Case Law Details
Mumbai Sogetsu Association Vs ITO (ITAT Mumbai)
Mumbai ITAT: Newly Incorporated Charitable Institution Cannot Be Denied 12AB Registration Merely for Limited Initial Activities; Fresh Opportunity Directed
The Mumbai ITAT set aside the orders rejecting registration under section 12AB and approval under section 80G(5) in the case of a newly incorporated Section 8 company. The Tribunal held that where a charitable institution was incorporated only shortly before filing Form 10AB, the Commissioner (Exemptions) ought to examine the charitable objects, activities undertaken from the date of incorporation, receipts, application and accumulation of income, rather than insist upon details for periods when the entity was not even in existence. The Tribunal also noted that the assessee had received initial donations, commenced charitable activities, incurred establishment expenses, filed Form 10 for accumulation of income, and alleged that no specific show-cause notice proposing rejection had been issued. Holding that adequate opportunity had not been afforded and that these relevant aspects remained unexamined, the ITAT restored both the 12AB registration and the consequential 80G approval applications to the file of the CIT(E) for de novo adjudication after granting a proper opportunity of hearing, without expressing any opinion on the merits of the claim.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
These two appeals are directed against the separate orders passed by the Ld. Commissioner of Income Tax (Exemptions), Mumbai [“Ld. CIT(E)”] rejecting the assessee’s application for grant of registration u/s 12AB of the Income-tax Act, 1961 (“the Act”) as well as the application for approval u/s 80G(5) of the Act.
2. Since common facts and identical issues are involved in both the appeals, these were heard together and are being disposed of by this consolidated order for the sake of convenience.
3. The assessee is a company incorporated under Section 8 of the Companies Act, 2013 on 27/11/2024 with charitable objects. It was granted provisional registration under the Act and thereafter filed an application in Form No.10AB on 27/09/2025 seeking regular registration u/s 12AB. Simultaneously, the assessee also sought approval u/s 80G(5) of the Act.
3.1. During the course of proceedings, the Ld. CIT(E) issued a notice dated 30/01/2026 calling upon the assessee to furnish various details and documentary evidences. After considering the material available on record, the Ld. CIT(E) rejected the application for registration u/s 12AB primarily observing that the assessee had not carried out charitable activities sufficient to establish the genuineness of its activities. Consequent thereto, the application seeking approval u/s 80G(5) also came to be rejected.
Aggrieved, the assessee is in appeal before us.
4. The Ld. AR submitted that the impugned orders have been passed without appreciating the peculiar facts of the assessee’s case. It was submitted that the assessee was incorporated only on 27/11/2024 and, therefore, it was practically impossible for it to undertake substantial charitable activities within such a short period before filing the application in Form No.10AB.
4.1. The Ld. AR invited our attention to the notice dated 30/01/2026 and submitted that the assessee was called upon to furnish year-wise expenditure details from A.Y. 2022-23 onwards, though the assessee itself came into existence only on 27/11/2024. It was contended that the Ld. CIT(E) ought to have examined the activities undertaken by the assessee from the date of its incorporation till the date of passing of the impugned order instead of calling for details pertaining to a period when the assessee was not even in existence.
4.2. It was further submitted that the assessee had received donations aggregating to Rs.5,00,000/- during its initial year and had commenced its charitable activities during F.Y. 2025-26. The expenditure incurred towards audit fees, bank charges and professional charges represented legitimate expenditure incurred for establishment and administration of the charitable institution. The Ld. AR further submitted that Form No.10 for accumulation of income u/s 11(2) had also been filed, but the same was not considered by the Ld. CIT(E).
4.2.1. The Ld. AR also contended that only one notice was issued and no specific show cause notice proposing rejection of the application was ever issued. It was therefore submitted that the assessee was not afforded an effective opportunity to explain its case before passing the impugned orders.
Accordingly, the Ld. AR prayed that both the matters may be restored to the file of the Ld. CIT(E) for fresh adjudication.
5. Per contra, the Ld. DR relied upon the reasoning contained in the impugned orders. It was submitted that the assessee failed to demonstrate the genuineness of its charitable activities before the Ld. CIT(E) and, therefore, the applications came to be rejected.
The Ld. DR, however, fairly submitted that if this Tribunal is inclined to restore the matters, appropriate directions may be issued to the assessee to furnish all requisite details before the Ld. CIT(E).
We have heard the rival submissions and carefully perused the material available on record.
6. The controversy involved in the present appeals lies in a narrow compass. The application for registration u/s 12AB has been rejected primarily on the ground that the assessee had not carried out sufficient charitable activities so as to establish the genuineness of its activities. Consequent upon such rejection, the application seeking approval u/s 80G(5) has also been rejected.
6.1. From the record, we find that the assessee was incorporated only on 27/11/2024 under Section 8 of the Companies Act, 2013. It is not in dispute that the application in Form No.10AB was filed on 27/09/2025, i.e., within a relatively short period from the date of incorporation.
6.2. We find force in the contention of the Ld. AR that while examining the application, the Ld. CIT(E) called upon the assessee to furnish year-wise details from Assessment Year 2022-23 onwards, although the assessee itself was not in existence duringthe said period. In our considered view, in the case of a newly established charitable institution, the examination is required to be confined to the activities undertaken after its incorporation and the material available up to the date of adjudication.
6.2.1. We further notice that the assessee has specifically contended that it had received donations during its initial year, had commenced its activities in the succeeding financial year, had incurred expenditure towards establishment and administration of the institution and had also filed Form No.10 for accumulation of income. These aspects do not appear to have been examined by the Ld. CIT(E) while passing the impugned order.
6.3. The assessee has also raised a specific grievance that no separate show cause notice proposing rejection of the application was issued before passing the impugned orders. The record indicates that only one notice was issued during the proceedings. In our considered opinion, before rejecting an application for registration under section 12AB, particularly in the case of a newly incorporated charitable institution, the applicant should be afforded an adequate and effective opportunity to explain its case and furnish all supporting documents.
6.4. Considering the totality of the facts and circumstances of the case, we are of the considered opinion that the issues require fresh examination by the Ld. CIT(E). Accordingly, in the interest of substantial justice, we set aside the impugned order passed u/s 12AB and restore the matter to the file of the Ld. CIT(E) for de novo adjudication. The Ld. CIT(E) shall afford reasonable opportunity of hearing to the assessee, permit it to furnish all relevant documents,explanations and evidences, examine the charitable objects, the activities undertaken from the date of incorporation, the receipts, application and accumulation of income and thereafter pass a reasoned and speaking order in accordance with law.
6.5. Since the rejection of approval u/s 80G(5) is consequential to the rejection of registration u/s 12AB, we also set aside the impugned order passed u/s 80G(5) and restore the matter to the file of the Ld. CIT(E) for fresh adjudication. The application seeking approval u/s 80G(5) shall be decided afresh in accordance with law after adjudicating the assessee’s application for registration u/s 12AB.
The assessee shall extend full cooperation in the remand proceedings and furnish all such information and documentary evidences as may be called for by the Ld. CIT(E). We clarify that we have not expressed any opinion on the merits of the controversy and all issues are left open to be adjudicated afresh.
In the result, both the appeals filed by the assessee are allowed for statistical purposes.
Order pronounced in the open court on 21/07/2026.
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