Sec. 12A Registration Cannot Be Denied On Unsubstantiated Allegations Of Capitation Fee Or Fund Diversion: ITAT Pune

by

In a significant ruling, the Pune Bench of the Income Tax Appellate Tribunal (ITAT) held that registration under section 12A of the Income-tax Act cannot be denied on the basis of vague and unsubstantiated allegations of capitation fee collection or diversion of funds. The Tribunal observed that where no adverse finding is recorded on the charitable nature of the objects or the genuineness of activities, rejection of registration exceeds the limited scope of enquiry prescribed under section 12AA and is legally unsustainable.

Citation:
26 Dec 2025 | [2025] 181 taxmann.com 331 (Pune – Trib.) | Income Tax
Decision Date: 01 December 2025

Facts of the Case

  • The assessee trust applied for registration under section 12A(1)(a) of the Income-tax Act.
  • The matter was earlier remanded by the ITAT with a direction to the Commissioner to examine the application strictly within the scope of enquiry prescribed under section 12AA(1).
  • On remand, the Principal Commissioner again rejected the registration, alleging:
    • Collection of capitation fees, and
    • Diversion of funds.
  • However, these allegations were vague, general, and unsupported by any concrete evidence.
  • Importantly, no adverse finding was recorded regarding:
    • The charitable nature of the objects, or
    • The genuineness of activities of the trust.

Issue

Whether registration under section 12A can be denied on the basis of unsubstantiated allegations of capitation fee collection and fund diversion, without any adverse finding on the trust’s charitable objects or genuineness of activities.

Held

The ITAT, Pune Bench held that:

  • The scope of enquiry at the stage of granting registration under section 12AA is limited only to:
    1. Charitable nature of the objects, and
    2. Genuineness of activities.
  • The Principal Commissioner exceeded jurisdiction by relying on unsupported and vague allegations.
  • In the absence of any concrete evidence or specific adverse findings, denial of registration was unsustainable in law.

Decision

  • Rejection of registration under section 12A was set aside.
  • The assessee trust was directed to be granted registration under section 12A.

Ratio / Key Takeaway

  • Registration under section 12A cannot be denied on mere suspicion or unproven allegations of capitation fee or fund diversion.
  • Unless the authority records a clear adverse finding on charitable objects or genuineness of activities, rejection of registration is invalid.

  • The Commissioner must strictly adhere to the limited scope of enquiry under section 12AA(1).

Please share

Leave a comment