Mumbai ITAT: Absence of Expenditure Alone Cannot Be a Ground to Deny Renewal of Registration Under Section 12AB

Abhinav Bharat Vs ITO (ITAT Mumbai)

Mumbai ITAT: Absence of Expenditure Alone Cannot Be a Ground to Deny Renewal of Registration Under Section 12AB

The Mumbai ITAT held that renewal of registration under section 12AB cannot be rejected merely because the trust’s financial statements do not reflect expenditure towards its charitable objects. The CIT (Exemptions) had concluded that since no expenditure was incurred, the genuineness of the trust’s activities was not established and, on that basis, rejected the applications for renewal under section 12AB and the consequential approval under section 80G. The Tribunal, however, noted that the trust had specifically explained that it continued to pursue its charitable objectives through academic and public awareness initiatives, maintenance of its website, support to public causes and other activities, with the related expenses being personally borne by the settlors and trustees rather than being routed through the trust’s accounts.

The Tribunal observed that the absence of expenditure in the trust’s accounts does not, by itself, establish absence of charitable activities, and that the explanations and supporting material furnished by the trust required proper verification. Since the CIT (Exemptions) had not comprehensively examined these aspects, the Tribunal set aside the orders rejecting registration under section 12AB and approval under section 80G and restored the matter for fresh adjudication. The CIT (Exemptions) was directed to examine all explanations, documents and evidence, provide an effective opportunity of hearing, and pass a reasoned speaking order in accordance with law. Both appeals were allowed for statistical purposes.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

These appeals by the assessee-trust are directed against the separate orders dated 20.01.2026 passed by the Ld. CIT (Exemptions), Mumbai, whereby the applications filed by the assessee for renewal of registration under section 12AB and approval under section 80G of the Act have been rejected.

2. Briefly stated, the assessee had filed Form No. 10AB seeking renewal of registration under section 12AB as well as renewal of approval under section 80G. During the course of proceedings, the Ld. CIT (Exemptions) issued notices calling for certain details and documents. Upon examination of the material furnished, the Ld. CIT (Exemptions) observed that the financial statements for the relevant years reflected no expenditure incurred towards the objects of the trust and, therefore, according to him, the genuineness of the activities of the trust could not be established. On this reasoning, the application for renewal of registration under section 12AB was rejected. Consequentially, since approval under section 80G is dependent upon the trust enjoying registration under section 12AB, the application under section 80G was also rejected.

3. Before us, the Ld. Counsel submitted that the rejection has been founded solely on the premise that no expenditure was reflected in the accounts of the trust during the relevant period. It was contended that absence of expenditure by itself cannot lead to the conclusion that the trust had not undertaken any activity or that its activities were not genuine. Attention was drawn to the affidavit and supporting material placed in the paper book wherein it has been stated that the trust continued to pursue its stated charitable objectives through various initiatives, maintenance of its website, academic and public awareness projects, support to public causes, and other activities, though the expenditure relating thereto was borne personally by the settlors and trustees and not routed through the trust accounts. It was further submitted that these aspects were neither properly examined nor dealt with in the impugned order and, therefore, the matter deserves to be restored to the file of the Ld. CIT (Exemptions) for fresh consideration.

4. We have considered the rival submissions and perused the material available on record. A perusal of the impugned order reveals that the principal basis for rejection of registration under section 12AB is the finding that no expenditure was incurred on the objects of the trust and, therefore, the genuineness of the activities could not be established. The record further shows that the assessee has placed before the authorities certain explanations and supporting material to demonstrate that activities in furtherance of its objects were being pursued notwithstanding the absence of expenditure reflected in the trust accounts. Whether such material is sufficient to establish the genuineness of the activities and whether the requirements of section 12AB stand satisfied are matters which require proper verification and examination by the competent authority. In our considered view, the impugned order does not reflect a comprehensive examination of these aspects. Since the rejection of approval under section 80G is merely consequential to the rejection of registration under section 12AB, the fate of both applications is intrinsically linked.

5. Considering the totality of facts and in the interest of substantial justice, we deem it appropriate to set aside the impugned orders and restore the entire matter to the file of the Ld. CIT (Exemptions). The Ld. CIT (Exemptions) shall examine afresh all the explanations, documents and evidences that may be furnished by the assessee in support of its claim, and thereafter decide the applications under sections 12AB and 80G independently and in accordance with law by passing a speaking order. Needless to mention, adequate and effective opportunity of hearing shall be afforded to the assessee, which shall also extend full cooperation and furnish all requisite details as may be called for during the course of fresh proceedings.

6. In the result, both the appeals of the assessee are allowed for statistical purposes.

Order pronounced on 24^th June, 2026.