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Facts
The assessee, a trust registered under the Bombay Public Trust Act and having provisional registration under section 80G, filed an application for permanent approval in Form 10AB. The application was inadvertently made under clause (iii) instead of clause (i) of the first proviso to section 80G(5). The CIT(E) rejected the application on the ground that the trust's activities commenced before the provisional registration date and cancelled the provisional approval.
Held
The Tribunal held that the incorrect mentioning of the clause in the application was a bona fide and curable defect. The CIT(E) was not justified in rejecting the application and cancelling the provisional registration solely on this technical ground without proper verification. The matter was restored to the CIT(E) for fresh consideration.
Key Issues
Whether the rejection of an application for registration under section 80G and cancellation of provisional approval due to an inadvertent mistake in mentioning the wrong clause is justified, especially when the defect is curable and the assessee has a history of compliance.
Sections Cited
80G, 10AB, 10AC, 12A, 11AA(2)
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 22.10.2024 of the Ld. Commissioner of Income Tax (Exemption), Pune [“CIT(E)”] whereby he rejected the application of the assessee filed before him on 04.05.2024 in Form No. 10AB under clause (iii) of first proviso to sub- section (5) of section 80G of the Income Tax Act, 1961 (the “Act”).
The assessee has raised the following grounds of appeal :-
1. On the facts and in the prevailing circumstances of the case and in law, the learned Commissioner of Income Tax (Exemption) (hereinafter referred as "CIT (Exemption)"), Pune has erred in rejecting the application in form 10AB filed under clause (iii) of first proviso to sub-section (5) of section 80G of the Income-tax Act, 1961 for permanent approval without giving reasonable opportunity of being heard. The order of the CIT (Exemption), Pune may kindly be set aside and permanent approval u's 80G may kindly be granted with the restoration of provisional approval granted u/s 80G, in form No 10AC on 24-09-2021.
2. On the facts and in the prevailing circumstances of the case and in law, the learned CIT (Exemption), Pune has erred in rejecting the application in form 10AB filed under clause (iii) of first proviso to sub-section (5) of section 80G of the Income-tax Act, 1961 (hereinafter referred as "the Act") for permanent approval in which clause (ii) was inadvertently mentioned in place of clause (i) of first proviso to sub-section (5) of section 80G of the Act.
The appellant was eligible for filing application under clause (1) of first proviso to sub-section (5) of section 80G of the Act in view of extended period upto 30-06-2024 granted vide CBDT circular No-07/2024 dated 24- 04-2024. The order of the CIT (Exemption), Pune may kindly be set aside and approval u/s 80G may kindly be granted for 5 years with effect from AY 2022-23 by treating the said application filed under clause (i) of first proviso to sub-section (5) of section 80G of the Act for which the assessee is otherwise eligible being having 80G certificate prior to 31-03-2021 (copy of the said certificate is enclosed). This is a bona fide mistake without any intention and is curable defect as held by the Hon'ble ITAT, Kolkata in case of Nitdaa Foundation vs CIT (Exemption) in dated 20-08-2024.
3. On the facts and in the prevailing circumstances of the case and in law, the learned CIT (Exemption). Pune has erred in rejecting the application in form 10AB filed under clause (iii) of first proviso to sub-section (5) of section 80G of the Act for permanent approval on the sole ground of commencement of Trust Activities prior to 6 months of date of application as the said condition is applicable in case of new Trust only and not to the Trust which have commenced activities prior to 31-03-2021. In this regard reliance is placed on the order of Hon'ble ITAT, Ahmedabad dated 24-01- 2024, in the case of Rabdi Vibhag Progressive Kelavni Mandal vs CIT (Exemption) in in which the Hon'ble ITAT has held that the application under clause (iii) of the Proviso to Section 80G(5) of the Act cannot be rejected in the case of existing Trust on the ground that commencement of activities has already been started before six months of application. Further, reliance is also placed on the decision of Hon'ble ITAT, Chandigarh in the case of Indian Red Cross Society vs CIT (Exemption) in ITA No. 288/CHD/2024 dated 01-05-2024.
4. On the facts and in the prevailing circumstances of the case and in law, the learned CIT (Exemption). Pune has erred in cancelling the provisional registration granted on 24-09-2021 in absence of any dissatisfaction about genuineness of the activities of the appellant and in absence of any violation of conditions prescribed in clause (i) to (v) of Section 80G(5).
5. The Appellate craves the right to add, amend, modify, alter, revise, substitute, delete any or all grounds of the appeal, if deemed necessary at the time of hearing of the appeal.”
