Friends Charitable Trust Vs CITE (ITAT, Bangalore Bench)
Wrong Portal Code Cannot Bury a Genuine Charity: ITAT Revives Trust’s Section 12AB Registration Claim
Summary: In M Friends Charitable Trust v. CIT(E), ITA No. 702/Bang/2026, decided on 28 August 2026, the Bangalore Bench of the Income Tax Appellate Tribunal considered whether an application for permanent registration u/s 12AB could be rejected merely because the charitable trust selected an incorrect section code while filing Form No. 10AB. The Tribunal held that a technical error in selecting the code could not, by itself, defeat the trust’s substantive claim, particularly when no opportunity was granted to rectify the mistake. The matter was accordingly restored to the CIT(E) for fresh adjudication.
The assessee was a charitable trust constituted through a trust deed dated 20 September 2019. Its principal objects included providing medical aid to needy persons irrespective of caste, creed or religion, assisting families affected by accidental or contingent deaths, conducting free medical camps & undertaking other activities for relief of the poor, education & medical relief.
Pursuant to an application dated 9 March 2020, the trust was granted provisional registration under section 12AA with effect from 1 March 2021. At that stage, the authority accepted that the trust’s activities fell within the statutory definition of “charitable purpose”, thereby entitling it, subject to compliance with the law, to claim benefits u/s 11 & 12.
The trust subsequently filed Form No. 10AB on 17 June 2025, seeking permanent registration. During processing of the application, the CIT(E) required it to produce evidence establishing the genuineness of its activities & compliance with statutory conditions. Although certain details were furnished, the CIT(E) found that the bank statements, rental agreement & list of trustees had not initially been submitted. The trust was once again directed to furnish these documents.
The CIT(E) also noticed that the application had been filed using an incorrect code, despite the trust having already received registration effective from 1 March 2021. A show-cause notice dated 20 August 2025 directed the trust to provide the relevant details by 1 September 2025. As no response was received, another notice was issued on 6 November 2025.
In response, the trust explained that it was under a bona fide belief that the registration granted from 1 March 2021 was perpetual & that the requirement contained in section 12A(1)(ac) was therefore inapplicable. The CIT(E) rejected this explanation, holding that selection of the wrong code could not be accepted as a valid justification for non-compliance. Consequently, the Form No. 10AB application was rejected by order dated 31 December 2025.
Issue Involved
The central issue was whether registration u/s 12AB could be refused solely because the assessee selected the wrong code or statutory provision while filing the online application. The related question was whether the CIT(E), instead of rejecting the application, was required to provide an opportunity to correct the technical error & then examine the trust’s eligibility on merits.
The proceedings also involved the trust’s request for registration from AY 2022-23, with condonation of delay, based upon its explanation regarding bona fide misunderstanding & difficulties with the e-filing portal.
Assessee’s Submissions
Before the Tribunal, the trust filed a 73-page paper book. It contended that the trust deed had been furnished before the CIT(E) & that the requirements raised during the registration proceedings had substantially been complied with. According to the assessee, its application was ultimately rejected only because an incorrect code had been selected while uploading Form No. 10AB.
The trust maintained that the error was procedural & occurred due to technical difficulties on the e-filing portal, where the correct code was allegedly not enabled when the application was filed. Such a technical mistake could not override the trust’s charitable character or justify outright rejection without permitting correction.
Reliance was placed upon the decisions of the Bangalore Tribunal’s Coordinate Benches in ITA No. 510/Bang/2025 & ITA No. 515/Bang/2025, both dated 31 July 2025. It was submitted that these decisions dealt with an identical issue & required the CIT(E) to permit filing under the correct code.
Revenue’s Contentions
The Revenue supported the rejection by pointing to the incorrect statutory code, the trust’s failure to furnish all documents initially & its delayed response to the show-cause notices. It maintained that an assessee already granted registration was expected to select the proper category while seeking permanent registration. The trust’s plea of bona fide belief regarding perpetual registration was therefore considered insufficient to excuse the procedural defaults.
Tribunal’s Findings & Legal Reasoning
The Tribunal held that the application could not be rejected merely because the assessee selected an incorrect section code. The decisive consideration was that the trust had not been granted an effective opportunity to correct the error before its application was rejected.
Following the Coordinate Bench rulings in ITA Nos. 510 & 515/Bang/2025, the Tribunal treated the incorrect code as a curable procedural defect, rather than a defect extinguishing the substantive right to seek registration. Registration proceedings require examination of the trust’s objects, genuineness of activities & statutory compliance. A wrong selection on the portal does not conclusively establish that the trust is ineligible.
The Tribunal therefore restored the matter to the CIT(E). It directed the assessee to file its application under the correct code & applicable provision. The trust was also required to substantiate that its activities were genuinely charitable. The CIT(E) was directed to examine the claim in accordance with law & decide it on merits after granting a proper opportunity of hearing. The appeal was allowed for statistical purposes.
Practical Implications
The ruling reinforces that technical portal errors should not defeat substantive charitable registration claims. Before rejecting Form No. 10AB for an incorrect code, the CIT(E) should ordinarily allow rectification. However, the order does not grant registration automatically. On remand, the trust must establish genuineness through bank statements, activity reports, beneficiary records, expense evidence, trustee particulars & other supporting documents. Charitable institutions should therefore select the correct application code, preserve portal screenshots where technical difficulties arise & respond promptly to every notice.
