Income Tax Appellate Tribunal - Delhi
Pista Devi Education Society,Gurgoan vs Cit Exemptions, Chandigarh on 20 April, 2026
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH 'A' : NEW DELHI)
BEFORE SHRI MAHAVIR SINGH, HON'BLE VICE PRESIDENT
AND
SMT. RENU JAUHRI, HON'BLE ACCOUNTANT MEMBER
ITA No. 6250/Del/2025
Asstt. Year : 2025-26
PISTA DEVI EDUCATION SOCIETY, VS. CIT (EXEMPTIONS)
A-603, BHAWANI APARTMENTS, CHANDIGARH
PLOT NO. 91, SECTOR-54, GURGAON ROOM NO. 1, 5TH FLOOR
HARYANA C.R. BUILDING,
(PAN: AAFAP1079G) HIMALAYA MARG,
SECTOR 17E,
CHANDIGARH
(Appellant) (Respondent)
Appellant by : Sh. R.S. Punia, CA & Sh. Pawan Chhikara, CA
Respondent by : Sh. Jitender Singh, CIT(DR)
Date of Hearing 20.01.2026
Date of Pronouncement 20.04.2026
ORDER
PER MAHAVIR SINGH, VP:
This appeal by the assessee is arising from the order of the Ld. Commissioner of Income Tax (Exemptions), Chandigarh (hereinafter referred 'CIT') rejecting the application for registration of trust u/s. 12AB(1)(b)(ii) of the Income Tax Act, 1961 (hereinafter referred "Act") vide his order dated 06.08.2025.
2. The brief facts of the case are that the assessee trust filed an application for registration u/s. 12(1)(ac)(vi) of the Act on 24.02.2025. The CIT required the assessee to file the documents complying the objects and genuineness of the trust. The CIT wanted to verify the activities of the trust, whether the same are in accordance with objects and genuineness of its activities. Accordingly, the CIT issued show cause notice on 13.03.2025, which is a part of CIT's order at pages no. 3 to 6 of Assessee Paper Book (hereinafter 'APB'). The CIT on perusal of bank statement of the assessee noted that there are number of high value debit transactions in favour of the Members of the Society i.e. Sh. Anil Tayal, President and Smt. Shewta Tayal, Vic-President and Savita Tayal. He also noticed from the bank statement that there are several cash deposits and withdrawals in assessee' bank account. He required the assessee to explain the debit transactions and cash deposits/withdrawals and how these transactions are related to charitable activities carried out by the society which are in agreement with the objects of the society along-with supporting documents. The assessee filed complete details which are reproduced in his order at page no. 8 & 9. The CIT considered the reply of the assessee, but noted that neither of the activities establish the charitable nature of the trust in regard to these transactions. The CIT reproduced the bank statement and the transactions entered into with the assessee society by Sh. Anil Tayal, Smt. Shewta Tayal and Smt. Savita Tayal. The CIT noted that the transactions entered by Sh. Anil Tayal in the books of the assessee's trust is the first concern. According to him, the assessee trust being a charitable trust falling in education limb, but still the frequency of the transaction give rise to the conclusion that the assessee is a business entity. The CIT also examined the opening balance of Rs. 64,89,869/- in
2|Page favour of Sh. Anil Tayal and according to him the payment of Rs. 92,50,000/- during the financial year 2024-25 and this clearly exceeds the recorded liability. According to CIT no explanation or supporting evidence was provided by assessee to justify this excess payment. Even the ledger account of Shweta Tayal and Savita Tayal remains unsubstantiated by any documentary evidences establishing the nexus between the genuine need of the trust and the loan raised. 2.1 The Ld. CIT also noted from the ledger of M/s Gargi Farms regarding rent payment and noted that the applicant relied on the arms' length price of transactions and mode of payment through banking channel to establish the genuineness, but no other documentary evidence was provided. According to CIT the perusal of ledger accounts of M/s Gargi Farms shows that the rent payment is inconsistent as the rent decreased from Rs. 50,000/- to Rs. 20,000/- from financial year 2022-23 to financial year 2023-24 and in immediate next year the rent was increased from Rs, 20,000/- to Rs. 1,00,000/- for which no explanation was offered for variance rent. Accordingly, he reached to a conclusion that the activities performed by the assessee trust are neither genuine nor in accordance with the objects of the trust. Therefore, the Application Form 10AB filed u/s. 12(1)(ac)(iii) of the Act was rejected. Aggrieved, assessee is in appeal before the Tribunal.
