ARUNA KISHORE FOUNDATION,VADODARA vs. CIT(EXEMPTION), AHMEDABAD

We have considered the contents of the affidavits, the chronology of events, and the reasons stated for the delay. In our considered view, the explanation tendered by the assessee constitutes sufficient cause within the meaning of section 253(5) of the Act, 1961. We find that the delay is neither contumacious nor deliberate, but rather a consequence of an erroneous interpretation of the Circular and the legal procedure. Accordingly, in the interest of substantial justice and considering the charitable

While disposing of the application under section 12AB, the learned CIT(E), Ahmedabad, rejected the application by invoking clause (vi)(B) of section 12A(1)(ac) of the Act. Though no conclusive finding was recorded as to whether such exemptions were claimed and 3 Others 5 specifically under section 11, 12 or clause (23C) of section 10, the CIT(E) treated the claim as falling within the mischief of clause (vi)(B) and held the application to be non-maintainable on that basis. The application under section 80G, though filed simultaneously, was not examined independently. It was rejected by way of an implicit and consequential finding linked to the disposal of the 12AB application. No separate discussion or satisfaction was recorded on the conditions prescribed under section 80G(5) of the Act.

Subsequently, the assessee filed a second set of applications in Form 10AB for registration under section 12AB and approval under section 80G. These applications were also processed by the learned CIT(E) as mentioned in the table. In the order rejecting the application under section 12AB, the CIT(E) recorded that the earlier application had already been rejected on merits and that the present application was not eligible for refiling under Circular No. 7 of 2024 dated 25.04.2024. The CIT(E) held that the assessee’s case did not fall within the situations covered by the said Circular, such as delayed filing or selection of wrong section code, and therefore the application was again treated as non- maintainable. The corresponding application under section 80G was once again rejected without independent adjudication, by merely referring to the rejection under section 12AB. No discussion was made in relation to the compliance with the statutory conditions under section 80G(5) or the relevant rules. and 3 Others 6 8. Following is the tabulated summary of the applications filed, opportunity given by the CIT(E) and date of order by CIT(E) along with the reasons: Sr. ITA Section Date of Date of Date of Reason for No. No. Application Opportunity Order of Rejection by /Ahd/ in form by CIT(E) (CIT(E)) CIT(E) 2025 10AB 1 293 12AB 15/06/2024 06/09/2024 24/12/2024 Earlier Application rejected and such rejection is not covered by Circular No. 7 of 2024 dated 25- 04-2024 hence not maintainable 2 294 80G 15/06/2024 05/10/2024 25/12/2024 Not independently examined. - Rejected consequentially along with 12AB. - No findings recorded under section 80G(5). 3 323 12AB 16/01/2024 24/04/2024 10/07/2024 Invoked bar under section 12A(1)(ac)(vi)(B). - Found that assessee had claimed exemption in ITRs: FY 2021– 22: Rs. 85,30,550 and FY 2022–23: Rs. 2,11,82,097 - No conclusive finding on whether exemption was under section 11/12 or 10(23C) but treated as such. and 3 Others 7 4 324 80G 11/01/2024 30/04/2024 15/07/2024 No separate adjudication. - Rejected implicitly with 12AB order. - No reference to section 80G(5) compliance.

Aggrieved by the orders of the CIT(E), the assessee is in appeal before us raising following grounds of appeal:

That, the Hon'ble CIT(Exemption) is not justified in cancelling the provisional approval already granted u/s 12A of the I.T. Act, only for the reason that the appellant could not comply to the notices issued for furnishing of certain details /documents despite the fact that the trust is engaged in genuine ‘charitable activities’ “1. On facts and circumstances of the case the Hon'ble CIT(Exemption) is not justified in rejecting the application of the appellant filed for grant of approval u/s 80G(5)(iii) of the l.T. Act, 1961.

That, the Hon'ble CIT(Exemption) is not justified in rejecting the application of the appellant filed for grant of approval u/s 80G (5)(iii) of the l.T. Act ,1961 for the sole reason that registration application filed by the Foundation u/s 12A of the Act has been rejected vide order dated 25.9.2023 & 10.07.2024 which he considered as 'pre-requisite' for grant of approval.”

