Denial of section 12AB registration for delayed Form 10AB invalid; CBDT Circular 22/2022 requires fresh examination

ITAT (Surat) held that the cancellation/denial of registration u/s 12AB to the appellant trust on the sole ground of delay in filing Form 10AB was unsustainable, as the time limit had been validly extended by CBDT Circular No. 22/2022. The Tribunal observed that the CIT(E) failed to examine the merits and compliance requirements under s.12A before rejecting the application. The matter was remanded to the CIT(E) for de novo consideration on merits after verifying the trust's details. The appeal was partly allowed for statistical purposes.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the delay of 544 days in filing the appeal before the Tribunal against the order of rejection of registration under Section 12AB deserved to be condoned.

1.2 Whether rejection of the application for registration under Section 12AB on the ground of delay in filing Form No. 10AB, in view of the time limits under Section 12A(1)(ac) and CBDT Circular No. 22/2022, was legally sustainable when the merits of eligibility under Section 12A/12AB were not examined.

1.3 Whether the matter required remand to the Commissioner (Exemptions) for fresh adjudication after due consideration of the merits and compliance with principles of natural justice.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Condonation of delay in filing appeal

Interpretation and reasoning: The Tribunal noted that there was a delay of 544 days in filing the appeal. The assessee supported the condonation request with a detailed affidavit explaining that the earlier Chartered Accountant mishandled and did not properly follow the proceedings, and that the trustees were not aware of the intricacies of law and could not properly follow up. The Tribunal considered these reasons to be genuine. The objection of the Departmental Representative that a delay of almost two years should not be condoned was considered but not accepted, as the Tribunal had already found sufficient cause in the assessee's explanation.

Conclusion: The delay in filing the appeal was condoned and the appeal was admitted.

Issue 2: Legality of rejection of registration under Section 12AB on ground of delay in Form 10AB

Legal framework: The Tribunal referred to Section 12A(1)(ac) prescribing time limits for filing applications in Form No. 10A and 10AB, and to CBDT Circular No. 22/2022, which extended the time limit for filing such applications up to 25.11.2022. The provisions of Section 12AB governing registration of trusts and the requirement of examining the objects and activities for granting registration were also implicit in the discussion.

Interpretation and reasoning: The Commissioner (Exemptions) considered the time limits under Section 12A(1)(ac) as mandatory and held that the assessee had not filed its application for registration at least six months prior to expiry of the provisional registration, i.e., on or before 30.09.2022, and accordingly rejected the application. The Tribunal observed that the CBDT, by Circular No. 22/2022, had already extended the time limit for filing the application in Form No. 10AB up to 25.11.2022. In this backdrop, the Tribunal held that the Commissioner (Exemptions) could not reject the application solely on the ground of delay in filing Form No. 10AB. Further, the Tribunal noted that the Commissioner (Exemptions) had not examined or discussed the merits of the trust's case in the context of Section 12A and the substantive conditions for grant of registration, and the order was confined only to the aspect of limitation.

Conclusion: Rejection of the application for registration under Section 12AB solely on the ground of delay in filing Form No. 10AB, without considering the extended time limit under CBDT Circular No. 22/2022 and without examining the merits under Section 12A/12AB, was held to be unsustainable.

Issue 3: Requirement of remand and observance of natural justice

Interpretation and reasoning: Since the Commissioner (Exemptions) had not evaluated the objects, activities and other relevant details of the assessee trust for purposes of registration under Section 12AB, the Tribunal considered it appropriate that the matter be reconsidered by the Commissioner (Exemptions) on merits. The Tribunal emphasized that the Commissioner (Exemptions) must verify the details filed by the assessee and adjudicate the eligibility for registration in accordance with law. The Tribunal also directed that, in such fresh proceedings, the assessee must be afforded an opportunity of hearing, and the principles of natural justice must be followed.

Conclusion: The matter was remanded to the Commissioner (Exemptions) for fresh adjudication of the assessee's application for registration under Section 12AB on merits, after granting adequate opportunity of hearing and following principles of natural justice. The appeal was treated as partly allowed for statistical purposes.

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