2025 (9) TMI 499 - AT - Income Tax

Registration u/s 12AB set aside due to unaddressed delay explanations; matter remitted for fresh consideration on merits

Viswa Veda Parayan Brindam Versus The Commissioner of Income Tax (Exemptions), Hyderabad.

ITAT HYDERABAD - AT set aside the CIT(E) order rejecting registration u/s 12AB and remitted the matter for fresh consideration. The tribunal found the ... Rejection of registration u/sec.12AB - assessee trust has applied Form-10AB for regular registration u/sec.12AB beyond the time limit prescribed for filing of Form-10AB - HELD THAT:- As per the provisions of sec.12A(1)(ac)(ii) the appellant is supposed to file application in Form 10AB seeking for permanent registration u/sec.12AB of the Act, atleast six months before the expiry of the provisional registration or within six months from the date of commencement of the activities, whichever is earlier. CBDT has extended the said due date considering the hardship faced by various Trusts/Institutions vide Circular No.7 of 2024 dated 25.04.2024 up-to 30.06.2024. In the present case, the assessee has filed application in Form 10AB on 28.09.2024 which is beyond the due date provided under the Act i.e., within six months from the date of commencement of the activities. Application filed by the assessee is atleast six months before the expiry of the provisional registration. The assessee claimed to have explained the reasons for delay in filing of application and as per the submission of the assessee, there is genuine hardship due to ambiguity in law and also improper assistance from the professionals, but, the delay in filing of the application is unintentional and for want of any benefit. We find that, the law has been amended in the case of trusts for procedure of registration and the same has been amended from time to time which is caused confusion in the minds of the public about the classification of Trust/ Institution. 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, when the assessee has filed it’s application for permanent registration atleast before six months from the expiry of provisional registration, the learned 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 learned CIT(E) to give another opportunity of hearing to the appellant-trust. Appeal of the assessee is allowed for statistical purposes ISSUES PRESENTED AND CONSIDERED 1. Whether an application for regular registration under section 12AB filed after the extended date but at least six months prior to expiry of provisional registration warrants rejection solely on ground of delay where explanations and supporting material are on record. 2. Whether the Commissioner (Exemptions) was obliged to consider on merits (a) the explanation for delay and (b) the substantive documents showing carrying-on of charitable activities and objects, before rejecting a Form 10AB application for regular registration under section 12AB. 3. Whether, in light of the legislative amendment (proviso to section 12A(iv) effective 01.10.2024) permitting condonation of delay, an assessing authority must consider any petition for condonation of delay filed by the applicant when deciding an application for regular registration under section 12AB. 4. Whether the Tribunal should remit the matter for fresh consideration where the authority rejected the Form 10AB application in a routine manner without addressing explanations for delay or the merits. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of rejecting Form 10AB solely for delay where application was filed before expiry of provisional registration Legal framework: Section 12AB (and related transitional provisions under section 12A(1)(ac)(ii)) prescribes timelines for filing Form 10AB - ordinarily at least six months before expiry of provisional registration or within six months from commencement of activities, whichever is earlier. CBDT Circular extended the filing date (Circular No.7 of 2024 to 30.06.2024). The proviso to section 12A(iv) (w.e.f. 01.10.2024) permits consideration of reasons for condonation of delay. Precedent Treatment: No prior judicial precedents are cited or applied in the judgment; therefore, the Court's analysis proceeds on statutory text, administrative circular and facts. Interpretation and reasoning: The Tribunal noted that the applicant filed Form 10AB on 28.09.2024 - beyond the CBDT-extended deadline but nevertheless at least six months before expiry of the provisional registration period. The Tribunal observed legislative amendments and administrative circulars created confusion and ambiguity in practice. Given that the application was filed before expiry of provisional registration, the Tribunal held that rejection solely for delay (without considering explanations and merits) was procedurally inappropriate. Ratio vs. Obiter: Ratio - where an applicant files Form 10AB at least six months before expiry of provisional registration, rejection solely on delayed filing (particularly without considering explanations and supporting material) is impermissible; the authority must consider the application on merits and address explanations for delay. Obiter - observations on the general ambiguity caused by frequent amendments and circulars. Conclusion: The authority should not have rejected the Form 10AB application solely for delay in the circumstances presented; the application required consideration on merits and of the delay explanation. Issue 2 - Obligation to consider explanations for delay and documentary merits before rejection Legal framework: Administrative law principles and statutory scheme require that quasi-judicial/statutory authorities consider material placed before them and afford opportunity to be heard; section 12AB applications require assessment of compliance with objects and activities. Precedent Treatment: No precedents cited; the Tribunal relies on principles of fair adjudication and statutory duty to examine applications on merits. Interpretation and reasoning: The Tribunal found that the Commissioner (Exemptions) issued notices and received responses and documents from the applicant but rejected the application in a routine manner without addressing the submissions or reasons for delay. The Tribunal emphasized the duty to consider both (a) the explanation for delay (including claims of ambiguity in law and lack of professional assistance) and (b) the substantive evidence of carrying-on charitable activities, before arriving at adverse conclusion. Ratio vs. Obiter: Ratio - a statutory authority must consider explanations for delay and the substantive merits of a Form 10AB application where those matters are raised and relevant materials are filed; routine dismissal without addressing them is procedurally unsustainable. Obiter - specific weight to be given to particular explanations (e.g., ambiguity, lack of assistance) left to the authority on remand. Conclusion: The Commissioner erred in rejecting the application without considering the delay explanation and the substantive material; the matter must be reopened for consideration on these aspects. Issue 3 - Effect of proviso to section 12A(iv) (effective 01.10.2024) allowing condonation and obligation to consider petitions for condonation Legal framework: The legislative insertion of a proviso to section 12A(iv) (w.e.f. 01.10.2024) provides for filing application with reasons for condonation of delay. Administrative circulars may extend filing timelines temporarily. Precedent Treatment: No prior decisions addressed; Tribunal applies statutory amendment prospectively to require consideration of condonation petitions filed under amended framework. Interpretation and reasoning: The Tribunal noted the applicant claimed to have filed a petition for condonation of delay under the amended provisions. Given the statutory amendment expressly contemplates consideration of reasons for condonation, the Commissioner should have considered any such petition. Even if the amendment is prospective, where an applicant invokes the amended provision and provides reasons, natural justice and statutory intent require consideration rather than summary rejection. Ratio vs. Obiter: Ratio - where the statutory scheme permits condonation of delay, the authority must consider any petition for condonation filed by the applicant in deciding registration; failure to do so is reversible. Obiter - treatment of borderline filings in relation to the effective date is case-specific and left for authority's fresh determination. Conclusion: The Commissioner ought to have considered the condonation plea in terms of the amended provision; failure to do so requires remand. Issue 4 - Appropriateness of remand where authority failed to consider explanations and merits Legal framework: Principles of appellate intervention and remand; where fact-finding or procedural irregularity occurs (e.g., non-consideration of submissions), appellate body may set aside and remit for fresh decision after compliance with fair process. Precedent Treatment: No authorities cited; Tribunal applied established remedial practice to remit for fresh adjudication. Interpretation and reasoning: Given the record showed notices issued, responses filed, and asserted explanations and evidence before the Commissioner, and given the Commissioner's order rejected the Form 10AB application without addressing these matters, the Tribunal found remand necessary to afford the applicant an opportunity of hearing and to permit the Commissioner to consider the condonation plea and merits afresh. Ratio vs. Obiter: Ratio - remand is appropriate where the authority's decision is rendered without consideration of material submissions and where further fact-finding and opportunity of hearing are warranted. Obiter - procedural directions (e.g., specific timeframe for decision on remand) are left to the authority's administrative discretion. Conclusion: The Tribunal set aside the rejection and remitted the matter to the Commissioner to (a) consider any petition for condonation of delay in terms of applicable law, (b) adjudicate the Form 10AB application on merits after considering the documents filed and opportunity to be heard, and (c) give reasoned decision on both delay and substantive compliance.