The learned Departmental Representative (DR) placed reliance on the orders passed by the learned CIT(E), Ahmedabad, and supported the reasons recorded therein for rejecting the applications filed by the assessee under section 12AB and section 80G. However, the DR raised no objection in remanding the matter back to the file of CIT(E) to decide a fresh.

We have considered the material on record and rival submissions, including the tabulated chronology of applications and orders passed by the CIT(E), Ahmedabad. The assessee had been granted provisional registration under section 12A of the Act

We first address the appeals in and 324/Ahd/2025. The application under section 12AB was rejected by the CIT(E) by invoking clause (vi)(B) of section 12A(1)(ac), holding that the assessee was not eligible to apply under that clause because it had already claimed exemption in its ITRs for financial years 2021–22 and 2022–23 in the amounts of Rs. 85,30,550/- and Rs. 2,11,82,097/-, respectively. However, we find that the CIT(E) did not conclusively examine whether such exemption was actually claimed under section 11, 12 or clause (23C) of section 10, which is a sine qua non for attracting the bar under clause (vi)(B). The finding is inferential and not supported by any verification of the nature of exemption claimed in the respective years. The mere reflection of income under the head “exempt” in the ITR without a finding on the legal source of exemption is insufficient to invoke a statutory bar of such consequence. Moreover, the assessee had already obtained provisional registration and had applied in continuity for regularisation. There is no allegation of any misstatement, suppression, or misuse of exemption provisions. and 3 Others 11 14. The application for approval under section 80G, though filed simultaneously, was rejected without any separate adjudication. The CIT(E) summarily disposed of the 80G application along with the 12AB rejection, without recording any satisfaction or finding in terms of section 80G(5). The record does not show that any specific notice was issued in respect of the 80G application or that the CIT(E) examined compliance with the relevant statutory conditions. In our view, such mechanical and consequential rejection of the 80G application is contrary to law, as approval under section 80G is an independent statutory function requiring separate satisfaction of eligibility parameters.

We now turn to the second set of appeals and 294/Ahd/2025. These arose from the assessee’s subsequent filing of Form 10AB on 15.06.2024 under the impression that CBDT Circular No. 07/2024 dated 25.04.2024 permitted a fresh application where earlier applications had been rejected or marked defective. However, the CIT(E), in the order dated 24.12.2024, held that the earlier rejection was on merits and not due to technical defects such as delay or wrong section code, and thus the fresh application was not covered by the Circular. Accordingly, the second application was held to be non-maintainable. The corresponding 80G application was again rejected without independent reasoning or analysis, merely by referencing the section 12AB rejection.

In our considered opinion, the second set of applications filed by the assessee was not in the nature of an independent claim but and 3 Others 12 was a remedial measure taken in good faith to address the procedural rejection of the first application. Once it is found that the earlier order dated 10.07.2024 rejecting the first application under section 12AB was based on an unverified assumption and without adequate opportunity, and the 80G rejection was non- speaking, the only proper course is to restore those matters to the CIT(E) for fresh adjudication. Consequently, the second set of applications, and the appeals arising therefrom, become infructuous.

We also note the grievance of the assessee that the CIT(E) granted only one opportunity before disposing of the applications, and that the procedural compliance was neither clarified nor supported through further inquiries. Given that the assessee is a non-profit entity engaged in rural and tribal welfare with limited resources, the burden of strict procedural default ought not to defeat the substantive right to seek registration and approval under the law. We accordingly find merit in the plea for restoration. In light of the foregoing discussion, we hold that the orders of the CIT(E) dated 10.07.2024 and 15.07.2024 (impugned in and 324/Ahd/2025) suffer from procedural impropriety and legal infirmity. These orders are accordingly set aside, and the matters are restored to the file of the CIT(E), Ahmedabad, for fresh consideration in accordance with law after affording due opportunity of being heard to the assessee. As the second set of applications was only a consequence of the rejection of the first, and 3 Others 13 the appeals in and 294/Ahd/2025 are dismissed as infructuous.

In the combined result, and 324/Ahd/2025 are allowed for statistical purposes and and 294/Ahd/2025 are dismissed as infructuous.