ITAT Chandigarh: Rejection of Form 10AB Application Does Not Automatically Invalidate Existing Section 12AB Registration

In a significant judicial pronouncement, the Income Tax Appellate Tribunal (ITAT), Chandigarh Bench, has clarified the distinct legal boundaries between the rejection of a new registration application and the cancellation of an existing charitable registration under the Income-tax Act, 1961. The ruling in the case of Balaji Educational & Welfare Trust Vs CIT establishes that while the revenue authorities possess the power to reject a fresh application for failing to prove the genuineness of activities, such a rejection cannot serve as a blanket mechanism to automatically supersede or cancel an already valid registration without following the strict statutory protocols.

This comprehensive summary delves into the factual background, the arguments presented by both the assessee and the Revenue, and the detailed legal reasoning adopted by the Tribunal in its order dated September 30, 2026.

Factual Matrix of the Dispute

The assessee, Shree Balaji Educational & Welfare Trust, was formally established on September 11, 2011. The foundational charter of the trust outlined multiple philanthropic objectives, encompassing educational advancement, medical relief, poverty alleviation, and other initiatives of general public utility.

To maintain its tax-exempt status under the evolving statutory framework, the assessee submitted an application in Form 10AB on September 29, 2025. This application was filed under Section 12A(1)(ac)(ii) of the Income-tax Act, 1961, seeking formal registration under Section 12AB.

During the scrutiny of this application, the Commissioner of Income-tax (Exemptions) [CIT(E)] observed that the submission lacked a comprehensive activity report. Consequently, the competent authority issued a notice directing the assessee to provide documentary evidence substantiating its ongoing charitable endeavors.

The Assessee's Explanation for Inactivity

In its response, the assessee acknowledged that its primary charitable activity—running a primary school—was not currently operational. The trust attributed this suspension entirely to the unprecedented disruptions caused by the COVID-19 pandemic. The assessee maintained that the closure was a temporary measure dictated by circumstances beyond its control and expressed a clear intent to resuscitate the educational institution in the future.