2024 (12) TMI 1520 - AT - Income Tax

Rejection of Application filed for approval u/s 80G - assessee had selected the wrong code while filing the application - HELD THAT - Application filed by the assessee was rejected on account of a typographical error of wrong mentioning of particular code and no other adverse findings has been given on merit by CIT Exemption Pune. In the light of the circular no 7/2024 issued by CBDT on 25-04-2024 i.e. after the filing of application by the assessee wherein the issue of mentioning wrong section code has been addressed / considered as a common frequent error and also observing the fact that in the instant case Ld. CIT Exemption Pune has not given any adverse finding on merits of the case against the assessee we deem it fit to set-aside the order passed by Ld. CIT Exemption and remand the matter back to him with the direction to treat the application of the assessee as filed under code 14 clause (iii) of first proviso to sub-section (5) of section 80G (or under the desired section code) and consider the same for grant of approval u/s 80G(5) of the IT Act in accordance with law after providing reasonable opportunity of hearing to the assessee. Appeal filed by the assessee is allowed for statistical purposes.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

• Whether the application for approval under section 80G of the Income Tax Act was correctly rejected due to the selection of an incorrect code in the application form.
• Whether the error in selecting the wrong code is a curable defect, allowing for reconsideration of the application under the correct provision.
• Whether the Central Board of Direct Taxes (CBDT) Circular No. 7/2024 provides guidance on handling such typographical errors in application forms.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Rejection of Application Due to Incorrect Code

• Relevant Legal Framework and Precedents: The application was filed under section 80G of the Income Tax Act, which provides tax exemptions for donations to certain funds and charitable institutions. The relevant legal framework includes the provisions of section 80G(5) and the procedural requirements for filing applications for approval.
• Court's Interpretation and Reasoning: The Tribunal noted that the rejection was based solely on a technical error, i.e., the incorrect selection of the code in the application form. The Tribunal emphasized that such an error should not be the sole basis for rejection if the merits of the application are otherwise satisfactory.
• Key Evidence and Findings: The Tribunal found that the assessee had acknowledged the mistake and requested that the application be considered under the correct provision. There was no adverse finding on the merits of the application by the CIT, Exemption, Pune.
• Application of Law to Facts: The Tribunal applied the principle that procedural errors, such as typographical mistakes, should not hinder the substantive rights of the assessee, especially when the error is acknowledged and corrected.
• Treatment of Competing Arguments: The Revenue argued for upholding the rejection based on procedural grounds, while the assessee argued for reconsideration based on the merits and the unintentional nature of the error. The Tribunal favored the assessee's argument, emphasizing fairness and substantive justice.
• Conclusions: The Tribunal concluded that the application should not have been rejected solely on technical grounds and should be reconsidered under the correct provision.

Issue 2: Curable Defect and Reconsideration

• Relevant Legal Framework and Precedents: The Tribunal referenced the case of Nitdaa Foundation, where a similar typographical error was deemed a curable defect, allowing for reconsideration of the application.
• Court's Interpretation and Reasoning: The Tribunal held that the error in the application was curable, as it was a typographical mistake without any intent to mislead or deceive.
• Key Evidence and Findings: The Tribunal noted the CBDT Circular No. 7/2024, which addresses the issue of incorrect section codes in applications and provides for the possibility of refiling within an extended timeframe.
• Application of Law to Facts: The Tribunal applied the principles from the Nitdaa Foundation case and the CBDT circular to determine that the error was curable and the application should be reconsidered.
• Treatment of Competing Arguments: The Tribunal considered the Revenue's insistence on procedural adherence but ultimately prioritized substantive justice and the opportunity for correction as outlined in the CBDT circular.
• Conclusions: The Tribunal directed the CIT, Exemption, Pune to treat the application as filed under the correct provision and reconsider it for approval under section 80G(5).

3. SIGNIFICANT HOLDINGS

• Preserve Verbatim Quotes of Crucial Legal Reasoning: "The application filed by the assessee was rejected on account of a typographical error of wrong mentioning of particular code and no other adverse findings has been given on merit by Ld. CIT, Exemption, Pune."
• Core Principles Established: Procedural errors, such as typographical mistakes, should not preclude consideration of an application on its merits, especially when acknowledged and corrected. The CBDT circular provides a framework for addressing such errors.
• Final Determinations on Each Issue: The Tribunal set aside the order of the CIT, Exemption, Pune, remanding the matter for reconsideration under the correct provision, with directions to provide a reasonable opportunity for the assessee to present supporting evidence.

In conclusion, the Tribunal's decision underscores the importance of substantive justice over procedural technicalities, allowing for the correction of inadvertent errors in application forms, provided there is no intent to mislead and the merits of the case are otherwise sound.