2025 (7) TMI 1418 - AT - Income Tax

Rejection of registration u/s 80G - no substantial charitable activity - as per AO no substantial charitable activity was being carried out by the assessee society and that the assessee society having an existing registration u/s 80G prior to 01.04.2021 ought to have applied in Form 10A by selecting the code 80G(5)(i) on or before 30.06.2024 as per the CBDT Circular No. 7 of 2024 dated 25.04.2024 HELD THAT - AR has taken us through the copies of the returns of income financials and other documentary evidence that were filed by the assessee society before the CIT(E) which prima facie demonstrate that the assessee society was undertaking activities aligned with its stated charitable objects. Although the CIT(Exemption) had observed that no substantial charitable activities were carried out by the assessee trust but he has neither identified any particular instance of non-compliance with the charitable nature of activities nor pointed out any deficiency in the documents filed by the assessee society before him. Rather there is no finding or evidence to support his conclusion that the assessee society was either engaged in any non-charitable activity or had violated the provisions of section 2(15) of the Act. The rejection of the application filed by the assessee society for registration u/s 80G of the Act on the technical ground that the assessee society should have filed Form 10A instead of Form 10AB is in our considered opinion not a valid basis for denial of registration. We are of the firm conviction that the procedural irregularities or usage of a wrong form should not be the sole ground for rejecting an otherwise valid application especially when the assessee is an existing registered entity under the Act and the charitable nature of its activities is not disproved. Our aforesaid view is fortified by the order of Gospel India Ministries 2025 (1) TMI 1587 - ITAT NAGPUR . CIT(Exemption) had acted upon the application filed by the assessee society in Form 10AB seeking registration u/s 80G of the Act. Rather it was the assessee society that had in its reply to Query no. 9 of the notice of the CIT(Exemption) dated 07/10/2024 had inter alia filed before him the details regarding the registration that it held u/s 80G of the Act. However the aforesaid infirmity i.e. using of the wrong form by the assessee society was never pointed out by the CIT(Exemption) and had figured for the first time in his impugned order rejecting the application of the assessee society. Order passed by the CIT(Exemption) Hyderabad is not a speaking order and suffers from non-application of mind to the facts and materials available on his record. Accordingly we restore the matter to the file of the CIT(Exemption) Hyderabad with a direction to consider the application filed by the assessee society for registration u/s 80G of the Act afresh. Assessee appeal allowed for statistical purposes.

Summary

ISSUES:

Whether the application for registration under section 80G of the Income-tax Act, 1961 can be rejected on the ground that no substantial charitable activity is being carried out by the applicant society without specific findings or evidence.Whether procedural non-compliance, specifically filing Form 10AB instead of Form 10A as required by CBDT Circular No. 7 of 2024, justifies rejection of the application for registration under section 80G.Whether the Commissioner of Income Tax (Exemptions) is required to issue a speaking order with proper application of mind based on facts and materials before rejecting an application under section 80G.

RULINGS / HOLDINGS:

The rejection of the application on the ground that "no substantial charitable activity was being carried out" is not sustainable where the authority has neither identified any particular instance of non-compliance nor pointed out any deficiency in the documents filed, and "there is no finding or evidence to support" such conclusion.The procedural irregularity of filing "Form 10AB" instead of "Form 10A" "is not a valid basis for denial of registration" under section 80G, particularly when the applicant is an existing registered entity and the charitable nature of its activities is not disproved; "procedural irregularities or usage of a wrong form should not be the sole ground for rejecting an otherwise valid application."The order passed by the CIT(Exemption) "is not a speaking order and suffers from non-application of mind to the facts and materials available on his record," and therefore the matter must be remanded for fresh consideration with a reasoned and speaking order after affording due opportunity of being heard.

RATIONALE:

The Court applied the statutory framework under section 80G of the Income-tax Act, 1961, including the proviso to section 2(15) and procedural requirements prescribed by CBDT Circular No. 7 of 2024.The Court emphasized the principle that rejection of charitable registration must be based on clear findings supported by evidence, not on vague or unsubstantiated observations.The Court relied on precedent that procedural errors, such as using an incorrect form, should not defeat substantive rights when the charitable nature of activities is established, citing the ITAT Nagpur order in Gospel India Ministries.The Court underscored the requirement of a "speaking order" demonstrating application of mind, in line with principles of natural justice and administrative fairness, mandating that the authority must consider all material facts and provide reasons for rejection.