Ever imagined that one small communication error could cost a charitable trust its tax benefits?
That’s exactly what happened when Ram Bhakt Mandal Trust—a religious charitable organization—lost its chance to secure tax-exempt status simply because its accountant forgot to inform them about crucial income tax notices.

In a recent decision that blends fairness with accountability, the Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) has restored the trust’s applications for 12AB and 80G registration, but not without slapping a ₹10,000 cost to be deposited in the Prime Minister’s Relief Fund.

Here’s everything you need to know about this case and why it matters for every charitable organization and taxpayer.

What Really Happened?

The Ram Bhakt Mandal Trust had filed applications for:

Section 12AB registration — which grants tax-exempt status to trusts and NGOs.
Section 80G registration — which allows donors to claim tax deductions for their contributions.

However, the Commissioner of Income Tax (Exemptions) [CIT(E)] rejected both applications because the trust failed to respond to official notices during the approval process. Without these registrations, the trust stood to lose significant benefits and donor support.

The Reason Behind the Rejection: A Costly Communication Failure

During the hearing before the ITAT, the trust’s counsel revealed that:

The email ID registered on the income tax portal belonged to the trust’s accountant.
The accountant did not inform the trust about the notices issued by the CIT(E).
As a result, the trust missed hearings and failed to file the necessary documents to prove the genuineness of its activities.

The trust’s legal team argued that this was a genuine oversight and pleaded for restoration of the applications in the interest of justice.

ITAT’s Balanced Decision: A Second Chance with Accountability

After hearing both sides, the two-member bench of the ITAT, consisting of:

🔹 Siddhartha Nautiyal (Judicial Member)
🔹 Narendra Prasad Sinha (Accountant Member)

made the following observations:

✔️ The trust’s non-compliance was clear and undeniable.
✔️ However, the rejection would have severe consequences for the charitable organization.
✔️ In the interest of justice, the trust deserved another opportunity to present its case.

The ITAT restored both applications to the CIT(E) for fresh adjudication, but with a condition:

🔸 The trust must pay ₹5,000 per appeal (₹10,000 in total) to the Prime Minister’s Relief Fund before the cases could be reconsidered.

The tribunal also directed the trust to comply diligently with all future notices to avoid such situations.

What are Section 12AB and Section 80G?

For those unfamiliar with these crucial tax provisions:

Section 12AB:

This section provides income tax exemption for charitable or religious trusts. Without this registration, any income generated by the trust could be subject to tax.

 Section 80G:

Under this section, donors contributing to an eligible trust or NGO can claim income tax deductions. This is a key incentive for encouraging charitable donations.

Without these registrations:
Donors lose tax benefits.
The trust’s donations may decline.
The trust itself may be liable to pay tax on its income.

Key Takeaways from This Case:

👉 Update Contact Details Regularly: Ensure that the email ID and phone number registered on the Income Tax portal are active, accessible, and monitored.
👉 Never Ignore Tax Notices: Always respond to Income Tax communications promptly—non-response can lead to automatic rejections or penalties.
👉 Accountability Matters: Even if a mistake is genuine, courts and tribunals are now holding organizations financially accountable.
👉 Second Chances Come with Costs: The judiciary may provide relief, but not without setting an example through penalties or conditions.

Conclusion: Compliance is Key—Even for Charities!

The case of Ram Bhakt Mandal Trust vs CIT(E) is a powerful reminder for NGOs, charitable trusts, and religious organizations that:

Communication lapses can lead to rejection of crucial tax registrations.
Income Tax compliance must be taken seriously, even if the organization is non-profit.
The law may offer second chances, but financial penalties and public accountability will follow.

With ₹10,000 directed to the PM’s Relief Fund as a condition, the ITAT’s decision balances compassion with caution—a fitting lesson for all involved in the non-profit sector.

FAQs:

Q1: What is the significance of Section 12AB registration?
It grants tax-exempt status to charitable or religious trusts under the Income Tax Act.

Q2: Why is Section 80G important?
It allows donors to claim tax deductions on donations, boosting funding for NGOs and trusts.

Q3: Why did the CIT(E) reject the trust’s applications?
The trust failed to respond to notices because their accountant did not inform them about the communications.

Q4: What action did the ITAT take?
The ITAT restored the applications for reconsideration but imposed a ₹10,000 cost to ensure accountability.

Q5: How can similar mistakes be avoided?
Monitor registered email accounts regularly.
Respond promptly to all tax notices.
Engage professional tax advisors for compliance.

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Your attention to detail today can save your organization from big troubles tomorrow!