2024 (4) TMI 1344 - AT - Income Tax

Denial of s. 80G(5) registration for technical error unjustified; matter remanded for fresh consideration on merits

ITAT Ahmedabad allowed the assessee-trust's appeal for statistical purposes, setting aside the order of the CIT(E) rejecting final registration under s. ... Rejecting the application for final Registration as filed u/s. 80G(5)(ii) instead of u/s. 80G(5)(iii) - assessee mentioned an incorrect clause of the first proviso - HELD THAT:- Undisputed fact that the assessee was granted Provisional Registration u/s. 80G(5) by Ld. CIT(E) on 24.09.2021 for a period of three years upto the Asst. Year 2024-25. As undisputed fact that the assessee Trust is carrying out the charitable activities and granted registration u/s. 12AB of the Act on 06.10.2021 and also Provisional Registration u/s. 80G of the Act on 24.09.2021. Genuineness of the activities carried out by the Trust is not doubted by the Ld. CIT(E), denial of Permanent Registration only the count of wrong mentioning of sub clause 80G(5) will certainly affects the charitable activities carried out by the Trust. In similar circumstances, the Co-ordinate Bench of the Kolkata Tribunal [2024 (1) TMI 1508 - ITAT KOLKATA] has set aside the matter to the file of Ld. CIT(E) and to pass order on merits, irrespective of the delay occurred in filing the fresh application for final approval u/s. 80G(5) of the Act. The present impugned order passed by Ld. CIT(E) is hereby set aside with a direction to Ld. CIT(E) to pass order on merits on the rectified application to be filed by the assessee. Appeal filed by the Assessee is allowed for statistical purpose. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether the delay of 17 days in filing the appeal before the Tribunal should be condoned. 1.2 Whether an application for final approval under section 80G(5) can be rejected as non-maintainable solely on the ground that the assessee mentioned an incorrect clause of the first proviso, despite being otherwise eligible and already holding provisional approval. 1.3 Whether the Commissioner (Exemption) is obliged to consider the assessee's application for final approval under section 80G(5) on merits and permit rectification of a technical or procedural mistake in mentioning the applicable clause. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Condonation of delay in filing the appeal Interpretation and reasoning 2.1 The Tribunal noted that the appeal was filed with a delay of 17 days. The Departmental Representative raised no objection to condonation. The Tribunal, considering the short period of delay and absence of opposition from the Revenue, proceeded to condone the delay. Conclusions 2.2 The delay of 17 days in filing the appeal was condoned, and the appeal was admitted. Issue 2: Validity of rejection of final approval under section 80G(5) for quoting an incorrect clause Legal framework (as discussed) 2.3 The Tribunal recorded that, pursuant to legislative amendments introduced by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 with effect from 01.04.2021, entities already approved under sections 12A and 80G were required to reapply for fresh approval under sections 12AB and 80G within the prescribed time. 2.4 The assessee had been granted registration under section 12AB and provisional approval under section 80G(5)(iv) in Form 10AC for a period of three years up to assessment year 2024-25. The subsequent application for final/regular approval was required, as per the Commissioner (Exemption), to be made under clause (iii) of the first proviso to section 80G(5); instead, the assessee mentioned clause (ii) and the application was treated as non-maintainable and rejected without examination on merits. Interpretation and reasoning 2.5 The Tribunal noted that the only reason for rejection of the application for permanent registration was the assessee having applied under section 80G(5)(ii) instead of section 80G(5)(iii), even though the assessee already enjoyed provisional registration under section 80G and registration under section 12AB, and the genuineness of the activities was not doubted. 2.6 The Tribunal observed that such an error in mentioning the applicable clause is a technical or procedural mistake, not going to the substance of the assessee's eligibility or the genuineness of its charitable activities. Denial of permanent registration solely on this ground would adversely affect charitable activities despite no substantive defect being found. 2.7 The Tribunal relied on the reasoning adopted in a co-ordinate Bench decision, where an identical issue was considered. In that decision, it was held that: (i) a wrong clause cited in the application for final approval under section 80G was a rectifiable mistake, not an illegality; (ii) all relevant facts regarding prior registration under sections 12A and 80G and subsequent provisional registration under the amended regime were already on record; (iii) instead of requiring withdrawal and refiling, the Commissioner (Exemption) ought to have afforded an opportunity to rectify the clause or could have suo motu treated the application as filed under the correct clause; and (iv) the application ought to be examined on merits, with delay or technical defects being condoned. 2.8 Applying the same rationale, the Tribunal held that the Commissioner (Exemption) should not have rejected the application as non-maintainable without examining the merits and should have allowed the assessee to correct the clause or treated the application as one under clause (iii) of the first proviso to section 80G(5). Conclusions 2.9 Rejection of the assessee's application for permanent approval under section 80G(5) solely on the ground that it was filed under clause (ii) instead of clause (iii) of the first proviso was held to be unsustainable. 2.10 The impugned order of the Commissioner (Exemption) was set aside, and the matter was remanded with a direction to pass a fresh order on merits on the basis of a rectified application to be filed by the assessee, mentioning the correct clause (iii) of the first proviso to section 80G(5). 2.11 The assessee was directed to file the application for permanent registration under clause (iii) of the first proviso to section 80G, and the Commissioner (Exemption) was directed to decide the application on merits without being influenced by the earlier technical lapse.