Cases Discussed
- ITA No. 515/Bangalore/2025, Coordinate Bench, dated 31 July 2025.
- ITA No. 510/Bangalore/2025, Coordinate Bench, dated 31 July 2025.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT BANGALORE
1. This appeal by the Assessee is directed against the order dated 31 December 2025 passed by the Commissioner of Income Tax (Exemption), Bangalore [learned CIT(E)], rejecting the Assessee’s Form No. 10AB application dated 17 June 2025 for registration under section 12AB of the Income Tax Act, 1961.
2. The Assessee has raised the following grounds of appeal:
1. The order of the learned CIT [Exemptions] dated 31/12/2025 refusing to register the trust u/s.12AB of the I.T. Act, 1961 in so far as it is against the appellant, is opposed to law, equity, weight of evidence, probabilities facts and circumstances of the case.
2. The learned CIT [Exemptions] erred in refusing to grant of registration u/s. 12AB of the Income-tax Act, 1961 with effect from assessment year 2022-23 by condoning the delay in filing the application u/s. 12A(1)(ac)(i) of the Act by exercising the power under the proviso to section 12A(1)(ac) under the facts and in the circumstances of the appellant’s case.
3. The Learned CIT [Exemptions] ought to have appreciated the fact that the appellant was prevented from reasonable cause from making the application under Section 12A(1)(ac)(i) of the Act and hence the delay in filing the application ought to have been condoned and registration be granted from AY 2022-23 under the facts and in the circumstances of the appellant’s case.
4. The learned CIT [Exemptions] is not justified in the rejecting the application filed by the appellant on the ground that the same was filed under the wrong code without considering the explanation given by the appellant under the facts and in the circumstances of the appellant’s case.
5. The learned CIT [Exemptions] failed to appreciate that the appellant’s failure to file the application seeking registration under the correct code was due to technical difficulties on the e-filing portal where the correct and relevant code was not enabled on the e-filing portal when the application was filed and thus, the same cannot be a ground for rejection of application for registration with condonation of delay in filing the said application under the facts and in the circumstances of the appellant’s case.
6. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs
3. Briefly stated, the Assessee is a charitable trust constituted by a trust deed dated 20 September 2019. Its main objects include providing medical aid and assistance to the needy public, irrespective of caste, creed, or religion; supporting families affected by accidental or contingent deaths; and conducting free medical camps, among other charitable activities. The Assessee was granted provisional registration under section 12AA of the Income Tax Act with effect from 1 March 2021, pursuant to its application dated 9 March 2020. At that stage, it was noted that the Assessee, constituted on 20 September 2019, was engaged in activities such as relief to the poor, education, and medical relief, which fall within the definition of charitable purpose, and was therefore entitled to the benefit of sections 11 and 12 of the Act. The Assessee thereafter filed an application before the learned CIT(E) on 17 June 2025 seeking permanent registration. The learned CIT(E) called upon the Assessee to furnish details to establish the genuineness of the trust’s activities and its compliance with the statutory requirements relevant to achieving its objects. In response, the Assessee furnished certain details; however, as the bank account statement, rental agreement, and list of trustees were not submitted, the Assessee was again asked to provide those documents. It was also noticed that the Assessee had filed the application under an incorrect code, despite having already been registered on 1 March 2021. Accordingly, a show-cause notice dated 20 August 2025 was issued requiring the Assessee to submit the details by 1 September 2025. As no response was filed, a further show-cause notice was issued on 6 November 2025. In reply, the Assessee stated that it was under a bona fide belief that the registration granted on 1 March 2021 was perpetual and that section 12A(1)(ac) therefore did not apply. After considering the details furnished, the learned CIT(E) held that selecting the wrong code could not be accepted as a valid ground for non-compliance and consequently rejected the application.
4. Aggrieved by the order, the Assessee is in appeal before us. We have heard Ms. Haripriya N., learned authorised representative for the Assessee, and Shri Somnath S. Ukkali, learned Commissioner of Income Tax Departmental Representative for the Revenue.
5. The Assessee filed a 73-page paper book and submitted that the trust deed had been furnished before the learned CIT(E) and that all requirements raised by the learned CIT(E) had been complied with. It was contended that, despite such compliance, the application was rejected solely on the ground that an incorrect code had been mentioned. The Assessee further submitted that Coordinate Benches had considered an identical issue in ITA No. 510/Bangalore/2025 and ITA No. 515/Bangalore/2025, and that the learned CIT(E) ought to have considered the application in the light of those decisions.
6. After carefully considering the Assessee’s submissions and the judicial precedents cited before us, we find that the Assessee’s application could not have been rejected merely because it selected an incorrect section code, particularly without first granting the Assessee an opportunity to correct the error. This position is supported by the decisions of the Coordinate Benches in ITA No. 515/Bangalore/2025 dated 31 July 2025 and ITA No. 510/Bangalore/2025 dated 31 July 2025. Respectfully following those decisions, we restore the matter to the file of the learned CIT(E), with a direction that the Assessee shall file the application under the correct code and applicable provision of law. The Assessee shall also substantiate before the learned CIT(E) that its activities are charitable and genuine. The learned CIT(E) shall examine the Assessee’s claim and, if it is found to be in accordance with law, decide the application on merits after granting the Assessee an opportunity of being heard.
7. In the result, the Assessee’s appeal is allowed for statistical purposes.
Order pronounced in the open court on 28th August, 2026.
