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2025 (6) TMI 1928 - AT - Income TaxRejecting the applications u/s 12A(1)(ac)(iii) r/w section 12AB(1)(b)(ii) and under section 80G(5)(iii) - applications were made under incorrect clauses i.e. for re-approval instead of renewal - HELD THAT - We find merit in the submission of the assessee that since the second applications were filed under the correct provisions and were within the extended compliance period stipulated by the CBDT they ought to have been examined as if filed within time. The procedural context and the corrective conduct of the assessee establish its bona fides and entitle it to a fair adjudication on merits. In our considered opinion the CIT(Exemption) failed to appreciate the distinction between a defective application and a curative application and improperly treated the second application as non-maintainable. The error in quoting a wrong sub-clause initially was procedural in nature and the subsequent filing under correct provisions rectified the same. There was no bar in law or under the CBDT Circular for the assessee to file such fresh applications. We hold that the orders passed by the CIT(Exemption) Ahmedabad rejecting the assessee s applications u/s 12A(1)(ac)(iii) and clause (iii) of the first proviso to section 80G(5) as non-maintainable are legally unsustainable and deserve to be set aside. The assessee had originally filed applications on 21.03.2024 under incorrect statutory clauses. Upon realising this the assessee filed corrective applications on 03.06.2024 under the correct provisions within the extended compliance period notified by CBDT. These subsequent applications were filed to rectify a procedural defect and were not in the nature of repetitive or infructuous filings. The impugned orders passed by the CIT(E) Ahmedabad in both appeals are hereby set aside and the matters are restored to his file with following directions i. The CIT(Exemption) shall treat the assessee s applications in Form No. 10AB u/s 12A(1)(ac)(iii) and section 80G(5)(iii) as valid curative and maintainable and proceed to dispose of them on merits in accordance with law. ii. The said applications shall be treated as having been filed within the period prescribed under the Act taking into account the extended deadline allowed vide CBDT Circular No. 07/2024 dated 25.04.2024. iii. The CIT(Exemption) shall also restore the provisional registration and approval granted earlier under section 12A and section 80G and treat the earlier orders dated 02.09.2024 (u/s 12A) and 03.09.2024 (u/s 80G) as non- operative thereby enabling the consideration of the fresh applications on merits as if no cancellation had taken place.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal in these appeals are:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Maintainability of Applications Filed under Section 12A(1)(ac)(iii) and Section 80G(5)(iii) after Earlier Rejections Relevant Legal Framework and Precedents: The provisions of section 12A and section 80G of the Income-tax Act govern the registration and approval of charitable trusts for tax exemption purposes. Section 12A(1)(ac)(iii) and section 80G(5)(iii) provide procedural requirements for renewal or fresh registration/approval. The CBDT Circular No. 07/2024 dated 25.04.2024 allows an extended window for filing such applications to ensure compliance. The principles of natural justice and fairness require that applications filed within the prescribed period and under correct provisions be considered on merits. Court's Interpretation and Reasoning: The Tribunal observed that the assessee initially filed applications on 21.03.2024 under incorrect sub-clauses, which were rejected by the CIT (Exemption). Recognizing this procedural error, the assessee filed fresh applications on 03.06.2024 under the correct statutory provisions within the extended compliance period specified by the CBDT Circular. The CIT (Exemption) rejected these fresh applications as non-maintainable, treating them as appeals or representations against the earlier rejections, which was found to be a misinterpretation. Key Evidence and Findings: The Tribunal noted that the second set of applications were bona fide curative filings, not appeals or revisions against earlier orders. The applications were filed suo motu to rectify procedural defects and were within the permissible time frame. The CIT (Exemption) failed to distinguish between defective initial filings and curative subsequent filings. Application of Law to Facts: Given that the second applications were filed under the correct provisions and within the extended deadline, the Tribunal held that the CIT (Exemption) was obligated to treat them as fresh and maintainable. The procedural error in the initial filings was rectified, and there was no legal bar to entertaining the corrected applications. The principle of fairness mandated adjudication on merits rather than rejection on technical grounds. Treatment of Competing Arguments: The assessee argued that the CIT (Exemption) misread the nature of the second applications and erred in rejecting them without merit-based consideration. The Departmental Representative did not oppose the proposal to set aside the impugned orders and restore the matter for merits adjudication, indicating acceptance of the assessee's position. Conclusion: The Tribunal concluded that the CIT (Exemption)'s rejection of the applications as non-maintainable was legally unsustainable and that the applications should be treated as valid curative filings to be decided on merits. Issue 2: Effect of CBDT Circular No. 07/2024 on Filing and Adjudication of Applications Relevant Legal Framework and Precedents: The CBDT Circular No. 07/2024 dated 25.04.2024 extended the deadline for filing applications for registration and approval under sections 12A and 80G, recognizing procedural difficulties and allowing rectification within the extended window. This circular is binding on the authorities and must be applied to ensure procedural fairness. Court's Interpretation and Reasoning: The Tribunal emphasized that the second applications filed by the assessee on 03.06.2024 fell within the extended compliance period notified by the CBDT Circular. The circular's purpose was to facilitate compliance and avoid penalizing procedural errors. Hence, the applications ought to be treated as if filed within time and considered on merits. Key Evidence and Findings: The Tribunal found no provision in the circular or the Act that barred fresh applications filed within the extended period, even if earlier incorrect applications were rejected. The circular envisaged curative filings and did not envisage procedural bars to such corrective filings. Application of Law to Facts: Applying the CBDT Circular to the facts, the Tribunal held that the CIT (Exemption) erred in not applying the extended deadline and in rejecting the applications on procedural grounds. The circular's extended window was designed to enable such rectifications and ensure substantive justice. Treatment of Competing Arguments: The Department did not contest the applicability of the circular or the extended filing window. The assessee's submissions on the curative nature of the second applications were accepted. Conclusion: The Tribunal held that the applications filed within the extended period must be treated as timely and maintainable, and the CIT (Exemption) must adjudicate them on merits in accordance with law and the circular. Issue 3: Restoration of Provisional Registration and Approval and Treatment of Earlier Cancellation Orders Relevant Legal Framework and Precedents: The provisional registration and approval granted under sections 12A and 80G confer certain tax benefits. Cancellation or rejection orders must be justified and based on substantive grounds. Where procedural defects are rectified and fresh applications filed, earlier cancellation orders may become inoperative to enable consideration of fresh applications. Court's Interpretation and Reasoning: The Tribunal found that since the fresh applications were to be treated as valid and maintainable, the earlier cancellation orders dated 02.09.2024 (under section 12A) and 03.09.2024 (under section 80G) should be treated as non-operative. This restoration was necessary to enable the CIT (Exemption) to consider the fresh applications on merits as if no cancellation had taken place. Key Evidence and Findings: The Tribunal noted that the provisional registration and approval were granted initially and that the subsequent procedural error was rectified by the assessee's curative filings. The cancellation orders were premised on procedural grounds and not on merits. Application of Law to Facts: To ensure fairness and substantive justice, the Tribunal directed restoration of provisional registration and approval and instructed the CIT (Exemption) to consider the fresh applications on merits without being influenced by the earlier cancellation orders. Treatment of Competing Arguments: The Department did not oppose this direction, and the assessee sought restoration to enable proper adjudication. Conclusion: The Tribunal ordered the restoration of provisional registration and approval and directed the CIT (Exemption) to treat the earlier cancellation orders as non-operative for the purpose of fresh consideration. 3. SIGNIFICANT HOLDINGS The Tribunal's crucial legal reasoning is encapsulated in the following verbatim excerpts:
Core principles established by the Tribunal include:
Final determinations on each issue:
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