2025 (5) TMI 2188 - AT - Income Tax

Assessee's s.80G(5) approval remitted for reconsideration after wrong Form 10AB code and hearing denial due to incorrect advice

ITAT AHMEDABAD found merit in the assessee's claim that a wrong section code was inadvertently selected in Form 10AB and noted the assessee was denied a ... Deduction u/s 80G - inadvertent error in filing of form 10AB - HELD THAT:- There is merit in claim of the AR that assessee has selected the wrong section code inadvertently while filing the application for final registration in Form 10AB. Further, we notice that assessee did not have the opportunity of being heard before CIT(E) due to incorrect course of action advised, which otherwise assessee might have explained the facts to avoid the impugned rejection. In case of North Eastern Social Research Centre[2024 (7) TMI 890 - ITAT KOLKATA] we remit the issue back to the file of CIT(E), with a direction to grant final approval to assessee under Clause (iii) to first proviso to section 80G(5) of the Act, if assessee is otherwise found eligible. Appeal of the assessee is allowed for statistical purposes. ISSUES PRESENTED AND CONSIDERED 1. Whether an application in Form 10AB filed selecting clause (ii) of the first proviso to s.80G(5), when the applicant only holds provisional approval under clause (iv), is maintainable or ought to have been filed under clause (iii). 2. Whether the Commissioner (Exemptions) has authority to alter or treat the section/ clause code chosen by the applicant in Form 10AB, and whether rejection on the ground of wrong clause selection without examining merits is permissible. 3. Whether inadvertent selection of an incorrect clause in Form 10AB (including technical/portal error) and absence of opportunity to be heard justify remitting the matter to the Commissioner for de novo consideration. 4. Whether delay in filing the appeal (37 days) should be condoned. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Maintainability of Form 10AB filed under clause (ii) when only provisional approval under clause (iv) exists Legal framework: The first proviso to s.80G(5) prescribes distinct sub-clauses for applications: (ii) for entities holding valid approval whose period is due to expire, (iii) for entities provisionally approved (application timelines tied to provisional approval expiry or commencement of activities), and (iv) for entities with activities not yet commenced or commenced after commencement of activities. The prescribed form for final approval is Form 10AB. Interpretation and reasoning: The Tribunal examined the form filed and the nature of existing approval. The Tribunal held that clause (ii) applies only to entities with a prior regular approval whose term is expiring; an entity holding only provisional approval under clause (iv) is required to apply under clause (iii). Therefore an application selecting clause (ii) while only holding provisional approval is not in conformity with the statutory classification and is, on its face, non-maintainable for the purposes of being considered as an application under clause (ii). Precedent treatment: The Tribunal followed coordinate-bench precedents addressing identical factual matrices where incorrect clause selection in Form 10AB was found to be inadvertent and remittal was ordered for fresh consideration under the correct clause (see discussion adopting the approach of other Tribunal orders dealing with wrong section codes and technical error). Those precedents were followed rather than overruled. Ratio vs. Obiter: Ratio - the statutory scheme mandates filing under the specific sub-clause aligned to the nature of prior approval; incorrect selection renders the application not maintainable under that sub-clause. Obiter - considerations about portal functionality and technical difficulties are explanatory but supportive rather than decisive legal pronouncements. Conclusion: The application, as filed under clause (ii), was not maintainable as an application under clause (ii) because the applicant only held provisional approval; correct filing should have been under clause (iii). Issue 2 - Authority of Commissioner (Exemptions) to alter section/clause code and validity of rejection without merits examination Legal framework: The statutory scheme and prescribed forms require applicants to select the appropriate clause; administrative officers act on the form and on eligibility criteria. The power to alter statutory provision codes selected by an applicant is not provided to the Commissioner in the statutory text. Interpretation and reasoning: The Tribunal held the Commissioner (Exemptions) lacks authority to unilaterally alter the section/clause code chosen by the applicant in Form 10AB. However, where the filed