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Facts
The assessee, a registered charitable trust, had provisional registration and applied for regular registration under Section 12AB. The application was rejected by the CIT(Exemption) because the assessee inadvertently selected the wrong sub-clause in Form 10AB, pertaining to renewal instead of provisional registration.
Held
The Tribunal held that the rejection of the application solely on the technical ground of incorrect section code, without affording an opportunity to rectify, was unsustainable. Following CBDT Circular No. 7/2024, procedural errors should not defeat substantive rights.
Key Issues
Whether rejection of an application for registration under Section 12AB solely on the technical ground of an incorrect section code, without providing an opportunity to rectify, violates principles of natural justice and substantive law.
Sections Cited
12A(1), 12AB, 10AB, 10AC
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Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
Before: MS. SUCHITRA KAMBLE & SHRI MAKARAND V. MAHADEOKAR
This appeal by the assessee is directed against the order dated 03.01.2025 passed by the Commissioner of Income Tax (Exemption), Ahmedabad [hereinafter referred to as “CIT(Exemption)”], rejecting the assessee’s application in Form No. 10AB for registration under section 12AB of the Income-tax Act, 1961 [hereinafter referred to as “the Act”].
Kautilaya Edurchar Trust vs. CIT(E) 2 Brief Facts of the Case 2. The assessee is a registered charitable trust. It was granted provisional registration under section 12A(1)(ac)(vi) vide Form 10AC dated 31.12.2021, effective from Assessment Year 2022–23. Subsequently, the assessee filed an application in Form No. 10AB dated 26.10.2024 seeking regular registration under section 12AB. However, while filing the said Form No. 10AB, the assessee inadvertently selected sub-clause (ii) of clause (ac) of section 12A(1), which applies to existing registrations due for renewal, instead of the appropriate sub-clause (iii) applicable to trusts holding provisional registration. The CIT(Exemption), without affording any opportunity to rectify this error, rejected the application purely on this technical ground, holding that the form was filed under the wrong section code and that he had no power to amend the section code selected by the assessee.
Aggrieved by the order of CIT(Exemption), the assessee preferred this appeal before us raising following grounds:
1. Ld. CIT (Exemption) erred in law and on facts in rejecting the application for registration under Section 12AB on the ground that the appellant had incorrectly quoted the section, despite the fact that the substance of the application was correct and complied with the provisions of the Income Tax Act.
Ld. CIT(Exemption) erred in law and on facts by rejecting the application under Section 12AB without affording the appellant an opportunity to explain or rectify the procedural issue, thereby violating the principles of natural justice 3. Ld. CIT(Exemption) ought to have exercised his discretion to allow the appellant to rectify the application instead of outright rejection. 4. That the Appellant craves leave to add, amend, modify, or withdraw any ground of appeal
at the time of hearing.
4. When the appeal was listed for hearing, the assessee filed an application seeking adjournment. However, in view of the narrow legal issue involved and the material available on record, the matter was taken up for adjudication. The learned Departmental Representative raised no objection for the same.
Kautilaya Edurchar Trust vs. CIT(E) 3 5. We have carefully perused the order of the CIT(Exemption) and the material placed on record. It is not in dispute that the assessee was holding a valid provisional registration in Form 10AC and had filed Form 10AB within the prescribed timeline. The rejection is solely on the ground that the application was made under the incorrect section code — i.e., sub-clause (ii) instead of sub-clause (iii) of clause (ac) of section 12A(1).
In this context, it is pertinent to refer to CBDT Circular No. 7/2024 [F. No. 173/25/2024-ITA-I] dated 15.04.2024, which provides guidance precisely for such situations. The Circular clarifies that procedural errors such as incorrect selection of section code should not, by themselves, become a ground for rejecting an otherwise valid application. The underlying intent is to mitigate hardship and ensure substantive justice.
In the present case, the assessee’s application was filed well before the cut-off date of 30.06.2024, and the rejection occurred solely on account of incorrect selection of the section code. The substance of the application was otherwise in accordance with law, and no deficiency was pointed out with respect to its merits. It is a settled principle of law that procedural lapses should not defeat substantive rights. It is also settled principle that a liberal and purposive interpretation must be adopted in matters involving registration under section 12A/12AB, especially where compliance is otherwise satisfactory.
In view of the above discussion and considering the directive issued in CBDT Circular No. 7/2024 dated 15.04.2024, we are of the considered opinion that the impugned order rejecting the assessee’s application solely on account of an incorrect section code is unsustainable in law. Accordingly, we set aside the order passed by the CIT(Exemption) and restore the matter to his file with a direction to treat the application as filed under sub-clause (iii) of clause (ac)
Kautilaya Edurchar Trust vs. CIT(E) 4 of section 12A(1), in light of the Circular. The CIT(Exemption) shall examine the application on merits after affording due opportunity of being heard to the assessee and pass a speaking order in accordance with law.
In the result, appeal filed by assessee is allowed for statistical purposes.
Order pronounced in the Open Court on 10th June, 2025 at Ahmedabad.