KRISHNA BALRAM FOUNDATION ,MATHURA V. CIT EXEMPTION, LUCKNOW

ITA 113/AGR/2025

AI Insights

The case involves Krishna Balram Foundation, which appealed against the rejection of its applications for registration under sections 12AB and 80G of the Income Tax Act, 1961, by the Commissioner of Income Tax (Exemption), Lucknow. The primary contention was that the rejection was based solely on the audited balance sheet for a period of three months, during which the trust had just commenced its activities. The Tribunal noted that the CIT(E) did not consider the replies and supporting documents provided by the trust before rejecting the applications. Additionally, no show-cause notice was issued prior to the rejection, which was seen as a violation of the principles of natural justice.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 708267 (ITAT-AGRA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2024-2025
• Other Referred Cases: D.Y. Patil Education Society v. CIT (2017) 398 ITR 18 (Bombay HC), M/s. Radha Krishna Educational Society (2015) 60 taxmann.com 18 (Delhi Tribunal), Akshaya Patra Foundation (2018) 401 ITR 330 (Karnataka HC), Commissioner of Income Tax vs Red Rose School on 7 February, 2007 (Allahabad High Court), St. Don Bosco Educational Society vs The CIT (Tribunal Lucknow) on 30 December, 2003
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUKESH KUMAR JAIN
• Assessee Lawyers: MANU RG LUTHRA
• Keywords: Opportunity of being heard; Principle of natural justice; Charitable institution
• Section: 12AA; 12A; 80G

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH ‘DB’ AGRA (Through Physical/Virtual Hearing) BEFORE SHRI SUNIL KUMAR SINGH, JUDICIAL MEMBER AND SHRI BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER ITA Nos.112 & 113/Agr/2025 Krishna Balram Foundation, 118, Kanak Dhara, Behind Iskon Temple, Vrindaban, Banger, Mathura, Uttar Pradesh-281121 Vs CIT(Exemption), Lucknow, Uttar Pradesh-226010 PAN-AAFTK5310A Appellant Respondent Appellant by Shri Manu RG Luthra, CA Respondent by Shri Sukesh Kumar Jain, CIT(DR) Date of Hearing 23.04.2025 Date of Pronouncement 18.07.2025 ORDER PER BRAJESH KUMAR SINGH, AM, These two appeals by the same assessee are directed against the rejection of the application of the assessee trust for regular registration u/s 12AB of the Income Tax Act, 1961 (hereinafter referred to ‘the Act’) and rejection of application of the assessee trust seeking approval u/s 80G of the Act by the Ld. Commissioner of Income Tax (Exemption), Lucknow vide orders both dated 31.12.2024. 2. Brief facts of the case in ITA No.112/Agr/2025: The application for registration of the trust u/s 12AB of the Act was filed on 12.06.2024 by the assessee in Form No.10AB under Rule 17A of the Income Tax Rules, 1962. The ld. CIT(E) issued notice dated 08.10.2024 fixing the date for compliance on 21.10.2024. In response to which, the assessee filed its reply. The Ld. 2 ITA No.112 & 113/Agr/2025 CIT(E) noted that the assessee was required vide query letter dated 08.10.2024 mentioned at point nos.7 and 8 to submit a note on activities conducted since inception/during last three years and a notes specifying the main area of charitable/religious activities and a projection/plan for the main charitable/religious activities to be undertaken in the next two years. The ld. CIT(E) on perusal of the reply submitted by the assessee noted about the main objects of the trust being rural development, imparting education, Art & Culture, Healthcare, environment and general welfare. Thereafter, the ld. CIT(E) noted the income and expenditure account of the assessee for FY 2023-24 and held that it was clearly evident from the said statement that the trust was not engaged in any substantial charitable activity as per its objects. He, therefore, held that the genuineness of the charitable activities being carried out by the trust has not been satisfactorily established. In view of these facts, the Ld. CIT(E) concluded that he was unable to arrive about the charitable nature of activities of the trust and hence he rejected the application filed in Form No.10AB for the registration u/s 12AB of the Act. However, he noted that no adverse inference was drawn on provisional registration dated 23.01.2024 granted vide Unique Registration No.AAFTK5310AF20241 to the said trust. 