Registration Rejected for “Low Activity”? ITAT Sends It Back – Opportunity Must Precede Denial

GDW Karya Foundation Vs CIT (Exemptions) (ITAT Bangalore)

Registration Rejected for “Low Activity”? ITAT Sends It Back – Opportunity Must Precede Denial

In the case of GDW Karya Foundation, the Bangalore ITAT dealt with rejection of registration u/s 12AB and consequential denial of 80G approval.

The Tribunal first condoned a delay of 181 days, accepting that the delay was caused due to illness of the Chartered Accountant handling the matter, and the assessee acted promptly once the issue came to light.

On merits, the CIT(Exemptions) had rejected the registration on the ground that:

• The trust received donations but spent very little, and
• Therefore, activities were not genuinely commenced.

However, before the ITAT, the assessee explained that:

• It had commenced charitable activities, including medical relief.
• Funds were accumulated through Form 10 for future projects due to large-scale expenditure requirements.
• Donations were tied to specific grant agreements.

The ITAT found a critical flaw in the CIT(E)’s approach:

• Though reliance on AO’s report is permissible, CIT(E) must independently examine and confront the assessee with adverse findings.
• Opportunity of hearing and reasoned decision are mandatory, especially in registration matters.

Since this was not properly done, the Tribunal:

• Set aside the rejection,
• Restored the matter to CIT(E) for fresh consideration, and
• Directed the assessee to demonstrate genuineness of activities, expenditure, and accumulation purpose.

The 80G issue was also restored as consequential.

FULL TEXT OF THE ORDER OF ITAT BANGALORE

1. ITA No. 1898/Bang/2025 is filed by M/s. GDW Karya Foundation[ The Assessee Trust/ Appellant] against the order passed by the Principal Commissioner of Income Tax (Exemptions), Bangalore [ The Id. PCIT } u/s. 12AB of the Income tax Act [ The Act] rejecting the application filed by the Assessee in form no. 10 AB for registration and cancelling the provisional registration already granted to the Assessee.

2. The briefly stated facts of the case show that Assessee made an application before Ld. CIT(Exemptions) in form no. 10AB on 26.06.2024 for registration u/s. 12AB of the Income Tax Act, 1961. On receipt of the application, the Ld. CIT referred the matter to the jurisdictional Assessing Officer for verification and after obtaining the report of the Range Head, the application of the Assessee was rejected stating that Assessee was required to submit necessary documents to prove the genuineness of the activities and also the compliance of such requirements of any other law which Assessee has failed to do so and therefore he passed an order rejecting the application on 23.12.2024.

3. The second Appeal of the Assessee is ITA No. 1897/Bang/2025 wherein the application made by the Assessee for recommendation u/s. 80G(5)of the Act was also rejected because application in section 12AB stands rejected.

4. Thus, these two appeals involve the similar facts. The Appeal shows that it is late by 181 days. The order u/s. 12AB of the Act was passed on 23.12.2024. However, the Appeal was filed before the ITAT on 28.08.2025 which resulted in delay of 181 days. This Appeal should have been filed on or before 28.02.2025.

5. The reason given by the Assessee for delay is that Assessee entrusted this registration work to one Shri Anshuman Prasad who was appearing before the Ld. CIT(Exemptions). However, due to his continuous illness he could not attend the work and therefore neither the Assessee was represented before the jurisdictional Assessing Officer, Range Head as well as before the Ld. CIT and consequently, the Appeal was also filed late before the ITAT. The Assessee came to know about this at the time of finalizing of the accounts for the year ended on March,2025 and at that time, immediately contacted another Chartered Accountant SMS & Associates to assist the trust in filing a representation before the ITAT. Immediately, the Appeal was filed on 28.08.2025. Thus, the Assessee submits that there is a sufficient cause in filing Appeal late by 181 days.

6. It is supported by the Affidavit of the trustee, the reasons shown are bonafide, and the Appeal may be admitted. The same condonation was reiterated in Affidavit of Mr. Safiya F Hussain who is the trustee of the trust.