form manifests an incorrect code inconsistent with the applicant's existing approval status, the Commissioner may treat the application as non-maintainable under the chosen clause. The Commissioner's rejection on procedural non-maintainability without examining merits is permissible where the filed application does not comply with statutory filing criteria; nevertheless, procedural fairness (opportunity to explain/cure) is relevant to whether summary rejection was appropriate in the circumstances. Precedent treatment: Followed prior Tribunal decisions that remitted cases for fresh consideration when wrong clause selection was shown to be inadvertent and procedural opportunities were not afforded. Those decisions emphasize that while the Commissioner cannot re-code the application, equitable consideration and chance to rectify may be warranted. Ratio vs. Obiter: Ratio - Commissioner cannot change the clause code; non-compliant filing can be held non-maintainable without merit adjudication. Obiter - remedial treatment (remittal, cure) in cases of inadvertence and confusion on part of applicant or administration is discretionary. Conclusion: Commissioner correctly identified non-maintainability under the selected clause and was not empowered to alter the clause; however, rejection without affording an opportunity to explain or rectify may be inappropriate in cases of inadvertent error and calls for equitable remedial measures (see Issue 3). Issue 3 - Effect of inadvertent/technical error and absence of opportunity to be heard: remittal for de novo consideration Legal framework: Principles of procedural fairness (right to be heard) and interpretation of statutory forms require that applicants be given a reasonable opportunity to explain errors; Tribunal practice recognizes remittal where bona fide/technical mistakes led to incorrect selections and where merits were not examined. Interpretation and reasoning: On the facts, the Tribunal found an inadvertent error in selecting the clause in Form 10AB, attributable to technical glitches in the income-tax portal and/or genuine mistake. The Tribunal also found the applicant was not afforded an effective opportunity to explain before rejection because the office response dissuaded further action. In light of these circumstances and consistent with coordinate-bench decisions, the Tribunal exercised its discretion in the interest of justice to restore the matter to the Commissioner for de novo consideration under the correct clause (iii), directing expeditious disposal and preservation of benefit where otherwise eligible. Precedent treatment: The Tribunal expressly followed recent coordinate-bench decisions that remitted similar cases for fresh consideration and, where applicable, directed that final approval be granted if eligibility is established, and that benefit continuity be preserved where statutory amendments and practical confusion caused gaps. Ratio vs. Obiter: Ratio - bona fide inadvertent mistakes in clause selection, coupled with lack of opportunity to explain, justify remittal for de novo consideration rather than upholding a summary rejection. Obiter - specific directions regarding deemed continuity of benefit and timelines for disposal are remedial instructions tailored to the facts of these cases. Conclusion: Remittal to the Commissioner for fresh consideration under clause (iii) was warranted; the Commissioner is directed to decide expeditiously and, if eligible, grant final approval without causing a break in statutory benefits attributable to the technical error and administrative confusion. Issue 4 - Condonation of delay in filing the appeal (37 days) Legal framework: Delay condonation principles permit excusing short delays where sufficient cause or no prejudice to the other side is shown. Interpretation and reasoning: The Tribunal examined the delay and relevant facts and exercised discretion to condone the 37-day delay, noting smallness of delay and absence of perceptible prejudice to the respondent. Ratio vs. Obiter: Ratio - the short delay was condoned in the exercise of discretion; this is a case-specific procedural determination. Conclusion: Delay of 37 days was condoned and the appeal was admitted for substantive consideration. Overall Disposition The Tribunal restored the matter to the file of the Commissioner (Exemptions) for de novo consideration under the appropriate clause (iii) of the first proviso to s.80G(5), directing expeditious disposal and indicating that, if final approval is granted, any benefit that would have been available prior to intervening statutory amendments shall not be treated as interrupted due to the technical/inadvertent error. The appeal was allowed for statistical purposes after condoning the delay.