Portal Glitches & Natural Justice: Restoring Regular Registration for Charitable Trusts

ORDER

Aby T. Varkey, Judicial Member.- ITA No.2866/Chny/2025 is an appeal preferred by the assessee-Temple-Trust against the order of the Learned Principal Commissioner of Income Tax (Exemptions), (hereinafter ‘the Ld.PCIT(E)’)/CPC dated 18.10.2022 granting provisional registration for three (3) years from AY 2023-24 instead of five (5) years from AY 2022-23 to AY 2026-27. And ITA No.2865/Chny/2025 is against the action of the Ld.CIT(E), Chennai, dated 03.06.2025 passing ex parte order rejecting the application filed by the assessee Temple Trust dated 08.11.2024 in Form 10AB u/s.12A(1)(ac)(ii) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) seeking regular registration u/s.12AB of the Act.

2. There is a delay of ‘1035’ days in filing of appeal (ITA No.2866/Chny/2025) against the impugned order of the CPC/PCIT(E); and there is a delay of ’47’ days in filing of appeal (ITA No.2865/Chny/2025) against the impugned order of the Ld.CIT(E) and the assessee has filed condonation application supported by Affidavit Sworn by the Secretary, Shri R.M. Veerappan, which contents states that the assessee Temple Trust is an old Trust, enjoying 12A registration from the year 1986; and the delay in filing of appeals were not intentional/deliberate. It was pointed out that it has been filing its ITR regularly claiming exemption u/s.12AA; and that Dr. MAM Ramasamy was the President of the assessee-society for a long time. But his demise on 02.12.2015 resulted in disputes (for becoming the office-bearers of assessee), which led to litigation [Civil Suit before the Hon’ble Madras High Court in CS No.37 of 2021, etc.] and only after the intervention of the Hon’ble Madras High Court, and appointment of Judge Commissioner, General Body was convened and elections were held and thus, he was elected as Secretary and finally, he has sworn the ibid affidavit. According to the assessee, since it was an old Trust enjoying registration u/s.12A of the Act from the year 1986, and due to change of new regime, the last date for filing application for provisional registration for five (5) years was on 30.06.2021, which time-limit was extended by the CBDT initially up to 31.03.2022 and ultimately up to 30.06.2024. So when the assessee filed application for provisional registration on 07.10.2022, system didn’t allow the assessee to file application under clause (i) of Section 12A(1)(ac), which forced them to only click on the ‘drop-down menu’ for clause (vi) of Section 12A(1)(ac) of the Act, because of which, assessee got registration for three (3) years from AY 2023-24. It is also submitted by the Ld.AR that since the assessee couldn’t file application under sub-clause (i) and only under sub-clause (vi), it enclosed a letter with it application, requesting the CPC/CIT to consider the application filed under sub-clause (vi) as an application filed under sub-clause (i) and referred to Page No.78 & 79 of Paper Book. According to the assessee, thereafter the CBDT extended the time-limit for filing of application for registration till 30.06.2024. And since, assessee’s case fell during the grey period [when there was no Circular extending the date for filing application during October, 2022], the assessee was not granted registration for five (5) years [from AYs 2022-23 to 2026-27]. Therefore, the assessee is aggrieved with passing of the impugned order by the CPC/PCIT on 18.10.2022 granting provisional registration for three (3) years from AY 2023-24 instead of granting registration for five (5) years from AYs 2022-23 to 2026-27. Thereafter, assessee being an old-Trust, had filed correctly application on 08.11.2024 in Form 10AB u/s.12A(1)(ac)(ii) of the Act seeking regular registration u/s.12AB of the Act, which was rejected by the Ld.CIT(E) by passing an ex parte order dated 03.06.2025 against which the assessee Trust has preferred ITA No.2865/Chny/2025 which is also delayed by ’47’ days due to certain technical glitches in the system and assessee came to know about the ex parte order only later on, which resulted in 47 days delay in filing of appeal. Since the assessee is an old Trust registered u/s.12A from 1986 onwards and due to litigation etc, referred to supra, the assessee society pleads for condoning delay in filing of both the appeals. Per contra, Ld.DR doesn’t want us to condone the delay and wants us to dismiss the appeals of the assessee Trust.

