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Facts
The assessee, a charitable trust, applied for registration under section 12A(1) and approval under section 80G. The PCIT(E) rejected the application for registration under section 12A(1) and subsequently rejected the application for approval under section 80G, citing delays and non-commencement of activities. The assessee appealed, also seeking condonation for a 50-day delay in filing the appeal.
Held
The Tribunal condoned the delay in filing the appeal, citing genuine and practical mistakes beyond the assessee's control, applying principles of natural justice. The Tribunal found that the PCIT(E) did not provide sufficient reasons for rejecting the application for registration and also that the rejection of the 80G application was based on a technicality that was addressed by subsequent CBDT circulars extending timelines.
Key Issues
Whether the PCIT(E) was justified in rejecting the assessee's application for registration under Section 12A(1) and approval under Section 80G due to delay and perceived lack of commencement of activities, and whether the delay in filing the appeal should be condoned.
Sections Cited
12A(1), 12AB, 80G, 11, 12, 80G(5)(iii)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘A’ BENCH: BANGALORE
Before: SHRI WASEEM AHMED & SHRI PRAKASH CHAND YADAV
PER WASEEM AHMED, ACCOUNTANT MEMBER:
The appeals have been filed by the assessee against the order of the Principal Commissioner of Income Tax (Exemption) [PCIT(E)] for the assessment year 2024-25, wherein the PCIT(E) rejected the assessee’s application for registration under section 12A(1) of the Income Tax Act.
The assessee is a Public Charitable Trust, formed on 24-04-2019, and registered with the objective of promoting social awareness about India’s rich traditional and cultural heritage, along with the distribution of daily necessities to the poor free of cost. The assessee applied for registration under section 12A(1) of the Income Tax Act by filing Form No. 10A on 30-03-2021. Accordingly, provisional registration was granted by the competent authority in Form 10AC on 27-05-2021.
Subsequently, the assessee applied for permanent registration by filing Form 10AB on 22-09-2023. In response, the assessee was required to furnish evidence of the genuineness of the trust’s activities. After considering the documents submitted, the Learned PCIT rejected the application in Form 10AD on 23-03-2024.
Being aggrieved, the assessee has now filed the present appeal before us. Along with the appeal, the assessee has also submitted an application seeking condonation of a 50-days delay in filing the appeal. In the application, the assessee stated that the case was handed over to the tax Advocate, for filing the appeal before the Hon’ble ITAT but due to workload of the tax advocate, the due date for filing the appeal before the ITAT was inadvertently missed. As a result, the appeal was filed with a delay of 50 days, and the assessee has requested to take a lenient and compassionate view to condone the delay.
The assessee further submitted that the delay was neither intentional nor due to negligence but arose from a genuine and practical mistake. It was also emphasized that the assessee acted in good faith by filing the appeal promptly upon realizing the delay. On the other hand, the ld. DR opposed to condone the delay on the ground that there was no sufficient cause by the assessee which prevented it in filing the appeal before the ITAT.
After considering the rival submissions of both the parties and the application for condonation, we find that the reasons for the delay are genuine and beyond the assessee’s control. The principles of natural justice require that an opportunity be granted to present the case on its merits.
The term "reasonable cause" has not been explicitly defined under the Act but has been interpreted through various judicial precedents. The Hon’ble Supreme Court, in the case of Collector, Land Acquisition v. Mst. Katiji & Others [1987] 167 ITR 471 (SC), held that: - Ordinarily, a litigant does not stand to benefit by delaying proceedings. - When substantial justice and technical considerations conflict, substantial justice should prevail. - Courts should adopt a liberal approach in condoning delays caused due to a genuine and bona fide mistake.
Furthermore, such a delay does not reflect negligence or mala fide intent but rather a genuine cause beyond the assessee’s control. The Hon’ble Supreme Court, in N. Balakrishnan v. M. Krishnamurthy* [1998] 7 SCC 123, also held that: - The length of the delay is not as material, if the explanation is reasonable and does not indicate deliberate negligence, the delay should be condoned.
In view of the above, we are of the opinion that the delay in the present case deserves to be condoned and accordingly, the delay of 50 . days in filing the appeal is condoned. Thus, we proceed to hear the matter on merit.
The primary issue before us is whether the ld. PCIT(E) was justified in rejecting the assessee’s application for registration under Section 12A(1) of the Act.
Section 12A of the Act provides that a trust or institution must be registered to avail of tax exemptions under sections 11 and 12 of the Act. As per section 12AB of the Act, the ld. PCIT(E) is required to assess the genuineness of the activities before granting registration.
In the present case, the assessee has furnished documents supporting that the trust started the construction of building which is basic infrastructure to carry out the charitable activity. Therefore, the rejection by the ld. PCIT(E) appears to be based on doubts about the genuineness of the activities rather than on any concrete evidence against the assessee. We also note that the order of the ld. PCIT is in few lines without any remark on the construction activity started by the assessee trust to achieve the object of the trust. There was no basis furnished by the ld. PCIT(E) concluding that assessee has not commenced its activity. Therefore, we find that the ld. PCIT(E) has not provided sufficient reasons for rejecting the application of the trust.