3. Aggrieved with the said order, the assessee is in appeal before us by raising the following grounds :- On the facts and in the circumstances of the case, the Learned Assessing Officer has rejected the Application for Final Registration. The trust hereby submits that the rejection of its application for 12A registration on the grounds that the activities do not appear to be genuine is misplaced. The activities of the trust are fully aligned with its charitable objectives, as clearly outlined in its 3 ITA No.112 & 113/Agr/2025 Memorandum of Association and Trust Deed. The trust has consistently worked towards rural development, education, healthcare, environment conservation, promotion of art and culture, and the welfare of society in general. The trust has actively been engaged in rural development programs, and successfully implemented projects focused on agriculture, water conservation, and rural education, thereby directly contributing to the socio- economic development of rural areas. The trust has always adhered to all regulatory and legal requirements under the Income Tax Act, including maintaining proper accounts, filing necessary returns, and ensuring the proper utilization of funds for the charitable purposes specified in the Trust Deed. The activities and utilization of funds have been regularly monitored and accounted for in the trust's audited financial statements. The trust has maintained and regularly updated its records, which substantiate the authenticity and genuineness of the activities. The rejection appears to have been based on a misunderstanding or misinterpretation of the activities conducted by the trust. The purpose of the trust is not only to promote social welfare but also to encourage sustainable development and empowerment of marginalized communities. All the trust's activities are carried out under the broad objective of promoting public welfare and national development. The trust has provided comprehensive supporting documentation, all of which substantiate the authenticity and effectiveness of its charitable endeavors. The rejection order was issued on 23rd December 2024; however, it was signed by the Income Tax Officer on 31« December 2024. Therefore, the due date for filing the appeal is calculated as 60 days from 31» December 2024 (i.e. 01.03.2025). The appeal was • filed within the prescribed period, adhering to the statutory timeline. The appellant submits that the due date for filing the appeal should be considered from 31\" December 2024, as per the signing date of the rejection order, ensuring compliance with the provisions of the Income Tax Act. In light of the foregoing, we respectfully request that the Honorable Tribunal reconsider the decision of the Commissioner of Income Tax (Exemption) and grant the trust registration under Section 12A of the Income Tax Act, 1961. The rejection is unjustified, as the trust's activities are genuine, charitable, and serve the public interest. 4 ITA No.112 & 113/Agr/2025 4. During the hearing before us, the ld. AR filed a written submission explaining the activities of the trust and also filed an appeal set giving the details about the ‘note on activities’ and supporting documents on page nos.40 to 144. The written submission of the assessee placed at page no.1 to 3 of the paper book is reproduced as under:- Subject: Request for Clarification on the Rejection of Application of Registration U/s 12AA and Submission of Missing Documents in the case of Krishna Balram Foundation having Reference DIN: Appeal No. ITA 112/AGR/2025. Respected Sir, We respectfully draw the Hon'ble Tribunal's attention to specific issues pertaining to the rejection of our application by the learned Commissioner of Income Tax (CIT), which we believe warrant further examination and consideration. Our application for registration was rejected by the learned Commissioner of Income Tax (CIT) solely on the grounds of the audited balance sheet, without due consideration of the following critical points: 1. The rejection appears to be primarily based on the audited balance sheet for a period of three months, during which the trust had only commenced its activities. As a newly established trust, our financial transactions were limited, and the audited balance sheet reflects only the initial stage of our operations. It is important to emphasize that such a brief financial history should not be the sole basis for rejecting the application, as it does not fully represent the trust's objectives or its intended charitable activities. The application was rejected only on the basis of balance sheet and the activities after balance sheet date was ignored despite enclosed in the earlier replies as submitted with the learned CIT. 2. We respectfully submit that the learned CIT has not adequately considered the genuineness of the trust's activities, which is a critical aspect when reviewing applications for registration under Sections 12AA. The rejection appears to focus solely on the financial records without considering the charitable objectives of the trust and its potential to carry out meaningful activities for public welfare, as outlined in our trust deed. In this regard, we kindly request that the learned CIT revisit the issue with due regard to the trust's objectives and its intended charitable activities, in line with established legal precedents. 