Briefly stated, the facts of the case are that the assessee trust is registered under the Bombay Public Trust Act, 1950 vide registration dated 18.01.2006 issued by the Charity Commissioner. It is formed vide trust deed dated 06.10.2005 with a major object to address growing emotional distress, to prevent suicides and to provide emotional support to those who have lost someone to suicide and its main source of income is by way of donations from corporate and other trusts. The assessee is registered u/s 12A of the Act vide registration dated 28.05.2021 issued by the CIT(E) for the period of five years from AY 2022-23 to AY 2026-27. The assessee trust is also provisionally registered u/s 80G of the Act prior to 31.03.2021 vide registration dated 31.03.2008 and therefore entitled to get fresh registration u/s 80G of the Act for a period of five years from AY 2022-23 to AY 2026-27, without any verification by the Department, by making application under clause (i) to first proviso to sub-section (5) of section 80G of the Act, as per amended procedure.
3.1 The assessee filed an application in Form 10AB on 04.05.2024 (within the extended time up to 30.06.2024, as per CBDT Circular No. 7 of 2024 dated 25.04.2024). The said application was inadvertently made under clause (iii) instead of clause (i) of first proviso to section 80G(5) of the Act. On receipt of the application along with annexures, with a view to verify the genuineness of activities of the assessee and fulfillment of the conditions laid down in clause (i) to (v) of section 80G(5) of the Act, the Ld. CIT(E) issued a notice through ITBA portal on 15.06.2024 requesting the assessee to upload certain information/clarification as mentioned therein seeking compliance by 01.07.2024. The notice was duly served upon the assessee and the same was duly responded by way of furnishing of the required submission/details/ documents by the assessee. However, the Ld. CIT(E) noticed certain discrepancies in the response/submission filed by the assessee which were communicated to the assessee by issue of another notice on 08.10.2024 stating as under : “(i) Trust has obtained provisional registration in form 10AC under item (A) on 06/04/2024. However, it is seen that the trust's activities were commenced much before the said date. Therefore, said provisions of sec.80G(5)(iii)-(A) of the Act are not applicable to your case. Please clarify with supporting documents."
3.2 The assessee was requested to show cause as to why the application should not be rejected and why the provisional approval granted u/s 80G(5) of the Act should not be cancelled by filing its response to the above notice on or before 15.10.2024. The assessee failed to respond. In the absence of any explanation offered by the assessee to the discrepancies (reproduced above), the Ld. CIT(E) presumed that the assessee has nothing to say in the matter. Ld. CIT(E) concluded that since the assessee failed to comply with the provisions of sub-clause (a) of clause (ii) of second proviso to section 80G(5) of the Act as well as the provisions of Rule 11AA(2) of the Income Tax Rules, 1962 in spite giving sufficient opportunities, he is unable to draw any satisfactory conclusion about the genuineness of the activities of the assessee and fulfillment of conditions laid down in clause (i) to (v) of section 80G(5) of the Act. Without prejudice, the Ld. CIT(E) also observed that the trust has obtained provisional registration in Form 10AC under item (A) on 06.04.2024. However, it is seen that the trust’s activities were commenced much before the said dated. Therefore, said provisions of section 80G(5)(iv)-(A) of the Act are not applicable in the assessee’s case. He, therefore, rejected the application filed by the assessee and also cancelled the provisional approval granted u/s 80G(5) of the Act on 06.04.2024.
Aggrieved, the assessee is in appeal before the Tribunal and all the grounds of appeal relate thereto.
The Ld. AR submitted that the application for registration was inadvertently made under clause (iii) instead of clause (i) of first proviso to section 80G(5) of the Act. This is a bonafide mistake of the assessee without any ulterior motive. He submitted that this is an inadvertent mistake of the assessee which is curable defect and the Ld. CIT(E) could have considered the application as filed in clause (i) instead of clause (iii) of first proviso to section 80G(5) of the Act. He submitted that the Ld. CIT(E) rejected the application mainly on technical ground i.e. the trust has started activities much before the date of application. In support of the above claim of the assessee, the Ld. AR placed reliance on the decision(s) of various Benches of the Tribunal. He brought to our attention the decision of the Kolkata Bench of the Tribunal in the case of Nitdaa Foundation Vs. CIT(E) in dated 20.08.2024 and the decision of the Pune Bench of the Tribunal in the case of Help For Children In Need Foundation Vs. CIT(E) in dated 09.12.2024. The Ld. AR also submitted that the Ld. CIT(E) did not mention any specific evidence to prove beyond doubt that the activities of the assessee of the assessee trust are not genuine and also did not being on record any specific non-fulfillment of the conditions laid down in clause (i) to (v) of section 80G(5) of the Act.
