2025 (2) TMI 1184 - AT - Income Tax

Rejecting the application for registration u/s 12AA - inadvertent error the application was filed under clause (vi) of section 12A(1)(ac) of the IT Act - HELD THAT - As relied upon Raj Krishan Jain Charitable Trust 2024 (6) TMI 1400 - ITAT DELHI we deem it proper to set-aside the order passed by Ld. CIT Exemption Pune and remand the matter back to him with a direction to treat the application already filed by the assessee as under clause (iii) of section 12A(1)(ac) of the IT Act instead of under clause (vi) of section 12A(1)(ac) of the IT Act and decide the same as per fact and law after providing reasonable opportunity of hearing to the assessee. Assessee is also hereby directed to respond to the notices issued by Ld. CIT Exemption Pune in this regard and produce supporting documents/evidences in support of application for registration without taking any adjournment under any pretext otherwise Ld. CIT Exemption Pune shall be at liberty to pass appropriate order as per law. Appeal filed by the assessee is allowed for statistical purposes.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal include:

• Whether the rejection of the application for registration under section 12AA of the Income Tax Act on the ground of filing under an incorrect sub-clause of section 12A(1)(ac) is justified.
• Whether a typographical or inadvertent error in selecting the incorrect sub-clause for registration application can be treated as a curable defect.
• Whether the assessee should be granted an opportunity to rectify the error and have the application considered under the correct provision.
• The applicability and interpretation of section 12A(1)(ac)(iii) versus section 12A(1)(ac)(vi)(B) of the Income Tax Act in the context of registration of charitable trusts.
• The relevance and binding nature of precedents where similar errors were allowed to be rectified by the Tribunal.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Justification for Rejection of Registration Application on Ground of Incorrect Section Code

Relevant legal framework and precedents: Section 12AA of the Income Tax Act empowers the Commissioner of Income Tax (Exemption) to grant registration to trusts or institutions fulfilling prescribed conditions. The application for registration must be filed under the correct sub-clause of section 12A(1)(ac), which specifies various categories of trusts eligible for exemption. The distinction between clause (iii) and clause (vi)(B) is material for classification and eligibility.

Court's interpretation and reasoning: The Tribunal examined the facts that the assessee trust filed its application under clause (vi)(B) instead of the correct clause (iii). The CIT (Exemption) rejected the application solely on this ground, finding the application defective and non-compliant with procedural requirements.

Key evidence and findings: The assessee admitted the error was inadvertent and due to lack of professional assistance. The trust is genuine and has been previously registered under section 12A since 2007. The application was otherwise complete and genuine.

Application of law to facts: The Tribunal noted that the rejection was based purely on a technical or typographical mistake in the section code cited. The substantive eligibility and genuineness of the trust were not questioned.

Treatment of competing arguments: The Revenue argued for confirmation of the rejection order, emphasizing procedural correctness. The assessee argued for leniency and correction of the error based on precedents.

Conclusions: The Tribunal found the rejection on this ground alone to be unjustified, considering the nature of the error and the trust's bona fide status.

Issue 2: Curability of Typographical/Inadvertent Error in Application Under Section 12A(1)(ac)

Relevant legal framework and precedents: The Tribunal relied heavily on decisions of coordinate Benches of the Tribunal, notably in the cases of Shree Swaminarayan Gadi Trust and Raj Krishan Jain Charitable Trust, where similar inadvertent errors in filing under incorrect clauses of section 12A(1)(ac) were held to be curable defects. These precedents emphasized the principle that procedural technicalities should not defeat substantive justice where the trust is genuine and the error is inadvertent.

Court's interpretation and reasoning: The Tribunal observed that the assessee had filed a revised Form 10AB to correct the section code, demonstrating intent to comply with the correct provision. The Tribunal quoted the Raj Krishan Jain case, which held that "the typographical error deserves to be corrected" and the application should be considered under the correct clause.

Key evidence and findings: The assessee's submission that the error was due to self-filing without professional help was accepted as a reasonable explanation. The genuineness of the trust and its prior registration supported the conclusion that the error was not an attempt to mislead or circumvent law.

Application of law to facts: The Tribunal applied the principle of substantial compliance and the precedents allowing correction of such errors, thereby rejecting the strict procedural approach adopted by the CIT (Exemption).

Treatment of competing arguments: The Revenue's insistence on strict adherence to procedural correctness was rejected in favor of a more liberal and justice-oriented approach.

Conclusions: The error was held to be curable, and the assessee was entitled to have the application considered under the correct clause after providing an opportunity of hearing.

Issue 3: Direction for Remand and Opportunity to the Assessee

Relevant legal framework and precedents: Principles of natural justice and fair hearing require that the assessee be given an opportunity to explain and rectify defects before rejection of registration applications. The Tribunal's prior decisions have emphasized this procedural fairness.

Court's interpretation and reasoning: The Tribunal directed the CIT (Exemption) to treat the application as filed under clause (iii) of section 12A(1)(ac) and to decide the matter afresh after providing reasonable opportunity to the assessee to respond to notices and produce supporting documents.

Key evidence and findings: The Tribunal noted the assessee's willingness to comply and produce evidence, and the absence of any substantive objection to the genuineness of the trust.

Application of law to facts: The Tribunal applied the principle that procedural defects should be cured and that the assessee should not be denied registration without a fair hearing.

Treatment of competing arguments: The Revenue's request for confirmation of rejection was overridden by the Tribunal's commitment to justice and procedural fairness.

Conclusions: The matter was remanded to the CIT (Exemption) with directions to consider the application under the correct clause and provide the assessee an opportunity to be heard and produce evidence.

3. SIGNIFICANT HOLDINGS

The Tribunal established the following core principles and made key determinations:

• "The typographical error deserves to be corrected."
• "The appeal deserves to be allowed and impugned order ... is liable to be set aside."
• "The application already filed by the assessee as under clause (iii) of section 12A(1)(ac) of the IT Act instead of under clause (vi) of section 12A(1)(ac) of the IT Act and decide the same as per fact and law after providing reasonable opportunity of hearing to the assessee."
• Procedural defects arising from inadvertent or typographical errors in the application for registration under section 12AA are curable and should not result in outright rejection if the trust is genuine and willing to comply.
• Natural justice mandates that the assessee be given an opportunity to rectify errors and produce supporting evidence before final rejection of registration.
• The Tribunal's power to remand matters for fresh consideration in light of corrected applications and submissions is affirmed.

The final determination was to set aside the rejection order of the CIT (Exemption), Pune, and remand the matter with directions to consider the application under the correct sub-clause of section 12A(1)(ac), after affording the assessee a reasonable opportunity of hearing and compliance with procedural requirements.