5 ITA No.112 & 113/Agr/2025 3. As your Honour mentioned during the previous hearing: - Relevant Extract of \"Section 12AB(1)(b)(ii)(B)\" under Income Tax Act is provided below for your ready reference: \"if he is not so satisfied, pass an order in writing, — (1) in a case referred to in sub-clause ii) or sub-clause iii) or sub- clause (v) of clause (ac) of sub-section (1) of section 12A rejecting such application and also cancelling its registration; (Il) in a case referred to in sub-clause (iv) or in item (B) of sub-clause (vi) of sub-section (1) of section 12A, rejecting such application, after affording a reasonable opportunity of being heard;\" It is also pertinent to note that no Show Cause Notice was issued by the CIT prior to the rejection of the application. As per the principles of natural justice, we were entitled to be notified of any deficiencies or concerns and to be given an opportunity to address them. The failure to issue a show cause notice before rejecting our application has resulted in significant hardship for the trust, which is dedicated to fulfilling its charitable objectives. We respectfully submit that such an omission is in contravention of the basic principles of fairness and due process. Your Honour, for your reference, the details of the notices, including the dates on which they were issued and the replies submitted, are hereby provided. This clearly indicates that no Show Cause Notice was issued, thereby depriving us of the opportunity to be heard. 6 ITA No.112 & 113/Agr/2025 4. In light of the above concerns, we respectfully submit these precedents before the Hon'ble Tribunal and request that it direct the learned CIT to kindly grant us registration under Sections 12AA, considering the trust's objectives and the limited financial activity during its initial phase. • D.Y. Patil Education Society v. CIT (2017) 398 ITR 18 (Bombay HC): The Bombay High Court ruled that the registration under section 12A should not be rejected merely because the trust has not yet undertaken substantial activities or because the balance sheet is in the early stages of its establishment. The Court noted that the genuineness of the trust's activities can only be evaluated over time, and the initial phase should not be a barrier to registration. • M/s. Radha Krishna Educational Society (2015) 60 taxmann.com 18 (Delhi Tribunal): The Delhi Tribunal in this case also took a similar view, stating that the rejection of the trust's registration under 12A on the grounds of balance sheet and the lack of sufficient activities in the initial years is not appropriate. The Tribunal ruled in favor of the assessee, stating that a newly established trust should be given a reasonable period to demonstrate its charitable activities. • Akshaya Patra Foundation (2018) 401 ITR 330 (Karnataka HC): The Karnataka High Court upheld that rejection of registration under Section 12AA solely based on the balance sheet is not justified, especially when the trust is newly formed and has limited financial transactions or activities in the early period. A trust's registration should not be denied just because it is in its formative stage and lacks a comprehensive financial history. • Commissioner of Income Tax vs Red Rose School on 7 February, 2007 (Allahabad High Court) & St. Don Bosco Educational Society vs The CIT (Tribunal Lucknow) on 30 December, 2003: The Allahabad High Court held that the rejection of 12A/80G registration based solely on the balance sheet of a newly registered trust, where the trust had limited activities, was improper. 7 ITA No.112 & 113/Agr/2025 The trust's objectives and its future potential to carry out charitable activities are more important than the financials in the early years. 