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Facts
The assessee received provisional approval for registration under Section 80G and applied for regularisation. The CIT(E) rejected the application citing that it was incomplete and filed beyond the permissible time limit, despite the assessee arguing that it was filed well before the provisional approval's expiry.
Held
The Tribunal held that the CIT(E) erred in rejecting the application without properly considering the assessee's submissions and by not following the principles of natural justice. The Tribunal relied on previous ITAT decisions that interpreted the time limit for regularisation differently for existing trusts.
Key Issues
Whether the application for regularisation of provisional registration under Section 80G was filed within the prescribed time limit, and whether the CIT(E) followed the principles of natural justice.
Sections Cited
80G, 11AA(2)
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Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI RAJ KUMAR CHAUHAN
O R D E R PER RAJ KUMAR CHAUHAN (J.M.): 1. This appeal is filed by the appellant/assessee against the order dated 25.03.2025 of Learned Commissioner of Income Tax (Exemption), Mumbai [hereinafter referred to as the “CIT(E)”], wherein the Ld. Page | 1 CIT(E) has rejected the appellant’s application for approval of registration u/s 80G(5) of the Income Tax Act.
The assessee was granted provisional approval and has filed application in Form 10AC for regularization of provisional approval granted by the CPC in Form 10AB under clause (iii) of first proviso to sub-section (5) of section 80G of the Act. On verification of Form 10AB filed by the assessee, the Ld. CIT(E) found that the application was not complete and all the documents required to be accompanying the application were not furnished, hence a notice was issued to the assessee on 15.01.2025 requesting the assessee to furnish the complete set of documents mentioned in Rule 11AA(2). In response, the assessee had made online submission on 30.01.2025. However after going through the submission made by assessee, the Ld. CIT(E) has noticed that the assessee has made violation of section 80G(5)of the Act. A show cause notice was issued regarding the above mentioned violations vide notice dated 11.03.2025. In response the assessee vide letter dated 18.03.2025 under protest submitting that “as the provisional approval is valid till 31st March 2025 and my client has filed for regularisation of provisional approval on 24.09.2024 which is 6 months before 31st March 2025”. However, despite Page | 2 the protest made by assessee, the Ld. CIT(A) proceeded to reject the application on 25.03.2025.
3. Aggrieved by the order of Ld. CIT(E), Assessee preferred the present appeal before us and has raised the following grounds of appeal:-
“1. On the facts and circumstances of the case and in law, the Ld. Commissioner of Income-tax (Exemptions) (CIT(E)) has erred in passing an order dated March 25, 2025, cancelling the provisional registration under section 80G of the Income-tax Act, 1961 (Act) and rejecting the application in Form 10AB filed by the Appellant.
2. On the facts and circumstances of the case and in law, the Ld. CIT(E) has erred in passing an order dated March 25, 2025, cancelling the provisional registration under section 80G of the Act without providing the Appellant with a reasonable opportunity of being heard by the Ld. CIT(E).
3. On the facts and circumstances of the case and in law, the Ld. CIT(E) has erred in passing an order dated March 25, 2025, cancelling the provisional registration under section 80G of the Act, although the Application was complete with all requisite documents.
4. Without prejudice to the above, on the facts and circumstances of the case and in law, the Ld. CIT(E) has erred in passing an order dated March 25, 2025, cancelling the provisional registration under section 80G of the Act without specifying the requisite documents which were not furnished. Page | 3
5. On the facts and circumstances of the case and in law, the Ld. CIT(E) has erred in passing an order dated March 25, 2025, cancelling the provisional registration under section 80G of the Act without appreciating that there was no delay in filing the Application.
Without prejudice to the above, on the facts and circumstances of the case and in law, the Ld. CIT(E) has erred in passing an order dated March 25, 2025, cancelling the provisional registration under section 80G of the Act without condoning the delay of the Appellant, as there was a bona fide reason for the delay of 86 days.