3. Having heard both the parties and after having going through the contents of the application/affidavit for condoning the delay and considering the facts stated supra, we note that the assessee is an old Trust registered u/s.12A of the Act in 1986 and is a Temple Trust; and due to the demise of the erstwhile President of the Temple, there were litigations/disputes which ultimately got settled by the intervention of the Hon’ble Madras High Court appointing a Judge Commissioner; and only after elections/general body, the assessee Trust was able to finalize the accounts after audit and then filed the appeals before this Tribunal with a delay of more than 1000 days [ITA No.2866/Chny/2025] which was filed after the legal advice that assessee being an old Trust was entitled for registration for five (5) years from AY 2022-23 onwards and not for provisional registration for three (3) years and therefore has preferred to file the appeal before this Tribunal with a delay of ‘1035’ days. The other appeal [ITA No.2865/Chny/2025] is against the ex-parte rejection of its application filed for regular registration u/s.12AB of the Act with a delay of ’47’ days. Having considered the totality of the facts and circumstances of the case, we are inclined to condone the delay in filing of both the appeals for the reasons given (infra) and in this regard note that assessee enjoyed registration u/s.12AA of the Income Tax Act, 1961 (hereinafter ‘the Act’) and had been claiming exemption u/s.11 of the Act, and since it was a old-Trust, it could have enjoyed Sec.12AA registration in perpetuity, but for the amendment which was brought in the law by the Taxation and Other Laws (Relaxation and Amendment of certain Provisions) Act, 2020 (hereinafter in short ‘TOLA, 2020’) w.e.f.01.04.2021. And by virtue of TOLA, 2020, [assessee had to apply for re-registration under the Act] amendments were brought in the provisions relating to the eligibility/procedure of registration u/s.12A/12AA of the Act, sec.10(23C), sec.80G of the Act. At present, we are concerned with the procedure to apply for re-registration brought in Sec.12A(1)(ac) and sec.12AB of the Act and the relevant provisions reads as under:-

12A. [(1)] The provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely:-

(a)….

(aa)….

(ab)….

(ac) notwithstanding anything contained in clauses (a) to (ab), the person in receipt of the income has made an application in the prescribed form and manner to the Principal Commissioner or Commissioner, for registration of the trust or institution,—

and such trust or institution is registered under section 12AB;]

12AB. (1)The Principal Commissioner or Commissioner, on receipt of an application made under clause (ac) of sub-section (1) of section 12A, shall,—

(c)where the application is made under sub-clause (vi) of the said clause, pass an order in writing provisionally registering the trust or institution for a period of three years from the assessment year from which the registration is sought,

and send a copy of such order to the trust or institution.

(2)All applications, pending before the Principal Commissioner or Commissioner on which no order has been passed under clause (b) of sub-section (1) of section 12AA before the date on which this section has come into force, shall be deemed to be applications made under sub-clause (vi) of clause (ac) of sub-section (1) of section 12A on that date.

(3)The order under clause (a), sub-clause (ii) of clause (b) and clause (c), of sub-section (1) shall be passed, in such form and manner as may be prescribed, before expiry of the period of three months, six months and one month, respectively, calculated from the end of the month in which the application was received.

(4)Where registration or provisional registration of a trust or an institution has been granted under clause (a) or clause (b) or clause (c) of sub-section (1) or clause (b) of sub-section (1) of section 12AA, as the case may be, and subsequently,—

the Principal Commissioner or Commissioner shall—

Explanation.—For the purposes of this sub-section, the following shall mean “specified violation”,—

(5)The order under clause (ii) or clause (iii) of sub-section (4), as the case may be, shall be passed before the expiry of a period of six months, calculated from the end of the quarter in which the first notice is issued by the Principal Commissioner or Commissioner, on or after the 1st day of April, 2022, calling for any document or information, or for making any inquiry, under clause (i) of sub-section (4).]]

4. And as noted, the assessee being a Temple already enjoyed registration u/s.12AA, [after TOLA 2020] as per the amended provisions (supra), was eligible to apply for re-registration in Form 10A within three months from 1^st day of April, 2021 i.e. within 30.06.2021 under subclause (i) of Sec.12A(1)(ac) and then, in such an event, it would have obtained registration automatically from CPC u/s.12AB(a) of the Act for five (5) years from AY 2022-23 to AY 2026-27. However, due to Covid pandemic, digital glitches, etc., several Institutions/Trusts could not e-file the application for registration and considering the genuine hardship faced by Trust/Institution, the CBDT had issued several Circulars extending the due date of filing from 30.06.2021 (applicable for old Trust enjoying 12A/12AA registration before TOLA 2020) to 31.03.2022 and then to 25.11.2022 [applicable also for registration u/s.10(23C), and 80G(5) of the Act] and ultimately extended up to 30.06.2024.