5. Your Honour, we sincerely apologize for the inadvertent omission of the rejection order. which was not included in the appeal memo on pages 11-16. We fully acknowledge this oversight, and in line with the reference made by the Hon'ble Tribunal during the previous hearing, we hereby submit the rejection order for your kind consideration. It is pertinent to note that our trust is dedicated to fulfilling its charitable objectives, and any delay or rejection of registration will cause considerable hardship. The rejection not only hampers our ability to benefit from the tax exemptions but also negatively impacts our capacity to continue working for the welfare of society. We request the Hon'ble Tribunal to consider the facts presented herein and kindly direct the learned CIT to grant us registration with due regard to the trust's objectives and the legal principles that govern the grant of registration under Section I2AA. In light of the above concerns. we respectfully request the Hon'ble Tribunal to provide us with an opportunity to submit any missing documents or clarifications that may have led to a misunderstanding of the facts of the case.” 6. The ld. CIT-DR supported the orders of the Ld. CIT(E) and submitted that denial of exemption along with denial of registration u/s 80G should be upheld. 7. We have heard both the parties and perused the material available on record. It is seen from the tabular chart about the case history of this case that the reply submitted by the assessee was not considered by the Ld. CIT(E) before rejecting the said application. Moreover, no show-cause notice was issued by the Ld. CIT(E) prior to the rejection of the application. Further, the assessee has submitted once again the necessary details regarding its charitable activities as listed out above and also relied upon case laws, which held that the registration u/s 12A should not be rejected merely because the trust has not yet under taken substantial activities or 8 ITA No.112 & 113/Agr/2025 because the balance-sheet is in the earlier stages of establishment. The assessee in its written submission also stated that the Hon’ble Court in the case of D.Y. Patil Education Society vs CIT [2017] 398 ITR 18 (Bom. HC) had noted that the genuineness of the trust activities can only be evaluated over time, and the initial phase should not be a barrier to registration. Therefore, in the given facts of the case and in the interest of justice, we set- aside the order of the ld. CIT(E) and restore back the matter to his file for passing a fresh order after giving reasonable opportunity to the assessee to submit necessary evidences in support of its claim for grant of regular registration u/s 12AB of the Act. 8. In the result, the appeal of the assessee is allowed for statistical purposes. ITA No.113/Agr/2025 9. The Ld. CIT(E) in his order dated 31.12.2024, rejecting the application of the assessee seeking approval u/s 80G of the Act noted that in this case, the application of the assessee filed for registration u/s 12AB was rejected vide its order dated 23/31.12.2024. Considering the above facts, the Ld. CIT(E) held that he was unable to arrive at a satisfaction about the genuineness of charitable activity of the trust. Accordingly, he rejected the application filed in Form No.10AB for registration u/s 80G(5) of the Act. However, he noted that no adverse inference was drawn on provisional registration dated 23.01.2024 granted vide Unique Registration No.AAFTK5310AF20241 to the said trust. 9 ITA No.112 & 113/Agr/2025 9.1. Therefore, rejection of application dated 12.06.2024 seeking approval u/s 80G of the Act is consequential in nature in this case to the rejection of the application of the assessee for registration u/s 12AB of the Act. Since, we have decided in ITA No. 112/Agr/2025, to remand the matter back to the file of ld. CIT(E) for fresh adjudication for grant of regular registration u/s 12AB of the Act, we, therefore also, set-aside the order of the ld. CIT(E) dated 31.12.2024 rejecting the application of the assessee filed in Form No.10AB for registration u/s 80G(5) of the Act subject matter of appeal in ITA No.113/Agr/2025 to the file of the Ld. CIT(E) for fresh order after giving reasonably opportunity of being heard to the assessee. 10. Finally, both appeals of the assessee are allowed for statistical purpose. Order pronounced in the open court on 18th July, 2025. Sd/- Sd/- [SUNIL KUMAR SINGH] [BRAJESH KUMAR SINGH] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated 18.07.2025. f{x~{tÜ f{x~{tÜ f{x~{tÜ f{x~{tÜ Copy forwarded to: 1. Appellant 2. Respondent 3. PCIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi, "