HP PATHSHALA FOUNDATION ,MUMBAI V. CIT(EXEMPTION), MUMBAI, MUMBAI

ITA 7941/MUM/2025

AI Insights

The case involves HP Pathshala Foundation, which appealed against the decisions of the Commissioner of Income-tax (Exemptions), Mumbai, rejecting their applications for registration under sections 12AB and 80G of the Income-tax Act, 1961. The Tribunal heard arguments regarding the mechanical and derivative approach taken by the CIT in rejecting the applications, the non-consideration of the appellant's documents, and the failure to appreciate the substantive evaluation required under section 80G. The Tribunal found merit in the assessee's arguments, particularly regarding the amendment of the trust deed to comply with section 11 and the potential for condonation of delay in filing the application for registration under section 12A.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 848953 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Mumbai
• Assessment Year: misc
• Appeal Filed On: 27-11-2025
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Condonation of delay; Set aside; Opportunity of being heard; Reasonable cause; Bonafide belief; Principle of natural justice; Charitable institution
• Section: 11; 12AA; 12A; 12; 10; 80G

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH MUMBAI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA Nos. 7940 and 7941/Mum/2025 Assessment Year: 2026-27 HP Pathshala Foundation Chumery HP Nagar Housing Complex East, Mahul Road, Vasi Naka, Mumbai-400074 (PAN: AACTH8968A) Vs. CIT(Exemption), Mumbai (Appellant) (Respondent) Present for: Assessee : Ms. Apurva Hire, Advocate Revenue : Shri Ritesh Misra, CIT DR Date of Hearing : 12.02.2026 Date of Pronouncement : 27.03.2026 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: These two appeals filed by the assessee are arising out of the orders of ld. Commissioner of Income-tax (Exemptions), Mumbai [CIT(E)] vide order nos. ITBA/EXM/F/EXM45/2025-26/1081308386(1) and ITBA/EXM/F/EXM45/2025- 26/1081308091(1) both dated 29.09.2025, u/s 80G and 12AA of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’). Printed from counselvise.com 2 ITA Nos. 7940 and 7941/2025 HP Pathshala Foundation AY 2026-27 2. Grounds taken by the assessee are reproduced as under: ITA No. 7940/Mum/2025 “ERRONEOUS DENIAL OF APPROVAL UNDER SECTION 80G BASED ON A DERIVATIVE PRESUMPTION The learned CIT Exemptions erred in rejecting the appellant's Form 10AB application for approval under section 80G by adopting a mere consequential approach, instead of undertaking an independent statutory inquiry mandated under section 80G; this mechanical approach renders the order unsustainable. 2. FAILURE TO APPRECIATE THAT SECTION 80G REQUIRES SUBSTANTIVE EVALUATION OF CHARITABLE NATURE, NOT AUTOMATIC REJECTION The learned authority misinterpreted section 80G by treating it as a strict precondition operating as an absolute bar, whereas the statutory scheme requires evaluation of whether the institution's objects and actual conduct are charitable, and whether its income is applied solely for charitable purposes. 3. NON-CONSIDERATION OF APPELLANT'S DOCUMENTS, ACTIVITIES, AND EVIDENCE FILED SPECIFICALLY FOR 80G PROCEEDINGS The impugned order is vitiated by complete non-application of mind, as the learned CIT Exemptions has not examined any of the appellant's materials submitted with the 80G application; The rejection is passed without a whisper of discussion on these documents. 4. FAILURE TO EXERCISE INDEPENDENT JURISDICTION IN 80G PROCEEDINGS The authority has treated the 80G application as if it were an automatic consequence of the 12AB adjudication. Section 80G proceedings require an independent, fresh, and self-contained evaluation, which has not been done. Treating 80G as a mere by-product of another proceeding amounts to abdication of statutory responsibility and renders the order without jurisdiction. 5. 5. VIOLATION OF PRINCIPLES OF NATURAL JUSTICE DUE TO NON-GRANT OF MEANINGFUL OPPORTUNITY Although notices were issued, the learned authority failed to grant a fair, effective, and independent opportunity to address issues specific to 80G. The rejection, passed solely on the ground of the 12AB outcome, establishes that the appellant's submissions were not considered at all for 80G purposes. This constitutes a breach of natural justice, rendering the impugned order null in law. 6. NON-SPEAKING, MECHANICAL, AND FACTUALLY UNSUSTAINABLE ORDER The impugned rejection contains no factual examination, no discussion of documents, no reasoning, and no independent findings. It merely states that since 12AB registration was not granted, 80G approval \"becomes untenable.