2024 (8) TMI 1364 - AT - Income Tax

Rejection of registration u/s 80G(5)/12AA of existing trust - instead of applying under clause (i) of the proviso to section 80G, it applied u/clause (iii) as a new trust - assessee did not file the form no- 10AB within the stipulated time limit - requirement for seeking any provisional approval HELD THAT - As the assessee was an existing trust and had been granted approval u/s 12AA of the Act as well as under section 80G of the Act earlier but instead of applying under clause (i) of the proviso to section 80G, it applied under clause (iii) as a new trust. If it had applied under clause (i), there was no need of issuing any provisional certificate and as per the second proviso to section 80G, the Principal Commissioner or Commissioner would have passed an order in writing granting it approval for a period of five years and there was no requirement for seeking any provisional approval which is required only for a new trust. The whole controversy arose due to incorrect mention of the clause under which the application was required to be filed, which was mentioned as clause (iv) of the first proviso to sub-section (5) of section 80G in column 6 of Form No. 10AC whereas the same should have been mentioned as clause (i) of the first proviso to sub-section (5) of section 80G and AR also admitted this fact in the course of the hearing. Since, Form No. 10AC was filed in time, 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(Exemption) is hereby set aside and he is required to consider the application as filed under clause (i) of the first proviso to section 80G(5) of the Act and consider the same for grant of approval. Appeal of the assessee is allowed for statistical purposes.

Issues Involved:
1. Rejection of application for registration under section 80G(5)(iii).
2. Non-consideration of application under section 12A(1)(ac)(iii).
3. Maintainability of the application filed in Form 10AB.
4. Verification of financial transactions.
5. Cancellation of provisional certificate under section 80G.

Issue-wise Detailed Analysis:

1. Rejection of Application for Registration under Section 80G(5)(iii):
The appellant trust filed an application for registration under section 80G(5)(iii) electronically on 24.05.2023 in Form No. 10AB. The Ld. CIT(E) rejected the application, stating that the trust had already commenced its activities from FY 2019-20 and did not file the application within the stipulated time limit as extended by various CBDT Circulars. The CIT(E) emphasized that the time limit prescribed under section 80G(5)(iii) is mandatory and cannot be condoned. The Tribunal noted that the appellant trust was an existing trust with prior approval under section 12AA and 80G, and the application should have been filed under clause (i) of the proviso to section 80G instead of clause (iii).

2. Non-consideration of Application under Section 12A(1)(ac)(iii):
The appellant argued that the CIT(E) did not consider their application under section 12A(1)(ac)(iii) filed on 06.05.2022. The Tribunal observed that the CIT(E) failed to address this aspect and did not provide any specific reasons for the non-consideration of the application. The Tribunal directed the CIT(E) to consider the application under the correct clause and grant approval accordingly.

3. Maintainability of the Application Filed in Form 10AB:
The CIT(E) deemed the application filed in Form 10AB as non-maintainable due to the delay in filing and the incorrect clause under which it was filed. The Tribunal, however, noted that the error in mentioning the clause was a curable defect and directed the CIT(E) to treat the application as filed under clause (i) of the proviso to section 80G(5). The Tribunal emphasized that the CIT(E) should have considered the application on its merits rather than rejecting it on technical grounds.

4. Verification of Financial Transactions:
The appellant argued that the CIT(E) did not make any effort to verify the financial transactions reflected in the audited accounts. The Tribunal noted that the CIT(E) failed to discuss whether the appellant fulfilled all other conditions mentioned in the section and documents enclosed with the Form. The Tribunal directed the CIT(E) to verify the financial transactions and other conditions as per the provisions of the Act.

5. Cancellation of Provisional Certificate under Section 80G:
The CIT(E) canceled the provisional certificate issued to the appellant trust under section 80G, stating that the application filed in Form 10AB was non-maintainable. The Tribunal observed that the cancellation of the provisional certificate was not justified as the CIT(E) did not point out any specific violation by the appellant. The Tribunal set aside the order of the CIT(E) and directed him to reconsider the application for approval under section 80G(5) within two months from the receipt of the order.

Conclusion:
The Tribunal allowed the appeal of the appellant for statistical purposes, set aside the order of the CIT(E), and directed the CIT(E) to reconsider the application for approval under section 80G(5) as filed under clause (i) of the proviso to section 80G(5) within two months from the receipt of the order. The Tribunal emphasized that the CIT(E) should verify the financial transactions and other conditions as per the provisions of the Act and grant approval accordingly.

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