2025 (9) TMI 574 - AT - Income Tax

Inadvertent wrong section code in Form 10A is a technical error, not a ground to deny registration; fresh application allowed

M/s. Divyavani Trust Versus Commissioner of Income Tax (Exemption), Hyderabad.

ITAT (Hyderabad) allowed the appeal, holding that inadvertent selection of an incorrect section code in the new Form 10A was a technical error and not a ... Rejecting the application for registration u/s 12AB -application in Form 10AB as infructuous solely on the ground that the assessee selected an incorrect section code in the earlier Form 10A application - HELD THAT:- It is not in dispute that the assessee was holding a valid registration u/s 12AB of the Act w.e.f. 14.05.2019. Due to statutory changes brought into effect from 01.04.2021, the assessee was required to re-apply using Form No. 10A. It is also admitted that Form No. 10A was newly introduced and many assessees had encountered difficulties and confusion in selecting appropriate section codes during the transition period. The assessee inadvertently selected section code pertaining to section 12A(1)(ac)(vi) of the Act instead of the correct section code i.e. section 12A(1)(ac)(i) of the Act. This mistake was purely technical in nature. It is evident that the Revenue itself granted provisional registration vide Form No. 10AC dated 03.08.2023 based on the application containing the wrong code, despite having full knowledge that the assessee was already registered u/s 12AB of the Act w.e.f. 14.05.2019. We are in agreement with the Ld. AR that technical or procedural defects should not come in the way of granting substantive relief, especially where the assessee is a charitable trust engaged in social welfare activities. Accordingly, in the interest of justice and fair play, we set aside the impugned order of the Ld. CIT(E) and restore the matter to his file with a direction to allow the assessee an opportunity to file a fresh application - Appeal of the assessee is allowed for statistical purposes. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether an application for final registration under section 12AB can be rejected solely because an earlier Form 10A contained an incorrect section code, when the incorrect code was a clerical/technical mistake made during a newly introduced filing process. 2. Whether technical or procedural defects (specifically incorrect selection of section code in Form 10A) are curable and whether the applicant must be given an opportunity to rectify such defects before rejection of the application for registration under section 12AB. 3. Whether the Revenue's own grant of provisional registration based on the defective Form 10A affects the propriety of later rejecting the Form 10AB application on the ground of the earlier clerical error. 4. Whether principles of natural justice require giving the applicant an opportunity to correct/clarify a technical defect before final adverse action in the context of charitable trust registration under section 12AB. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Rejection solely for incorrect section code in earlier Form 10A Legal framework: Statutory scheme requires registration/approval under section 12AB; Form No.10A is the prescribed procedure for re-application after legislative amendment; Form No.10AB converts provisional registration to final registration. Precedent Treatment: The Tribunal relied on general administrative-law principles (procedural correctness and curability of technical defects) as applied in comparable contexts; no specific precedent was cited or overruled in the reasoning. Interpretation and reasoning: The Court found the incorrect selection of section code in Form 10A to be a purely technical/clerical mistake occurring during transition to the newly introduced form, and not a substantive deficiency affecting eligibility. The Revenue had, on the basis of the same defective Form 10A, issued provisional registration (Form 10AC), demonstrating tacit acceptance of the application despite the coding error. Therefore, rejection of the Form 10AB solely on the basis of that earlier error ignored the substantive position that the trust held valid registration since 14.05.2019 and that the error did not evidence ineligibility or deliberate misstatement. Ratio vs. Obiter: Ratio - A mere clerical/technical error in selecting a section code in Form 10A, especially during an initial period of transition to a new form, is not a ground for outright rejection of a subsequent Form 10AB application where substantive eligibility is otherwise demonstrable. Obiter - Observations about general confusion among applicants during the transition period; while explanatory, they are ancillary to the holding. Conclusion: Rejection of final-registration application solely on account of an inadvertent incorrect section code in Form 10A is not sustainable where the error is technical and does not affect substantive entitlement to registration. Issue 2: Curability of procedural/technical defects and duty to permit rectification Legal framework: Principles of administrative law and procedural fairness require that procedural defects be curable where they do not strike at the core of statutory disqualification; departmental processes (including