Typo in Section 80G(5) Application Leads to Rejection; Fresh Filing Under 80G(5)(iii) Directed

ITAT RAJKOT held that the rejection of the application under section 80G(5)(iii) was due to a typographical error, as the assessee had mistakenly filed it under section 80G(5)(ii). The tribunal directed the assessee to file a fresh application under the correct provision, section 80G(5)(iii), in Form No. 10AB before the CIT(E). The CIT(E) was further directed to decide the application on merits in accordance with law. The appeal was allowed for statistical purposes.

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1. ISSUES PRESENTED and CONSIDERED

• Whether the application filed under clause (ii) of the first proviso to sub-section (5) of section 80G of the Income Tax Act, 1961, when the correct clause should have been (iii), can be rejected on the ground of non-maintainability due to such error.
• Whether a typographical error in the clause reference in Form No. 10AB justifies rejection of the application for approval under section 80G(5) of the Act.
• Whether the assessing authority (CIT (Exemption)) ought to allow rectification of such typographical error with the consent of the applicant instead of outright rejection.
• Whether the application for permanent registration under section 80G(5)(iii) can be entertained and decided on merit after rectification of the application.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Validity of rejection of application due to filing under incorrect clause (ii) instead of clause (iii) of first proviso to section 80G(5) of the Income Tax Act

Relevant legal framework and precedents:

Section 80G(5) of the Income Tax Act, 1961, provides for registration and approval of trusts for claiming deduction under section 80G. The first proviso to sub-section (5) contains multiple clauses specifying different categories or conditions for approval. The application for approval must be filed under the correct clause corresponding to the trust's status and eligibility.

The procedural requirement is to file Form No. 10AB electronically for seeking approval under section 80G(5). Prior provisional registration under clause (iv) may require filing of permanent registration application under clause (iii).

Precedent from a Coordinate Bench of ITAT, Ahmedabad, held that a typographical error in mentioning clause (ii) instead of clause (iii) in the application should not lead to rejection of the application but should be allowed to be rectified and decided on merit. The genuineness of the trust's activities and provisional registration were not in dispute, and the rejection solely on the basis of incorrect clause reference was held to be unjustified.

Court's interpretation and reasoning:

The Tribunal observed that the rejection by the CIT (Exemption) was solely on the ground that the application was filed under clause (ii) instead of clause (iii). This was identified as a typographical error on the part of the assessee. The Tribunal emphasized that such a clerical mistake should not result in denial of substantive rights or affect the charitable activities carried out by the trust.

The Tribunal relied on the Coordinate Bench's judgment which directed that the application should be rectified and decided on merits. The Tribunal noted that the genuineness of the trust's activities was not doubted, and provisional registration was already granted, which further supported allowing rectification.

Key evidence and findings:

• The application in Form No. 10AB was filed electronically on 27/09/2023 under clause (ii) instead of clause (iii).
• Provisional registration under clause (iv) was granted on 09/07/2021 for AY 2021-22 to AY 2023-24.
• Correspondence and clarifications were exchanged between the assessee and CIT (Exemption).
• The assessee's counsel admitted the typographical error and submitted that it should be corrected rather than rejected.

Application of law to facts:

Given that the application was incorrectly filed under clause (ii) due to a typographical error, and the trust was otherwise eligible and had provisional registration, the Tribunal applied the principle of allowing correction of such errors rather than rejecting the application outright. The law mandates approval on merit and procedural compliance, and a mere clerical mistake should not deprive the trust of its rights.

Treatment of competing arguments:

The Revenue's representative relied on the CIT (Exemption)'s order rejecting the application as non-maintainable due to incorrect clause reference. The Tribunal rejected this argument, holding that the rejection was not justified in law or on facts and that the application should be allowed to be rectified and decided on merit.

Conclusions:

• The rejection of the application solely on the ground of filing under clause (ii) instead of clause (iii) is not justified.
• The typographical error in the application is curable and should be rectified with the consent of the applicant.
• The application should be re-filed correctly under clause (iii) and decided on merits by the CIT (Exemption).

Issue 3 & 4: Direction for filing fresh application and decision on merits

Relevant legal framework and precedents:

The Income Tax Act allows for provisional registration under section 80G(5)(iv) and permanent registration under section 80G(5)(iii). The procedure requires filing Form No. 10AB for permanent registration. The CIT (Exemption) has the authority to grant or reject approval based on merits and compliance.

The Coordinate Bench precedent directs that in cases of clerical or typographical errors, the matter should be remanded to the CIT (Exemption) for fresh consideration on merits after rectification.

Court's interpretation and reasoning:

The Tribunal directed that the assessee file a fresh application in Form No. 10AB under the correct clause (iii) of the first proviso to section 80G(5). The CIT (Exemption) was directed to consider and decide the application on merits in accordance with law.

The Tribunal emphasized that the appeal was allowed for statistical purposes, indicating that the substantive rights of the assessee were preserved pending fresh consideration.

Key evidence and findings:

• The assessee's provisional registration and genuine charitable activities were acknowledged.
• The incorrect clause reference was admitted as a typographical error.
• The Coordinate Bench precedent supported remand for fresh decision.

Application of law to facts:

The Tribunal applied the principle of natural justice and procedural fairness, ensuring that the assessee's application is considered on substantive merits rather than procedural technicalities.

Treatment of competing arguments:

The Revenue's reliance on procedural rejection was overruled in favor of allowing rectification and merit-based consideration.

Conclusions:

• The assessee is directed to file a fresh application under section 80G(5)(iii) in Form No. 10AB.
• The CIT (Exemption) shall decide the application on merits in accordance with law.
• The appeal is allowed for statistical purposes, preserving the assessee's right to approval.

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