An application cannot be rejected without a final opportunity to address defects.

By | October 9, 2025
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An application cannot be rejected without a final opportunity to address defects.

Issue

Can the Commissioner (Exemption) reject a charitable trust’s registration application after finding its reply unsatisfactory, without providing the trust with one final and specific opportunity to address the very defects that are forming the basis for the rejection?

Facts

  • An assessee-trust filed an application for registration under Section 12AB of the Income-tax Act, 1961.
  • The Commissioner (Exemption) issued notices, and the assessee duly complied by furnishing replies.
  • However, the Commissioner was not satisfied with the responses and rejected the application. The primary reason given was that the trust’s main objectives appeared to be for the benefit of a particular religious community (the Christian community), and the trust had not provided credible evidence of undertaking any charitable activities for the general public.
  • The core of the assessee’s grievance was that the Commissioner, after finding the reply unsatisfactory, simply proceeded to reject the application without giving them a final chance to address the specific shortcomings.

Decision

The court ruled in favour of the assessee and remanded the matter.

  • It held that if the Commissioner was not satisfied with the reply submitted by the assessee, the principles of natural justice required that the Commissioner should have provided one final opportunity to the assessee.
  • This final opportunity should have involved clearly pointing out the specific defects or shortcomings on the basis of which the rejection was being contemplated, and allowing the assessee to make a final submission on those points.
  • Since this was not done, there was a breach of the principles of natural justice.
  • The court set aside the rejection order and remanded the matter back to the Commissioner with a clear direction to decide the issue afresh, but only after providing the assessee with a reasonable and effective opportunity of being heard.

