2025 (6) TMI 1833 - AT - Income Tax

Rejection of grant of registration u/s 12AB and u/s 80G - application was not filed under the correct provisions - assessee trust was supposed to file application for grant of approval u/s 80G under Clause (iii) of First Proviso to sub-Section (5) of Section 80G of the Act whereas he incorrectly filed applicant in Clause (ii) of First Proviso to sub-Section (5) of Section 80G HELD THAT - In the case of Global Academy for Medical Education Science Trust 2024 (6) TMI 864 - ITAT AHMEDABAD where CIT(E) by ex-parte order rejected the assessee trust s applications for grant of registration u/s 12AB and u/s 80G in view of the principles of natural justice said authority was directed to re-consider grant of registration u/s 12AB and u/s 80G by providing one more opportunity to the assessee to pass appropriate orders. In the case of Bhagwan Mahaveer Jain Relief Trust 2025 (2) TMI 162 - ITAT RAIPUR held that where CIT(E) rejected assessee trust s application for registration under Section 80G on the technical ground that the application was not filed under the correct provisions since there was no mention of any specific query or show-cause to the assessee about ineligibility to file an application under the provisions of Clause (iv)(b) of the First Proviso to Section 80G(5) of the Act in the impugned order principles of natural justice had been violated by rejecting the application without confronting the assessee about reasons for such rejection and thus the matter was required to be remanded back. In the case of Rotary Charity Trust 2025 (2) TMI 114 - ITAT MUMBAI held that where assessee trust filed an application for final registration u/s 80G(5) of the Act and Commissioner (Exemption) rejected said application on ground that assessee was not fulfilling stipulated conditions prescribed for filing application for approval in Form 10AB since assessee had inadvertently mentioned wrong section issue was to be remitted back to file of Commissioner (Exemption) with a direction to grant final approval to assessee under Clause (iii) to First Proviso to Section 80G(5) of the Act if assessee was otherwise found eligible. Accordingly the matter is restored to the file of CIT(E) for de-novo consideration.

Summary

1. ISSUES PRESENTED and CONSIDERED

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

• Whether the delay of 78 days in filing the appeal before the Tribunal should be condoned on the grounds stated by the assessee trust.
• Whether the application for renewal of provisional approval under clause (iv) of the first proviso to sub-Section (5) of Section 80G of the Income Tax Act, filed by the assessee trust selecting an incorrect clause due to technical glitches in the online portal, is maintainable.
• Whether the Commissioner of Income Tax (Exemption) (CIT(E)) was justified in rejecting the application for renewal of approval under Section 80G on the ground that the application was filed under an incorrect clause and that the CIT(E) lacks the power to amend the section code selected in Form 10AB.
• Whether principles of natural justice were followed by the CIT(E) in rejecting the application without providing an opportunity to the assessee trust to rectify or explain the error.
• What is the appropriate remedy in case of inadvertent or technical errors in filing applications under Section 80G of the Act.

2. ISSUE-WISE DETAILED ANALYSIS

Condonation of Delay in Filing Appeal

Relevant legal framework and precedents: The Tribunal has the discretion to condone delay in filing appeals if sufficient cause is shown, particularly where there is no mala fide intention and the delay is explained satisfactorily.

Court's interpretation and reasoning: The assessee filed an affidavit explaining that the delay was due to the original Chartered Accountant not informing the assessee about the appellate order, and the subsequent change of consultant and verification of documents led to the delay. The Tribunal found these reasons to be genuine and without mala fide intent.

Application of law to facts: Given the explanation and absence of any deliberate delay, the Tribunal exercised its discretion to condone the delay in the interest of justice.

Conclusion: The 78-day delay in filing the appeal was condoned.

Maintainability and Merits of Application Filed under Incorrect Clause of Section 80G

Relevant legal framework: Section 80G of the Income Tax Act provides for approval of trusts to enable donors to claim deductions for donations. The first proviso to sub-Section (5) of Section 80G contains various clauses under which an application for approval can be filed. Form 10AB is the prescribed form for such applications.

Key precedents: Several Tribunal decisions were cited, including:

• Global Academy for Medical Education & Science Trust vs. CIT(E): Emphasized principles of natural justice and directed reconsideration of registration applications where orders were passed ex-parte.
• Bhagwan Mahaveer Jain Relief Trust vs. CIT(E): Held that rejection on technical grounds without specific show-cause violates natural justice and requires remand.
• Subharma Charitable Trust vs. CIT(E): Recognized inadvertent clerical errors in selecting clauses and remanded for opportunity to file revised application.
• Rotary Charity Trust vs. CIT(E): Directed remand where application was rejected for inadvertent mention of wrong section, with instructions to grant approval if otherwise eligible.

Court's interpretation and reasoning: The Tribunal acknowledged the admitted inadvertent error in selecting clause (ii) instead of clause (iii) in the application due to a system error in the online portal. The CIT(E) rejected the application solely on the ground that it could not amend the section code selected by the applicant. The Tribunal found this approach to be harsh and inconsistent with the principles of natural justice and the precedents cited.

Key evidence and findings: The assessee's counsel admitted the error was inadvertent and caused by a technical glitch. No mala fide or deliberate misrepresentation was found. The CIT(E) did not provide an opportunity to rectify or explain the error before rejecting the application.

Treatment of competing arguments: The Department relied on the CIT(E)'s order denying approval on technical grounds. The Tribunal weighed this against the principles of natural justice and the precedents favoring leniency in cases of inadvertent errors and system glitches.

Application of law to facts: The Tribunal applied the principles established in the cited precedents and held that the application should not have been rejected outright without affording an opportunity to the assessee to rectify the error.

Conclusion: The matter was remanded to the CIT(E) for de-novo consideration, with directions to consider the application as if filed under the correct clause, and to provide the assessee an opportunity to rectify or explain the error.

3. SIGNIFICANT HOLDINGS

The Tribunal held:

"Looking into the instant facts and the reasons cited by the assessee for the delay of 78 days in the filing of the present appeal, in the interest of justice, the delay in filing of the present appeal is hereby condoned."

"In light of the assessee's set of facts and in view of the judicial precedents referred to above, in the interest of justice, the matter is restored to the file of Ld. CIT(E) for de-novo consideration."

"The appeal of the assessee is allowed for statistical purposes."

Core principles established include:

• Delay in filing appeals can be condoned if adequately explained and without mala fide intent.
• Rejection of applications for approval under Section 80G on purely technical grounds without affording an opportunity to rectify or explain errors violates principles of natural justice.
• Inadvertent or clerical errors, especially caused by system glitches in online portals, should be treated leniently, and applicants should be allowed to amend or re-file applications correctly.
• The CIT(E) has a duty to consider applications on merits and provide opportunity for correction rather than outright rejection on technicalities.

Final determinations:

• The delay in filing the appeal was condoned.
• The rejection of the application for approval under Section 80G on the ground of selecting the incorrect clause was set aside.
• The matter was remanded to the CIT(E) for fresh consideration, allowing the assessee to file the application under the correct clause and to be heard.