3. We have heard the rival contentions and gone through the facts and circumstances of the case. Before us, assessee filed the paper book consisting of pages 1-108 wherein, completed ledger account of Anil Tayal, Shweta Tayal,
3|Page Savita Tayal and M/s Gargi Farms were filed from 01.04.2022 to 31.03.2025 i.e. for financial years 2002-23, 2023-24 and 2024-25. Even the copy of lease deed dated 06.01.2021, is filed. Ld. Counsel for the assessee, Sh. R.S.Punia, CA first of all drew our attention towards the Registration Certificate of assessee's trust, registered with the Department of Industries & Commerce, Haryana. The assessee also filed copy of Constitution of assessee-society which is enclosed at assessee's paper book at pages 55-80. The assessee also filed the copy of affiliation of the assessee society being an educational society with the Director of Elementary Education, Haryana, Panchkula dated 12.11.2021 which is enclosed at assessee's paper book pages 81-82. Assessee also filed another affiliation with Directorate of School Education dated 28.8.2025 which is enclosed at assessee's paper book pages 83-85.
4. Ld. Counsel for the assessee pointed out from the order of the CIT that only charge leveled by the CIT is that there are loan transactions with Anil Tayal and assessee-society. It has taken unsecured loan from Anil Tayal to meet the infrastructure and academic needs etc. etc. and there are frequency of transactions conducted by the assessee-society with Sh. Anil Tayal. He pointed out from the ledger account which shows an opening balance of Rs. 64,89,869/- as on 01.04.2024 and had paid Rs. 92,50,000/- during the financial year 2024-25 and precisely pointed out that Rs. 71,00,000/- and Rs. 20,00,000/- on 25.04.2024 and Rs. 1,50,000/- on 20.05.2024. According to him this clearly exceeds the recorded
4|Page liability. But no explanation or supporting documents were provided by the assessee-society to justify this excess payment. Ld. Counsel for the assessee explained that CIT has misunderstood the entire transactions and he stated that the ledger account of Sh. Anil Tayal which is enclosed at Assessee's Paper Book Pages 6 & 7 clearly indicates the receipts and payments and at last there is finally the account is settled and there is no excess payment to Sh. Anil Tayal. It was explained by the assessee that as and when amount is required by the assessee company, he has taken loan from Anil Tayal, Shweta Tayal and Savita Tayal as well as from Gargi Farms to ensure timely payments for creation of infrastructure, academic materials and staff salary to be paid. He made a categorical statement that these loans have been taken without any interest and are to support the charitable objects of the assessee-society.
5. Ld. Counsel for the assessee further pointed out that the objection of the CIT as regards to rent paid to Gargi Farms, he explained that there is variance in rent payment as the assessee-society pays rent to Gargi Farms for its operation on premises where educational activities are conducted. He stated that the rent amount is less than the market value and even less than the arm's length price. On the above counts only, CIT held that the activities performed are neither genuine nor in accordance with objects of the trust, whereas Ld. Counsel for the assessee argued that simplicitor loan taken by the assessee-society from these persons namely Anil Tayal, ShwetaT ayal and Savita Tayal, that also interest free, does not
5|Page in any way effect the charitable activities of the assessee-society rather it has supported the cause of assessee in carrying out the charitable activities i.e. education. In view of the above, Ld. Counsel for the assessee submitted that there is no charge that the assessee-society is not carrying out the activities as per the objects of the assessee-society/trust or there is any violation of the terms and conditions of the assessee-society for the purpose of which the assessee-society was created. Accordingly, he urged the Bench to allow the grant of registration and CIT be directed.
6. On the other hand, Ld. CIT(DR) relied on the order of the CIT and argued that the CIT has rightly held that the assessee is being used for the benefit of its own members namely, Mr. Anil Tayal, Smt. Shweta Tayal and Smt. Savita Tayal. In view of the frequency of transactions conducted by its members with the society, he argued that the CIT has rightly rejected the registration for the reason that the assessee has not provided any documentary evidence to establish the nexus between the unsecured loans raised and furtherance of charitable activities in the nature of infrastructure or academic needs per se. He also argued that the assessee-society has not claimed any application of income in the income tax return since last two years. He also argued that even the rent paid to Gargi Farms by the assessee-society for its operation is at variance in price, which is not substantiated or supported by any fair market value or rent valuation. In terms of above, Ld. CIT(DR) stated that
6|Page the CIT has rightly rejected the registration application and he urged the Bench to confirm the same.
