Rejection of 80G(5) Approval for Wrong Section Code is Hyper-Technical, Allows Opportunity to Rectify

ITAT Pune-AT allowed the appeal and held that rejection of approval u/s 80G(5) on the ground of selecting the wrong section code in Form No.10AB was hyper-technical. The tribunal ruled that the assessee should be given an opportunity to rectify the defect, as wrong code selection is not fatal to the claim. The order emphasized natural justice and fairness, directing the revenue to grant one more chance to the appellant to correct the application. The appeal was allowed for statistical purposes.

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ISSUES:

Whether an application for approval under section 80G(5) of the Income Tax Act, 1961 can be rejected on the ground of selecting an incorrect section code in Form No. 10AB.Whether the assessing authority is required to provide an opportunity to rectify technical or procedural defects in the application before rejecting it.Whether a wrong selection of section code/clause in the application form is a fatal defect disentitling the applicant from consideration on merits.

RULINGS / HOLDINGS:

The application for approval under section 80G(5) was wrongly rejected on a hyper-technical ground of non-selection of the correct section code in Form No. 10AB; such rejection without opportunity for rectification was improper.The assessing authority ought to have given an opportunity to the applicant to rectify the defect, as "wrong selection of section code/clause would not disentitle the appellant to its rightful claim."Selection of wrong clause by the applicant "cannot be treated as fatal to the proceedings" and the matter should be decided on merits after allowing correction.

RATIONALE:

The Court applied the statutory framework under section 80G(5) of the Income Tax Act, 1961, which governs the grant of approval to trusts for tax exemption purposes.The Court relied on precedent from a coordinate bench decision interpreting procedural defects in Form No. 10AB applications under related provisions (section 12A/12AB), emphasizing the principle of natural justice and the need to allow rectification of inadvertent mistakes.The decision reflects a doctrinal approach favoring substantive justice over hyper-technical rejections, mandating that procedural errors such as incorrect section code selection should not preclude consideration on merits.The Court set aside the impugned order and remanded the matter for de novo consideration after allowing the applicant to correct the application and comply with procedural requirements.

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