The Toy Association Of India vs CIT(Exemption)

PER MANISH AGARWAL, AM :

The present appeal is filed by the assessee against the order dated 26.09.2025 by Ld. Commissioner of Income Tax (Exemption), Delhi [“Ld.CIT(E)”] passed u/s 12AB(1)(b)(ii) (B) of the Income Tax Act, 1961 [“the Act”].

Brief facts of the case are that the appellant’s society is established in the year 1995 under the Societies Registration Act, 1860 with the principal of promoting, developing and regulating the Indian toy industry, spreading awareness about toy safety standards encouraging indigenous manufacturing, skill development and undertaking activities beneficial to children and society at large. The activities of the assessee society fall within “advancement of any other object of general public utility” as defined u/s 2(15) of the Act. The appellant’s society has filed application for grant of permanent registration under Form 10AB on 28.03.2025 as it was granted provisional registration in terms of order dated 20.01.2022. Ld. CIT(Exemption) has held that the assessee’s activities are commercial in nature as more than 20% of receipts are from commercial activities and therefore, denied the registration sought u/s 12A(1)(ac)(iii) of the Act.

Against the said order, the assessee filed appeal before the Tribunal by taking various Ground of appeal mentioned in the appeal memo wherein all the Grounds of appeal of the assessee are with respect to the rejection of the registration u/s 12AB of the Act.

In Ground of appeal No.9 raised by the assessee wherein the assessee has challenged the action of Ld. PCIT in rejecting the application of the assessee without affording a reasonable opportunity of being heard and without issuing specific show-cause noticed thus, violating the principal of natural justice.

Heard the contentions of both the parties at length and perused the material available on record. From the perusal of the order of Ld. CIT(E) and further from the Paper Book filed, it is observed that Ld. CIT(E) has issued notice to the assessee dated 23.04.2025 seeking explanation on various issues with respect to the activity of the assessee and other particulars which was replied in terms of the letter dated 26.05.2025, both the query letter and reply was placed at pages 62 to 72 of the Paper Book and the necessary evidences filed are available at pages 73 to 208 of the Paper Book. Thereafter, Ld. CIT(E) again issued another notice dated 11.08.2025 wherein certain more queries were raised and same were replied by the assessee vide letter dated 18.08.2025. The copies of the same are placed at pages 209 to 213 and the details are filed placed at pages 214 to 252. Thereafter, Ld. CIT(E) has passed the impugned order rejecting the application for registration u/s 12A of the Act. It is observed that after seeking reply from the assessee on 11.08.2025, Ld. CIT(E) has not issued any show cause notice to the assessee asking him to justify its activities as charitable in nature.

In view of these facts and in the larger interest of justice, we set aside the order of ld. CIT(E) and remand the matter back to the file of Ld. CIT(E) with the direction to issue show cause notice and decide the same in accordance with law.

In the result, the appeal of the assessee is allowed for statistical purposes.