2025 (8) TMI 1673 - AT - Income Tax

Order directs reconsideration of 80G registration denial after technical Form 10AB error; remits for fresh merits review

SK Foundation Versus The Commissioner of Income Tax (Exemption), Hyderabad

ITAT HYDERABAD - AT set aside the CIT(E)'s denial of registration under section 80G and allowed the appeal for statistical purposes, directing the CIT(E) ... Denial of registration u/s 80G - assessee has filed Form 10AB with wrong section code and was selected clause-(iv) of first proviso to sub-section-(5) of Section 80G instead of clause (i) of first proviso to s/s (5) of section 80G and assessee has not carried-out any charitable activities - HELD THAT:- First reason given by the CIT(E) is technical in nature. If at all, the assessee filed an incorrect application by choosing incorrect code, then, the learned CIT(E) should have directed the assessee to file correct application and consider the application on merits, if such application filed by the assessee is on or before the due date provided under the Act. The second reason given by the learned CIT(E) is contrary to material available on record, which is evident from the details submitted by the assessee and as per the details, the assessee is running 150 bedded hospital for the benefit of public at large and this fact has been ignored by the learned CIT(E), while rejecting the application filed by the assessee for registration under section 80G of the Act. Assessee society was granted registration under section 12A of the Act, which is in force for the subject assessment year. When the assessee society has been granted 12A Registration, after considering the relevant objects and activities, in our considered view, the application filed by the assessee, seeking for Registration under section 80G cannot be rejected on technical reasons, more particularly, when the assessee has explained the reasons for filing application with in correct code. Since the CIT(E) rejected the application filed by the assessee society, in a casual manner without considering relevant details filed by the assessee, in our considered view, the issue needs to go back to the file of CIT(E) for fresh consideration. Appeal filed by the assessee is allowed for statistical purposes. ISSUES PRESENTED AND CONSIDERED 1. Whether an application for registration under section 80G filed in Form 10AB with an incorrect section/code is a ground for outright rejection, or whether the Commissioner (Appeals)/CIT(E) should allow correction and decide the application on merits. 2. Whether rejection of an application for registration under section 80G on the ground that the applicant has not carried out charitable activities is sustainable where material on record (including existence of a 12A registration and documentary details of activities) indicates charitable operations such as running a 150-bedded hospital. 3. Whether, and to what extent, remedial directions (remand, opportunity of hearing, treating a corrected Form as filed on the original date) are available/appropriate when an application for 80G registration is rejected on technical or incorrectly assessed substantive grounds. ISSUE-WISE DETAILED ANALYSIS Issue 1: Effect of filing Form 10AB with an incorrect section/code - technical defect vs. fatal defect Legal framework: Applications for registration under section 80G are to be filed in Form 10AB with selection of appropriate clause/sub-clause of the proviso to sub-section (5) of section 80G. The statutory scheme contemplates assessment of eligibility on specified criteria; procedural regularity in filing is required but the statute and administrative practice permit rectification of procedural errors in appropriate cases. Precedent Treatment: No specific judicial precedent was cited by the authorities below or in the Tribunal's order; the Tribunal addressed the matter on principles of procedural fairness and merits of the application. Interpretation and reasoning: The Tribunal regarded the selection of an incorrect code in Form 10AB as technical in nature. It reasoned that when an applicant explains the mistake and the substantive eligibility can be determined, the proper course is to allow correction and consider the application on merits rather than reject it outright. The Tribunal relied on administrative sensibility: if the corrected Form is filed within the relevant statutory period (or explained), the CIT(E) should permit rectification and examine eligibility substantively. Ratio vs. Obiter: Ratio - rejection of an 80G application solely on account of an incorrect code in Form 10AB, where the applicant has explained the error and substantive eligibility can be ascertained, is not appropriate; the competent authority should permit correction and decide on merits. Obiter - comments on the CPC's earlier issuance of registration under a different clause (not determinative here) are ancillary. Conclusions: The Tribunal held that