2025 (6) TMI 1057 - AT - Income Tax

Rejecting the application for grant of approval u/s 80G - non-availability of registration u/s 12A - as per CIT(A) assessee trust could not furnish the details as requested in the show cause notice HELD THAT - CIT(E) has observed that the assessee trust filed the present application for grant of approval u/s 80G of the Act on 20.09.2023 whereas the assessee trust has filed the application for grant of approval u/s 80G on 27.07.2024 and there is a minor delay of 27 days in light of CBDT Circular No.7/2024 dated 25.04.2024 extending the date for such application upto 30.06.2024. Since it is the submission of assessee that the assessee has filed all the relevant details and the assessee trust is having a valid registration u/s 12A of the Act and the application was also filed on 27.07.2024 with a delay of only 27 days therefore considering the totality of the facts of the case and in the interest of justice we deem it proper to restore the issue to the file of the Ld. CIT(E) with a direction to adjudicate the issue afresh. Appeal filed by the assessee is allowed for statistical purposes.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in this appeal are:

(a) Whether the assessee trust was justified in seeking approval under clause (iii) of the first proviso to sub-section (5) of section 80G of the Income Tax Act, 1961, given the alleged non-fulfillment of conditions laid down in clauses (i) to (v) of section 80G(5) of the Act?

(b) Whether the assessee trust had valid registration under section 12A of the Income Tax Act, 1961 at the time of filing the application for approval under section 80G, as required under clause (i) of section 80G(5)?

(c) Whether the delay in filing the application for approval under section 80G(5) beyond the prescribed and extended due dates could be condoned, considering the provisions of clause (iii) of the first proviso to section 80G(5) and the CBDT Circular No.7/2024 dated 25/04/2024?

(d) Whether the assessee had furnished sufficient and satisfactory evidence to establish the genuineness of its charitable activities and fulfillment of the conditions stipulated under section 80G(5) of the Act?

(e) Whether the rejection of the application for approval under section 80G(5) and cancellation of provisional approval granted under clause (iv) of the first proviso to section 80G(5) was legally sustainable?

2. ISSUE-WISE DETAILED ANALYSIS

(a) Validity of the Assessee's Application for Approval under Section 80G(5)

The legal framework requires that for a trust or institution to be granted approval under section 80G(5), it must satisfy conditions laid down in clauses (i) to (v) of the said section. Clause (i) mandates that the income of the institution should not be liable for inclusion in total income under sections 11 and 12 or clauses (23AA) or (23C) of section 10, except as provided under specified provisos. The institution must be registered or approved under section 12AB or section 10(23AA) or 10(23C), or fall within certain exclusions such as Regimental Funds or Non-Public Funds established by the armed forces.

The CIT(Exemption) rejected the application on the ground that the assessee was neither regularly registered under section 12AB nor approved under section 10(23C) or 10(23AA). Further, the provisional registration under section 12A(1)(ac)(vi) had been cancelled, and the subsequent provisional registration was obtained after filing the application for approval under section 80G. Therefore, the assessee did not fulfill the mandatory registration condition at the time of filing the application.

The Tribunal noted factual inaccuracies in the CIT(E)'s order, observing that the assessee did hold valid registration under section 12A(1)(ac)(vi) as of 01/08/2024, although the application for approval under section 80G was filed on 27/07/2024, prior to the grant of such registration. The Tribunal recognized that the CIT(E) erred in concluding that the assessee had no valid registration under section 12A at the relevant time.

(b) Delay in Filing the Application for Approval under Section 80G(5)

Clause (iii) of the first proviso to section 80G(5) requires that where a trust has provisional approval under section 80G(5)(vi), the application for regular approval must be filed at least six months prior to expiry of the provisional approval or within six months from commencement of activities. The provisional approval in this case expired on 31/03/2024. Hence, the application should have been filed by 30/09/2023. The CBDT Circular No.7/2024 extended this due date to 30/06/2024.

The CIT(E) held that the application filed on 27/07/2024 was beyond both the prescribed and extended due dates, thus rejecting the application for non-compliance with the time limit.

The assessee contended that the delay of 27 days beyond the extended due date was minor and should be condoned, arguing that the provision is directory and not mandatory. The Tribunal accepted this submission, noting that the delay was minimal and the assessee had obtained provisional registration under section 12A shortly after filing the application, thereby justifying condonation of delay in the interest of justice.

(c) Sufficiency and Genuineness of Evidence Regarding Charitable Activities

The CIT(E) issued multiple notices seeking detailed information and clarifications regarding the assessee's activities, including dates, locations, details of beneficiaries, and supporting bills and vouchers. The assessee submitted some details and photographs; however, the CIT(E) found discrepancies and incomplete submissions. The photographs were held not to demonstrate the charitable nature of activities, and crucial details such as beneficiary identification and expense documentation were lacking.

The Tribunal noted the CIT(E)'s findings regarding insufficiency of evidence but did not make a conclusive determination on this issue. Instead, it directed the matter to be adjudicated afresh by the CIT(E) after giving the assessee an opportunity to be heard, implicitly recognizing that the record may warrant further examination.

(d) Legality of Rejection and Cancellation of Provisional Approval

The CIT(E) rejected the application and cancelled the provisional approval granted under clause (iv) of the first proviso to section 80G(5) based on the grounds of non-compliance with registration requirements, delay in filing, and failure to substantiate genuineness of activities.

The Tribunal found factual errors in the CIT(E)'s order concerning the registration status and application filing date. Given these errors and the minor delay in filing, the Tribunal held that the rejection and cancellation were not sustainable without a fresh adjudication. Consequently, it restored the matter to the CIT(E) for reconsideration in accordance with law and after affording the assessee a proper hearing.

3. SIGNIFICANT HOLDINGS

The Tribunal made the following crucial legal determinations:

"We find in paras 7 and 7.1 of the order, the Ld. CIT(E) has observed that the assessee trust does not have valid registration u/s 12A of the Act whereas the same is factually incorrect as the assessee trust is having valid registration u/s 12A of the Act."

"Similarly, at para 8, the Ld. CIT(E) has observed that the assessee trust filed the present application for grant of approval u/s 80G of the Act on 20.09.2023 whereas the assessee trust has filed the application for grant of approval u/s 80G on 27.07.2024 and there is a minor delay of 27 days in light of CBDT Circular No.7/2024 dated 25.04.2024 extending the date for such application upto 30.06.2024."

"Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the Ld. CIT(E) with a direction to adjudicate the issue afresh and in accordance with law after giving due opportunity of being heard to the assessee."

The Tribunal established the principle that minor delays in filing applications under section 80G(5), especially when accompanied by subsequent valid registration under section 12A, may be condoned in the interest of justice. It also emphasized the necessity of accurate factual findings regarding registration status and application dates before rejecting applications or cancelling provisional approvals.

On the issue of evidence sufficiency regarding charitable activities, the Tribunal refrained from making a final finding and instead mandated a fresh adjudication, underscoring the importance of procedural fairness and comprehensive evaluation of facts.

In conclusion, the Tribunal allowed the appeal for statistical purposes by setting aside the CIT(E)'s order and remanding the matter for fresh consideration consistent with the observations made.