Denial of final approval under s.80G(5) improper where provisional approval existed and wrong sub-clause citation was inadvertent

ITAT AHMEDABAD held that denial of final approval under s.80G(5) was improper where the assessee had provisional approval and had inadvertently cited the wrong sub-clause; the CIT(E) knew the true position and could have corrected the error. The tribunal directed the CIT(E) to treat the application as made under the correct sub-clause, reconsider the file accordingly and pass orders on grant of final approval under s.80G(5) in accordance with law.

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The core legal questions considered by the Tribunal in this appeal are:

1. Whether the delay of 109 days in filing the appeal before the Tribunal should be condoned under the principle of "sufficient cause" as per Section 5 of the Limitation Act, given the explanation provided by the assessee trust.

2. Whether the rejection of the assessee's application seeking approval under Section 80G(5) of the Income Tax Act, 1961, by the Commissioner of Income Tax (Exemption) was justified solely on the ground that the application was filed under an incorrect sub-clause of the First Proviso to Section 80G(5), despite all relevant facts being on record.

3. Whether the application for final approval under Section 80G(5) should be considered in the correct sub-clause of the proviso, notwithstanding the inadvertent error in mentioning the wrong sub-clause in the application.

Issue 1: Condonation of Delay in Filing Appeal

Relevant Legal Framework and Precedents: The Tribunal relied on Section 5 of the Limitation Act, which allows condonation of delay if sufficient cause is shown. The principle is that the term "sufficient cause" must be liberally construed to advance substantial justice. The Tribunal referred to the Apex Court decision in Collector Land Acquisition Vs. Mst. Katiji & Others (1987 AIR 1353), which emphasized that delay should not be condoned if it is deliberate or part of a dilatory strategy, but mere inadvertence or lack of knowledge should not bar justice.

Court's Interpretation and Reasoning: The Tribunal found that the delay was due to the trustee's advanced age (62 years), lack of familiarity with Income Tax matters, and inability to use computer technology, which prevented timely knowledge of the CIT(E)'s order rejecting the approval application. The trustee came to know of the order only through other trustees in January 2025 and immediately took steps to file the appeal. The Revenue failed to prove that the explanation was false or mala fide.

Application of Law to Facts: The Tribunal held that the explanation constituted "sufficient cause" for condonation of delay. It noted that the delay was not deliberate or due to negligence but arose from bona fide and unavoidable circumstances.

Treatment of Competing Arguments: The Revenue opposed condonation, but the Tribunal gave precedence to substantial justice over technicalities.

Conclusion: The delay of 109 days in filing the appeal was condoned, and the appeal admitted for adjudication.

Issue 2 and 3: Validity of Rejection of Application under Section 80G(5) for Mentioning Incorrect Sub-Clause

Relevant Legal Framework and Precedents: Section 80G(5) of the Income Tax Act, as amended by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, prescribes detailed provisions for grant of approval to institutions or funds for claiming deduction on donations. The First Proviso to Section 80G(5) categorizes applications for approval into various sub-clauses depending on the status of the institution/fund:

• Sub-clause (i): Institutions already approved under the old law as of 1st April 2021.
• Sub-clause (ii): Institutions with approval expiring.
• Sub-clause (iii): Institutions provisionally approved seeking final approval.
• Sub-clause (iv): Institutions that have not commenced activities or have commenced activities but are seeking provisional approval.

Separate forms and timelines are prescribed for each category. The Tribunal also relied on a recent decision of the ITAT Mumbai Bench in Rotary Charity Trust vs. CIT(E), which dealt with an identical issue of an inadvertent error in mentioning the sub-clause while seeking final approval after provisional registration.

Court's Interpretation and Reasoning: The assessee had provisional approval granted under sub-clause (iv) on 01.10.2021. When applying for final approval, the assessee inadvertently filed the application again under sub-clause (iv) instead of the correct sub-clause (iii). The CIT(E) rejected the application solely on this ground, without considering the facts that the provisional approval was granted by his own office and that the error was inadvertent. The Tribunal observed that the CIT(E) was aware of the facts and could have corrected the application or considered it under the correct sub-clause.

Key Evidence and Findings: The provisional approval certificate (Form 10AC) dated 01.10.2021 issued by the CIT(E) was on record, confirming provisional registration under the relevant sub-clause. The application for final approval (Form 10AB) incorrectly mentioned the sub-clause. The Tribunal noted that the CIT(E) did not afford the assessee an opportunity of being heard on the error before rejecting the application.

Application of Law to Facts: The Tribunal applied the principle of substantial justice and the precedent set by the ITAT Mumbai Bench, which held that such inadvertent errors should not result in outright rejection if the facts reveal eligibility under the correct provision. The Tribunal emphasized that the CIT(E) should consider the application as if filed under the correct sub-clause and decide on merits.

Treatment of Competing Arguments: The Revenue strongly supported the rejection but could not dispute the inadvertent nature of the error or the presence of all relevant facts before the CIT(E). The Tribunal found the Revenue's argument unpersuasive in light of the facts and legal principles.

Conclusion: The rejection of the application solely on the ground of mentioning the incorrect sub-clause was unjustified. The matter was remitted to the CIT(E) with a direction to consider the application afresh under the correct sub-clause (iii) and grant final approval if otherwise eligible.

Significant Holdings:

"The delay therefore is for sufficient cause and not deliberate or on account of any laxity on the part of the assessee."

"The word 'sufficient cause' as per section 5 of the Limitation Act should receive a liberal construction so as to advance substantial justice and that merely because there is some lapse of the litigant concerned, that alone is not enough to shut the door of justice to him."

"It is abundantly clearly, therefore, the assessee's application seeking approval u/s.80G(5) of the Act has been denied merely for an inadvertent mistake of mentioning incorrect Sub-Clause in which the application was made, which Ld. CIT(E) himself could have corrected and considered in the light of the fact that he was aware of the fact and situation in which the application was filed by the assessee."

"We, therefore, find merit in the contention of the Ld. Counsel for the assessee that the Ld. CIT(E) ought not to have rejected the assessee's application but should have considered it in the light of the correct provisions of law."

"We direct the Ld. CIT(E) to consider the application of the assessee to have been made as per the applicable provision of law and, thereafter, pass order regarding grant of final approval u/s.80G(5) of the Act in accordance with law."

The Tribunal established the core principles that:

• Delay in filing appeals should be condoned liberally if bona fide reasons exist and no mala fide or deliberate delay is shown.
• Inadvertent errors in statutory applications, especially where all facts are on record and known to the authority, should not lead to outright rejection but should be corrected or the application considered under the correct provision.
• The authorities must afford reasonable opportunity to the applicant before rejecting applications on technical grounds.
• Substantial justice must prevail over technicalities, particularly in matters involving charitable institutions seeking tax approvals.

Accordingly, the Tribunal allowed the appeal for statistical purposes, condoned the delay, and remitted the matter back to the CIT(E) for fresh consideration of the application for final approval under Section 80G(5) on the correct sub-clause, in accordance with law and after affording the assessee an opportunity of being heard.

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