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Facts
The assessee applied for approval under Section 80G(5) of the Income Tax Act but inadvertently selected the wrong sub-clause (B)(iv) instead of the correct one. The CIT(E) rejected the application, citing both the inapplicability of the chosen sub-clause due to prior Section 11 deductions and the assessee's failure to provide adequate information and evidence regarding its activities and genuineness. The assessee contended it was a procedural error that should not lead to outright rejection.
Held
The Tribunal, noting similar precedents, set aside the CIT(E)'s rejection order and remanded the case back to the CIT(E). It directed the CIT(E) to either treat the original application as filed under the correct section code or allow the assessee to file a fresh application with the correct clause, condoning any delay, and then decide the matter afresh on merits after providing a reasonable opportunity of hearing.
Key Issues
Whether an application for Section 80G approval should be rejected solely for selecting an incorrect sub-clause, and if the tax authorities should permit rectification or re-filing under the correct provision, especially when it's an inadvertent error.
Sections Cited
80G(5), 11, 10, 12, 17A(2)(k), 11AA(2)(h)
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Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI R.K. PANDA & MS. ASTHA CHANDRA
आदेश / ORDER
PER ASTHA CHANDRA, JM :
The appeal filed by the assessee is directed against the order dated 28.01.2025 of the Ld. Commissioner of Income Tax (Exemption), Pune [“CIT(E)”] whereby he rejected the application of the assessee filed before him in Form No. 10AB under sub clause (B) of (iv) of first proviso to sub-section (5) of section 80G of the Income Tax Act, 1961 (the “Act”) on 08.08.2024.
The brief facts are that on receipt of the assessee’s application filed in Form No. 10AB under sub clause (B) of (iv) of first proviso to section 80G(5) of the Act along with annexures thereto, with a view to verify the genuineness of the activities of the assessee and fulfillment of the conditions laid down in clauses (i) to (v) of section 80G(5) of the Act, the Ld. CIT(E) issued notice on 18.10.2024 through ITBA portal requesting the assessee to upload certain information/clarification such as date of commencement of activity, date of expiry of provisional approval, details of any other law applicable for achievement of objectives and the proof of compliance of said law, proof of identity of main trustees/directors/trustees, year-wise list of donations received, note on activities carried out etc. The compliance was sought by 05.11.2024. On verification of the details submitted by the assessee in response to the said notice and the documents submitted along with the application, the Ld. CIT(E) noticed various discrepancies which were communicated vide issue of another notice dated 01.01.2025 duly served via e- portal/email, seeking compliance by 08.01.2025. The said discrepancies are reproduced below :
"(i) You have filed application under section 80G(5) (iv)-ITEM(B) of the Income Tax Act, 1961. However, as per financial statements, the trust has claimed deduction u/s 11 in earlier years. Therefore, said provisions of sec. 80G(5)(iv)-ITEM(B) of the Act are not applicable to your case. As such, your present application is liable to be rejected. Please clarify with supporting documents. (ii) Kindly furnish evidences claiming expenses on charitable activities such as bills/vouchers/invoices alongwith photographs of charitable activities actually carried out by your trust. (iii) You have not submitted details of donation in the requisite format. You were specifically requested to furnish year-wise list of all donations received (including corpus donations etc.) during the last 3 years / since inception, whichever is later viz. full name, complete Postal address & PAN of donor, date & mode of donation, amount, receipt No. issued by trust / institute and copies of donation receipts and directions from the donors, if any. Please furnish the same. (iv) It is seen from your submission that you have not furnished note on activity giving details viz. dates and places of each activities carried out by you, details of beneficiaries, how they were identified, etc. As per the provisions of Rule 17A(2)(k) / 11AA(2)(h) of the Income Tax Rules, 1962, the application in Form No.10AB shall be accompanied by note on activities giving details of activities actually carried out but you have failed to comply with those provisions. You ought to be submit the details of actual activities carried out in the last 3 years or since inception, whichever is later. Further, the supporting evidence of the activities in the form bills and photographs are also not submitted by you. In absence of any such tangible material in respect of details and proof of activities being carried out, it is not possible to ascertain as to whether the activities are charitable and in line with the objects of the trust/institution. Also, explain with credible evidences as to how charity is intrinsically involved. (v) It is seen that you are having substantial receipts in the nature of income from Hostel i.e. rent / deposits / maintenance / geyser. Further, it is not clear as to whether the receipts are from the activities intrinsically involved while carrying out the main objectives. No separate books of accounts (financial statements) are furnished in respect of these receipts which are prima facie from an activity in the nature of commercial activities. In absence of such separate books of accounts it will not be possible to check whether such activity is with a profit motive or not. Please substantiate as to how each of such commercial/business activity is intrinsic to the carrying out of the main charitable activity in terms of the recent Law delivered by Hon'ble Supreme Court in the case of Assistant Commissioner of Income-tax (Exemptions) v. Ahmedabad Urban Development Authority [(2022) 143 taxmann.com 278 (SC)]. Also, explain with credible evidences as to how charity is intrinsically involved."
