2025 (8) TMI 1674 - AT - Income Tax

Section 80G registration denial set aside for routine rejection; remitted for fresh consideration after delay condonation plea

Maharanyam Muralidhara Swamiji Vedha Ashram Versus The Commissioner of Income Tax (Exemptions), Hyderabad

ITAT, Hyderabad set aside the denial of regular registration under section 80G, finding that the assessing authority (CIT(E)) rejected the application ... Denial of Regular registration u/sec. 80G - Application filled beyond the time limit prescribed for filing of Form 10AB - as per the Finance Act, 2020, the assessee should have applied Form 10AB for regular registration u/sec. 80G, at least six months before the expiry of provisional registration or within six months from the date of commencement of activities, whichever is earlier. HELD THAT:- Although, the CBDT has issued Circulars from time to time and explained the procedure to be followed for obtaining registration, but, there is an ambiguity in law, which is difficult to understand by any layman. Therefore, in our considered view, when the assessee has filed it’s application for permanent registration atleast before six months from the expiry of provisional registration, CIT(E) ought to have consider the application filed by the assessee on merits, when the assessee claims to have filed relevant evidences to prove carrying-out charitable activities in accordance with it’s objects. Assessee claims to have filed a petition for condonation of delay in terms of amended provisions which is applicable from 01.10.2024. Therefore, CIT(E) has rejected the application filed by the assessee in a routine manner without even considering the explanation for delay in filing of the application and also on merits, in our considered view, the issue needs to be set-aside to the file of CIT(E) to give another opportunity of hearing to the appellant-trust. Appeals filed by the assessee are allowed for statistical purposes. ISSUES PRESENTED AND CONSIDERED 1. Whether an application in Form 10AB for regular registration under section 12AB and section 80G of the Income Tax Act, filed after the extended filing date under CBDT Circular but at least six months prior to expiry of provisional registration, can be rejected solely on ground of delay without considering merits and explanations for delay. 2. Whether the assessing authority (Commissioner (Exemptions)) is obliged to consider explanations for delay and an application for condonation of delay under the amended statutory framework effective from 01.10.2024 before rejecting an application for registration under sections 12AB and 80G. 3. Whether factual material demonstrating commencement of activities, timely filing of returns and auditor's reports, and documentary evidence of charitable activity should be considered on merits when an applicant files Form 10AB before expiry of provisional registration but beyond the CBDT-extended cutoff. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of rejecting Form 10AB solely for delay when application is filed at least six months prior to expiry of provisional registration Legal framework: Sections 12AB(1)(ac)(ii) and 80G(5)(iv) require filing Form 10AB for permanent registration at least six months before expiry of provisional registration or within six months from commencement of activities, whichever is earlier. CBDT Circular extended filing till a specified date for hardship (Circular No.7 of 2024). Subsequent amendment effective 01.10.2024 introduced a proviso permitting filing with reasons for condonation of delay. Precedent treatment: No specific precedent in the text was cited; the Tribunal treated the statutory amendments and administrative circulars as governing the timeline and the discretion to condone delay. Interpretation and reasoning: The Court recognized two temporal benchmarks: (a) six months before expiry of provisional registration and (b) six months from commencement of activities. Where an applicant files Form 10AB at least six months before expiry of provisional registration (though beyond the CBDT-extended cutoff), the filing aligns with the statutory protection intended by the 'six months prior to expiry' limb. Given the statutory complexity and amendments, rejecting an application solely on the ground of temporal delay without examining whether the filing satisfies the alternate statutory limb is unsound. The Court emphasized that administrative circulars are meant to mitigate hardship and that amendment permitting condonation of delay makes it incumbent on the authority to consider explanations for late filing where applicable. Ratio vs. Obiter: Ratio - An application filed at least six months prior to expiry of provisional registration cannot be summarily rejected solely on the ground of being beyond an extended administrative cutoff without consideration of the alternate statutory timeline and explanations for delay. Obiter - Observations on administrative confusion and layman difficulty in understanding amendments (supporting remedial approach) are guidance rather than binding ratio. Conclusions: Rejection solely on the basis of delay (as per CBDT circular cutoff) was inappropriate where the application met the statutory six-month-before-expiry criterion; matter requires reconsideration on merits including delay explanation. Issue 2 - Duty to consider explanations for delay and condonation petitions under amended law Legal framework: Proviso inserted w.e.f. 01.10.2024 allows the applicant to file reasons for condonation of delay; authorities possess discretion to admit delayed applications after considering explanations and relevant material. Precedent treatment: Not applicable in the judgment; the Court applied statutory amendment directly to the authority's duty. Interpretation and reasoning: The Court held that after amendment, the Commissioner (Exemptions) must consider any submissions and petitions for condonation of delay before rejecting an application. Denial without considering explanations (including the asserted ambiguity in law and lack of professional assistance) constitutes failure to exercise jurisdiction properly. The Court noted that procedural changes and frequent amendments have created confusion, thereby strengthening the need for authorities to consider explanations in good faith rather than issue routine rejections. Ratio vs. Obiter: Ratio - Authority is required to consider explanations for delay and any condonation petition under the amended provisions before rejecting Form 10AB. Obiter - Commentary on administrative confusion and need for pragmatic approach is persuasive but ancillary. Conclusions: The matter must be remitted for the authority to consider condonation requests and the reasons for delay; the initial rejection without such consideration is set aside. Issue 3 - Obligation to decide application on merits when supporting evidence of activities, returns and auditor reports is filed Legal framework: Registration under sections 12AB and 80G depends on satisfaction about objects and activities; procedural compliance includes filing returns and auditor's report (Form 10BB) within due dates. Precedent treatment: No prior rulings cited; Tribunal applied principled administrative law requiring merits consideration where factual material exists. Interpretation and reasoning: The Court observed that the applicant had commenced activities, filed returns timely, and submitted auditor reports and other evidence. When such material is on record and the application is filed before expiry of provisional registration, the Commissioner ought to have examined the substantive compliance with objects and activities rather than dismiss on temporal grounds. The treatment of applications in a 'routine manner' without considering evidence and explanations was held to be contrary to fair procedure. Ratio vs. Obiter: Ratio - An application supported by documentary evidence of activities and statutory filings must be considered on merits and not rejected summarily for delay when the filing aligns with one of the statutory timelines. Obiter - Observations on the difficulty lay trusts face in interpreting frequent legislative changes. Conclusions: The authority must reconsider the Form 10AB on merits, taking into account the documentary evidence of activities, returns and auditor's reports; matter remitted for fresh decision after opportunity of hearing. Disposition and remedial direction (operative conclusion) The Tribunal set aside the Commissioner's orders rejecting Form 10AB under sections 12AB and 80G and remitted the matter for fresh consideration. The Commissioner is directed to (a) afford an opportunity of hearing, (b) consider any petition for condonation of delay under the amended law, and (c) decide the application on merits after evaluating the documentary evidence submitted by the applicant. This remedial direction constitutes the binding outcome of the judgment.