Key Takeways

  1. Natural Justice Requires a Meaningful Opportunity: The right to be heard is not just about filing a piece of paper. If an authority is not satisfied with a reply, fairness dictates that they should communicate the specific points of their dissatisfaction to the applicant and give them a chance to respond to those specific points before passing an adverse order.
  2. The Duty of the Adjudicating Authority: An adjudicating authority like the Commissioner has a duty to not only receive a reply but to engage with it. If they find it deficient, they must point out the deficiencies to the applicant. Passing an order based on uncommunicated reasons is an arbitrary exercise of power.
  3. A “Final Opportunity” Can Prevent Needless Litigation: Giving a final, specific opportunity is also a matter of administrative efficiency. It allows the taxpayer to potentially cure the defect or provide the exact information needed, which can resolve the issue without forcing the parties into a prolonged legal appeal.
  4. Remand as the Standard Remedy: When an order is passed in violation of the principles of natural justice, the standard and most appropriate judicial remedy is to set that order aside and remand the case for a fresh and fair hearing, ensuring that the proper procedure is followed.
IN THE ITAT PUNE BENCH ‘B’
ZLS Foundation
v.
Commissioner of Income-tax, Exemption
Vinay Bhamore, Judicial Member
and Manish Borad, Accountant Member
IT Appeal No.1939 (PUNE) of 2025
SEPTEMBER  22, 2025
Nikhil Mutha for the Appellant. Amit Bobde for the Respondent.
ORDER
Vinay Bhamore, Judicial Member. – This appeal filed by the assessee is directed against the order dated 27.09.2024 passed by Ld. CIT, Exemption, Pune rejecting the application for registration u/s 12AB of the IT Act.
2. There is delay of 257 days in filing of the present appeal. We are satisfied with the reasons mentioned in the affidavit for condonation that the applicant was prevented by sufficient cause for not filing the appeal within the prescribed time limit. After hearing Ld. DR, we condone the delay of 257 days and proceed to adjudicate the appeal.
3. Facts of the case, in brief, are, that the assessee has applied for registration in Form 10AB under section 12A(1)(ac)(vi)-ITEM(B) of the IT Act on 22.03.2024. With a view to verify the genuineness of activities of the assessee and compliance to requirements of any other law for the time being in force by the trust/institution as are material for the purpose of achieving its objects, a notice was issued on 20.05.2024 through ITBA portal requesting the assessee to upload various information detailed in notice on or before 03.06.2024. In compliance to the above notice, the desired information was furnished by the assessee. On verification of said information, Ld. CIT, Exemption, Pune found certain discrepancies and issued another notice on 02.09.2024 requesting the assessee to furnish further details/information in this regard on or before 09.09.2024. The assessee complied to the said notice dated 02.09.2024, however, Ld. CIT, Exemption, Pune was not satisfied with the reply of the assessee and rejected the application for registration by observing as under :-
“6. The assessee furnish its response on 09/09/2024, However, the same is not accepted for the reasons as stated under-
(1)The major objects of the trust revolves around a particular community Le. “Christian Community”. The said fact is evident from the photographs showing activity of mass gathering for prayers, group meetings. conducting festival, music concert. Also, there are no signage or banners displayed in the photographs so as to show association of the assessee with said activities.
(ii)The trust has claimed to have provided packages of groceries to 1000 people However, the trust has failed to provide the details of beneficiaries as to their names, how the beneficiaries were identified. date and place of distributions of the food packages to each beneficiaries. Also, there are no signage or banners displayed in the photographs so as to show association of the assessee with said activities. Upon verification of the grocery bills it is seen that the bills does not contain details of grocery purchased and does not have GST/CGST details. Thus, the authenticity of the said purchase bills cannot be considered genuine.
(iii)The trust has also submitted details of donations given. Upon verification of the said details it is found that the donations were given for monthly support for “Pastor” / Support for cultural centre / services for church member only. There is no benefit provided to general public at large. The details also shows that the donations are individual contributors and not provided by the assessee. This confirms that the assessee is collecting membership fees from a particular community. This also shows that the activities of the institution pertains to a particular community i.e. “Christian Community”. The memorandum specifically mentions that the development and progress of this particular religious community i.e. “Christian Community” in its primary objects. Though the trust deed speaks of numerous other charitable objects, broadly none of them was met with. No credible evidence to the claim that the activities corresponding to object other than benefitting the Christian community is/was undertaken, has been submitted. Thus, the trust fails to prove genuineness of charitable activities
7. Considering the above facts discussed in the show-cause notice and discrepancies noticed, the undersigned is not satisfied about the charitable nature and the genuineness of activities of the assessee
8. In view of the above, the application dated 22/03/2024 filed by the assessee under section 12A(1)(ac) (vi)-ITEM(B) of the Income Tax Act, 1961 is hereby rejected.”
