Trust wins section 80G(5) approval after timely application filing and invalid notice service

The ITAT PUNE ruled in favor of the appellant trust regarding denial of section 80G(5) approval. The tribunal held that the trust's application for regular approval was filed within the prescribed limitation period, as it was submitted before the six-month deadline prior to provisional approval expiry. The CIT(Exemptions) was found unjustified in denying approval based on alleged delay in filing Form 10AB. Additionally, the tribunal determined that service of hearing notices through ITBA portal was invalid under section 282(1), citing precedent from Punjab Haryana HC in Munjal BCU Centre case, and concluded proper notice was not served to the appellant.

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Issues:
Appeal against denial of approval u/s. 80G(5) of the Income Tax Act, 1961.

Analysis:
The appeal was filed by a trust against the order denying approval u/s. 80G(5) of the Income Tax Act, 1961. The trust had applied for approval under the relevant provision but was rejected due to a delay in filing the application. The Commissioner of Income Tax (Exemptions) observed that the trust had not filed the application within the prescribed time limit, leading to the denial of approval. Additionally, the Commissioner raised concerns about the genuineness of the trust's activities and fulfillment of conditions under section 80G of the Act.

Despite the trust being aggrieved and appealing the decision, no representation was made on behalf of the assessee during the hearing. The Departmental Representative supported the Commissioner's decision, arguing against any interference by the Tribunal. The Tribunal proceeded to hear the arguments and examine the case based on the material on record.

The Tribunal analyzed the relevant provisions of the proviso to section 80G and highlighted the requirement for filing an application for approval within six months of the commencement of activities or before the expiry of provisional approval. The literal interpretation of the clause led to a discussion on the practical implications for institutions that had commenced activities before the provisional approval was granted, leading to a potential absurd and unjust outcome.

In light of the above discussion, the Tribunal concluded that a fair and reasonable construction of the clause would be to substitute the word "earlier" with "later," allowing institutions like the appellant trust to file for regular approval within a reasonable timeframe. This interpretation was supported by a Supreme Court decision in a similar context.

Regarding the issue of notices served through the ITBA portal, the Tribunal found that such service did not comply with the provisions of the Income Tax Act. Citing a judgment of the Punjab & Haryana High Court, the Tribunal emphasized the importance of following proper communication methods for serving notices and ensuring the principles of natural justice are upheld.

Consequently, the Tribunal ruled in favor of the appellant trust, allowing the appeal in part. The matter was remanded back to the Commissioner for a fresh decision on merits in accordance with the law. The decision was pronounced in the open court on a specified date.

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