7. The Appellant craves leave to add, amend, alter or delete any or all the above grounds of appeal. ”
4. We have heard Ld AR and DR and examined the record. At the outset, it is pointed out by Ld. AR that the Ld. CIT(A) has passed the impugned order in a very hurried manner without giving sufficient opportunity to the assessee which is evident from the show cause notice issued on 11.03.2025 and in response to the said notice, assessee had replied vide letter dated 18.03.2025, but the contention of the assessee has not been accepted and without appreciating the reply, the Ld. CIT(E) has rejected the application on 25.03.2025. Therefore, the impugned order passed by the Ld. CIT(E) is not legally sustainable in the eyes of law. Ld. AR requested that the impugned order be set aside and restore to the file to Ld. CIT(E) for giving proper opportunity of hearing to the assessee for furnishing the required documents, if any, in respect of regularisation of the provisional approval u/s 80G of the Act.
5. Ld. AR has filed a written brief note in support of his arguments and referred page 7 of the Paper Book 1 to show that assessee’s provisional registration was valid from 10.09.2022 to AY 2025-26. He further referred page 9 of the paper book 1 to show that the assessee has applied for registration dated 24th September 2024 i.e. 6 months prior to the expiry of provisional registration. In support of his arguments that the impugned order is not legally sustainable, he has referred and relied on the decision of Coordinate Bench of ITAT Pune in the case of Shri Kailash Math Trust vs. CIT(E) in dated 05.01.2024 and Coordinate Bench of ITAT Mumbai in the case of Saaksh Foundation vs. CIT(E) (2024) 162 taxmann.com 474 (Mumbai Trib.) dated 01.05.2024. Ld. AR further argued that the impugned order has been passed in violation of principle of natural justice without affording the sufficient opportunity and without appreciating the material /reply of the assessee and in violation of the settled law on the said issue Page | 5 decided by the Hon’ble Pune Bench Tribunal as well as Hon’ble Mumbai Bench Tribunal in the above cases (supra).
6. On the other hand, Ld. DR supported the impugned order of Ld. CIT(E) and prayed that the appeal is liable to be dismissed.
We have considered the rival submissions of both the parties and examined the record. To understand the issued raise in the appeal, we proceed to extract the relevant portion of the impugned order of Ld. CIT(E) in para no. 3 to 5 as under:-
On verification of the application in Form 10AB filed by the applicant, it was found that the application was not complete, and all the documents required to be accompanying the application were not furnished. Hence, a notice was issued to the applicant vide DIN & Notice No. ITBA/EXM/F/EXM43/2024-25/1072179076(1) dated 15.01.2025 requesting the applicant to furnish the complete set of documents mentioned in Rule 11AA(2). In response, applicant made submission online vide letter dated 30.01.2025. After going through the submission it is noticed that the applicant has obtained provisional approval in Form 10AC on 10.09.2022 valid upto A.Y. 2025-26. As per the clause (iii) of 1st proviso to sub-section 5 of section 80G:
where the institution or fund has been provisionally approved, at least six months prior to expiry of the period of the provisional approval or within six months of commencement of its activities, whichever is earlier, Thus, as per the above provision, the trust should have applied either within six months of start of activities or at least six months prior to expiry of the period of the provisional approval i.e. before September 2023 whichever is earlier. As the applicant has been carrying out activities since obtaining provisional approval, therefore, the applicant trust must have applied for regularization of provisional approval latest by the end of the month of March, 2023. However, the trust has filed application for regularization of provisional approval order u/s 80G on 24.09.2024 which is not valid as per the above provision as the application is filed beyond permissible time limit.
3.1 Further, the CBDT, vide circular no. 07/2024 dated 25.04.2024, has provided another opportunity and has extended the due date for filing application till 30.06.2024 with certain conditions. However, the applicant trust has not availed the benefits of the said circular.
In view of the above, an opportunity was provided to the applicant vide DIN & Notice No. ITBA/EXM/F/EXM43/2024-25/1074362643(1) dated 11.03.2025 to show cause why the application in Form 10AB should not be rejected on the grounds of application filed beyond permissible time limit. In response, the application vide letter dated 18.03.2025 has made submission in this regard. The relevant para of the reply is reproduced as under:
"1) The provisional approval order in Form 10AC, issued on 10th September 2022is valid from 10th September 2022 to A.Υ. 2025-26.
In other words validity of provisional approval order extended form 10th September to 31st March, 2025. My client has filed provisional application for regularisation of provisional approval order under section 80G on 24th September, 2024. As the provisional approval is valid till 31st March 2025, my client has filed for regularisation of provisional approval on 24.09.2025 which is 6 mønths before 31st March, 2025." Page | 7 4.1 The contention of the assessee is not acceptable. As the application has been carrying out activities since obtaining the provisional approval the application for regularisation of provisional approval is to be made within six months from obtaining the provisional approval as per the provisions of subsection (5) of section 80G.
