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Facts
The assessee, a charitable trust, applied for registration under section 12AB. Due to a technical error in selecting the wrong section code in Form 10A, the application was rejected by the CIT(E). The trust had a prior registration and the error was not intentional.
Held
The Tribunal held that technical or procedural defects should not prevent substantive relief, especially for charitable trusts. The CIT(E)'s order was set aside, and the matter was restored with a direction to allow the assessee an opportunity to file a fresh application with the correct section code.
Key Issues
Whether a technical error in selecting a section code in an application for registration, when the trust is otherwise eligible, warrants outright rejection.
Sections Cited
12AB, 12A, 10A, 10AC
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Income Tax Appellate Tribunal, Hyderabad ‘B’ Bench, Hyderabad
Before: SHRI RAVISH SOOD & SHRI MADHUSUDAN SAWDIA
(निर्धारण वर्ा/Assessment Year:2023-24) M/s. Divyavani Trust, Commissioner of Income Tax Vs. Hyderabad. (Exemption), PAN:AADTD2316F Hyderabad. (Appellant) (Respondent) निर्धाररती द्वधरध/Assessee by: Shri T. Chaitanya Kumar, Adv. रधजस् व द्वधरध/Revenue by:: Shri Narendra Kumar Naik, CIT-DR सुिवधई की तधरीख/Date of hearing: 07/08/2025 घोर्णध की तधरीख/Pronouncement: 20/08/2025 आदेश/ORDER PER MADHUSUDAN SAWDIA, A.M.: This appeal is filed by M/s. Divyavani Trust (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Exemption), Hyderabad (“Ld. CIT(E)”), dated 19.03.2025 for the A.Y. 2023-24.
The assessee has raised the following grounds of appeal :
“1. The order passed by the Learned Commissioner of Income Tax (Exemptions), Hyderabad, rejecting the application for registration u/s 12AB of the Income Tax Act, 1951, is erroneous, arbitrary, and not sustainable in law.
2. The Learned CIT (Exemptions) erred in holding the application in Form 10AB as infructuous solely on the ground that the assessee selected an incorrect section code in the earlier Form 10A application. The appellant submits that such a technical error is curable and should not be a ground for outright rejection.
3. The Learned CIT (Exemptions) failed to appreciate that the appellant is a charitable trust with an existing registration granted u/s 12A dated L2.07.2022, valid retrospectively from 14.05.2019 to 31.03.2022.
The rejection of the application based on a clerical mistake in section code selection, despite the trust's compliance with other documentary and procedural requirements, is against the principles of natural justice.
5. The impugned order is passed without providing the appellant a clear opportunity to rectify or clarify the technical defect related to section code selection, and therefore, violates the principles of natural justice.
6. The appellant prays that the order passed by the Learned CIT (Exemptions), Hyderabad, be set aside and that appropriate directions be issued to consider the application for registration u/s 12AB on merits, by allowing correction of the section code or by condoning the procedural error.
7. The appellant craves leave to add, amend, alter, or withdraw any of the above grounds or to submit additional grounds at the time of hearing.”
The brief facts of the case are that, the assessee is a charitable trust which had been granted approval under section 12AB of the Act w.e.f. 14.05.2019. Consequent to the amendments introduced by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, effective from 01.04.2021, the assessee was required to re-apply for approval under section 12AB of the Act in Form No. 10A. In accordance with the requirement, the assessee filed Form No. 10A, but inadvertently selected the wrong section code i.e. section 12A(1)(ac)(vi) of the Act instead of the correct section code i.e. section 12A(1)(ac)(i) of the Act. Based on the said form, the assessee was granted provisional registration vide Form No. 10AC dated 03.08.2023. Subsequently, the assessee filed Form No. 10AB for conversion of provisional registration into final registration under section 12AB of the Act. However, the Ld. CIT(E) rejected the said application solely on the ground that the assessee had originally selected an incorrect section code while filing Form No. 10A.
4. Aggrieved by the rejection order of Ld. CIT(E) , the assessee is now in appeal before the Tribunal. The Learned Authorised Representative (“Ld. AR”) submitted that the assessee had been granted valid registration under section 12AB of the Act since w.e.f. 14.05.2019. In light of the 2020 amendment, the assessee was required to re-apply through Form No. 10A. However, since the Form No. 10A was newly introduced at that point in time, there was widespread confusion among applicants, and as such, the assessee inadvertently selected section code i.e. section 12A(1)(ac)(vi) of the Act instead of the correct section code i.e. section 12A(1)(ac)(i) of the Act. It was also submitted that the mistake was a technical error and not deliberate or intentional. The Ld. AR argued that the Revenue was already aware of the assessee’s earlier registration under section 12AB of the Act w.e.f. 14.05.2019, and yet proceeded to issue a provisional registration under the wrong code. Therefore, the mistake, if any, was two-fold and not solely attributable to the assessee. It was further contended that the trust is engaged in genuine charitable activities and denial of approval merely on account of a technical coding error would be against the principles of justice. The Ld. AR relied on the settled judicial principle that procedural lapses should not defeat substantive rights, especially in the case of charitable institutions. Accordingly, he prayed for the matter to be remanded back to the file of the Ld. CIT(E) with a direction to allow the assessee one more opportunity to file the application in the correct section code and for adjudication of the same on merits.
Per contra, the Learned Departmental Representative (“Ld. DR”) supported the order of the Ld. CIT(E) and submitted that the application was rightly rejected as the assessee had selected an incorrect section code while filing Form No. 10A.
We have heard the rival contentions and perused the records available before us. It is not in dispute that the assessee was holding a valid registration under section 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. Further, 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 under section 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 in the correct section code under section 12A, and adjudicate the same on merits after granting due opportunity of being heard.