7. We noted from the facts of the case that admittedly assessee-society is running a school in the name of Pista Devi Education Society, situated at A-603, Bhawani Apartments, Plot No. 91, Sector-54, Gurgaon, Haryana. The Assessee- society is providing education through running of this school which falls under the category of "Charitable Purpose" as defined u/s 2(15) of the Act. Admittedly, assessee-society is registered with the District Registrar of Firms and Societies, Gurugram, Haryana vide Registration No. HR018201703050 dated 09.07.2017 under the Haryana Registration and Regulation of Societies Act, 2012. Copy of the registration certificate is attached in the Paper Book as Annexure -1.Alongwith this, assessee also filed the copies of Memorandum of Association and Bye Laws of the society. The assessee also filed copies of Annual Accounts for the last 3 years including copy of ledger account, major receipts and expenditure account and copies of income tax returns filed alongwith Computation and Audit Report in Form 10B/10BB. The assessee also filed corroboration of the expenditure shown in the income and expenditure account with the date-wise details of charitable activities and also explained or highlighted the payments thereof in bank account statement and cash book. The assessee also filed registration certificate under Foreign Contribution (Regulation) Act, 2010. The only charge was that the assessee is entering into large number of transactions in the shape of taking loans from Shri
7|Page Anil Tayal, Smt. Shweta Tayal and Smt. Savita Tayal. The first allegation was that the assessee has not provided any documentary evidence to establish the nexus between the loan raised and furtherance of charitable activity in the nature of infrastructure or academics needs per se. The second allegation is of frequency of transaction and assessee society has not proved any charitable activity with documentary evidence. The third allegation is excess payment to Shri Anil Tayal for 44 days so probability of benefit in terms of section 13(3) of the Act to the management which establishes suspicion. The 4th allegation is that the assessee could not prove the nexus between the loan raised and the genuine income of the assessee-society which remain unsubstantiated for want of documentary evidences. The next allegation is that there is variance in the rent paid by the assessee to Gargi Farms, another related firm. We noted from this that there may be suspicion to benefit taken by the members of the society in excess payment for 44 days. There is provision in making disallowance while framing assessment u/s. 143(3) by the AO and this cannot be the reason that the assessee is not engaged in the charitable activity or is violating the terms and conditions of the trust. There is no case made out by the CIT that the income derived by the assessee has been applied other than for the objects of the trust / institution or the institution income from profits and gains of business which is not incidental to the attainment of its objects of the trust or institution has not applied any part of its income which does not ensures for the benefit of the public. It is also not the case that trust/society is not genuine or is
8|Page not being carried out its activities in accordance with law or any of the conditions subject to which society registered. It is also not the case that the institution has not complied with the requirement of any other law or application referred to any clause (ac) of sub section (1) of Section 12A of the Act, contain false and incorrect information.
8. In view of the above, now we will discuss the applicability of provisions of section 13(1) and 12AB(4) of the Income Tax Act, 1961 for the refusal of Registration u/s. 12AB of the Act and the scheme of the Act, how the registration application is to be considered and what the scheme of the Act. A trust had filed an application seeking registration u/s 12AB of the Act within the prescribed time and in the prescribed manner. During the course of proceedings, the CIT has raise an observation that the applicant trust has allegedly made certain payments to its trustees / specified persons and, on that basis, has proposed to invoke the provisions of section 13 of the Act, alleging that the funds of the trust are being utilised for the benefit of persons referred to in section 13(3) of the Act (hereinafter referred "interested persons"), and accordingly proposing denial of registration u/s 12AB of the Act.
