2025 (3) TMI 1114 - AT - Income Tax

Rejection of application for registration and cancelling the provisional registration granted to the assessee u/s 80G(5) - HELD THAT - CIT(E) was not justified in dismissing the application for registration and cancelling the provisional registration granted to the assessee u/s 80G(5) of the Act. Revenue has not brought on record any contrary material/judicial precedent before us. We therefore deem it fit in the interest of justice and fair play to restore the matter back to the file of the Ld. CIT(E) with a direction to consider and decide afresh the assessee s application for registration u/s 80G(5) of the Act on merits. Appeal of assessee is treated as allowed for statistical purposes.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

1. Whether the rejection of the application in Form 10AB filed under clause (iii) of the first proviso to sub-section (5) of section 80G of the Income Tax Act, 1961, by the CIT (Exemption), Pune, was justified without providing a reasonable opportunity of being heard.

2. Whether the application should be treated under clause (i) instead of clause (iii) due to a bona fide mistake, considering the extended period granted by the CBDT circular.

3. Whether the rejection of the application based on the commencement of trust activities prior to six months of the application date was appropriate, given that this condition applies only to new trusts.

4. Whether the cancellation of provisional registration granted on 24-09-2021 was justified in the absence of any dissatisfaction about the genuineness of the activities or violation of conditions prescribed in section 80G(5).

ISSUE-WISE DETAILED ANALYSIS

1. Rejection of Application in Form 10AB

- Legal Framework and Precedents: The relevant legal framework involves section 80G of the Income Tax Act, 1961, which provides for approval of donations for tax deductions. The procedural requirement for filing under the correct clause is crucial.

- Court's Interpretation and Reasoning: The Tribunal noted that the CIT (Exemption) rejected the application without providing a reasonable opportunity for the assessee to be heard, which is against principles of natural justice.

- Key Evidence and Findings: The application was filed under the wrong clause due to a bona fide mistake. The Tribunal emphasized that such errors are curable defects.

- Application of Law to Facts: The Tribunal applied precedents where similar mistakes were considered curable, allowing applications to be treated under the correct clause.

- Treatment of Competing Arguments: The Tribunal considered the CIT (Exemption)'s technical grounds for rejection but found them insufficient to deny the application.

- Conclusions: The Tribunal concluded that the application should be reconsidered under clause (i) of the first proviso to section 80G(5).

2. Commencement of Trust Activities

- Legal Framework and Precedents: Section 80G(5) and its provisos outline the conditions for approval. The condition regarding the commencement of activities applies primarily to new trusts.

- Court's Interpretation and Reasoning: The Tribunal referenced decisions from other benches, indicating that the commencement condition should not apply to existing trusts.

- Key Evidence and Findings: The trust had begun activities before the application date, but this was not a valid ground for rejection for an existing trust.

- Application of Law to Facts: The Tribunal applied the interpretation that existing trusts are not subject to the six-month commencement condition.

- Treatment of Competing Arguments: The Tribunal found the CIT (Exemption)'s application of the commencement condition to be incorrect for existing trusts.

- Conclusions: The Tribunal directed the CIT (Exemption) to reconsider the application without applying the commencement condition.

3. Cancellation of Provisional Registration

- Legal Framework and Precedents: Provisional registration under section 80G(5) is granted based on the genuineness of activities.

- Court's Interpretation and Reasoning: The Tribunal found no evidence of non-genuine activities or violation of prescribed conditions.

- Key Evidence and Findings: The CIT (Exemption) did not provide specific evidence of non-compliance or lack of genuineness.

- Application of Law to Facts: The Tribunal emphasized the need for concrete evidence before canceling provisional registration.

- Treatment of Competing Arguments: The Tribunal rejected the CIT (Exemption)'s rationale for cancellation, citing a lack of substantive evidence.

- Conclusions: The Tribunal reinstated the provisional registration pending a fresh review.

SIGNIFICANT HOLDINGS

- Verbatim Quotes: "The error on the part of the assessee for mentioning the wrong clause is deemed to be a curable defect."

- Core Principles Established: Bona fide mistakes in filing can be corrected, and existing trusts are not subject to the six-month commencement condition.

- Final Determinations: The Tribunal set aside the CIT (Exemption)'s order and directed a fresh review of the application, treating it under the correct clause and without applying the commencement condition.