12.1 In view of the above discussion, we set aside the order of the PCIT(E) and direct him to verify the activities afresh as per the provision of law after considering the registration application of the assessee under section 12A(1) of the Act.
In the result, the appeal of the assessee is allowed for statistical purpose.
The assessee has raised the following grounds of appeal:
1. The order of rejection for approval under section 80G of the Act passed by the learned Principal Commissioner of Income-tax [Exemptions], Bengaluru dated 23/03/2024, in so far as it is against the Appellant is opposed to law, weight of evidence, probabilities, facts and circumstances of the Appellant's case, requires to be quashed.
2. The learned Principal Commissioner of Income-tax [Exemptions], Bengaluru, is not justified in mechanically rejecting the application filed by the appellant for registration of the appellant Trust under section 80G of the Act, on the facts and circumstances of the case.
3. The learned Principal Commissioner of Income-tax [Exemptions], Bengaluru, is not justified in holding that appellant has not filed the application for renewal under section 80G of the Act within the time limit specified in the statute and consequently has mechanically rejected the application filed by the appellant for renewal of registration under section 80G of the Act, on the facts and circumstances of the case.
4. The learned Principal Commissioner of Income-tax [Exemptions], Bengaluru, is further not justified in rejecting the application under section 80G of the Act on the ground that the appellant Trust was not granted registration under section 12AB of the Act and consequently the approval for registration under section 80G of the Act was also rejected which is not in accordance with law, on the facts and circumstances of the case.
5. The appellant craves leave of this Hon'ble Tribunal to add, alter, amend, substitute or delete any or all of the grounds of appeal urged above at the time of hearing of the appeal by this Hon'ble Tribunal.
6. For the above and other grounds to be urged during the course of hearing of the appeal the Appellant prays that the appeal be allowed in the interest of equity and justice.
In the present case, the application filed by the assessee in Form No. 10AB on 22.09.2023 for approval under section 80G of the Act, 1961, has been rejected. It was reviewed by the ld. PCIT that the assessee was granted provisional approval under Section 80G via Form .
No. 10AC on 09.07.2021, which was valid for a specific period (AY 2021- 22 to 2023-24). As per section 80G of the Act, the institution or fund was required to apply for regularization at least six months before the expiry of the provisional approval or within six months of commencing activities, whichever was earlier. In this case, the deadline for applying was 30.09.2022, but the application was submitted belatedly on 22.09.2023. Additionally, as per CBDT Circular 6 of 2023, the extension of time limits was granted only for regularization under section 12AB, not under section 80G. Furthermore, the assessee's registration was cancelled on 23.03.2024 due to non-commencement of activities. Therefore, the application for approval under section 80G was rejected by the ld. PCIT (Exemptions), Bangalore.
15.1 The assessee has filed an appeal before us, being aggrieved by the order of the Learned PCIT. Along with the appeal, the assessee has also submitted an application seeking condonation of a 50-days delay in filing the appeal.
At the outset, we note that a similar request for the condonation of delay was granted in the assessee's case in as mentioned in paragraph Nos. 6 to 9. Therefore, the delay in filing this appeal is also condoned.
Furthermore, regarding the issue of the non-commencement of activities by the trust, we have restored a similar matter to the ld. PCIT in the assessee’s case in as per paragraph No. 12 of this appeal. Accordingly, we are restoring this matter to the ld. PCIT for reconsideration.
Issue Related to the Due Date for Filing Form 10AB
The assessee obtained provisional approval under Section 80G via Form No. 10AC on 09.07.2021, which was valid from Assessment Year (AY) 2021-22 to AY 2023-24.
As per the provisions of section 80G(5)(iii), the institution or fund was required to apply for regular approval at least six months before the expiry of the provisional approval or within six months of commencing its activities, whichever was earlier.
The Ld. PCIT(E) rejected the application of the assessee trust on the basis of CBDT Circular 6 of 2023, wherein the extension of time limits till 30-9-2023 was granted only for regularization under section 12AB, not section 80G of the Act.
However, we note that the intention of CBDT in its circular clearly reflects its mind that once the timeline prescribed for filing Form No.10AB for recognition u/s 12A of the Act has been extended up to 30.09.2023, the same may be treated as extended for forms namely Form No.10AB for renewal of approval/recognition/registration under clause (iii) of first proviso to section 80G of the Act also.