prescribed forms) are to be interpreted to advance substantive rights where possible. Precedent Treatment: The Tribunal followed settled administrative-law principle that procedural lapses should not defeat substantive rights; no contrary authority was applied to justify non-curability in the facts. Interpretation and reasoning: The Tribunal emphasized that the form-based error was accidental, not deliberate or fraudulent, and that the assessee otherwise satisfied documentary and procedural requirements. Given that provisional registration had been granted despite the error, fairness required that the assessee be allowed to cure the defect by filing a fresh application under the correct section code and that the matter be adjudicated on merits after affording an opportunity of hearing. Ratio vs. Obiter: Ratio - Technical/formal defects, especially those arising from inadvertence in newly introduced forms, are curable and an applicant must be given an opportunity to correct them before final adverse action is taken. Obiter - Commentary that charitable institutions' substantive rights merit special protection; this informs but does not alone determine the holding. Conclusion: The defect was curable; the Tribunal directed remand for opportunity to re-file/correct and adjudication on merits after hearing. Issue 3: Effect of Revenue's issuance of provisional registration despite the defective Form 10A Legal framework: Administrative consistency and estoppel principles require that an authority's acts be coherent; issuance of provisional registration based on a given application undermines later reliance upon the same application's technical defects to refuse finalization, absent new disqualifying material. Precedent Treatment: The Tribunal treated the Revenue's prior act of issuing Form 10AC as an important factor, implicitly applying principles that an administrative authority should not adopt inconsistent positions that prejudice a party's substantive rights. Interpretation and reasoning: Because the Revenue granted provisional registration on the basis of the Form 10A containing the incorrect code, it cannot in equity and fairness shut out the assessee from final registration later on the basis of that same clerical error without first permitting corrective steps; the double role of the Revenue in accepting the application and then rejecting on technicality was noted as undermining the justification for outright rejection. Ratio vs. Obiter: Ratio - A departmental grant of provisional registration based on an application containing a technical error weighs strongly against subsequent rejection of final registration on the sole ground of that error; absent evidence of substantive ineligibility, the authority should permit correction and adjudicate on merits. Obiter - Discussion of two-fold attribution of mistake (applicant and process) is persuasive but not strictly necessary to the decision. Conclusion: The prior provisional registration negates the propriety of rejecting the Form 10AB solely for the earlier coding mistake; remand and opportunity to correct are required. Issue 4: Natural justice - duty to provide opportunity before rejection Legal framework: Principles of natural justice require notice and opportunity to be heard before adverse administrative action is taken; this includes giving an opportunity to cure procedural defects when such defects are not central to statutory disqualification. Precedent Treatment: The Tribunal applied general natural justice norms and the equitable principle that procedural non-compliance should not defeat substantive entitlement without affording cure or hearing. Interpretation and reasoning: The Tribunal found that no clear opportunity had been afforded to the assessee to rectify the technical defect; rejection without such opportunity violated principles of natural justice. The nature of the error (clerical in a new form), acceptance of the application by issuance of provisional registration, and the assessee's continued engagement in genuine charitable activity strengthened the requirement to permit correction and adjudication on merits. Ratio vs. Obiter: Ratio - Natural justice required giving the applicant a chance to rectify the technical defect prior to final adverse action on the Form 10AB; failure to do so vitiates the rejection. Obiter - Emphasis on protecting charitable institutions from forfeiture of substantive rights by procedural lapses is persuasive context but ancillary to the holding. Conclusion: Principles of natural justice mandated remand with a direction to allow correction and to adjudicate the application on merits after hearing; the prior order was set aside and matter restored to the assessing authority's file. Net Disposition The Tribunal set aside the rejection of the Form 10AB, held that the incorrect section code selection in Form 10A was a curable technical mistake, found that provisional registration issued by the Revenue precluded outright rejection on that ground, concluded that natural justice required permitting rectification and adjudication on merits, and remanded the matter to the authority with directions to allow filing of a fresh application under the correct section code and to decide after affording opportunity of hearing.