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Facts
The assessee, a charitable trust, applied for approval under section 80G. The CIT(E) rejected the application, stating that the assessee had claimed deduction under section 11 and used the wrong section code for the application. The assessee failed to provide satisfactory explanations for discrepancies noted by the CIT(E).
Held
The Tribunal held that the wrong selection of a section code should not be fatal to the assessee's claim, especially when there is a precedent for treating such applications as filed under the correct code. The CIT(E) was directed to reconsider the application.
Key Issues
Whether rejecting an application for approval under Section 80G solely on the ground of using a wrong section code, when the assessee is otherwise eligible, is justified? Can a technical error in filing prevent a genuine charitable trust from obtaining necessary approval?
Sections Cited
80G, 11, 12A, 12AB, 10(23AA), 10(23C)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI R.K. PANDA & MS. ASTHA CHANDRA
The appeal filed by the assessee is directed against the order dated 20.09.2024 of the Ld. Commissioner of Income Tax (Exemption), Pune [“CIT(E)”] whereby he rejected the application of the assessee filed before him on 30.03.2024 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”).
Briefly stated, the facts of the case are that the assessee is a charitable trust registered under Maharashtra Public Trusts Act, 1950 on 25.02.2015. The assessee trust was approved u/s 80G by the Commissioner of Income Tax, Pune on 14.07.2016. The assessee sought approval under new scheme and was also granted provisional approval on 14.10.2021. On receipt of assessee’s application for regular approval along with annexures thereto, with a view to verify the genuineness of activities of the assessee and fulfillment of conditions laid down in clauses (i) to (v) of section 80G(5) of the Act, the Ld. CIT(E) issued a notice through ITBA portal on 27.05.2024 which was duly served on the assessee through e-portal and email, requesting the assessee to upload certain information/clarification. Compliance to the said notice was due by 11.06.2024. On verification of the details submitted by the assessee in response thereto, certain discrepancies were noticed by the Ld. CIT(E) which were communicated to the assessee by issue of another notice on 09.09.2024 served via email/e-portal seeking compliance by 16.09.2024. The said discrepancies are as under: “(i) As per financial statements and ITRs furnished by you, it is seen that the trust has claimed deduction u/s 11. Therefore, said provisions of sec. 80G(5) (iv) (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 carried out by your trust. (iii) It is seen from the financial statement that no credible evidence is furnished in support of the activities claimed to have been carried out and considering the fact that a very meagre / no expenditure is shown on charitable objects as compared to expenditure on establishment, the satisfaction about the genuineness of activities could not be arrived at. Kindly furnish your explanation with credible evidences.”
2.1 Since, the assessee failed furnish any explanation to the above discrepancies, the Ld. CIT(E) presumed that the assessee has nothing to say in the matter and therefore he proceeded to pass the impugned order rejecting the application of the assessee on the ground that the assessee is not having regular registration under section 12A of the Act and the impugned application has been filed under the wrong section code by observing as under : “7. As per the condition vide clause (i) of section 80G(5) of the Income Tax Act, 1961, the approval is available only if the income of the institution or fund is not be liable to inclusion in its total income under the provisions of section 11 and 12 or clause (23AA) / clause (23C) of section 10 of the Income Tax Act, 1961. Exclusions for the said condition are detailed in clause (a), (b) and (c) of proviso to clause (i) of section 80G(5) of the Act. Therefore, the institution / fund is required to be regularly registered / approved either under section 12AB or 10(23AA) or 10(23C) of the Income Tax Act, 1961 or the institution/fund shall be a Regimental Fund or Non-Public Fund established by the armed forces of the Union for the welfare of the past and present members of such forces or their dependents.
8. In the instant case it is noticed that the assessee is neither regularly registered u/s 12AB read with section 12A(1)(ac)(i) /12A(1)(ac)(iii) nor having regular approval under section 10(23C) read with clause (i) / (iii) of first proviso to the said section and the case is not covered under the exclusions provided vide proviso to clause (i) of section 80G(5) of the Act. The assessee is not approved under section 10(23AA) of the Act. The assessee is also not a Regimental Fund or Non-Public Fund established by the armed forces of the Union for the welfare of the past and present members of such forces or their dependents. Therefore, the condition (i) of section 80G(5) of the Income Tax Act, 1961 is also not fulfilled in this case.
9. Considering the above facts discussed in the show cause notice and discrepancies noticed and Without prejudice to the above, as per financial the statements and ITRs furnished by the assessee, it is seen that the trust has claimed deduction u/s 11. Therefore, said provisions of sec.80G(5)(iv)(B) of the Act are not applicable in the assessee's case. And thus, the undersigned is not satisfied about the fulfilment of conditions laid down in clause (i) to (v) of section 80G(5) of the Act and has left no alternative but to reject the application.
In view of the above, 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 grounds: “
1. On the basis of facts and in the circumstances of the case and as per law, the Commissioner of Income Tax, (Exemptions), Pune is not justified in rejecting the regular registration even after the submission of information called from the assessee-trust. The rejection is only on the hyper-technical ground of wrong section code inadvertently/mistakenly used by the assessee in Form 10AB. The Commissioner of Income Tax (Exemptions), Pune be directed to consider Form 10AB filed on 27.03.2024 as having been filed under Clause (iii) of sec 12A(1)(ac) by condoning the delay/limitation, if any.
2. The appellant craves leave to add, alter, omit or substitute any of the grounds at the time of hearing of the appeal.”
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) solely on the ground that the assessee has used wrong section code while e-filing Form 10AB. He submitted that this mistake has happened inadvertently by the assessee and the same is not fatal denying the registration of a charitable trust. In support of his contention, the Ld. AR placed reliance on the decision of Pune Tribunal in the case of U V Patel Foundation (ITA No. 1956/PUN/2024), dated 01.12.2024. He also brought to the attention of the Bench that in assessee’s appeal filed against the rejection of section 12A application, the Coordinate Bench of the Tribunal 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 issue 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 heard the Ld. Representatives of the parties, perused the order of the Ld. CIT(E) and the paper book filed on behalf of the assessee and as well as the judicial precedent relied upon by the Ld. AR. The facts of the case are not in dispute. Admittedly, the assessee failed to respond to the second notice wherein amongst others the Ld. CIT(E) asked for clarification with supporting documents relating to selection of wrong clause by the assessee. The Ld. CIT(E) therefore rejected the assessee’s application on ground of selection of wrong section code and that there is no regular registration u/s 12A of the Act. As pointed out by the Ld. AR, we find that in assessee’s appeal in filed against the rejection of section 12A application, the Coordinate Bench of the Tribunal vide its order dated 15.01.2025 (a copy of which has been placed on record), 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.
We find that the impugned issue is covered in favour of the assessee by catena of decisions of the various benches of the Tribunal involving similar set of facts as that of the assessee in the present appeal. In our view, wrong selection of section code/clause would not disentitle the assessee to its rightful claim and cannot be treated as fatal to the proceedings initiated after the filing of the application. The case of the assessee finds support by the Pune Tribunal’s decision in U V Patel Foundation’s case (supra) relied by the Ld. AR. 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 matter 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 it afresh as per fact and law after affording 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 hold and direct accordingly. The grounds raised by the assessee are 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 28th July, 2025.