Mumbai ITAT Rules: Section 115BBE Cannot Be Invoked on Additions Arising from Denial of Section 11 Exemption

Case Overview

Case: Shri Saibaba Charitable Trust Vs ITO Exemptions (ITAT Mumbai)
Assessment Year: 2019-20
Order Date: 11/06/2026

The Mumbai Bench of the Income Tax Appellate Tribunal delivered a significant ruling clarifying the limited and specific scope of Section 115BBE of the Income Tax Act, 1961. The Tribunal categorically held that this provision cannot be mechanically applied to every addition made during assessment proceedings — it operates exclusively where income has been assessed under Sections 68 to 69D. Where an addition arises from denial of exemption under Section 11 due to absence of registration under Section 12A/12AA, the special tax rate under Section 115BBE has no application whatsoever.

Background and Facts of the Case

The assessee before the Tribunal was a charitable trust carrying out charitable and educational activities. For Assessment Year 2019-20, the trust filed its return of income on 31/10/2019 declaring Nil income, having claimed exemption under Sections 11 and 12 of the Income Tax Act, 1961. The return was initially processed under Section 143(1) and was subsequently selected for scrutiny under CASS, primarily on the ground that registration or approval under the relevant provisions had not been granted or had been cancelled.

Assessment Proceedings

During the course of scrutiny, notices under Sections 143(2) and 142(1) were issued, and the assessee furnished the required details and explanations. Upon examination, the Assessing Officer observed that the assessee had claimed exemption under Section 11 of the Act. The Assessing Officer also noted that the assessee's application for registration under Section 12AA had been rejected by the ITO (Exemption) vide order dated 20/09/2020.

In response, the assessee submitted that:

  • It was duly registered under the Bombay Public Trust Act, 1950
  • It had applied for registration under Section 12AA on 28/12/2019
  • The application was rejected on account of non-submission of certain required details
  • The process of obtaining registration was still underway

The Assessing Officer's Action

The Assessing Officer rejected the assessee's explanation. Since the Section 12AA registration application stood rejected, the Assessing Officer held that the provisions of Section 11 were not applicable to the assessee. Consequently:

  • A sum of ₹49,321/- representing donation/expenditure incurred towards charitable purposes was disallowed
  • This amount was treated as income and added to the total income of the assessee
  • The assessment was completed under Section 143(3) determining the total income at ₹50,388/- as against Nil income returned
  • The Assessing Officer proceeded to apply the provisions of Section 115BBE on the aforesaid addition, thereby subjecting it to a special rate of tax

Proceedings Before CIT(A)

The assessee challenged the assessment order before the CIT(A)/NFAC, Delhi. The Authorized Representative submitted before the CIT(A) that: