Section 80G(5) approval rejection overturned due to procedural non-compliance being curable under CBDT Circular 7/2024

ITAT Jaipur allowed assessee's appeal for statistical purposes after CIT(E) rejected section 80G(5) approval for failure to file permanent approval application within six months of commencement. The rejection was based on procedural non-compliance, which ITAT found curable. CBDT Circular 7/2024 dated April 25, 2024 extended the application deadline to June 30, 2024, considering stakeholder hardship. Since no other adverse observations existed and the circular addressed the timeline issue, ITAT set aside the matter and remanded it to CIT(E) for fresh consideration.

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Issues Involved:
1. Whether the Commissioner of Income Tax (Exemption) erred in not granting approval under section 80G(5) due to the delay in filing the application.
2. Whether the provisional approval granted earlier should be canceled.
3. Whether the Commissioner has the authority to condone the delay in filing the application.

Issue-Wise Detailed Analysis:

1. Delay in Filing the Application for Approval under Section 80G(5):
The assessee filed an online application in Form No. 10AB seeking approval under section 80G of the Income Tax Act, 1961, on 02.09.2023. The Commissioner of Income Tax (Exemption) [CIT(E)] noted that the assessee commenced its activities on 10.02.2022 and filed the application after a delay of six months from the commencement of its activities. According to the CIT(E), the application should have been filed within six months of commencement or at least six months prior to the expiry of the provisional approval, whichever is earlier. The CIT(E) deemed the time limit prescribed under sub-section 5 of section 80G mandatory and rejected the application as it did not fall within the extended period allowed by the Central Board of Direct Taxes (CBDT).

2. Cancellation of Provisional Approval:
The CIT(E) canceled the provisional approval dated 08.03.2023, which was initially granted under clause (iv) of the first proviso to section 80G(5). The CIT(E) argued that no power is given under the Act to condone the delay, and therefore, the application filed by the assessee was rejected as non-maintainable. The decision relied on the ruling of the Hon'ble Kolkata ITAT in the case of Bishnupur Public Education Institute.

3. Authority to Condon the Delay:
The assessee contended that the delay in filing the application should not lead to its rejection. They argued that procedural provisions should aid in the administration of justice and not hinder it. The assessee cited various judgments, including the Hon'ble Supreme Court's decision in S. Nagaraj & Others Vs. State of Karnataka & Another, which emphasized that technicalities should not obstruct substantial justice. The Tribunal observed that section 80G(5) does not explicitly deny the CIT(E) the power to condone delays, unlike section 10(23C)(vi). The Tribunal held that the CIT(E) inherently possesses the power to condone delays unless specifically restricted by the statute.

Tribunal's Observations and Conclusion:
The Tribunal noted that the CBDT had extended the time limit for filing applications under section 80G until 30.06.2024, as per Circular No. 7/2024 dated 25th April 2024. The Tribunal found no other adverse observations in the CIT(E)'s order and deemed it fit to set aside the matter to the CIT(E) for reconsideration in light of the CBDT circular. The Tribunal directed the CIT(E) to grant registration under section 80G(5) based on the application filed on 02.09.2023 and allowed the appeal for statistical purposes.

Order Pronounced:
The appeal of the assessee was allowed for statistical purposes, and the order was pronounced in the open court on 02/07/2024.

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