5. However, the present assessee applied initially on-line for registration on 07.10.2022, which was during the grey period (when there was no CBDT Circular extending time beyond 31.03.2022). Therefore, assessee couldn’t file application under sub-clause (i) of Section 12A(1)(ac) which could have enabled the assessee Trust to get registration for five (5) years from AY 2022-23 to AY 2026-27; And since there was no CBDT Circular as on 07.10.2022 as noted extending time for filing of application, consequently the system drop-down menu showed only clause (vi) of Section 12A(1)(ac), because of which, assessee got provisional registration for three (3) years from AY 2023-24 to 2026-27. However, the CBDT later on brought out Circular firstly (i) on Circular dated 01.11.2022 extending the time up to 25.11.2022, and then vide subsequent Circulars, the due date was finally extended up to 30.06.2024. Since when assessee filed online application on 07.10.2022, Circular extending due date was not existing and since CBDT issued it only on 01.11.2022 extending the time-limit up to 25.11.2022, the assessee should not be denied the benefit for no fault of assessee. Hence, assessee’s application dated 07.10.2022 needs to be treated as if filed well within the extended time; and secondly, as noted, the assessee couldn’t apply under clause (i) of Section 12A(1)(ac), because drop-down menu didn’t show it and instead it only displayed clause (vi) of Section 12A(1)(ac), which granted it only provisional registration for three years from AY 2023-24 onwards. The assessee Trust after receiving the provisional registration was of the bona fide belief that it was enjoying registration u/s.12AB of the Act without any break/continuity; but to its surprise, the assessee received notices of demand for AY 2022-23, then, it realized that the CPC/PCIT(E) has granted only provisional registration for three years from AY 2023-24 onwards, and then it realized that due to the aforesaid omission of the CBDT not issuing timely Circular extending the time-limit resulted in assessee to select only sub-clause (vi) instead of sub-clause (i), had adversely affected the assessee’s right to continue registration (without a break from AY 2022-23 onwards) and it lost registration for AY 2022-23; immediately on realizing the same, it approached the Tribunal by filing appeal before this Tribunal and thus, there was a delay of ‘1035’ days which was the cause of delay, which we find to be reasonable for condoning because, assessee was legally entitled for re-registration u/s.12AB(a) for five years, if it had applied online by clicking on sub clause (i) instead of sub-clause (vi) of sec.12A(1) of the Act; and for no fault of assessee, since the system didn’t allow the assessee to click under clause (i), [since the drop-down menu didn’t show clause (i) instead displayed only clause (vi)], forcing the assessee to click clause (vi). Hence, considering the totality of facts, we do condone the delay and proceed to decide the appeal.

6. The main grievance of the assessee in ITA 2866/Chny/2025 is against the action of the Ld.CIT/CPC granting provisional registration for only three years (for AYs 2023-24 to 2025-26) rather than granting registration for five years from AY 2022-23 onwards.

7. Brief facts are that the assessee is a Society, formed with the objects of constructing and maintaining the temple for worship of Sri Ayyappa Swamy, to conduct poojas, bajans and other forms of worship as stated in the MoA and bye-laws. According to the assessee, it obtained registration u/s.12AA of the Income Tax Act, 1961 (hereinafter “the Act”) in the year 1986 from the Competent Authority vide order dated 13.05.1986 (refer Page Nos.80-82 of Paper Book), and that it had been regularly filing its Income Tax Returns claiming exemption u/s.11 of the Act. According to the assessee, as per new provisions u/s.12A(1)(ac) of the Act w.e.f.01.04.2021, the assessee trust in order to claim exemption u/s.11 of the Act had to obtain fresh registration u/s.12AB of the Act, and for that it had to apply for registration under sub-clause (i) of section 12A(1)(ac) of the Act, within three months from the first day of April, 2021 i.e.30.06.2021 which time line has been extended by CBDT taking note of covid/pandemic, genuine hardship faced by assessee, to 25.11.2022; and assessee had filed for registration in Form No.10A on 18.10.2022, legitimately expecting registration u/s.12AB of the Act for five Assessment Years from AY 2022-23 onwards, since assessee was legally entitled for the same as per Sec.12A(1)(ac)(i) r.w.s.12AB(1)(a) of the Act. However, as the drop-down menu of the CPC showed only clause (vi) of Section 12A(1)(ac), while filling up Form 10A on 18.10.2022 instead of sub clause (i), as noted supra, the assessee could only click sub-clause (vi) of sec.12A(1)(ac) of the Act; and the CPC/PCIT(E) processed the application and granted provisional registration for three years from AY 2023-24 onwards; whereas assessee being a Trust enjoying Sec.12AA of the Act from year 1986 was qualified/eligible to apply under sub-clause (i) of Clause (ac) of sec.12A(1) of the Act and in that event if the drop-down menu had shown sub-clause (i), then, it would have automatically got registration u/s.12AB(1)(a) of the Act, for five years i.e. from AY 2022-23 onwards and the assessee would not have faced the problem of not having registration u/s.12AB for AY 2022-23. According to the Ld.AR, the CBDT, taking note of the hardships and the transition period from the old regime to the new regime and the complexities of the digital world for adapting to the new system and considering the technical glitches, the time to file application for registration even re-registration was extended as noted supra and only because assessee filed during the grey period [i.e assessee filed online application on 18.10.2022, circular extending time-line was not existing and CBDT issued it only on 01.11.2022 extending the time-limit up to 25.11.2022]. Hence, its application dated 18.10.2022 should treated as if filed well within the extended time and secondly, as noted, since the assessee couldn’t apply under sub-clause (i) of Section 12A(1)(ac), because drop-down menu didn’t show it and instead displayed clause (vi) of Section 12A(1)(ac), it got provisional registration for three years from AY 2023-24 only, by passing the impugned order dated 18.10.2022 (granting provisional registration from AY 2023-24 to AY 2025-26), which resulted in assessee having no registration for AY 2022-23, which would jeopardize/create insurmountable problems for assessee Trust; And since, assessee had applied for registration well within the extended period of time allowed by the CBDT and taking note of the fact that the assessee is enjoying Sec.12AA registration from year 1986 onwards and eligible as per law to claim registration for five assessment years u/s.12AB of the Act, the claim of assessee should not be denied.