4. It is the above order against which the assessee is in appeal before this Tribunal.
5. Ld. AR appearing from side of the assessee submitted before us that the order passed by Ld. CIT, Exemption, Pune is unjustified. Ld. AR submitted that if Ld. CIT, Exemption, Pune was not satisfied with the reply of the assessee he ought to have allowed at least one more opportunity to the assessee company to furnish requisite details and evidences in support of application for registration. Ld. AR furnished various details in paper book and relied on following decisions in support of his application for registration u/s 12AB of the IT Act :-
(i)CIT v. Dawoodi Bohara Jamat  228 (MAG)/364 ITR 31 (SC).
(ii)CIT (Exemptions) v. Indian Society of the Church of Jesus Christ of Latter Day Saints  136/397 ITR 762 (Delhi).
(iii)CIT v. Chandra Charitable Trust  19/[2007] 294 ITR 86 (Guj).
(iv)CIT v. Girdharram Hariram Bhagat  377/154 ITR 10 (Guj).
(v)Addl. CIT v. A.A. Bibijiwala Trust [1975] 100 ITR 516 (Guj).
(vi)Society of Presentation Sisters v. ITO [2009] 121 ITD 422 (Cochin-Trib) (TM).
(vii)Amritsar Diocese of Believers Eastern Church v. CIT (Exemptions) 182/200 ITD 111 (Amritsar – Trib.).
(viii)Diocese of Pune (CNI) v. CIT  175/68 SOT 554 (Pune – Trib.).
(ix)JITO Pune Chapter v. CIT [IT Appeal No. 2167 (Pune) of 2013, dated 17-11-2014].
6. Accordingly, Ld. AR requested before the Bench to set-aside the impugned order passed by Ld. CIT, Exemption, Pune and further requested to direct Ld. CIT, Exemption, Pune to grant the registration u/s 12AB of the IT Act.
7. Ld. DR appearing from side of the Revenue relied on the order of Ld. CIT, Exemption, Pune and requested to confirm the same. Ld. DR also relied on the decision of coordinate Bench of the Tribunal in the case of Soudharma Brihad Tapogachchiya Tristutik Jain Sangha Samarpanam v. CIT (Exemption) 590 (Ahd-Trib.)/in ITA No.1571/Ahd/2024 order dated 03.01.2025 wherein the Tribunal on identical facts and circumstances dismissed the appeal filed by the assessee. Ld. DR submitted that Ld. CIT, Exemption, Pune in his order observed that the objects of the assessee revolves around a particular community i.e. Christian Community & the photographs also shows the activity of mass gathering for prayers etc. Ld. DR also referred specified violation referred in clause (c) & (d) of explanation to sub-section (4) of section 12AB of the IT Act which is inserted w.e.f. 01-04-2022, which suggests that application of any part of its income for the benefit of any particular religious community or cast & not for the benefit of public, is treated as specified violation, attracting cancellation of registration u/s 12AB of the IT Act. Accordingly, Ld. DR requested before the bench to confirm the order passed by Ld. CIT, Exemption, Pune.
8. We have heard Ld. Counsels from both the sides and perused the material available on record including the case laws furnished by both the parties. In this regard, we find that the Ld. CIT, Exemption, Pune has rejected the application for registration u/s 12AB of the IT Act observing that the major objects of the trust revolves around a particular community i.e. Christian Community. It was also observed that the donations were given for monthly support for pastor and for the services of church member only. In the absence of any signage or banner the photographs of activities provided by the assessee company also could not be associated with the assessee company. It was also observed by Ld. CIT, Exemption, Pune that the memorandum specifically mentions that the development and progress of this particular religious community i.e. Christian Community is the primary object. It was also observed that the trust deed speaks of numerous other charitable objects, broadly none of them was met with. Ld. CIT, Exemption, Pune also observed that the assessee company has not furnished any evidence which proves that the activities are corresponding to object other than benefiting the Christian Community was undertaken. Accordingly, Ld. CIT, Exemption, Pune hold that the assessee company fails to prove the genuineness of charitable activities and consequently rejected the application for registration u/s 12AB of the IT Act filed by the assessee company.
9. In this regard, we find that admittedly the assessee made compliance and furnished replies to the notices issued by the Ld. CIT, Exemption, Pune. However, after hearing Ld. AR, we are of the considered opinion that if Ld. CIT, Exemption, Pune was not satisfied with the response made by the assessee company, he should have had provided one final opportunity to the assessee company to reply, by pointing out all such defects on the basis of which he has rejected the application for registration of the assessee company. Accordingly, we find that the principles of natural justice have not been followed by Ld. CIT, Exemption, Pune.
10. Considering the totality of the facts of the case, submissions of both the parties and in view of our above discussion in preceding paragraphs & also in the interest of justice and without going into merits of the case, we deem it appropriate to set-aside the impugned order passed by Ld. CIT, Exemption, Pune and remand the matter back to his file with a direction to decide the issue afresh as per fact and law after providing reasonable opportunity of hearing to the assessee. The assessee is also hereby directed to comply with the notices issued by Ld. CIT, Exemption, Pune and to produce requisite documents/information/ submissions and evidences in support of the application for registration without taking any adjournment under any pretext, otherwise, Ld. CIT, Exemption, Pune shall be at liberty to pass appropriate order as per law. Thus, the grounds of appeal raised by the assessee are allowed for statistical purposes.
11. In the result, the appeal filed by the assessee is allowed for statistical purposes.