2025 (9) TMI 1033 - AT - Income Tax

Fresh Form 10AB filed under CBDT Circular No.7/2024 held valid despite earlier wrong section code; 80G(5) approval remitted

ITAT held that the assessee's fresh Form 10AB filed within the CBDT Circular No.7/2024 extended period was valid despite an earlier rejection for ... Rejecting application seeking registration u/s. 80G(5) - CIT(E) reveals that he rejected assessee’s application noting that the assessee had earlier also filed an application which stood rejected vide order dated 03-09- 2024 and the said earlier rejection order was not covered by CBDT Circular No. 7 of 2024 dated 25-04-2024, so as to entitle the assessee to file a fresh application within the extended date provided by the said circular HELD THAT:- We have perused the contents of the CBDT Circular No.7 dated 25-04-24, which extends time limit for filing applications in Form 10AB not filed upto the date of the issuance of the said Circular, upto 30-06-24. Applications pending for approval on the date of issuance of the Circular, i.e. 25-04-24, were also to be treated as valid. Since time limit was extended, therefore those assessee’s whose earlier applications were rejected as delayed were allowed to file fresh applications within extended time, vide Para 4.1 of the Circular. The said para also allowed assesses whose earlier applications were rejected on account of incorrect section code mentioned, to file fresh applications within extended time limit. Thus, the CBDT Circular extended time for filing Form 10AB and also allowed filing of fresh form within the extended time in circumstances where original Form stood rejected for delayed filing or for mentioning incorrect section code. Assessee had mentioned wrong code in the original application filed on 23-03- 24 and rectified the same by filing another form 10AB on 04-06- 24, within the time extended by CBDT Circular 07 dated 25-04- 24 and even before the original Form was considered and order passed by Ld.CIT( E) on 02-09-24. Clearly when the CBDT Circular itself gives assessee benefit of extended time to file fresh applications for rectifying their errors of mentioning wrong section code on account of which their earlier application stood rejected, in the facts of the present case where the assessee rectified this error even before detection by the Ld.CIT(E), the assessee stands on a better footing. This new application, rectifying the error in the earlier application of wrong section code, filed before the original application was considered for approval and order passed therein, is to be considered as original application, and being filed within extended time, the assessee’s application, we hold, is squarely covered by CBDT Circular No.7 dated 25-04-24. The assessee we hold is entitled to benefit of extended time prescribed in the said Circular and the rejection of the same by the Ld.CIT( E) as not covered by the CBDT Circular, is incorrect. Order of the Ld.CIT (E) is set aside and he is directed to consider assessee’s application seeking approval u/s 80G(5) of the Act and pass order following due process of law. Appeal of the assessee is allowed for statistical purposes. ISSUES PRESENTED AND CONSIDERED 1. Whether an application in Form No.10AB filed within the extended time granted by the Board's circular is maintainable where an earlier application was filed with an incorrect section code and a fresh/corrected application is filed within the extended period. 2. Whether the benefit conferred by paragraph 4.1 of the Board's circular (permitting filing of a fresh application within the extended time where an earlier application was rejected solely for delayed filing or wrong section code) applies where the fresh/corrected application was filed before the authority passed an order rejecting the earlier application. 3. Whether an application is excluded from the benefit of paragraph 4.1 where the earlier application was rejected on grounds other than delayed filing or incorrect section code (specifically, for failure to participate in proceedings and thereby preventing verification of genuineness of activities). ISSUE-WISE DETAILED ANALYSIS Issue 1 - Applicability of CBDT circular (para 4.1) to fresh applications correcting wrong section code Legal framework: The Board, exercising powers under section 119 of the Act, extended due dates for filing Forms 10A/10AB and in paragraph 4.1 expressly permitted trusts/institutions whose earlier Form No.10AB was rejected solely because (i) it was furnished after the due date or (ii) it had been furnished under the wrong section code, to furnish a fresh application within the extended period. Precedent treatment: No prior judicial precedents were invoked or applied in the judgment; the Court proceeded on textual construction of the circular and statute. Interpretation and reasoning: The Court construed paragraph 4.1 purposively - the Board intended to mitigate genuine hardship caused by electronic-filing difficulties and to allow rectification of specified procedural errors by permitting fresh filing within the extended period. Where an original application contained an incorrect section code and a corrected application is filed within the extended time, the corrected filing falls squarely within the remedial scope of paragraph 4.1. Ratio vs. Obiter: Ratio - the Court's interpretation that paragraph 4.1 authorizes filing a fresh Form 10AB within the extended period to correct an earlier wrong section code is essential to the decision. Conclusions: The Court holds that paragraph 4.1 applies to a fresh application filed within the extended period that corrects an earlier application's incorrect section code; such fresh filing is maintainable and to be treated as a valid application for consideration under section 80G(5). Issue 2 - Effect of timing: fresh application filed before rejection of earlier application Legal framework: The circular (para 3 and para 4) treats pending applications as valid where the Commissioner had not passed an order before issuance of the circular and expressly permits fresh applications in specified rejected-once circumstances within the extended time. Precedent treatment: None relied upon; Court applied plain-text and purposive construction. Interpretation and reasoning: The Court reasoned that if the corrective/fresh application is filed within the extended time and before the earlier application was adjudicated, the corrected application stands on at least as good a footing as one filed after rejection and squarely comes within the remedial intent of the circular. The timing - filing the corrected form before detection or rejection of the earlier error - places the applicant in a better position, not a worse one, and cannot be treated as outside the circular's relief. Ratio vs. Obiter: Ratio - the holding that a fresh/corrected Form 10AB filed within the extended time prior to any rejection of the earlier application is to be considered an original/valid application under the circular is central to the decision. Conclusions: The Court concludes that filing a corrected Form 10AB within the extended time prior to the rejection of the earlier application is covered by the circular and renders the corrected filing maintainable for consideration under the Act. Issue 3 - Rejections for reasons other than delayed filing or wrong section code: limitation of paragraph 4.1 Legal framework: Paragraph 4.1 is framed narrowly to permit fresh filing only where the earlier rejection was 'solely on account of the fact that the application was furnished after the due date or that the application has been furnished under the wrong section code.' Precedent treatment: No authorities considered; analysis based on language of the circular and facts. Interpretation and reasoning: The Court acknowledged that where an earlier application was rejected for reasons other than those specified in paragraph 4.1 (for example, for non-participation in proceedings, inability to verify genuineness of activities, or failure to satisfy substantive conditions), paragraph 4.1 would not entitle the applicant to file a fresh application under the remedial grant. The circular's relief is confined to procedural defects expressly enumerated; substantive rejections are not thereby cured. Ratio vs. Obiter: Ratio - the limitation that paragraph 4.1 does not cover rejections grounded on substantive or investigative deficiencies (as opposed to late filing or incorrect section code) is an operative conclusion of the Court. Conclusions: The Court confirmed that paragraph 4.1 does not extend to cases where the earlier rejection was for reasons other than delayed filing or incorrect section code; such cases are not entitled to the fresh-filing benefit of the circular. Cross-reference and application to facts The Court applied the foregoing principles to the facts: the original Form No.10AB bore an incorrect section code; a corrected Form was filed within the extended period and before the earlier application was rejected; the earlier rejection (when later passed) was for non-participation and verification failure, but the corrected filing preceded that rejection. Applying the circular's terms and purposive intent, the Court held the corrected application is a valid application within the extended time and entitled to consideration. Remedial conclusion and direction As a consequence of the legal conclusions above, the Court set aside the order denying maintainability and directed the authority to consider the corrected Form No.10AB on merits, following due process and applicable legal requirements.