9. We have gone through the provisions of the Act and notes that Section 13 has no application at the stage of grant of registration u/s 12 AB of the Act. The provisions of section 13 of the Act are intended solely to regulate and restrict the availability of exemption u/s 11 and 12 of the Act at the time of computation of
9|Page total income of a charitable trust or institution. Section 13 of the Act merely provides for circumstances under which exemption otherwise allowable u/s 11 and 12 of the Act shall not be granted to the extent income is applied or used for the benefit of interested persons. The said provision, therefore, operates only after registration is granted and only at the assessment stage, when exemption u/s 11 and 12 of the Act is claimed is claimed. It is pertinent to note that section 13 of the Act does not, either expressly or by implication, empower the rejection or cancellation of registration u/s 12AB of the Act. The scope of examination at the time of grant of registration u/s 12AB of the Act is confined to the objects of the trust and the genuineness of its activities, and not to the application or alleged misapplication of income, which is a matter to be examined by the Assessing Officer during assessment proceedings. In order to place the legal position on record, the relevant provisions of section 13(l)(c) are respectfully reproduced hereunder:
"13. (1) Nothing contained in section 11 or section 12 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof--
(c) in the case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof--
(i) if such trust or institution has been created or established after the commencement of this Act and under the terms of the trust or the rules governing the institution, any part of such income ensures, or
(ii) if any part of such income or any property of the trust or the institution (whenever created or established) is during the previous year 10 | P a g e used or applied, directly or indirectly for the benefit of any person referred to in subsection (3), such part of income as referred to in sub-clauses (i) and (ii):"
A plain and harmonious reading of the above provision clearly demonstrates that section 13 of the Act comes into operation only when exemption u/s 11 or 12 of the Act is claimed and seeks to deny such exemption to the extent of violation, if any. The provision nowhere contemplates or authorises denial of registration u/s 12AB of the Act on this ground. Therefore, even assuming that there is any alleged violation of section 13 of the Act, the same can at best result in denial of exemption u/s 11 and 12 of the Act for the relevant assessment year and cannot be a ground for refusal of registration u/s 12AB of the Act.
10. According to our understanding. Where the proceedings relate purely to the grant of registration u/s 12AB of the Act and not to the adjudication of any claim of exemption u/s 11 of the Act, the reliance placed on section 13 of the Act for the purpose of rejecting the registration application is misplaced and beyond the scope of section 12AB of the Act. Scope of enquiry u/s 12AB of the Act is limited and well-defined. The provisions of section 12AB of the Act are reproduced hereunder for ready reference:
"12AB. (1) The Principal Commissioner or Commissioner, on receipt of an application made under clause (ac) of sub-section (1) of section 12A, shall,--
(a)......
(b) where the application is made under sub-clause (ii) or sub-clause (Hi) or sub-clause (iv) or sub-clause (v) 94[or item (B) of sub-clause (vi)] of the said clause,--
(i) call for such documents or information from the trust or institution or
11 | P a g e make such inquiries as he thinks necessary in order to satisfy himself about--
(A) the genuineness of activities of the trust or institution; and (B) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects;"
From a plain reading of the above provision, it is clear that the scope of enquiry u/s 12AB of the Act is strictly confined to verifying:
• whether the objects of the trust are charitable in nature, and • whether the activities carried out are genuine and in furtherance of such objects.
Where an applicant trust has been carrying out charitable activities strictly in accordance with its stated objects and applicable laws and there is no finding or allegation that the objects of the trust are non charitable or that the activities are in genuine, fictitious, or a mere camouflage, no ground survives for denial of registration u/s 12AB of the Act.
11. At this stage, it is pertinent to discuss that the provisions of section 12AB(4) of the Act come into operation only in cases where registration or provisional registration has already been granted u/s 12AB of the Act and thereafter certain specified violations are noticed, warranting cancellation or withdrawal of such registration. The statutory scheme clearly envisages that action u/s 12AB(4) of the Act can be initiated only where the registration already stands granted and either:
• the CIT notices the occurrence of one or more specified violations during any previous year; or • a reference is received from the AO upon noticing such specified
12 | P a g e violations during assessment proceedings in terms of the second proviso to section 143(3) of the Act; or • the case is selected based on risk management strategy formulated by the Board.