8. Per contra, the Ld.DR opposed the plea of the assessee and submitted that since, the assessee had wrongly filled up online portal of the Income Tax Department, CPC/PCIT(E) granted it provisional registration for three years and there is no mechanism to correct the system.

9. We have heard both the parties and perused the material available on record. The facts afore-stated being not disputed, it is not repeated for sake of brevity. The assessee being an old Trust which enjoyed registration u/s.12AA of the Act, from year 1986 onwards, after the Parliament passed TOLA 2020 w.e.f.01.04.2021, had to apply for reregistration under sub-clause (i) of Clause (a) of Sub-section (1) of Sec.12A of the Act, whereas, it couldn’t apply under sub-clause (i) but only under sub-clause (vi) since the system (drop-down menu) was not allowing any other option to apply. So, it had no option but to apply under sub-clause (vi) of Section 12A(1)(ac) of the Act, and because of which, it was granted provisional registration u/s.12AB(1)(c) for three (3) years from AY 2023-24 onwards; and because of this action, the assessee lost its registration u/s.12AB of the Act for AY 2022-23 and was denied exemption u/s.11 of the Act, for that year. We also find that the assessee had filed a letter with the CIT along with its application under sub-clause (vi) on 07.10.2022 to treat the application filed under sub-clause (i). As per the scheme of the Act, we find that assessee Trust was legally entitled for registration u/s.12AB(1)(a) for five (5) years; and because of no extension of time-limit to file application for registration as on 07.10.2022, the assessee had no other option but to file/click sub-clause (vi) instead of sub clause (i), the assessee’s right for registration u/s.12AB of the Act for AY 2022-23 cannot be denied. We are of the considered opinion that due to technical difficulties faced by the assessee clicking online for fresh registration under clause (vi) of sec.12A(1)(ac) needs to be intervened and rectified; therefore, the assessee’s application for registration under sub-clause (vi) filed on 07.10.2022 is to be treated as if assessee has applied under sub-clause (i) of sec.12A(1)(ac) and granted registration u/s.12AB(a) of the Act for five assessment years from AY 2022-23 onwards. Considering the purpose for issuing Circular by CBDT was for mitigating the hardships faced by assessee, we set aside the impugned order of the Ld.PCIT(E) dated 18.10.2022 and restore the assessee’s application for registration back to the file of the Ld.PCIT(E)/CIT(E)/CPC, Bangalore and direct him to process the application filed by assessee on 07-10-2022 in Form 10A as filed u/s.12A(1)(ac)(i); and the competent authority is at liberty to call for any documents including asking assessee to file hard copy of Form 10 u/s.12A(1)(ac)(i); and thereafter, decide on granting registration u/s.12AB(1)(a) of the Act for five (5) years from AY 2022-23 onwards. Needless to say, assessee be given opportunity of hearing if the authority desires to hear it and to pass orders in the light of discussion (supra) and in accordance to law.

10. Coming to appeal No.2865/Chny/2025, we note that impugned order of the Ld.CIT(E) is an ex parte order qua assessee, rejecting the application filed by the assessee Trust on 08.11.2024 in Form 10AB u/s.12A(1)(ac)(ii) of the Act for regular registration u/s.12AB of the Act. Since the impugned action of the Ld.CIT(E) is in violation of natural justice, we set aside the impugned order and restore it back to the file of the Ld.CIT(E) to process the ibid application after the assessee has been granted registration for five (5) years from AYs 2022-23 to 2026-27 as ordered in ITA No.2866/Chny/2025 (supra).

11. In the result, appeals filed by the assessee are allowed for statistical purposes.