ITAT Delhi Rules CIT(E) Overstepped Jurisdiction by Rejecting Section 12AB Registration on Donation Source Grounds

Background and Overview

The Delhi Bench of the Income Tax Appellate Tribunal delivered a significant ruling in the matter of Shree Vishnu Bhagwan Mandir Trust Vs ITO, clarifying the precise boundaries within which the Commissioner of Income Tax (Exemptions) [CIT(E)] must operate while adjudicating registration applications filed under Section 12AB of the Income Tax Act, 1961. The Tribunal firmly established that the CIT(E) does not possess unlimited inquisitorial authority at the registration stage and cannot travel beyond the statutorily defined scope of inquiry to reject an application merely because of doubts surrounding the origin of donations or cash deposits.

The trust in question manages and operates a historically significant temple situated in Hansi Town, Haryana. It had duly submitted its application for registration in Form 10AB under Section 12(1)(ac)(vi) — Item (B) of the Income Tax Act, 1961. Despite having placed relevant documents on record, the application met with rejection at the hands of the CIT(E), prompting the assessee to approach the Tribunal by way of an appeal.

Facts of the Case

The assessee, Shree Vishnu Bhagwan Mandir Trust, filed its registration application before the CIT(E) in the prescribed format. During the course of proceedings, the CIT(E) issued notices to the trust seeking information related to its financial transactions. According to the assessee's representative, only three notices were actually served upon the trust, though the rejection order repeatedly referred to multiple dates of notice — suggesting an inconsistency in procedural documentation.

The assessee maintained that it had duly responded to the notices issued, submitting compliances accordingly. The CIT(E), however, was not satisfied with the information furnished and proceeded to reject the application on the following grounds:

  • The assessee had failed to furnish requisite information concerning its financial transactions.
  • In the absence of details relating to sources of cash deposits, it was not possible to verify the nature of the trust's objects.
  • The genuineness of activities could not be established without complete financial disclosure.

Aggrieved by this outcome, the trust appealed before the ITAT Delhi, contending that the rejection was neither legally sound nor procedurally fair.

Grounds of Appeal Raised by the Assessee

Before the Tribunal, the assessee raised the following substantive grounds:

  1. The CIT(E) erred in rejecting the application of the appellant trust — which runs a historical temple in Hansi Town, Haryana — filed in Form 10AB under Section 12(1)(ac)(vi) Item (B) of the Income Tax Act, treating the same as deficient without providing a reasonable opportunity to make good the alleged deficiency.

  2. The appellant reserved the right to add, delete, modify, or amend the above grounds with the permission of the Hon'ble Appellate Authority.

Arguments Advanced by the Assessee

The Authorized Representative (AR) of the assessee put forth the following contentions before the ITAT: