2025 (9) TMI 21 - AT - Income Tax

Registration rejection under s.12AB set aside for misquoting s.12A(1)(ac)(vi) instead of (i); allow rectification and fresh hearing

Britg Foundation Versus Commissioner of Income Tax (Exemptions), Hyderabad

Britg Foundation Versus Commissioner of Income Tax (Exemptions), Hyderabad - TMI ISSUES PRESENTED AND CONSIDERED 1. Whether the Tribunal should condone a 90-day delay in filing the appeal where the delay was explained as inadvertent confusion about the proper forum and reliance on professional advice. 2. Whether an application for registration under section 12AB should be rejected as infructuous where the applicant had earlier received registration via CPC based on an incorrect section code in Form 10A (a clerical/technical error), and whether such rejection without opportunity to rectify violates principles of natural justice. 3. Whether procedural or clerical errors in selecting the correct section code in Form 10A can justify cancellation/rejection of registration where substantive eligibility for registration under section 12AB is otherwise met, and whether the authority ought to permit rectification and decide the application on merits. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Condonation of Delay (90 days) Legal framework: Statutory limitation rules governing appeals and the power of the Tribunal to condone delay where a party is prevented by 'reasonable and sufficient cause'. Precedent Treatment: The Tribunal applied settled principles permitting condonation where delay is not wilful or deliberate and is explained by a reasonable cause; no specific case law cited in judgment for this issue beyond general practice. Interpretation and reasoning: The assessee filed an affidavit explaining that the order was received online, the appeal deadline was misunderstood due to confusion about the appropriate forum, and professional advice led to belated filing. The Tribunal found the explanation credible and characterized the delay as neither wilful nor deliberate but caused by reasonable circumstances. Ratio vs. Obiter: Ratio - the Tribunal's decision to condone delay is based on applying the statutory relief for 'reasonable and sufficient cause' to the facts; not obiter. Conclusions: Delay of 90 days in filing the appeal is condoned and the appeal admitted for adjudication on merits. Issue 2 - Rejection of Form 10AB as Infructuous for Incorrect Section Code in Earlier Form 10A Legal framework: Provisions relating to registration/reauthorisation of charitable institutions (Form 10A/10AB/10AC) under sections governing registration (section 12A/12AB codes referenced), and principles of natural justice requiring opportunity to be heard before adverse action. Precedent Treatment: The Tribunal referred to the general principle (citing a Supreme Court authority) that procedural lapses should not deny substantive relief where eligibility is otherwise satisfied; other judicial pronouncements supporting non-defeat of substantive rights by clerical errors were noted. The Tribunal relied on these authorities as followed rather than distinguished or overruled. Interpretation and reasoning: The Tribunal found the sole basis for rejection was the incorrect code selection in Form 10A (claimed to be an inadvertent clerical error). It emphasized that CPC had earlier processed/issued a Form 10AC based on that selection and that the error was procedural/technical in nature. The Tribunal reasoned that where the substantive conditions for registration under section 12AB are met, a mere procedural mistake should not result in rejection or cancellation without an opportunity to rectify. Further, denial of an opportunity to correct a clerical error violated principles of natural justice. The Tribunal directed that the matter be remitted to the CIT(E) for fresh consideration after affording the assessee an opportunity to rectify the procedural error and to be heard on merits. Ratio vs. Obiter: Ratio - the decision that procedural/clerical errors in Form 10A do not justify outright rejection/cancellation without affording opportunity to rectify, and the direction to re-examine the application on merits after hearing, constitutes the binding ratio of the judgment. Obiter - ancillary references to general policy considerations (public interest, bona fide charitable work) serve as supporting observations rather than the core legal holding. Conclusions: The rejection of the Form 10AB application for registration and consequent cancellation is set aside. The matter is remitted to the CIT(E) to permit rectification of procedural errors and to decide the registration application afresh after affording a proper opportunity of hearing; appeal allowed for statistical purposes. Issue 3 - Proportionality and Legitimate Expectation/Rectification Power of Authority Legal framework: Principles of proportionality in administrative action, legitimate expectation doctrine where prior administrative act (CPC issuance of Form 10AC) created an expectation of continuity, and statutory/administrative power to rectify apparent mistakes. Precedent Treatment: The Tribunal invoked the established principle (Supreme Court authority) that procedural mistakes should not prevent substantive relief; it relied on this precedent to support relief rather than distinguishing or overruling existing law. Interpretation and reasoning: The Tribunal noted that cancellation or rejection without opportunity to correct a clerical error is disproportionate when the institution otherwise satisfies statutory conditions and when earlier administrative processing (CPC issuance of a registration form) had occurred. The Tribunal observed that the Commissioner ought to allow rectification and re-examination rather than treat the error as fatal. The Tribunal treated the request for rectification as acceptable and within the scope of fair administrative procedure. Ratio vs. Obiter: Ratio - administrative action must be proportionate; authorities should permit rectification of clerical/technical errors and decide on substantive eligibility. Obiter - broader remarks about public interest and the social impact of charitable work are persuasive but not necessary to the legal holding. Conclusions: The Commissioner is directed to exercise power to re-examine the application on merits, allow rectification of the procedural error, and afford the assessee an opportunity of hearing before passing a fresh order; blanket cancellation/rejection for a clerical mistake is not justified.