In this context, the provisions of section 12AB(4) of the Act are reproduced hereunder:
"(4) Where registration or provisional registration of a trust or an institution has been granted under clause (a) or clause (b) or clause (c) of sub-section (1) or clause (b) of sub-section (1) of section 12AA, as the case may be, and subsequently,--
(a) the Principal Commissioner or Commissioner has noticed occurrence of one or more specified violations during any previous year; or
(b) the Principal Commissioner or Commissioner has received a reference from the Assessing Officer under the second proviso to sub-section (3) of section 143 for any previous year; or
(c) such case has been selected in accordance with the risk management strategy, formulated by the Board from time to time, for any previous year, the Principal Commissioner or Commissioner shall,--
(i) call for such documents or information from the trust or institution, or make such inquiry as he thinks necessary in order to satisfy himself about the occurrence or otherwise of any specified violation;
(ii) pass an order in writing, cancelling the registration of such trust or institution, after affording a reasonable opportunity of being heard, for such previous year and all
13 | P a g e subsequent previous years, if he is satisfied that one or more specified violations have taken place;
(iii) pass an order in writing, refusing to cancel the registration of such trust or institution, if he is not satisfied about the occurrence of one or more specified violations;
(iv) forward a copy of the order under clause (ii) or clause (iii), as the case may be, to the Assessing Officer and such trust or institution."
ii. Further, the term "specified violation" has been exhaustively defined in Explanation 1 to section 12AB(4). For completeness and clarity, the same is reiterated hereunder:
"Explanation.--For the purposes of this sub-section, the following shall mean "specified, violation",--
(a) where any income derived from property held under trust, wholly or in part for charitable or religious purposes, has been applied, other than for the objects of the trust or institution; or
(b) the trust or institution has income from profits and gains of business which is not incidental to the attainment of its objectives or separate books of account are not maintained by such trust or institution in respect of the business which is incidental to the attainment of its objectives; or
(c) the trust or institution has applied any part of its income from the property held under a trust for private religious purposes, which does not ensure for the benefit of the public; or
(d) the trust or institution established for charitable purpose created or established after the commencement of this Act, has applied any part of its income for the benefit of any particular religious
14 | P a g e community or caste; or
(e) any activity being carried out by the trust or institution,--
(i) is not genuine; or
(ii) is not being carried out in accordance with all or any of the conditions subject to which it was registered; or
(f) the trust or institution has not complied with the requirement of any other law, as referred to in item (B) of sub-clause (i) of clause
(b) of sub-section (1), and the order, direction or decree, by whatever name called, holding that such non-compliance has occurred, has either not been disputed or has attained finality 98[; or]
(g) the application referred to in clause (ac) of sub-section (1) of section 12A contains false or incorrect information.]
12. A conjoint reading of s. 12AB(4) of the Act along with the above Explanation clearly establishes that the legislature has consciously empowered the CIT to cancel or withdraw registration only upon satisfaction that one or more specified violations have occurred, such as non-genuine activities, deviation from objects, non- compliance with applicable laws, or furnishing of false or incorrect information. In the present scenario, where, the objects of the applicant trust are charitable in nature;
• the activities carried out are genuine and in furtherance of such objects; • there is no finding or allegation that the applicant has violated any applicable law which has attained finality; and the application for registration does not contain any false or incorrect information, none of the conditions constituting "specified violation" u/s 12AB(4) of the Act are attracted.
13. Therefore, the provisions of s. 12AB of the Act read with Explanation thereto, reinforce the settled position that at the stage of grant of registration, the focus of 15 | P a g e examination is limited to the objects of the trust, genuineness of activities, and compliance with applicable laws. Allegations relating to section 13 of the Act or application of income do not fall within the ambit of section 12AB(4) of the Act , particularly when registration itself is yet to be granted. Furthermore, as per s. 12AB(4)(b) of the Act, the matter has to be examined by the AO at the time of assessment proceedings while computing the income of the trust, and not at the time of granting registration u/s 12AB of the Act as the registration u/s 12AB of the Act is merely a recognition of the charitable status of the Trust. In support of the aforesaid submissions, various courts have consistently held that the application of provisions u/s 13 of the Act would only arise at the stage of assessment when determining exemption under s. 11 of the Act, depending on the actual income and activities of the Trust.
