2024 (9) TMI 19 - AT - Income Tax

Denial of grant of approval u/s. 80G(5) - delay in filing the application - HELD THAT - The appellant trust commenced its actual activities on 26.02.1981 and in view of the above construction of clause (iii) of proviso to section 80G(5) the appellant trust is entitled to file the application for regular approval prior to six months of expiry of the provisional approval, i.e., on or before 03.10.2022. Therefore, it cannot be said that the application filed by the appellant trust for grant of regular approval is barred by limitation prescribed under the proviso to section 80G(5). Therefore, the ld. CIT(Exemptions) is not justified in denying the grant of approval u/s. 80G(5) to the appellant trust on the ground of delay in submission of Form No.10AB. As regards the compliance to the notices by the CIT(Exemptions), we find that in the instant case the hearing notices were sent through ITBA portal by the CIT(A). In our considered opinion, it is not a valid method and manner of service of notice as specified under the provisions of section 282(1) of the Act. Therefore, it is crystal clear that the notices were not served upon the appellant. To fortify our view, we would like to make a reference to a decision rendered in the case of Munjal BCU Centre of Innovation and Entrepreneurship 2024 (3) TMI 479 - PUNJAB HARYANA HIGH COURT wherein the Hon ble High Court after making reference to provisions of 282(1) held that service of notice through ITBA portal is not valid service and remanded the matter to AO for denovo disposal of case

Summary

Issues:
Appeal against denial of approval u/s. 80G(5) of the Income Tax Act, 1961.

Analysis:
The appeal was filed by a trust against the order denying approval u/s. 80G(5) of the Income Tax Act, 1961. The trust had applied for approval under the relevant provision but was rejected due to a delay in filing the application. The Commissioner of Income Tax (Exemptions) observed that the trust had not filed the application within the prescribed time limit, leading to the denial of approval. Additionally, the Commissioner raised concerns about the genuineness of the trust's activities and fulfillment of conditions under section 80G of the Act.

Despite the trust being aggrieved and appealing the decision, no representation was made on behalf of the assessee during the hearing. The Departmental Representative supported the Commissioner's decision, arguing against any interference by the Tribunal. The Tribunal proceeded to hear the arguments and examine the case based on the material on record.

The Tribunal analyzed the relevant provisions of the proviso to section 80G and highlighted the requirement for filing an application for approval within six months of the commencement of activities or before the expiry of provisional approval. The literal interpretation of the clause led to a discussion on the practical implications for institutions that had commenced activities before the provisional approval was granted, leading to a potential absurd and unjust outcome.

In light of the above discussion, the Tribunal concluded that a fair and reasonable construction of the clause would be to substitute the word "earlier" with "later," allowing institutions like the appellant trust to file for regular approval within a reasonable timeframe. This interpretation was supported by a Supreme Court decision in a similar context.

Regarding the issue of notices served through the ITBA portal, the Tribunal found that such service did not comply with the provisions of the Income Tax Act. Citing a judgment of the Punjab & Haryana High Court, the Tribunal emphasized the importance of following proper communication methods for serving notices and ensuring the principles of natural justice are upheld.

Consequently, the Tribunal ruled in favor of the appellant trust, allowing the appeal in part. The matter was remanded back to the Commissioner for a fresh decision on merits in accordance with the law. The decision was pronounced in the open court on a specified date.