ITAT Pune Holds That Failure to Obtain Prior Charity Commissioner Approval Is a Procedural Lapse, Not a Bar to Section 12A Registration

Background and Context

A charitable trust engaged in mental health care and rehabilitation activities found itself at the receiving end of a registration rejection when the Commissioner of Income Tax (Exemptions) ["CIT(E)"], Pune, declined both its application for registration under Section 12A and approval under Section 80G of the Income Tax Act, 1961. The Pune bench of the Income Tax Appellate Tribunal (ITAT), however, took a markedly different view and set aside the CIT(E)'s order, restoring the matter for fresh adjudication.

The case — Jagruti Public Charitable Trust Vs ITO (ITAT Pune) — arose from two appeals, ITA Nos. 1694 & 1695/PUN/2025, both directed against separate orders dated 20.06.2025 passed by the CIT(E), Pune.

Facts of the Case

Application Filed by the Trust

The assessee trust had submitted an application in Form No. 10AB on 18.12.2024, seeking registration under Section 12A(1)(ac)(vi)-ITEM(B) of the Income Tax Act, 1961. The nature of its activities primarily centred around mental health awareness programs and welfare initiatives for mentally challenged individuals.

Notices Issued by CIT(E)

Following the submission of the application, the CIT(E) served a notice through the ITBA portal on 28.01.2025, directing the assessee to upload certain clarificatory information by 12.02.2025. Upon reviewing the documents furnished in response, the CIT(E) identified various discrepancies and issued a subsequent show cause notice on 07.04.2025, seeking compliance by 15.04.2025.

The discrepancies flagged by the CIT(E) included:

  • Requirement for complete details of mental health awareness programs — dates, venues, expert credentials, and beneficiary identification methods
  • A specific demand for documentary proof of permission obtained under Section 36A of the Maharashtra Public Trust Act, 1950 from the Charity Commissioner in relation to loans taken by the trust
  • Comprehensive details of donations received, including donor names, addresses, PAN numbers, amounts, dates, modes of payment, and receipt numbers
  • Clarification on the claim of deduction under Section 11 of the Act, given that Section 12A(1)(ac)(vi)(B) was stated to be inapplicable if exemption under Section 11 had already been claimed; the trust was also asked to furnish ITRs for the relevant financial years
  • Details of free or concessional services rendered to patients from economically weaker sections, along with applicable State Government norms for charitable hospitals

Response Filed by the Assessee

The assessee trust filed its reply to the show cause notice on 21.04.2025. With respect to the query on deduction under Section 11, the trust clarified that the exemption had been claimed in the ITR during the period when it was provisionally registered. However, this explanation was not accepted by the CIT(E).

Regarding the loan taken without prior Charity Commissioner approval, the trust acknowledged the lapse but explained that:

  • The loan was borrowed from the trustees to meet day-to-day operational requirements
  • Release of government funding had been delayed, necessitating the borrowing
  • The entire loan amount was exclusively applied toward charitable objects, specifically the care, rehabilitation, and welfare of mental health patients
  • No part of the funds was used for any non-charitable or personal purpose
  • The failure to obtain prior approval was owing to unawareness of the procedural requirement and was entirely unintentional