14. We may also gain fully refer here the first proviso of section 143(3) of the Act, which reads as under:-
"Provided further that where the Assessing Officer is satisfied that any fund or institution referred to in sub-clause (iv) or trust or institution referred to in sub-clause (v) or any university or other educational institution referred to in sub-clause (vi) or any hospital or other medical institution referred to in sub-clause (via), of clause (23C) of section 10, or any trust or institution referred to in section 11, has committed any specified violation as defined in Explanation 2 to the fifteenth proviso to clause (23C) of section 10 or the Explanation to sub-section (4) of section 12AB, as the case may be, he shall -
(a) send a reference to the Principal Commissioner or Commissioner to withdraw the approval or registration, as the case may be; and 16 | P a g e
(b) no order making an assessment of the total income or loss of such fund or institution or trust or any university or other educational institution or any hospital or other medical institution shall be made by him without giving effect to the order passed by the Principal Commissioner or Commissioner under clause (ii) or clause (iii) of the fifteenth proviso to clause (23C) of section 10 or clause (ii) or clause (iii) of sub-section (4) of section 12AB:"
15. We have also perused the applicability of provisions of section 13(1) and 12AB(4) of the Act as reproduced above. It is an admitted fact that the assessee- society filed an application seeking registration u/s 12AB of the Act and CIT has made an observation that the applicant trust has allegedly made certain payments to its trustees/specified persons and, on that basis, has proposed to invoke the provisions of section 13 of the Act, alleging that the funds of the trust are being utilised for the benefit of persons referred to in s. 13(3) of the Act and accordingly denied the registration u/s 12AB of the Act. It is noted that Section 13 of the Act has no application at the stage of grant of registration u/s 12 AB of the Act. The provisions of section 13 of the Act are intended solely to regulate and restrict the availability of exemption u/s 11 and 12 of the Act at the time of computation of total income of a charitable trust or institution. Section 13 of the Act merely provides for circumstances under which exemption otherwise allowable u/s 11 and 12 of the Act shall not be granted to the extent income is applied or used for the benefit of interested persons. The said provision, therefore, operates only after 17 | P a g e registration is granted and only at the assessment stage, when exemption u/s 11 and 12 of the Act is claimed. Also, Section 13 of the Act does not, either expressly or by implication, empower the rejection or cancellation of registration u/s 12AB of the Act. The scope of examination at the time of grant of registration u/s 12AB of the Act is confined to the objects of the trust and the genuineness of its activities, and not to the application or alleged misapplication of income, which is a matter to be examined by the Assessing Officer during assessment proceedings. On plain reading of section 13(1)© of the Act as reproduced above, clearly demonstrates that section 13 of the Act comes into operation only when exemption u/s 11 or 12 of the Act is claimed and seeks to deny such exemption to the extent of violation, if any. The provision nowhere contemplates or authorises denial of registration u/s 12AB of the Act on this ground. Therefore, even assuming that there is any alleged violation of section 13 of the Act, the same can at best result in denial of exemption u/s 11 and 12 of the Act for the relevant assessment year and cannot be a ground for refusal of registration u/s 12AB of the Act. Where the proceedings relate purely to the grant of registration u/s 12AB of the Act and not to the adjudication of any claim of exemption u/s 11 of the Act, the reliance placed on section 13 of the Act for the purpose of rejecting the registration application is misplaced and beyond the scope of section 12AB of the Act. It is also noted that the scope of enquiry u/s. 12AB of the Act is limited and the scope of enquiry u/s 12AB of the Act is strictly confined to verifying:
18 | P a g e • whether the objects of the trust are charitable in nature, and •whether the activities carried out are genuine and in furtherance of such objects.
16. However, the applicant trust has been carrying out charitable activities strictly in accordance with its stated objects and applicable laws and there is no finding or allegation that the objects of the trust are non- charitable or that the activities are in-genuine, fictitious, or a mere camouflage, no ground survives for denial of registration u/s 12AB of the Act.
17. It is also observed that no specific violation u/s 12AB(4) of the Act has been committed by the applicant trust, because the statutory scheme clearly envisages that action u/s 12AB(4) of the Act can be initiated only where the registration already stands granted and either (i) the CIT notices the occurrence of one or more specified violations during any previous year; or (ii) a reference is received from the AO upon noticing such specified violations during assessment proceedings in terms of the second proviso to section 143(3); or (iii) the case is selected based on risk management strategy formulated by the Board. Hence, it is clearly establishes that the legislature has consciously empowered the CIT to cancel or withdraw registration only upon satisfaction that one or more specified violations have occurred, such as non-genuine activities, deviation from objects, non- compliance with applicable laws, or furnishing of false or incorrect information. Whereas in the instant case the objects of the applicant trust are charitable in nature; the activities carried out are genuine and in furtherance of such objects; there is no finding or 19 | P a g e allegation that the applicant has violated any applicable law which has attained finality; and the application for registration does not contain any false or incorrect information, none of the conditions constituting "specified violation" u/s 12AB(4) of the Act are attracted. Therefore, the provisions of s. 12AB, read with Explanation thereto, reinforce the settled position that at the stage of grant of registration, the focus of examination is limited to the objects of the trust, genuineness of activities, and compliance with applicable laws. Allegations relating to s. 13 of the Act or application of income do not fall within the ambit of s. 12AB(4) of the Act, particularly when registration itself is yet to be granted. Furthermore, as per s.