2.1 The assessee furnished its reply to the above notice on 08.01.2025, however, the Ld. CIT(E) observing that the provisions of section 80G(5)(iv)(B) of the Act are not applicable to the assessee’s case and since the assessee has not furnished any explanation to the above discrepancies, rejected the application of the assessee on the ground that the impugned application has been filed under the wrong clause by observing as under : “7….80G(5)(iv)(B): in any other case, where activities of the trust or institution have- (A) …..; (B) commenced and no income or part thereof of the said trust or institution has been excluded from the total income on account of applicability of sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, or section 11 or section 12, for any previous year ending on or before the date of such application, at any time after the commencement of such activities,"
8. It can be thus seen that the provisions of said section applies to a case where activities of the trust or institution have 'commenced and no income or part thereof of the said trust or institution has been excluded from the total income on account of applicability of sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, or section 11 or section 12, for any previous year ending on or before the date of such application, at any time after the commencement of such activities.' However, in the assessee's case, its income pertaining to previous years 2022-23 and 2023-24 to the tune of Rs. 43.96 Lakhs and Rs. 32.88 Lakhs respectively has been excluded from the total income on account of applicability of section 11.
Considering the above, and since the assessee's activities were already commenced at the time of filing the present application and it has claimed deduction under section 11 for previous year before the date of the present application, the assessee trust is not eligible to file application under clause (B) of clause (iv) of first proviso to sub-section (5) of section 80G of the Income-tax Act, 1961. Hence, the application under sub clause (B) of (iv) of first proviso to sub- section (5) of section 80G of the Income Tax Act, 1961 filed by the assessee is hereby rejected.”
Aggrieved with such order of Ld. CIT(E), the assessee is in appeal before the Tribunal by raising the following solitary ground of appeal : “1. On the facts and in the circumstances of the case and in law Ld. CIT Exemption has erred in not granting registration u/s 80G without appreciating the facts of the case, and without considering the aspect that while selecting the correct subsection from the dropdown box, sub clause (iv) of clause (b) of subsection (5) of section 80G was selected instead of correct sub clause (iii) and therefore conclusions drawn for rejection for registration are incorrect and appellant is entitled for registration u/s 80G(5) of the IT Act. Your appellant craves for to add, alter amend, modify, delete any or all grounds of appeal before or during the course of hearing in the interest of natural justice.”
The Ld. Counsel for the assessee at the outset submitted that the application filed for grant of approval under section 80G of the Act was rejected by the Ld. CIT(E) on the ground that the assessee has filed the impugned application under the wrong clause. He submitted that this mistake has happened inadvertently by the assessee and the same is not fatal denying the registration of a charitable trust. This is merely a procedural error and therefore the assessee’s application should not be rejected when otherwise all the conditions are fulfilled by the assessee for grant of approval under section 80G of the Act. Relying on the decision of the Co-ordinate Bench of the Tribunal in the case of Shree Hari Kirth Anottejak Sabha Vs. CIT(Exemption) in dated 28.05.2025, the Ld. AR submitted that the Tribunal in the said case involving the identical set of facts as that of the assessee, has remanded the matter back to the file of the Ld. CIT(E) to decide the same afresh with a direction to treat the application already filed by the assessee as filed under the correct section code. He, accordingly prayed that the impugned matter may also be set aside to the Ld. CIT(E) for adjudication afresh after affording an opportunity of hearing to the assessee.
The Ld. DR, on the other hand, supported the order of the Ld. CIT(E). He, however, brought to our attention that there is a technical difficulty on the part of the Ld. CIT(E) to treat and dispose off the assessee’s application as filed under the correct section code as per the directions of the Tribunal and hence the assessee may be directed to file the fresh application with the correct clause.
We have heard the rival arguments made by both the sides and perused the material available on records. The Ld. CIT(E) has rejected the application filed by the assessee for the reason that the same has been filed under the wrong section code. It is the submission of the Ld. Counsel for the assessee it was an inadvertent mistake on the part of the assessee. It is also his submission that given an opportunity, the assessee is in a position to substantiate its case by filing the requisite details before the Ld. CIT(E) to his satisfaction. We find that the Coordinate Bench of the Pune Tribunal in the decision (supra) relied upon by the Ld. AR, has set aside the matter to the file of the Ld. CIT(E) with a direction to decide the application of the assessee afresh considering the same as filed by the assessee under the correct section code. It is, however worthwhile to note the concern of the Ld. DR that there are certain technical difficulties faced by the Ld. CIT(E) in treating and disposing off the assessee’s application as filed under the correct section code.
Considering the totality of the facts and in the circumstances of the case and legal position enumerated above, we deem it fit and proper, to set aside the impugned order of the Ld. CIT(E) and restore the issue to his file with a direction to treat the application for grant of approval under section 80G of the Act as filed under the correct section code and decide the same afresh as per fact and law after granting reasonable opportunity of hearing to the assessee.
Having said so, in the light of the above concern of the Ld. DR, we also direct that the Ld. CIT(E) shall give an opportunity to the assessee to file the correct application if needed and condone the delay/ limitation, if any in filing of the fresh application or allow the assessee to rectify the application and then decide the same on merits denovo. The assessee is also hereby directed to remain vigilant and make his submissions on the appointed date without seeking any adjournment under any pretext unless required for the sufficient cause, failing which the Ld. CIT(E) shall be at liberty to pass appropriate order(s) as per law. We direct and order accordingly. The solitary ground raised by the assessee is accordingly allowed for statistical purposes.
In the result, the appeal filed by the assessee is treated as allowed for statistical purposes.
Order pronounced in the open court on 26th August, 2025.