No records to Show Misuse of Activities Inconsistent with Objects: ITAT restores Trust’s Application for Permanent Registration [Read Order]

The Income Tax Appellate Tribunal (ITAT), Visakhapatnam Bench, comprising Judicial Member Ravish Sood and Accountant Member S. Balakrishnan, dealt with the issue of rejection of a trust’s application for permanent registration under Section 12AB of the Income Tax Act, 1961, on the ground that its activities were allegedly inconsistent with its stated objects.

The appellant, Bethany Chapel, constituted by a trust deed dated 16 January 1924 with objectives of a predominantly public religious nature and related to the poor, had been granted provisional registration under Section 12A(1)(ac)(vi) of the Act for the assessment years 2023-24 to 2025-26. Thereafter, it filed an application in Form 10AB seeking permanent registration.

The Commissioner of Income Tax (Exemptions), Hyderabad, however, vide order dated 19 March 2025, rejected the application in Form 10AB, stating that the trust’s activities were not commensurate with its objectives and that it had furnished only partial information.

Appearing for the assessee trust Smt. A. Aruna, Advocate, argued that Bethany Chapel had responded to the notices issued by the Commissioner on 3 December 2024 and 7 February 2025 through replies dated 21 December 2024 and 22 February 2025, enclosing the required documents.

It was contended that the rejection order was arbitrary and non-speaking, as it neither specified what particular information was lacking nor explained how the activities of the trust deviated from its stated objectives.

Badicala Yadagiri, CIT (DR) representing the department, supported the order of the CIT (Exemptions) and submitted that the rejection was justified.

The Tribunal bench comprising Ravish Sood, Judicial Member, and Balakrishnan S, Accountant Member, observed that the order was cryptic and non-speaking. It noted that there was no analysis on record to substantiate how the activities of the trust were inconsistent with its objects or what information had not been furnished.

The Tribunal said that rejection of an application for registration under Section 12AB without a reasoned order violated the principles of natural justice.

Accordingly, the Tribunal set aside the order dated 19 March 2025 and restored the matter to the file of the CIT (Exemptions), with directions to pass a fresh, speaking order after affording the assessee a reasonable opportunity of being heard and to submit any further documents required.

The Tribunal thus allowed the appeal filed by the assessee for statistical purposes.

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