However, it has failed to do so. It is appropriate to mention that the due date of filing application on or before 30.06.2024 as per the Circular 7 dated 25.04.2024 was an extension provided by the Board to all the Trust/Institution to file/re-file their applications under certain conditions. However, the applicant has failed to avail the benefit of the same.
Thus, the application for regularization of provisional approval in Form 10AB filed by the assessee is not allowable on the ground of late filing of application. For statistical purposes, this application is non-maintainable and stands rejected.
It is thus evident from the above findings of Ld. CIT(E) that Ld. CIT(E) has relied clause (iii) of 1st proviso of sub section (5) of section 80G of the Act and held that as per the said provision, the trust should have applied either within six months of start of activities or at least six months prior to expiry of the period of the provisional approval i.e. before September 2023 whichever is earlier. He further observed that the applicant has been carrying out activities since obtaining provisional approval, therefore, the applicant trust must have applied for regularization of provisional approval latest by the end of the month of Page | 8 March, 2023, but the trust has filed application for regularization of provisional approval order u/s 80G on 24.09.2024 which is not valid.
However, in reply of the assessee which has been reproduced in para 4 of the impugned order, the assessee has claimed the provisional approval order in Form 10AC, issued on 10th September 2022is valid from 10th September 2022 to A.Υ. 2025-26 i.e. validity of provisional approval order extended from 10th September 2022 to 31st March, 2025. The assessee has filed application for regularisation of provisional approval order under section 80G on 24th September, 2024. As the provisional approval is valid till 31st March 2025, the assessee has filed for regularisation of provisional approval on 24.09.2025 which was 6 mønths before 31st March, 2025 i.e. the date till the provisional approval was valid. This contention of the assessee was not accepted by the Ld. CIT(E) on the ground that the applicant has been carrying out activities since obtaining the provisional approval, therefore the application for regularisation of provisional approval was to be made within six months from obtaining the provisional approval as per the provisions of subsection (5) of section 80G.
10. The Ld. AR in that regard submitted that the Ld. CIT(E) has misguided itself as he was under the impression that assessee was a new entity having commenced trust activity after taking provisional approval; but the assessee is an old trust carrying out activity since registration in the year 1988. It was further submitted by Ld. AR that the requirement of law was satisfied by the assessee by filing the regularisation application on 24th September 2012 which was 6 months prior to expiry of the provisional registration. Ld. AR further submitted that the case of the assessee is therefore covered by the judgment of Hon’ble ITAT Pune Bench in the case of Shri Kailash Math Trust (supra) and the said judgment has been followed by ITAT Mumbai Bench in the case of Saaksh Foundation (supra)
To appreciate the arguments of Ld. AR, we are extracting para 10 to 10.3 of the order of ITAT Pune Bench in the case of Shri Kailash Math Trust (supra) as under:-
Thus, when we read the Budget Speech of the Hon‟ble Finance Minister 2020 and the Memorandum of Finance Bill, 2020 together, it becomes clear that the concept of Provisional registration was mainly to facilitate the registration of newly formed Trust/Institutions which have not yet begun the activities. The parliament in its wisdom has decided to differentiate Page | 10 between the Trust which were newly formed and the trust which were already doing charitable activities. In the second category of cases, there are again two possibilities, one trust was already doing charitable activities and was already having Registration u/s 12AA or 80G(5) of the Act, such trust were directed to reapply for registration under new procedure on or before 30th August, 2020 but due to Covid-19 pandemic this date was subsequently extended. There is Second category of trust/institutions which were already doing Charitable Activities but had never applied for registration u/s.80G(5) of the Act. It is not mandatory that every charitable trust/institution has to apply for registration u/s.80G(5) of the Act. However, there is no bar in the Act that such trust or institutions cannot apply for registration u/s.80G in the new procedure. In these kinds of cases, the Trust/Institute though doing charitable activity may apply first for the „Provisional Registration „under the Act. After getting the Provisional Registration the Trust/Institution have to apply for Regular Registration. These kind of Trust/Institutes will fall under sub clause (iii) of the Proviso to Section 80G(5) of the Act, since they have obtained Provisional registration.
