ITAT Indore Remands 12A/12AB, 80G Rejections for Fresh Consideration in 50 cases

Aatma Prakash Mental Health Foundation Vs CIT (Exemption) (ITAT Indore)

ITAT Indore Sets Aside Multiple 12A/12AB and 80G Rejections

The ITAT Indore disposed of a batch of 50 appeals filed by charitable trusts and institutions whose applications for registration or renewal under Section 12A/12AB and/or approval under Section 80G(5) of the Income Tax Act, 1961 had been rejected by the CIT(Exemption). The appeals involved similar grounds and factual circumstances and were heard together. Delays in three appeals were also condoned after considering the reasons stated and the charitable activities of the assessees. Ultimately, all the appeals were allowed for statistical purposes.

Wrong Selection of Sub-Clause Treated as Curable Defect

In several cases, applications were rejected because the assessees had selected an incorrect statutory sub-clause in the electronic application. The assessees submitted that these were inadvertent technical errors and that they had not been given an opportunity to rectify them.

The Tribunal held that the incorrect selection was a curable procedural defect where the application had been rejected solely for that reason and the CIT(E) had not examined the trust’s objects, genuineness of activities or other statutory requirements. It set aside the relevant orders and restored the matters to the CIT(E), directing that the assessees be permitted to rectify the defect, if permissible, or file an appropriate application under the correct provision and have the applications examined afresh after adequate opportunity of hearing. Where a fresh application was required, the CIT(E) was directed to condone the delay in filing it. These appeals were allowed for statistical purposes.

Non-Compliance Cases Remanded for Final Opportunity

In cases where applications had been rejected solely for non-compliance and there had been no adjudication on merits, the Tribunal considered it appropriate to provide one effective and final opportunity. The matters were restored to the CIT(E) for fresh adjudication after considering documents and evidence furnished by the assessees.

The CIT(E) was directed to pass speaking orders dealing with the objects of the trusts, genuineness of activities and fulfilment of statutory requirements. The Tribunal clarified that the remand should not be construed as condoning repeated or wilful defaults.

Specific Appeals Involving Registration and Approval Issues

In ITA No. 696/Ind/2026, the Tribunal considered an application rejected because there was no valid registration under the old regime. It noted the assessee’s submission that an earlier Section 12A application had been set aside by the Tribunal in 2013 and had remained undecided by the Department for more than 12 years. The Tribunal held that the assessee could not be penalized for the Department’s inaction and directed the CIT(E) to examine the current application under the present law after providing an opportunity of hearing.

In ITA No. 352/Ind/2026, concerning delay in filing Form 10AB, the Tribunal directed the CIT(E) to condone the delay and decide the application on merits.

In ITA No. 778/Ind/2026, involving Section 80G(5), the Tribunal set aside the rejection concerning the nature of the trust’s objects and directed the CIT(E) to provide another opportunity to explain the objectives and examine the expenditure incurred.

In ITA No. 437/Ind/2026, the Tribunal set aside the rejection under Section 12AB concerning expenditure allegedly not incurred for the trust’s objects. The CIT(E) was directed to allow the assessee to furnish expenditure details and explain how the expenses related to its objects before deciding the matter on merits.

Final Decision of ITAT Indore

The Tribunal concluded that all 50 appeals were allowed for statistical purposes. The order was pronounced in the open Court on 10.08.2026.

Assessee is represented by Advocate : CA Sh. Milind Wadhwani, Adv. Ms. Shradha Piplodia & Others.

FULL TEXT OF THE ORDER OF ITAT INDORE

This batch of 50 appeals are preferred by different Assesses (Charitable Trust and Institutions) as their respective application filed for seeking registration/renewal of registration under Section 12A/12AB of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] and/or approval under Section 80G(5) of the Act, was rejected by the Learned Commissioner of Income-Tax (Exemption) [hereinafter referred to as ‘the CIT(E)’]. Since similar grounds arising from similar factual matrix were raised in the present appeals, all the matters were listed and heard together; and are, therefore, being disposed off by way of this common order.