the first ground of rejection (wrong section code) is technical and required an opportunity for correction and consideration on merits; the CIT(E) should have directed filing of the correct Form and then considered the application as if the corrected Form were filed on the original date. Issue 2: Rejection on substantive ground that no charitable activities were carried out despite material indicating charitable purpose and existing 12A registration Legal framework: Registration under section 80G requires the entity to be engaged in charitable purposes as defined (including reference to section 2(15)) and to satisfy conditions relevant to eligibility. Registration under section 12A is granted after consideration of objects and activities and bears on the assessment of charitable character. Precedent Treatment: No prior case law was relied upon by the CIT(E); the Tribunal invoked the significance of prior 12A registration and documentary material filed by the applicant in assessing the claim. Interpretation and reasoning: The Tribunal found the CIT(E)'s conclusion - that the society had not carried out charitable activities - to be contrary to material on record. Facts noted by the Tribunal included documentary details and the existence of a 150-bedded hospital established for public benefit, and a valid 12A registration in force for the relevant assessment year. Given that 12A registration was granted after scrutiny of objects and activities, the Tribunal treated it as relevant and probative of charitable character. The Tribunal concluded that the CIT(E) acted in a casual manner by ignoring the submitted details and therefore erred in rejecting the application on substantive grounds without adequate inquiry or opportunity to the applicant. Ratio vs. Obiter: Ratio - substantive rejection of 80G registration on the basis of absence of charitable activity is unsustainable where contemporaneous material and an existing 12A registration demonstrate charitable operations; the competent authority must consider such material and afford the applicant opportunity to substantiate activities. Obiter - detailed characterization of the hospital under section 2(15) is supportive but ancillary to the main holding. Conclusions: The Tribunal held that the second ground of rejection was contrary to record and required fresh consideration; the CIT(E) must consider the documentary evidence of charitable activities (including existence of hospital) and not dismiss the application without proper enquiry. Issue 3: Appropriate remedy - remand, opportunity to file corrected Form, and treatment of corrected filing date Legal framework: Administrative fairness and statutory scheme allow for procedural rectification and for authorities to give applicants an opportunity to remedy defects and to consider applications on merits; where an authority has acted without proper consideration the remedy is remand with directions to provide hearing and reconsideration. Precedent Treatment: No specific authority was cited; the Tribunal applied established principles of natural justice and administrative law to direct remand and correction. Interpretation and reasoning: Given the technical nature of the filing error and the substantive evidence of charitable activity, the Tribunal set aside the CIT(E)'s order and remitted the matter for fresh consideration. It directed the applicant to file the corrected Form with proper particulars and mandated that the CIT(E) treat the revised Form as if filed on the date of the original Form-10AB. The Tribunal also directed that the CIT(E) afford adequate opportunity of hearing and consider prior financial years' activities in assessing eligibility for 80G registration. Ratio vs. Obiter: Ratio - where an application for 80G registration is rejected on technical or incorrectly assessed substantive grounds, the proper remedy is to remit for fresh consideration with directions to allow correction, treat the corrected filing as original if appropriate, and afford the applicant an adequate hearing. Obiter - specific time limits or considerations for retrospective effect beyond treating the corrected Form as filed on the original date were not elaborated and remain open. Conclusions: The Tribunal set aside the rejection, remitted the application to the CIT(E) for fresh consideration on merits after filing of a corrected Form, directed that the corrected Form be treated as filed on the original date, and directed the CIT(E) to consider documentary evidence (including 12A registration and details of the hospital) and to afford opportunity of hearing. Cross-References See Issue 1 (procedural correction) and Issue 2 (substantive sufficiency): the Tribunal linked procedural fairness in allowing correction of Form 10AB with the substantive obligation to consider available evidence of charitable activities (including 12A registration) rather than rejecting applications on technical or cursory grounds.