5.1 The Ld. AR also raised an alternate contention and submitted that sub- clause (iii) of the first proviso to section 80G(5) of the Act is applicable in case of new trust only. For the existing trust, the time limit for regular registration should be “within six months of expiry of provisional registration” if the application is made under sub-clause (iii) of the first proviso to section 80G(5) of the Act. If, the literal interpretation of the said provision is made applicable, then trust having started activities prior to 2021 but not applied for 80G certificate, will never be eligible for permanent registration u/s 80G. This cannot be the intention of the legislation and it may lead to absurd situation. The rejection of application on this ground of commencement of activities by the Ld. CIT(E) is therefore not proper and would cause injustice to the assessee trust. In support thereof, he relied on the decision of the Ahmedabad Bench of the Tribunal in the case of Rabdi Vibhag Progresive Kelavni Vs. CIT(E) in and the Chandigarh Bench of the Tribunal in the case of Indian Red Cross Society Vs. CIT(E) in wherein it has been held that application under clause (ii) of the first proviso to section 80G(5) of the Act cannot be rejected in the case of existing trust on the ground that commencement of activities has already been started before six months of application. He therefore, requested that the matter may be set aside to the file of the Ld. CIT(E) for fresh consideration of its application filed under clause (i) to the first proviso to section 80G(5) of the Act in place of clause (iii) thereof or to allow the application and grant certificate as the condition regarding commencement of activities is not applicable.
The Ld. DR supported the order of the Ld. CIT(E).
We have heard the Ld. Representative of the parties, perused the material on record and various judicial precedents relied on by the Ld. AR. The facts of the case are not disputed. The assessee trust is registered u/s 12A of the Act. It has also obtained provisional registration u/s 80G of the Act. Admittedly, the assessee filed an application for regular registration u/s 80G(5) of the Act under wrong code. The Ld. CIT(E) has rejected the application of the assessee for the reason(s) reproduced above. We find force in the arguments advanced by the Ld. AR and also note that the impugned issue has been decided in favour of the assessee by the various Co-ordinate Bench(es) of the Tribunal which are cited above including the Co-ordinate Bench of the Pune Tribunal.
7.1 We have perused the decision of the Kolkata Bench of the Tribunal in the case of Nitdaa Foundation (supra). In the said case, the Tribunal under the similar set of facts held that the error on the part of the assessee for mentioning the wrong clause is deemed to be a curable defect and the application on Form No. 10AC is deemed to be filed under clause (i) of the first proviso to sub-section (5) of section 80G. The order of the Ld. CIT(E) was thereby set aside by ITAT, Kolkata and the Ld. CIT(E) was required to consider the application as filed under clause (i) of the first proviso to section 80G(5) of the Act.
7.2 The decision of the Pune Bench of the Tribunal in the case of Help For Children In Need Foundation (supra) also supports and covers the case of the assessee in its favour, wherein under the similar set of facts, the Pune Bench of the Tribunal relying on the decision of the Kolkata Bench of the Tribunal in the case of Nitdaa Foundation (supra) remanded the matter back to the file of the Ld. CIT(E) with a direction to consider the application afresh, treating the same as filed under clause (iii) in accordance with law.
7.3 The alternate claim of the assessee finds support by the decision of the Ahmedabad Bench of the Tribunal in the case of Rabdi Vibhag Progresive Kelavni (supra) and the Chandigarh Bench of the Tribunal in the case of Indian Red Cross Society (supra) wherein the Tribunal has observed that the application under clause (iii) of the first proviso to section 80G(5) of the Act cannot be rejected in the case of existing trust on the ground that commencement of activities has already been started before six months of applications. We observe that the Ld. CIT(E) has cancelled the provisional registration granted to the assessee trust on 22.10.2024 without there being any satisfaction about the genuineness of the charitable activities of the assessee and also any violation of conditions prescribed under clause (i) to (v) of section 80G(5) of the Act recorded by him.
7.4 Considering the totality of the facts of the case and in the light of the legal position enumerated above, we are of the considered opinion that the Ld. CIT(E) was not justified in dismissing the application for registration and cancelling the provisional registration granted to the assessee u/s 80G(5) of the Act. The Revenue has not brought on record any contrary material/judicial precedent before us. We therefore deem it fit, in the interest of justice and fair play to restore the matter back to the file of the Ld. CIT(E) with a direction to consider and decide afresh the assessee’s application for registration u/s 80G(5) of the Act on merits as per fact and law set out above after allowing due opportunity of being heard to the assessee who shall provide the requisite support in terms of submitting the relevant details as may be called upon before the Ld. CIT(E) on the appointed date without seeking any adjournment under any pretext, failing which the Ld. CIT(E) shall be at liberty to pass appropriate order as per law. Thus, the grounds raised by the assessee are allowed for statistical purposes. We hold and direct accordingly.
In the result, the appeal of assessee is treated as allowed for statistical purposes.
Order pronounced in the open court on 14th February, 2025.