2025 (7) TMI 1571 - AT - Income Tax

Denying grant of approval u/s.80G(5) - selecting wrong section code filling form for approval - HELD THAT - A perusal of the impugned order as well as the grounds of appeal filed by the appellant would reveal that application for approval u/s.80G(5) has been rejected on hyper-technical ground mainly on account of non selection of right section code as applicable to the assessee while filing the application on Form No.10AB. Therefore the appellant in its grounds of appeal prayed for an opportunity for rectification of the same. DR was fair enough in not opposing the request made by the assessee. We note that similar issue came up for adjudication before Coordinate Bench Surat in the case of Shree Swaminarayan Gadi Trust Vadtal (SVG) 2024 (6) TMI 527 - ITAT SURAT We are of the opinion that the ld. CIT(E) ought to have given an opportunity to the appellant to rectify the defect. Further we are of the view that wrong selection of section code/clause would not disentitle the appellant to its rightful claim. Selection of wrong clause by the appellant cannot be treated as fatal to the proceedings initiated after the filing of the application. We therefore in the interest of natural justice being fair to both the parties deem it appropriate to grant one more opportunity to the appellant - Appeal of the appellant is allowed for statistical purposes.

Summary

ISSUES:

Whether an application for approval under section 80G(5) of the Income Tax Act, 1961 can be rejected on the ground of selecting an incorrect section code in Form No. 10AB.Whether the assessing authority is required to provide an opportunity to rectify technical or procedural defects in the application before rejecting it.Whether a wrong selection of section code/clause in the application form is a fatal defect disentitling the applicant from consideration on merits.

RULINGS / HOLDINGS:

The application for approval under section 80G(5) was wrongly rejected on a hyper-technical ground of non-selection of the correct section code in Form No. 10AB; such rejection without opportunity for rectification was improper.The assessing authority ought to have given an opportunity to the applicant to rectify the defect, as "wrong selection of section code/clause would not disentitle the appellant to its rightful claim."Selection of wrong clause by the applicant "cannot be treated as fatal to the proceedings" and the matter should be decided on merits after allowing correction.

RATIONALE:

The Court applied the statutory framework under section 80G(5) of the Income Tax Act, 1961, which governs the grant of approval to trusts for tax exemption purposes.The Court relied on precedent from a coordinate bench decision interpreting procedural defects in Form No. 10AB applications under related provisions (section 12A/12AB), emphasizing the principle of natural justice and the need to allow rectification of inadvertent mistakes.The decision reflects a doctrinal approach favoring substantive justice over hyper-technical rejections, mandating that procedural errors such as incorrect section code selection should not preclude consideration on merits.The Court set aside the impugned order and remanded the matter for de novo consideration after allowing the applicant to correct the application and comply with procedural requirements.