2. There has been delay in filing of the appeals in ITA Nos. 545/Ind/2026, 58/Ind/2026 and 59/Ind/2026. The respective assessee has filed a condonation application explaining the reason for delay. Considering the reasons as explained in the condonation application and also the fact that the assesses are engaged in charitable activities, the delay in filing of the appeals is condoned.

3. The issue involved in these appeals and the reason of rejection is briefly summarized in the table below.

4. We have heard the Learned Authorized Representatives (AR’s) of the respective Assessee as well as the Learned Departmental Representative appearing before us physically or in virtual mode. We have perused the impugned order and the grounds raised in each appeal. We have also given thoughtful consideration to the contentions raised on behalf of the Assessee as well as the submissions advanced by the Learned Departmental Representative appearing before us.

5. A perusal of the provisions contained in Section 12AB of the Act shows that the scheme of registration and renewal of registration contained in Section 12AB of Act provide for the registration and periodic renewal of registration of charitable trust and institutions desirous of claiming benefit of Section 11/12 [income of charitable/religious trusts] and/or Section 80G [Donations] of the Act. The registration process requires, inter alia, verification of activities, compliance checks, and linkage with permanent account number to ensure transparency. For effective operation of the scheme contained in Section 12AB of the Act, both, the Assessee as well as the Concerned Tax Authority (i.e. The Principal Commissioner or Commissioner), have been assigned distinct responsibilities to balance compliance with fairness in the registration/renewal process. The Assessee, being a charitable or religious trust or institution, must apply for registration/approval in the prescribed form; furnish the founding documents, and demonstrate that its activities are genuine and aligned with its stated charitable objects. It is clear that all the supporting documents and details are required to be furnished by the Assessee upfront along with the application in prescribed form. On the other hand, the Concerned Tax Authority is required to examine the application; call for further documents/clarification; verify the genuineness of activities; and pass a reasoned order within the prescribed period (not exceeding six month). It has been specified that before refusing or cancelling the registration, the Concerned Tax Authority is required to provide to the applicant ‘a reasonable opportunity of being heard’.

6. Having considered the rival submissions and on perusal of the materials on record, we find that the common feature in the appeals before us is that one or both the parties before us have failed to discharge their respective responsibilities/obligations. Bare perusal of the impugned order(s) shows the application(s) filed by the Assessee(s) were not accompanied by the relevant supporting documents and/or were filed under a wrong sub-clause. At the same time, many of the application(s) were rejected by the Concerned Tax Authority without granting ‘a reasonable opportunity of being heard’ to the Assessee.

7. The stand taken by the assessees’ is that they were was not confronted with the defect or deficiency in the application. Whereas, the Revenue has taken a position that the notice(s) were issued and the Assessee(s) had failed to respond to the same and had, resultantly, failed to establish that their activities were genuine charitable activities. Therefore, as per the Learned Departmental Representatives the rejection was warranted. Conversely, the Learned Authorized Representatives defended their respective positions by broadly contending (a) non-service of notice, or (b) lack of sufficient time to respond to notice, (c) lack of knowledge of service of notice on e-mail or (d) the reply sent/uploaded by them not being considered. The common contention being that, in effect, the Assessee was denied an effective opportunity of being heard.

8. It would be pertinent to note that perusal of record shows that since the applications were required to be disposed off in a time bound manner within the specified period (not exceeding 6 months), in some cases the Tax Authorities did not have time to await compliance from the assessee(s). Therefore, the application(s) were rejected without granting any further notice/opportunity to the assessee. The aforesaid rejection resulted in cancellation of the provisional registrations, if any, and also rejection of application for approval under Section 80G(5) of the Act (since holding a valid registration under Section 12A/12AB of the Act was a condition precedent to grant of such approval).

Rejection due to wrong selection of sub-clause:

9. In many of the cases, the application was rejected for the reason of selection of wrong sub-clause in the application. The learned ARs have submitted that the rejection in such cases was solely on account of an inadvertent technical error committed while selecting the applicable sub-clause in the electronic application. It was contended that the assessee had at all times intended to seek registration under the appropriate statutory provision and that the incorrect selection of the sub-clause was a curable procedural defect. It was further submitted that no opportunity was granted to the assessee to rectify the defect or file a corrected application before rejecting the application. The Ld. CIT-DR, on the other hand, has defended the action of the CIT(Exemption) in rejecting the application for registration/approval in such cases.

