The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that where a charitable institution withdraws its application for registration under Section 12AB of the Income Tax Act after extensive scrutiny by the tax authorities, the Commissioner of Income Tax (Exemptions) [CIT(E)] is not precluded from recording observations arising from the inquiry.
The bench of Sudhir Kumar (Judicial Member) and Ramit Kochar (Accountant Member) emphasized that any fresh application filed by the institution must be considered independently, fairly, and strictly in accordance with law.
The appeal arose from an order dated March 30, 2026, passed by the CIT(E), New Delhi, rejecting as withdrawn an application filed by Hamdard Laboratories India for registration under Section 12A(1)(ac)(ii) of the Income Tax Act. The institution challenged the order primarily on the ground that once it had withdrawn its application in Form 10AB, the Commissioner ought not to have made observations touching upon issues beyond the withdrawal itself.
Buy Now: INCOME TAX E-COMPILATION – JUNE 2026
The institution had filed an application in Form 10AB on September 30, 2025, seeking registration under Section 12A. During the statutory verification process, the CIT(E) undertook a detailed examination of the application and noticed several discrepancies concerning the properties claimed by the institution.
According to the Commissioner, there were contradictions regarding the inclusion and exclusion of various properties in the application, inconsistencies with the audited financial statements as of March 31, 2025, and conflicting claims involving another trust, Hamdard Foods India. The Commissioner also issued a notice under Section 133(6) to Hamdard Foods India to independently verify the factual position.
In response, Hamdard Foods India informed the Commissioner that several properties had already been transferred to it with effect from July 1, 2024, and that one property had been formally registered in its name while registration and mutation of the remaining properties were pending before the competent authorities. It also stated that the transfers had been recorded in the books of both trusts and reflected in their financial statements.
The Tribunal noted that Section 12AB(3)(ii) required the Commissioner to dispose of the registration application within six months from the end of the quarter in which it was filed. Since the application had been submitted on September 30, 2025, the statutory deadline for passing an order expired on March 31, 2026.
However, just days before this deadline, on March 25, 2026, the institution sought permission to withdraw its application. Accepting the request, the CIT(E) rejected the application as withdrawn but also recorded that the details furnished in Form 10AB did not match the audited accounts and referred to the family settlement governing the trust’s properties. The Commissioner granted liberty to file a fresh application after rectifying the discrepancies.
Following withdrawal of the original application, the institution submitted a fresh Form 10AB application on March 31, 2026.
Before the Tribunal, counsel for the institution initially sought expunging of the observations recorded by the Commissioner in the withdrawal order, arguing that such remarks could prejudice consideration of the fresh application. During the hearing, however, the institution confined its request to seeking a direction that the fresh application be decided after granting a fair opportunity of hearing and strictly on merits.
The Tribunal distinguished the present case from decisions where courts refrain from making observations while directing parties to pursue alternative statutory remedies. It observed that in the present matter, the institution had not approached a different forum but had withdrawn one application only to file another before the same authority.
The Bench remarked that permitting taxpayers to withdraw applications at an advanced stage of inquiry and then seek deletion of findings recorded by authorities could potentially result in misuse of legal process, particularly where detailed investigations had already been carried out by statutory authorities.
At the same time, the Tribunal reiterated that every taxpayer is entitled to a fair hearing. Referring to the Supreme Court’s landmark judgment in Maneka Gandhi v. Union of India, it observed that the right to a fair hearing forms an essential component of the procedure established by law.
The Bench further stated that statutory authorities are duty-bound to decide every application on its own merits and in accordance with law. If the institution apprehended that its fresh application would be prejudiced because of the observations contained in the earlier order, the law already provides adequate statutory and constitutional remedies should any actual prejudice arise.
Without expunging the observations made by the Commissioner in the withdrawal order, the ITAT disposed of the appeal, observing that the fresh registration application must receive a fair hearing and be adjudicated strictly on its merits in accordance with law. It also noted that any grievance arising from the eventual decision could be challenged through the remedies available under the statute or before the constitutional courts.
Membership Required to Access Case Details & Order Copy
To view the complete Case Details and Download Order Copy, you must have an active membership. Please subscribe to continue.