\" Such a conclusory and derivative approach is contrary to the requirement of a reasoned and evidence-based order, and is therefore invalid and liable to be quashed.” ITA No. 7941/Mum/2025 ERRONEOUS REJECTION OF REGISTRATION: 1. The learned CIT (Exemptions) has erred in law and on facts in rejecting the appellant's Form 10AB application on a narrow and hyper-technical Printed from counselvise.com 3 ITA Nos. 7940 and 7941/2025 HP Pathshala Foundation AY 2026-27 interpretation of Section 12A(1)(ac) (iii), without appreciating the statutory scheme, legislative intent, and bona fide conduct of the appellant. MISINTERPRETATION OF 'COMMENCEMENT OF ACTIVITIES' FOR LIMITATION PURPOSES 2. The learned authority has wrongly construed an isolated preparatory expenditure as \"commencement of activities,\" thereby triggering limitation incorrectly. The conclusion is perverse, legally untenable, and contrary to the distinction between trial/incidental steps and actual operational commencement. IGNORING VALIDITY OF PROVISIONAL REGISTRATION TILL AY 2026-27 3. The learned CIT(Exemptions) failed to consider that the appellant's provisional registration continued to be valid till AY 2026-27. PROCEDURAL DELAY TREATED AS SUBSTANTIVE DEFAULT 4. The learned authority erred in treating the alleged delay in filing Form 1АВ as a jurisdictional bar, ignoring the appellant's bona fide explanation and the settled principle that procedural stipulations in beneficial provisions must be construed liberally. UNSUPPORTED FINDING OF ALLEGED VIOLATION OF SECTION 11 5. The finding that clauses 5.17 and 5.24 permit application of income outside India is speculative, factually unfounded, and contrary to the appellant's categorical undertaking to amend the objects to remove any ambiguity. FAILURE TO RECOGNISE CURABLE NATURE OF ALLEGED OBJECT-CLAUSE DEFECT 6. The learned authority erred in rejecting the application without granting reasonable opportunity to file amended trust-deed clauses, despite the alleged deficiency being purely curable and non-substantive in nature. VIOLATION OF NATURAL JUSTICE 7. The impugned order is vitiated by non-consideration of the appellant's detailed submissions and failure to grant an effective and meaningful opportunity to rectify alleged defects, thereby offending the principles of natural justice. 3. The issue involved in the present appeal is in respect of rejection of application filed in Form-10AB u/s. 12A(1)(ac)(iii) and under section 80G(5) seeking registration u/s.12AB and section 80G of the Act, both of which have been rejected. 4. Brief facts of the case are that assessee was set up as a trust vide its trust deed dated 16.09.2022 for advancement of charitable objects and purposes including educational support and tuitions to needy Printed from counselvise.com 4 ITA Nos. 7940 and 7941/2025 HP Pathshala Foundation AY 2026-27 children and other benevolent and philanthropic objects like medical relief, relief to poor, shelter, clothing and advancement of any other object of general public utility. It got registered with the office of Charity Commissioner of Mumbai vide Registration No. E-0038364 (GBR), dated 14.07.2023. Assessee obtained provisional registration u/s. 12A of the Act in Form-10AC as on 11.08.2023. The provisional registration so granted had validity period from Assessment Year 2024-25 to 2026-27. Ld. CIT(Exemption) had called for details and explanations in respect of application made by the assessee in Form-10AB for regularisation of its provisional registration, to which detailed replies were furnished. After considering the submissions made by the assessee, ld. CIT(E) rejected the said application on two grounds. 4.1. First ground for rejection is the late filing of the application in Form-10AB. According to ld. CIT(E), assessee had commenced its charitable activities on 26.08.2023 by incurring expenses towards payments to “Janata Welfare English High School”. By considering this date, ld. CIT(E) observed that assessee ought to have filed its application in Form-AB within six months of commencement of its activities, i.e., by the end of the month of February, 2024. By referring to the provisions of section 12A(1)(ac)(iii), he took note of the other alternative limitation prescribed therein, according to which application could be made at least six months prior to the expiry of the period of provisional registration, which in the present case is September, 2025. The limitation prescribed, u/s. 12A(1)(ac)(iii), mentions about the two timelines to be reckoned as “whichever is earlier”. Accordingly, assessee ought to have filed its Form-10AB latest by the month of February, 2024 which in fact has been filed on 06.03.2025. Since, assessee has not been able to show any reasonable cause for the delay nor it had established the genuine hardship it faced in filing the said application Printed from counselvise.com 5 ITA Nos. 7940 and 7941/2025 HP Pathshala Foundation AY 2026-27 beyond the prescribed limitation, he rejected the said application on account of late filing. Ld. Counsel also submitted that assessee was under bonafide belief that the provisional registration was always available to it until Assessment Year 2026-27 and therefore, it had the time available up to September, 2025 for the purpose of regularisation of the provisional registration. 4.2. The second ground for the rejection is violation of section 11 of the Act as observed by ld. CIT(E). He noted from clauses 5.17 and 5.24 of the trust deed that they violate the provisions of section 11 as they refer to application of fund outside India. On confrontation of this fact to the assessee, it was admitted by the assessee to drop these clauses from the trust deed. However, no supporting documents were furnished by the assessee as to resolution passed by the Board of trustees and application filed before the Charity Commissioner for the amendment made in the object of the trust. Ld. CIT(E) held that assessee has not satisfactorily and conclusively demonstrated its contention, hence this also formed another ground of rejection of application made by the assessee in Form-10AB. Aggrieved, assessee is in appeal before the Tribunal. 