PRAVINBHAI PURANRAJ STHANAKVASI FOUNDATION,AHMEDABAD vs. CIT(EXEMPTION), AHMEDABAD

The application for approval of the Trust under clause (iii) of first proviso to sub-section (5) of Section 80G of the Income Tax Act, 1961 was filed by the assessee in Form No.10AB electronically. The ld. CIT(Exemption) observed that the assessee should be provisionally approved prior to filing of application for obtaining regular approval under clause (iii) of first proviso to sub-section (5) of Section 80G of the Act. Since no order of provisional approval was filed by the assessee, the ld. CIT(Exemption) held that the application of the assessee for regular approval was premature and non-maintainable. Therefore, the application of the assessee was rejected.

Aggrieved with the order of the ld. CIT(Exemption) the assessee is in appeal before us. The following grounds have been taken in this appeal:

The order passed by CIT (Exemption) is bad in law and required to be quashed.

Sh. Parin Shah, the ld. Counsel of the assessee submitted that the assessee trust was incorporated on 06.02.2024 and this ITA 1890/Ahd/2024 [Pravinbhai Puranraj Sthanakvasi Foundation vs. CIT(E)] A.Y. NA - 3 – was the first year of activity. The trust was formed with the object of relief to poor, education and advancement of any other object of public utility. The trust had undertaken the project of construction of girl’s hostel at Navarangpura. The ld. AR submitted that the trust had applied for final registration as the activity had commenced immediately after incorporation and that the registration u/s 12AB(1)(b) was granted on 01/08/2024 for the years 2024-25 to 2028-29. The ld. AR submitted that there was an inadvertent error in the application filed by the assessee as the application was made under subclause (iii) of the proviso to section 80G(5) whereas the application should have been made under sub-clause (iv) of the said proviso. According to the ld. AR the ld. CIT (Exemption) was not correct in rejecting the application of the assessee for this inadvertent mistake without allowing any opportunity of being heard to the assessee. He submitted that the assessee was not allowed any opportunity to rectify the mistake in the application, The ld. AR relied upon the decision of coordinate bench of this Tribunal in the case of Uttar Gujarat Shikshan Seva Trust in dated 05.04.2024 and submitted that the assessee should have been allowed an opportunity to rectify its application.

Per contra the ld. CIT-DR, Sri A P Singh, appearing for the Revenue supported the order passed by the ld. CIT (Exemption) and submitted that since the application was filed by the assessee under wrong provision the Revenue had no option to rectify the mistake. Therefore, he requested to uphold the order passed by ITA 1890/Ahd/2024 [Pravinbhai Puranraj Sthanakvasi Foundation vs. CIT(E)] A.Y. NA - 4 – the ld. CIT (Exemption). He further submitted that the assessee was free to make a fresh application under the correct provisions of the Act.

We have given thoughtful consideration to the rival submissions and perused the materials available on the record. The only reason for rejecting the registration u/s. 80G(5) of the Act was that the assessee had wrongly filed the application under sub-clause (iii) of the proviso to section 80G(5) of the Act. The said proviso is reproduced for sake of easy comprehension:

As rightly held by the ld. CIT (Exemption) the application could have been filed under sub-clause (iii) of the proviso only in the case where the institution or fund was provisionally approved. In the present case the assessee was not granted provisional approval when the present application ITA 1890/Ahd/2024 [Pravinbhai Puranraj Sthanakvasi Foundation vs. CIT(E)] A.Y. NA - 5 – was filed by it. In the case of the assessee sub-clause (iv)(B) of the proviso was applicable since the trust had had already commenced its activities and the application for approval was filed thereafter. The fact that the activity of the trust had commenced immediately after incorporation on 06.02.2024 and, therefore, sub-clause (iv) of the proviso was applicable, was apparent from the reply of the assessee filed before the ld. CIT (Exemption). Under the circumstances the ld. CIT (Exemption) should have allowed an opportunity to the assessee to rectify its application. The rejection of the application by the ld. CIT (Exemption) without allowing any opportunity to the assessee was against the principle of natural justice. It is undisputed fact that the assessee was carrying out the charitable activities and the genuineness of the activities were not under doubt. The denial of registration only for wrong mention of the sub-clause in the application certainly affects the charitable activities carried out by the trust.

An identical issue was involved in the case of Uttar Gujarat Shikshan Seva Trust (Supra) wherein the Coordinate Bench of this Tribunal had set aside the matter to the ld. CIT (Exemption) with a direction to pass order on merits after the rectified application was filed by the assessee. In that case the assessee had filed application u/s 80G(5)(ii) of the Act instead of u/s 80G(5)(iii) of the Act.

Respectfully following the decision of the Coordinate Bench, the present impugned order of ld. CIT (Exemption) is hereby set aside with a direction to pass order on merits on the rectified application to be filed by the assessee. Needless to mention, the assessee should file the application for ITA 1890/Ahd/2024 [Pravinbhai Puranraj Sthanakvasi Foundation vs. CIT(E)] A.Y. NA - 6 – registration under the correct sub-clause of proviso to section 80G(5) of the Act before the ld. CIT (Exemption).

In the result, the appeal filed by the assessee is allowed for statistical purpose.