12AB(4)(b) of the Act, the matter has to be examined by the AO at the time of assessment proceedings while computing the income of the trust, and not at the time of granting registration u/s 12AB of the Act as the registration u/s 12AB of the Act is merely a recognition of the charitable status of the Trust. It is also settled law that the application of provisions u/s. 13 of the Act would only arise at the stage of assessment when determining exemption u/s. 11 of the Act, depending upon the actual income and activities of the trust. Our aforesaid view is fortified by the decision of the ITAT, Ahemedabad Tribunal in the case of Shree Dandhavya Chhasath Prajapati Samaj vs. CIT(E) [ITA No. 505/Ahd/2022] wherein it has been observed as under:-
"Charitable trust--Registration under s. 12AA--Rejection-- CIT(Exemption) rejected the application for registration under s. 12AB 20 | P a g e on the grounds that the Trust's objects benefit a particular community, thereby invoking s. 13(1) (b)-- Not correct--Sec. 13(l)(b) is applicable at the stage of assessment for determining exemption under s. 11, and not at the stage of granting registration under s. 12AB--Thus s. 13(l)(b) is not relevant at the stage of registration under s. 12AB, but rather comes into play at the time of assessment when determining exemption under s. 11--Assessee's Authorised Representative has categorically stated that all documents were uploaded online through the official portal as per the notices issued--
CIT(Exemption) has not pointed to any specific document that remained unfiled--In the absence of any specific deficiency in documentation being highlighted, one do not find merit in the Department's argument that the assessee failed to comply with the document submission requirement--As per objectives it is found that the trust is engaged in various educational, social, and economic activities that serve the public at large, not limited to the Chhasath Prajapati Community--These include scholarships, hostel facilities for students, social reform programs, and efforts to uplift the community economically--Therefore, the Trust's activities cannot be said to benefit only a particular religious or caste-based community--In view of the above findings and judicial precedents, that the CIT(Exemption) erred in rejecting the application for registration under s. 12AB--Accordingly, the order of the CIT(Exemption) is set aside, and the CIT(Exemption) is directed to grant registration to the assessee--Dawoodi Bohara Jamat (2014) 268 CTR (SC) 1 : (2014) 102 DTR (SC) 361 and Jamiatul Banaat Tankaria vs. CIT(Exemption) (2024) 205ITD 673 (Ahd) followed."
18. In the background of the aforesaid discussions and respectfully following the precedent, as aforesaid, it is abundantly clear that the provisions relating to grant of registration is strictly limited to the scope of s. 12AB of the Act. Therefore, the question of whether the payment made interested persons is unreasonable or excessive is a subject matter of verification by the AO during assessment proceedings. If the AO finds the payments unreasonable, he may disallow the exemption to that extent in the relevant assessment year, but this cannot be a ground 21 | P a g e to deny the registration of the trust itself, provided the objects are charitable and activities are genuine. Thus, in our considered view the CIT(Exemption) erred in rejecting the application for registration under s. 12AB of the Act. Accordingly, the order of the CIT(Exemption) is set aside, and the CIT(Exemption) is directed to grant registration u/s 12AB of the Act to the applicant-society, in accordance with law.
19. In the result, the appeal of the assessee is allowed.
Order pronounced in the Open Court on 20.04.2026.
Sd/- Sd/-
(RENU JAUHRI) (MAHAVIR SINGH)
ACCOUNTANT MEMBER VICE PRESIDENT
Date: 20.04.2026
SRBhatnaggar
Copy forwarded to: -
1. Appellant
2. Respondent
3. DIT
4. CIT (A)
5. DR, ITAT
Assistant Registrar, ITAT, Delhi Bench
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