7. The Ld. Authorized Representative reiterated the same facts and pleaded for condonation of delay.

8. The Ld. CIT-DR vehemently objected to the same and stated that delay is not for sufficient cause.

9. We have carefully considered the rival contentions and perused the affidavit filed by the trustee as well as the application for condonation of delay. We find that the Assessee entrusted the work to one Chartered Accountant who was ill during the course of hearing before the Ld. CIT (Exemptions) as well as after the rejection of the order. Subsequently, the trust contacted another CA who immediately filed the Appeal. This fact came to the notice of the Assessee trust only at the time of finalizing the accounts for the yearending on March 2025. Accordingly, we find that there is a sufficient cause in filing of the Appeal which has caused delay. Same is condoned and Appeal is admitted.

10. Before the Ld. CIT (Exemptions), we find that the Assessee has received the donation for two years and Assessee has not been able to spend towards the charitable objects and therefore the Ld. lower authorities JAO as well as Range Head did not recommend the approval. The Ld. CIT (Exemptions) once again held in para no. 2 that as Assessee has not made substantial amount of expenditure towards the objects, thus, the Assessee has not commenced its activities towards the attainment of its objects. Therefore, in para no. 4 of the order, he held that Assessee is required to submit necessary documents to prove the genuineness of the activities of the trust. In the end, he rejected the application.

11. Before us, the Ld. Authorized Representative made a detailed submission stating that Assessee has already commenced its activities towards the object. It has incurred expenditure on medical relief. As the Assessee could not spend the donation received during the year and therefore it has made an application in form no. 10 on 30.09.2024 wherein for educational purpose the Assessee has accumulated the above sum. He further submitted that it is not the case that activities of the Assessee are found to be not genuine. Therefore, he submitted that the denial of registration is not appropriate and without giving proper opportunity of hearing.

12. The Ld. CIT-DR though supported the order of the Ld. CIT (Exemptions) but submitted that the Assessee may be given one more opportunity to show the genuineness of the activities.

13. We have carefully considered the rival contentions and find that Assessee is a charitable trust registered as a company u/s. 8 of the Companies Act, 2013 to carry out the charitable activities. The main activities are stated to be social welfare and economic opportunities to rural India. It was stated that it is engaged in research and design application for low income population of the society. During the year, the Assessee received a donation of Rs. 50,00,000/-and in the earlier year of Rs. 15,00,000/-. It is shown that meager expenditure of Rs. 17,700/- were incurred in financial year 2022-23. However, in 2023-24, the Assessee has incurred expenditure of Rs. 4,67,210/-. It is also not in dispute that Assessee has made an application for accumulation of the income. Both the donations are received from M/s. Nudge Life Skill Foundation for specified activities, and a grant agreement was entered into with the donor. Due to the huge expenditure required to be incurred and as Assessee has a meager source of income in the form of donation only, form no. 10 is filed to accumulate the above income.

14. However, the fact remains that according to provisions of section 12AB that Ld. CIT (Exemptions) is duty bound to call for the information and after making enquiry, is required to satisfy himself about the genuineness of the activities and the compliance of other law. Then only, the registration certificate u/s. 12AB can be granted to the Assessee. The learned CIT — exemption deputed the jurisdictional assessing Officer to carry out the enquiry and to submit a report. The report of the assessing officer says that assessee should not be granted registration.

15. However, the learned CIT exemption is correct in relying upon the report of the jurisdictional assessing officer, however, he is also duty bound to raise the concerns, which are raised by the jurisdictional assessing officer for denial of registration to the assessee, after giving an opportunity of hearing, only he could have rejected the application of the assessee. He is also bound to pass a reasoned order. In the present case, the CIT exemption merely relied on the report of the assessing officer and rejected the application.

16. In view of the above facts, we restore the Appeal back to the file of the Ld. CIT (Exemptions) with a direction to the Assessee to explain the facts of the case, activities of the trust, details of expenditure incurred by the Assessee on charitable objects and the purpose for which it is accumulated. The Assessee is also required to draw the attention of the Ld. CIT (Exemptions) towards the respective grant agreements. The Ld. CIT (Exemptions) may examine the same and then decide the issue afresh after granting Assessee an opportunity of hearing.

17. The second Appeal of the Assessee in ITA No. 1897/Bang/2025 is consequential and thereafter examining whether the Assessee deserves recommendation u/s. 80G or not and therefore this Appeal also requires to be restored to the file of the Ld. CIT (Exemptions) who may decide the same in accordance with the law after deciding the issue of registration u/s. 12AB of the Act.

18. In the result, both the Appeals filed by the Assessee are allowed for statistical purposes.

Order pronounced in the open court on 29^th April, 2026.