10. We have considered the rival submissions. It is well settled that procedural provisions are intended to facilitate the cause of justice and not to defeat substantive rights. A bona fide technical or clerical mistake, unless prohibited by statute, should ordinarily be permitted to be rectified, particularly when no prejudice is caused to the revenue. The object of the registration provisions is to examine the eligibility of the trust on the parameters prescribed by law and not to deny consideration merely because of an inadvertent error in selecting the appropriate option in the online form. The application in such cases was rejected solely because of selection of incorrect sub-clause while filing the online application and there is nothing on record to suggest that the Ld. CIT(E) had examined the objects of the trust, genuineness of its activities or any other statutory requirement governing grant of registration. The rejection in such cases is exclusively on account of a technical defect in the electronic application. Such incorrect selection of the relevant sub-clause was a curable procedural defect. The principles of natural justice also required that before rejecting the application on such a technical ground, the assessee should have been afforded a reasonable opportunity to rectify the defect or explain the circumstances leading to the error.

11. In these circumstances, and in the interest of substantial justice, we deem it appropriate to set aside such impugned orders and restore the matter to the file of the Ld. CIT(E) who shall permit the assessee to rectify the defect, if permissible in law, or to file an appropriate application under the correct statutory provision, and thereafter examine the application afresh on merits in accordance with law after affording adequate opportunity of being heard to the assessee. In case, a fresh application is required to be filed under correct sub-clause, in that circumstances, the Ld. CIT(E) should condone the delay in filing of the application. All the appeals, which have been rejected due to wrong selection of clause in the application, are allowed for statistical purpose.

Cases of Non-compliance before CIT(Exemption)

12. In the cases of non-compliance, the learned ARs have submitted that the assessee could not comply with the notices issued by the Ld. CIT(E) due to bona fide reasons and that the non-compliance was neither deliberate nor intentional. It was explained that either the notices sent on the email were nor accessed in time or they didn’t have sufficient time to comply to the notices. In many cases reply was filed either physically or on the portal, which was not considered by the Ld. CIT(Exemption). It was submitted that the assessee is willing to furnish all the documents and evidences necessary for examining the conditions prescribed under the Act. It was, therefore, prayed that one more effective opportunity be granted in the interest of justice. In such cases, the Ld. CIT-DR had no objection in setting aside the matter to the file of Ld. CIT(E) for allowing another opportunity to the assessee.

13. We have considered the request of the assessee. Where the application has been rejected solely on account of non-compliance, and no adjudication on merits has taken place, the ends of justice would be served by affording one final opportunity, particularly when the assessee expresses its willingness to place all relevant material before the authority. Having regard to the facts and circumstances of the case, and in the interest of substantial justice, we deem it appropriate to set aside such orders and restore the matter to the file of the Ld. CIT(E) for fresh adjudication. The Ld. CIT(E) shall afford one effective and final opportunity of hearing to the assessee and shall examine the application afresh in accordance with law after considering the documents and evidences that may be furnished by the assessee. Thereafter, the Ld. CIT(E) shall pass a speaking order dealing with the objects of the trust, the genuineness of its activities and the fulfilment of the statutory requirements governing grant of registration. It is made clear that this remand has been ordered to advance the cause of substantial justice and should not be construed as condoning repeated or wilful defaults. The assessee is directed to comply in the remand proceedings and furnish all the information, documents and explanations as may be called for by the Ld. CIT(E). In the event of any failure on the part of the assessee to comply with the notices or directions issued during the set aside proceeding without sufficient cause, the Ld. CIT(E) shall be at liberty to proceed in accordance with law on the basis of the material available on record.