5. We have heard both the parties and perused the material available on record. Before us, ld. Counsel for the assessee admitted that there is a delay in filing Form-10AB. For the purpose of explaining this delay, reference was made to circular No.7 of 2024 issued by Central Board of Direct Taxes (CBDT), which extended the time period to 30.06.2024. It was pointed out that even if the extended period is considered, there is still a delay of 8 months, for which a prayer is made to condone the same. Attention was drawn to the newly inserted proviso to sub-clause (ac) to sub-section (1) of section 12A, inserted by Finance (2) Act, 2024 Printed from counselvise.com 6 ITA Nos. 7940 and 7941/2025 HP Pathshala Foundation AY 2026-27 w.e.f. 01.10.2024, wherein ld. PCIT/CIT(A) have been empowered to condone the delay, if they find that there was reasonable cause, in not filing the application within the prescribed time limit. 5.1. In respect of the second ground which formed the basis of rejection, ld. Counsel for the assessee appraised the Bench about the compliance made by the assessee of amending the trust deed to drop the clause relating to application of funds outside India for which copy of the documents furnished before the office of the Assistant Charity Commissioner, Mumbai vide letter dated 26.11.2025, is placed on record. Ld. Counsel thus, submitted that the second ground considered by ld. CIT(E) for rejection has been made good by undertaking necessary compliances and therefore, submitted that the matter may be remitted back to the file of ld. CIT(E) for denovo meritorious consideration. 6. In the given set of facts and the submissions made before us, along with documentary evidences on record, we find that assessee has mitigated the second ground which formed the basis for rejection relating to violation of provisions to section 11 wherein trust deed had the clause for application of funds outside India, by making necessary amendments to the trust deed. Since these documents have been furnished before us for the first time which needs to be verified and considered by the ld. CIT(E), the same are remitted back to the office of ld. CIT(E). In respect of the first ground relating to late filing of Form - 10AB, we take note of the amendment brought in by the Finance (2) Act, 2024 by way of insertion of the proviso to section 12A(1)(ac) which empowers ld. PCIT/CIT(A) to condone the delay, more particularly when the assessee has explained its case for the delay caused in filing the regularisation of the application. Considering this proviso brought on statute, we find it appropriate to set aside the order of ld. CIT(E) and Printed from counselvise.com 7 ITA Nos. 7940 and 7941/2025 HP Pathshala Foundation AY 2026-27 remit the matter back to the file of ld. CIT(E) to consider the application for condonation of delay by the assessee, denovo. 7. Needless to say, assessee be given reasonable opportunity of being heard and be allowed to make any further submission, if so required. Assessee is also directed to be diligent in attending the hearing as and when fixed and make all the required submission without seeking adjournments unless warranted by compelling reasons. Accordingly, grounds raised by the assessee in this regard are allowed for statistical purposes. 8. In the result, appeal of the assessee is allowed for statistical purposes. 9. Appeal filed by the assessee in ITA No. 7940/Mum/2025 is in respect of granting of approval for registration u/s. 80G. In this regard, order of ld. CIT(E) mentions that since the application filed for registration u/s. 12AB has been rejected and that section 80G(5)(i) stipulates the condition that provision of the said section is available only to those institutions or funds for which section 11 or 12 or clause (23AA) or clause (23C) of section 10 of the Act applies. Thus, on account of rejection of application for registration u/s. 12AB, the application for approval u/s. 80G was held to be untenable by ld. CIT(E) and was therefore, rejected. 9.1. Since we have remitted the matter back to the file of the ld. CIT(E) for de-novo meritorious adjudication in respect of registration u/s. 12AB, it has consequential bearing on the appeal relating to registration u/s. 80G. Thus, this matter is also remitted back to the file of ld. CIT(E) in terms of our observations and finding in the above paragraphs while Printed from counselvise.com 8 ITA Nos. 7940 and 7941/2025 HP Pathshala Foundation AY 2026-27 dealing with the registration u/s. 12AB. Accordingly, grounds raised by the assessee in this appeal are allowed for statistical purposes. 10. In the result, both the appeals of the assessee are allowed for statistical purposes. Order is pronounced in the open court on 27 March, 2026 Sd/- Sd/- (Amit Shukla) (Girish Agrawal) Judicial Member Accountant Member Dated: 27 March, 2026 MP, Sr.P.S. Copy to: 1 The Appellant 2 The Respondent 3 DR, ITAT, Mumbai 4 5 Guard File CIT BY ORDER, (Dy./Asstt.Registrar) ITAT, Mumbai Printed from counselvise.com "