10.1 In this background, we need to read the sub-clause (iii) of the Proviso to Section 80G(5) of the Act. For ready reference it is again reproduced here under :
“iii) where the institution or fund has been provisionally approved, at least six months prior to expiry of the period of the provisional approval or within six months of commencement of its activities, whichever is earlier”
10.2 The sub-clause says that the Institution which have provisional registration have to apply at-least six months prior to expiry of the provisional registration or within Six months of commencement of activities, whichever is earlier.
10.3 In continuation of this when we read the „sub clause iii of Proviso‟ of section 80G(5), which we have already reproduced above, it is clear that the intention of parliament in putting the word “or within six months of commencement of its activities, whichever is earlier” is in the context of the newly formed Trust/institutions. For the existing Trust/Institution, the time limit for applying for Regular Registration is within six months of expiry of Provisional registration if they are applying under sub clause (iii) of the Proviso to Section 80G(5) of the Act. This will be the harmonious interpretation.
The above observation of ITAT Pune Bench was followed by the Jurisdictional Tribunal of Mumbai Bench in the case of Saaksh Foundation (supra). For the sake of clarity, we are reproducing para 13 of the order of Jurisdictional Mumbai Tribunal as under:-
Therefore, as per the provisions of clause (iii) of the first proviso to section 80G(5) of the Act, where the institution or fund has been provisionally approved, such institution or fund is required to make an application in the prescribed form and manner at least six months prior to the expiry of the period of provisional approval or within six months of commencement of the activities, whichever is earlier. Therefore, it needs to be examined what would be the time period for filing the application under clause (iii) of the first proviso to section 80G(5) of the Act in case of a trust that has already commenced its operations prior to grant of provisional approval, as in such cases the time period of six months from the commencement of activities in any way will expire earlier than expiry of six months prior to expiry of period of provisional approval. We find that a similar issue came up for consideration before the coordinate bench of the Tribunal in Shri Kailash Math Trust v. CIT(E), in ITA No.1177/PUN/2023. While deciding the issue in favour of the assessee, the coordinate bench of the Tribunal, vide order dated 05/01/2024, held that the words “within six months of commencement of its activities” is to be interpreted to be applicable in those cases where the trust or institutions have not started the activities at the time of grant of provisional approval. Accordingly, the coordinate bench held that since the taxpayer filed the application at least six months prior to the expiry of the period of provisional approval, therefore the same is within the time permitted under the Act. The relevant findings of the coordinate bench, in the aforesaid decision, are reproduced as under:-
“11.2 Thus, as observed by the Hon‟ble Supreme Court, that the statutory provision shall be interpreted in such a way to avoid absurdity. In this case to avoid the absurdity as discussed by us in earlier paragraph, we are of the opinion that the words, “within six months of commencement of its activities” has to be interpreted that it applies for those trusts/institutions which have not started charitable activities at the time of obtaining Provisional registration, and not for those trust/institutions which have already started charitable activities before obtaining Provisional Registration. We derive the strength from the Speech of the Hon‟ble Finance Minister and the Memorandum of Finance Bill. 2020.
11.3 Therefore, in these facts and circumstances of the case, we hold that the Assessee Trust had applied for registration within the time allowed under the Act. Hence, the application of the assessee is valid and maintainable.
12. Even otherwise, the Provisional Approval is uptoA.Y.2025-26, and it can be cancelled by the ld.CIT(E) only on the specific violations by the assessee. However, in this case the ld.CIT(E) has not mentioned about any violation by the Assessee. Therefore, even on this ground the rejection is not sustainable.”
13. In view of the above findings rendered by the ITAT Pune Bench and thereafter followed by ITAT Mumbai Bench on the same issue as before us, we find that the application of the assessee in this case was filed for regularisation of provisional approval within the prescribed period and we find force in the arguments of the Ld. AR in that regard. Moreover the principle of natural justice has not been followed by Ld. CIT(E) as the material submitted by the assessee was not considered in an objective manner. Therefore, the impugned order is not legally sustainable and is accordingly set aside and the matter is restored to the file of Ld. CIT(E) for deciding the same fresh in view of the above directions after giving proper opportunity of hearing to the assessee. The appellant/assessee shall present its case before the Ld. CIT(E) within 90 days of this order. The impugned order is accordingly set aside and appeal filed by the assessee is allowed in above terms. Page | 14
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 18.06.2025.