In support and guidance, we place our reliance on the order of ITAT Chennai in the case of Teddy Trust Vs CIT (Exemption) reported in 164 taxmann.com 474 where in it was held as under:
7.8 After hearing the arguments of ld. counsel for the assessee and ld. CIT- DR as noted above, we findfrom the facts that the timeline prescribed for filing Form No.10AB for registration u/s.12A of the Act inthe case of assessee trust has been extended up-to 30.09.2023 after considering the genuine hardshipfaced by charitable institutions vide various CBDT circulars and finally, vide Circular - 29 - ITANos.827, 875 & 1136/Chny/2023 No.6/2023 dated 24.05.2023. Similarly, the timeline prescribed forfiling Form No.10A for recognition u/s.80G of the Act was also extended up-to 30.09.2023 by the samecircular for trusts filing registration under clause (i) to first proviso to section 80G(5) of the Act. But theabove extension was not extended beyond 30.09.2022, unlike other forms which were extended up to30.09.2023 to the disputed forms namely Form No.10AB for renewal of recognition u/s.80G(5) of theAct under clause (iii) of the first proviso to section 80G(5) of the Act. Once, the CBDT has extended thetimeline for filing Form No.10AB for recognition u/s.12A of the Act and also for filing Form No.10A forrecognition u/s.80G of the Act extended up to 30.09.2023 for trusts filing registration under clause (i) offirst proviso to section 80G(5) of the Act, we find no difference in continuing hardship as recognized byCBDT even in filing Form No.10AB for renewal of recognition u/s.80G of the Act under clause (iii) offirst proviso to section 80G(5) of the Act. In our view, this being a genuine hardship case, which isrecognized by Revenue or CBDT by issuing a general circular, we are of the view that this specificprovision of clause (iii) to first proviso to section 80G(5) cannot be excluded and or it has not been theintention of the CBDT while issuing the circular. There cannot be a distinction within the same provisionwithout bringing out any exception and even this provision is for the benefit of the donors who aredonating money to the charitable trusts for claiming exemption in their returns of income. In our view, weagree with the argument of ld. counsel for the assessee that the timeline prescribed under clause (iii) offirst proviso to section 80G(5) of the Act should be treated as directory and not mandatory especiallyconsidering the transitional nature of the amendment as brought out by the taxation of other laws(relaxation and amendment of certain provisions) act 2020 for bringing new regime. Hence, in our view,the CIT(Exemptions) should not have rejected the assessee's application in Form No.10AB only for thistechnical reason. We are of the view that the intention of CBDT in its circular clearly reflects their mind that once the timeline prescribed for filing Form No.10AB for recognition u/s.12A of the Act has beenextended up to 30.09.2023, the same may be treated as extended for forms namely Form No.10AB forrenewal of approval/recognition/registration under clause (iii) of first proviso to section 80G of the Actalso. Hence, we accept the plea of assessee and agree with the arguments of ld. counsel for the assesseeand remand the matter back to the file of the CIT(Exemption) to decide the issue on merits. Hence, theorder of CIT(Exemption) on this issue is set aside and matter is remanded back to the file of theCIT(Exemption)
Page 9 of 10 for redeciding the issue on merits as per law. The appeal of the assessee is allowed forstatistical purposes. The bench thus held that the extended time limit of 30.09.2023 as per CBDT Circular would apply to FormNo.10AB as well.”
Thus, in view of the above we hold that the application of the assessee for the registration under section 80G of the Act, cannot be rejected merely on the reasoning that there was a delay in filing the application as observed by the ld. PCIT discussed above.
Besides the above, we also note that CBDT has issued another Circular bearing No. 7/2024, dated 25.04.2024, for extending the due date for filing Form 10AB till 30.06.2024. The relevant portion of the circular states as under: “Considering the difficulties reported by taxpayers and other stakeholders in the electronic filing of Form No. 10A/10AB, the Central Board of Direct Taxes (the Board), in exercise of its powers under Section 119 of the Income-tax Act, 1961, has extended the due date for filing Form No. 10A multiple times—first to 31.08.2021 (Circular No. 12/2021 dated 25.06.2021), then to 31.03.2022 (Circular No. 16/2021 dated 29.08.2021), to 25.11.2022 (Circular No. 22/2022 dated 01.11.2022), and further to 30.09.2023 (Circular No. 6/2023 dated 24.05.2023). Similarly, the due date for filing Form No. 10AB was extended to 30.09.2022 (Circular No. 8/2022 dated 31.03.2022) and further to 30.09.2023 (Circular No. 6/2023 dated 24.05.2023).”*
“Additionally, the circular specifies: "To mitigate genuine hardship in such cases, the Board, in the exercise of its powers under Section 119 of the Act, hereby extends the due date for electronically submitting applications/intimations, including Form No. 10AB, under clause (iii) of the first proviso to clause (23C) of Section 10, under sub- clause (iii) of clause (ac) of sub-section (1) of Section 12A, and under clause (iii) of the first proviso to sub-section (5) of Section 80G, until 30.06.2024."
Thus, in view of the above, it is clear that the aforementioned circular extended the deadline for filing an application under clause (iii) of the first proviso to sub-section (5) of Section 80G of the Act until 30.06.2024.
In light of CBDT Circular No. 7/2024, dated 25.04.2024 and the other discussion, we set aside the order of the ld. PCIT (Exemptions) and direct the ld. PCIT to consider this circular while adjudicating the approval request under section 80G of the Act afresh as per the provisions of law.
In the result, the appeal of the assessee is allowed for statistical purposes.