M/s Vaidik Sewa Trust vs Income Tax Officer, Ward-2(3), Faridabad

PER MAHAVIR SINGH, VP:

These two appeals by the Assessee arise out of the orders of the Learned Commissioner of Income Tax (Exemptions), Chandigarh ['the CIT(E)'] (i) dated 24.03.2026, passed under section 12AB(4) of the Income Tax Act, 1961 ('the Act') cancelling the Assessee's registration granted earlier under section 12A(1)(ac)(iii) of the Act., and (ii) dated 01.09.2025, rejecting the Assessee's application for approval under section 80G(5) of the Act. Since both the appeals pertain to the same Assessee and involve interconnected issues, they were heard together and are being disposed of by this consolidated order.

The brief facts of the case are that the Assessee is a charitable trust constituted under a trust deed dated 16.05.2019 and is stated to be engaged in the activity of imparting free education to underprivileged children. The Assessee was granted provisional registration under section 12A(1)(ac)(iii) of the Act on 08.07.2024. The Assessee thereafter applied for approval under section 80G(5) of the Act, which came to be rejected by the CIT(E) vide order dated 01.09.2025. In the said order, the CIT(E) observed that the trust deed contained a wide range of objects, including relief to the poor, education, scholarships, hospitals, publications, peace and social reform, promotion of 'Vasudhaiva Kutumbakam' and Sanatan/related thought in respect of castes and religions, service to cows, establishment of gaushalas and other broadly framed social and religious purposes.

The CIT(E) held that the trust was, therefore, not shown to be engaged in a narrowly defined and verifiable educational activity alone, and that some of the objects were religious-cum-charitable in nature. The CIT(E) further recorded that a discreet field enquiry was got conducted by the Department through an Inspector, including enquiries with residents in the locality of the trust, and that such enquiries did not yield any information about the activities of the trust.

Proceeding from his findings in the section 80G proceedings, the CIT(E) initiated proceedings in respect of the cancellation of the registration of the Assessee. The CIT(E) recorded that the very initiation of the said proceedings stemmed from the findings arrived at during the section 80G examination, wherein it was concluded that the activities of the applicant were neither genuine nor in accordance with its objects. Holding that the Assessee had been unable to submit satisfactory evidence to dispel the doubts which arose during the section 80G proceedings, the CIT(E), vide order dated 24.03.2026, denied the benefit of registration to the Assessee. Aggrieved by both the orders, the Assessee is in appeal before us.

The Learned Counsel for the Assessee filed a paper book of 78 pages containing, inter alia, the trust deed, the financial statements of the Assessee, photographs of the activities, and bills and vouchers, to establish the genuineness of the activities of the trust. The Learned Counsel submitted that: (i) the initiation of proceedings against the registration under section 12AB of the Act, solely on the basis of unproven observations made during the section 80G proceedings, is not sustainable in law; (ii) the evidence in the form of bills, vouchers, financial statements and photographs was ignored in its entirety by the CIT(E) without pointing out any specific deficiency in any of those documents; and (iii) the Assessee was not provided any opportunity to controvert the observations of the Inspector who conducted the field enquiry, the report of which was neither shared with nor confronted to the Assessee.

The Learned CIT-DR, on the other hand, strongly relied on the orders of the CIT(E).

We have heard the submissions of both the sides and perused the material placed before us, including the paper book filed by the Assessee. At the outset, we find substantial force in the grievance of the Assessee founded on the breach of the principles of natural justice. The adverse inference drawn by the CIT(E) rests materially upon the report of a discreet field enquiry conducted by an Inspector, which was admittedly neither supplied to nor confronted to the Assessee, thereby denying the Assessee any opportunity to rebut it. It is well settled that material collected behind the back of an assessee cannot be used against it without confronting the assessee with such material and affording an opportunity to rebut the same. The reliance placed by the CIT(E) on the unconfronted Inspector's report is, therefore, impermissible.

We further observe that the Assessee had placed on record its trust deed, financial statements, bank statements, photographs of activities, and bills and vouchers evidencing the conduct of its charitable activities. The CIT(E) has brushed aside this entire body of evidence without recording any specific deficiency, defect or falsity in any of these documents; the reasoning employed is general and vague. Where documentary evidence of the activities is placed on record, a conclusion that the activities are not genuine must rest on a specific and reasoned examination of that evidence, and cannot be founded on generalised doubt. Equally, findings recorded in collateral proceedings under section 80G, themselves vitiated by the breach of natural justice noticed above, could not, without independent enquiry and specific material, form the sole foundation for denying the benefit of registration under section 12AB of the Act.

Insofar as the objection of the CIT(E) founded on the breadth and the religious-cum-charitable character of some of the objects is concerned, we note that the objects of the trust, as per the trust deed dated 16.05.2019, include assisting and supporting schools and institutions such as orphanages and assisting deserving students, apart from the other objects noticed above. Object No. (xiv) at page 4 of the trust deed specifically provides for respecting all castes and religions on humanitarian grounds, and there is no restriction on any person taking benefit under the trust on the basis of religion, caste or creed. No material has been brought on record by the CIT(E) to demonstrate that the whole or substantially the whole of any of the objects of the Assessee trust is of a religious nature, or that the benefits of the trust are confined to any particular religious community or caste.

In view of the foregoing, since the impugned action in respect of the registration of the Assessee rests solely on vague and generalised reasoning, on an unconfronted Inspector's report and on findings in the section 80G proceedings which themselves do not survive scrutiny, and since we are satisfied, on the basis of the documents and evidence submitted, viz., the trust deed, financial statements, bank statements, photographs, and bills and vouchers, all of which were available before the CIT(E), as to the genuineness of the activities of the trust, we hereby quash the order of the CIT(E) dated 24.03.2026 and direct that the registration of the Assessee under section 12AB read with section 12A of the Act be restored.

As a consequence, and for the reasons recorded above, the objection to the composite character of the objects does not survive, the genuineness of the charitable activities of the Assessee stands satisfactorily established, and the conditions of section 80G(5) of the Act are fulfilled. We, therefore, hold that the Assessee is entitled to approval under section 80G of the Act, and direct the CIT(E) to grant the approval in accordance with law.

In the result, both the appeals of the Assessee are allowed.