ITA No. 696/Ind/2026

14. In this case, the Ld. CIT(E) had rejected the application of the assessee for the reason that the assessee was not having a valid registration under the old regime. As explained by the Ld. AR, the application of registration u/s. 12A of the Act made in old regime, was rejected by the Ld. Commissioner of Income Tax-1, Indore on 04.01.2012, against which the assessee had filed an appeal. The Tribunal vide order in ITA No. 501/Ind/2012 dated 10.05.2013 had set aside the matter to the file of the Commissioner of Income Tax with a direction to allow another opportunity to the assessee and, thereafter, decide the matter on merits. As submitted by the assessee, the Ld. Commissioner of Income Tax did not decide the set aside matter in spite of lapse of more than 12 years and various reminders issued by the assessee. Thus, when the Department did not act as per the direction of the Tribunal and the application under the old regime u/s. 12A of the Act was not decided, the assessee cannot be penalized for the own fault / inaction of the Department. Since the set aside proceeding was not decided by the Department within the prescribed time line as provided u/s 153 of the Act, the application made u/s. 12A of the Act under the old regime should be deemed to have been allowed. The Ld. CIT(E), is therefore, directed to examine the current application of the assessee as per present law after allowing an opportunity of being heard to the assessee.

ITA No. 352/Ind/2026

15. In this case, the Ld. CIT(E) had rejected the application of the assessee on the ground of delay in filing of Form no. 10AB. He has not given any reason for not condoning the delay in filing of the application. The provision of the Act has since been amended and the Commissioner of Income Tax has been empowered to condone the delay in filing of the application by the assessee. The Ld. CIT(E) is, therefore, directed to condone the delay in filing of the application and, thereafter, decide the application of the assessee on merits.

ITA No. 778/Ind/2026

16. The Ld. CIT(E) had rejected the application of the assessee by holding that the objects and activities of the assessee were religious in nature and did not qualify the eligibility criteria of section 80G(5) of the Act. The Ld. AR of the assessee has explained that the objects of the assessee trust was to spread the philosophy and concept of Nath Sampradaya and also to spread the concept of Vedic culture along with its philosophy, which was educational in nature and intended to impart morality and human values. The objectives of the Trust as explained by the Ld. AR are as under:

• To spread the philosophy and concepts of the Nath Sampradaya.
• To propagate Vedic culture and its philosophy.
• To promote education, morality, and human values.
• To encourage the practice of yoga and self-meditation for the welfare of society.
• To organize public welfare activities, such as Bhandaras (Annadan), by distributing food to the general public without discrimination on the basis of caste, creed, or religion.
• To serve society at large and not any particular religious community or caste.

The Ld. AR submitted that the Ld. CIT(E) was not correct in treating the objectives of the assessee as religious in nature. Further that, the expenses incurred by the assessee were not restricted to any caste or community or any religious group. The Ld. AR, therefore, requested that the assessee may be allowed another opportunity to explain the objects of the trust and the nature of expenses before the Ld. CIT(E). The Ld. CIT-DR had no objection in setting aside the matter to the file of Ld. CIT(E) for this purpose. Considering the submissions of the assessee, the matter is set aside to the file of Ld. CIT(E) with a direction to allow another opportunity to the assessee to explain the nature of objectives of the trust. The Ld. CIT(E) should also examine the expenditures incurred by the assessee for various objects and activities and thereafter decide the matter as per law.

ITA No. 437/Ind/2026

17. In this case, the Ld. CIT(E) had rejected the application for registration u/s. 12AB of the Act, for the reason that the expenditures incurred were not for the objects of the Trust. He found that the only expenditure incurred was in respect of marketing and consultation. According to the Ld. AR, no opportunity was provided to the assessee before rejecting the application of the assessee. In the interest of justice, therefore, we deem it proper to set aside the matter to the file of the Ld. CIT(E) with a direction to allow another opportunity to the assessee to furnish the details of the expenditures and also to explain as to how the expenses were incurred towards fulfilment of the objects of the Trust. Thereafter, the Ld. CIT(E) should decide the matter on merits as per law.

18. In the final result, all the appeals of the assessee are allowed for statistical purpose.

This Order is pronounced in the Open Court on 10/08/2026