rejected the registration under section 12 AB of the act, had attained finality because it had not been challenged before the appellate authority, and that approval under section 80 G could not be granted in the absence of a valid and subsisting registration under section 12 AB of the act. Accordingly, the assessee is in appeal before us against all three orders passed by the learned CIT exemption.
13. The facts show that the ITA No. 2225/Bangalore/2026, filed by the assessee against the first rejection order, is time-barred by 453 days. The assessee has applied for condonation of delay, accompanied by an affidavit. In the application for condonation of delay, Ms. Nandini, the managing trustee of the trust, submitted that the order was passed on 16 December 2024 and therefore there is a delay of 467 days in filing the present appeal. It was further submitted that the delay occurred due to bona fide circumstances, as at the relevant time the appellant trust, being new, was not clearly established and was managed by a person not fully conversant with the procedural requirements under the Income Tax Act and did not receive proper professional guidance regarding the necessity of filing an appeal against the aforesaid order within the prescribed period of limitation.
However, the assessee was under a bona fide belief that a fresh application for registration should be made before the same authority in terms of circular No. 7/2024, and accordingly, on 25 April 2024, acting under such understanding, the assessee trust proceeded to file a fresh application before the learned CIT – exemption on 27 November 2025. Thereafter, a fresh application was also rejected on 16 December 2024. Thus, the assessee pursued another alternative remedy under the mistaken belief that a fresh application for registration should be filed before the learned CIT – exemption, which resulted in delay. It was further stated that the delay in filing the appeal is unintentional, for bona fide reasons, and the assessee does not gain any benefit from filing the appeal late.
14. The learned authorised representative reiterated the same facts as stated in the petition for condonation of delay and requested for condonation of delay of 453 days in filing of the appeal.
15. The learned departmental representative, Shri Somnath Ukkali, CIT DR, has submitted that the delay in filing the appeal is not for sufficient reason and therefore should not be condoned.
16. We have carefully considered the rival contention and perused the petition for condonation of delay, along with the affidavit filed by the trust. We find that the assessee originally filed an application for registration before the learned CIT – exemption, which was rejected by order under section 12 AB of the Act on 16 December 2024. However, the appeal before us was filed on 27 May 2026. Meanwhile, the facts show that the assessee made a fresh application for registration, which was also rejected on 30 March 2026 because the assessee had not challenged the original rejection made by the learned CIT – exemption on 16 December 2025. Therefore, the assessee came to know that it was required to file an appeal against the original rejection, as this was the main reason for the rejection of the second application. This order was passed on 30 March 2026, and the assessee filed an appeal on 29 May 2026. We find that there is sufficient cause for the late filing of the appeal, by 467 days, against the order passed by the learned CIT – exemption on 16 December 2024, and therefore we admit ITA No. 2225/Bangalore/2026.
17. On the merits of the appeals, we have heard the learned authorised representative and the learned CIT DR.
18. Coming to the merits of the appeal in ITA No. 2225/Bangalore/2026, we find that the assessee states that a notice dated 8 October 2024 was issued calling for certain details. The assessee filed its submission and supporting documents on 21 November 2024 and also submitted a copy of the acknowledgement in the paper book filed before us, as the concerned officer was on leave on that date. This information was ignored by the learned CIT, as set out in pages 43 to 46 of the paper book, for which the acknowledged copy is also placed. According to that letter, the assessee has submitted the certified copy of the order granting provisional registration, the certified copy of the trust deed, documents evidencing the establishment of the trust, acknowledgements of income tax returns filed for the last three years along with the audited financial statement, the provisional financial statement for the current year, details of the bank account held by the trust, activities of the trust since inception, along with certain supporting documents such as brochures and photographs. It further submitted the list of trustees and the rental agreement.
19. On the application for exemption being preferred before the learned CIT, the case was assigned for verification to the jurisdictional assessing officer, who submitted a report. In paragraph No. two, it was clear that the assessee had not commenced activities towards the attainment of the main object. Accordingly, in paragraph No. four, it was held that the assessee was required to submit the necessary documents to prove the genuineness of the trust’s activities and the completion of such requirements, and accordingly the assessee’s application was rejected.
20. We find that the report itself shows that the assessee has received donations of ₹ 713,380 for assessment year 2022-23, ₹ 3,072,946 for assessment year 2023-24, and ₹ 1,156,932 for assessment year 2024 – 25. As per the provisional financial statements for the year ended on 31st March 2025, the assessee has received a donation of ₹ 1,298,630. With respect to expenditure, for assessment year 2022 – 23 the assessee incurred ₹ 65,743; for assessment year 2024 – 25, ₹ 1,047,792; and for the year ended on 31st of March 2025, ₹ 1,180,328. These figures are taken from the report of the jurisdictional assessing officer, which was submitted to the CIT exemption. We fail to understand how, based on these details, one can conclude that the assessee has not commenced its activity. Even if such a view is formed by the learned CIT exemption, he must confront this with the assessee or his jurisdictional assessing officer who has submitted his report. No such notice to the assessee or examination of the report is conducted by the CIT exemption. Thus, we find that unless further examination of the facts determines whether the activity has been carried out by the assessee and then about genuineness, the application of the assessee cannot be rejected.
21. Further, the second application by the assessee is rejected on the ground that the earlier rejection has not been challenged and that the reasons remain the same. The rejection is also incorrect because the assessee has spent a reasonable amount on the donations received by it. It is not a finding of fact that no donations were received by the assessee, or that the expenditure incurred by the assessee is not for the object of trust. It may also happen that, if the trust has not commenced its activities, and the assessee’s application is rejected for this reason, as soon as the activities commence, the assessee can again apply for registration. There is no bar under the Income Tax Act in such a situation. Therefore, it is not correct to reject the assessee’s application in the absence of a challenge to the earlier orders of rejection. It is for the approving authority/registering authority to examine the same and decide whether it is in conformity with the law or not.
22. Therefore, the order passed by the learned CIT (Exemptions) is not sustainable. Accordingly, we quash the order passed by the learned CIT (Exemption) dated 16/12/2024 and direct him to examine the details submitted by the assessee and to adjudicate the application of the assessee for registration under section 12 AB of the act. Needless to say, proper opportunity of hearing is mandatory.
23. In view of the above facts ITA No. 2225/Bangalore/2026 filed by the assessee is allowed for statistical purposes.
24. As we have already decided ITA No. 2225/Bangalore/2026 for registration under section 12 AB, ITA No. 2253/Bangalore/2026, with the same subject matter, becomes infructuous. Therefore, ITA No. 2253/Bangalore/2026 is dismissed.
25. The ITA No. 2254/Bangalore/2026 concerns the assessee’s application for recognition under section 80 G (5) of the Act, which may be taken up in accordance with the law after the assessee is granted registration under section 12 AB of the Act. Accordingly, this appeal is also restored to the file of the learned CIT (exemption). It is allowed for statistical purposes.
Order pronounced in the open court on 11th September, 2026.
