CIT(E) cannot reject a trust's renewal application over a technical

CIT(E) cannot reject a trust’s renewal application over a technical selection mistake in Form 10AB

Issue

Whether the CIT(E) is legally justified in rejecting a charitable trust’s renewal application under Section 12AB simply because the trust inadvertently selected the incorrect statutory clause on the electronic form.

Facts

The Assessee: A charitable institution that already held a regular, valid registration under Section 12AB (via Form No. 10AC) effective from A.Y. 2022-23 to A.Y. 2026-27.
The Error: The assessee filed an online application in Form No. 10AB for renewal but accidentally selected Section 12A(1)(ac)(iii) (provisional to regular conversion) instead of Section 12A(1)(ac)(ii) (renewal of regular registration).
The Rejection: The CIT(E) rejected the application on the sole ground that it was filed under the wrong statutory clause.
Lack of Opportunity: The CIT(E) passed the adverse order without providing the trust an opportunity to explain or rectify the clerical mistake.

Decision

Substance Over Form: Procedural provisions are enacted to facilitate the adjudication of substantive rights and should not be used as a trap to defeat them.
Evident Intent: Since the documents and materials on record clearly demonstrated that the trust was seeking a routine renewal of its existing registration, the application should not have been rejected for a mere typographical error in an electronic form.
Natural Justice: The CIT(E) was legally obligated to grant the assessee an opportunity to explain or cure the defect before dismissing the application.
Outcome: The impugned rejection order is set aside, and the matter is remanded back to the CIT(E) with directions to treat the application under the correct clause or permit rectification and decide it afresh on its merits.

Key Takeaways

Clerical Errors Are Curable: Inadvertent data-entry mistakes in online tax forms cannot invalidate a substantive claim if the underlying intent and supporting documents are clear.
Mandate of Natural Justice: Tax authorities must provide an opportunity for rectification before passing adverse orders based purely on technical or procedural flaws.

IN THE ITAT MUMBAI BENCH ‘B’

Alloy Steel Producers Association of India

Commissioner of Income-tax (Exemptions)^*

SAKTIJIT DEY, Vice President
and MAKARAND VASANT MAHADEOKAR, Accountant Member

IT Appeal No. 4004 (Mum) of 2026
[Assessment year 2027-28]

JUNE 30, 2026

Abhishek Choksy, Ld. AR for the Applicant. Yogesh Kamat, Ld. DR for the Respondent.

ORDER

Makarand Vasant Mahadeokar, Accountant Member.- This appeal is directed against the order dated 26.03.2026 passed by the Commissioner of Income Tax (Exemptions), Mumbai [“CIT(E)”] in Form No. 10AD, whereby the application filed by the assessee under section 12AB(1)(b)(ii) of the Incometax Act, 1961 (“the Act”) seeking registration under section 12AB came to be rejected.

2. The assessee has raised the following grounds of appeal:

That the learned CIT (Exemption) has erred both on facts and in law in not granting registration to the appellant on the mere ground that in the application made in Form No. 10AB of the Income Tax Rules, 1962, section 12A(1)(ac)(iii) of the Income Tax Act had inadvertently been typed on account of typographical error instead of section 12A(1)(ac)(ii) of the Act.

That the learned CIT (Exemption) has further failed to appreciate that benefit of the provisions of section 12AB of the Act ought not to be denied merely on technical grounds due to clerical/inadvertent mistakes. Thus, the Order of Rejection u/s. 12AB of the Act dated 26.03.2026 in Form No. 10AD is liable to be set aside.

That the learned CIT (Exemption) has erred in rejecting the application for registration u/s. 12AB of the Act without providing proper opportunity of being heard and without issuance of any Show Cause Notice for rejection of application which is against the provisions of the Act and principles of natural justice. Thus, the Order of rejection in Form 10AD dated 26.03.2026 is liable to be set aside.

The appellant craves leave to add to, alter, amend and/or delete in all the foregoing grounds of appeal.

3. Briefly stated, the facts emerging from the impugned order are that the assessee filed an application in Form No.10AB on 24.09.2025 seeking registration under section 12AB. During the course of examination of the application, the learned CIT(E) noticed that the assessee had earlier been granted regular registration under section 12AB in Form No.10AC dated 28.05.2021, which was valid for the period from A.Y. 2022-23 to A.Y. 2026-27. According to the learned CIT(E), since the assessee was already enjoying regular registration, the renewal application ought to have been filed under section 12A(1)(ac)(ii). However, in Form No.10AB, the assessee had selected section 12A(1)(ac)(iii), which applies to cases of conversion of provisional registration into regular registration. The learned CIT(E), therefore, held that the application had been filed under the wrong statutory provision and rejected the same on that ground. While doing so, the learned CIT(E) observed that the regular registration already granted to the assessee vide Form No.10AC dated 28.05.2021 would continue to remain valid from A.Y.2022-23 to A.Y.2026-27 and further observed that the assessee would be at liberty to pursue the remedies available under the statute.

4. The learned Authorised Representative(AR) submitted that the impugned order deserves to be set aside since the rejection is founded solely upon an inadvertent typographical error committed while selecting the applicable clause in Form No.10AB. It was submitted that the assessee had at all times intended to seek renewal of its existing registration under section 12A(1)(ac)(ii), but owing to an inadvertent clerical mistake, section 12A(1)(ac)(iii) came to be selected in the online application. According to the learned AR, such a technical mistake could not be made the sole basis for denying a substantive statutory benefit. It was further submitted that no show cause notice proposing rejection on this specific ground was ever issued and, therefore, the assessee had no opportunity to explain that the error was purely inadvertent. It was contended that the impugned order has thus been passed in breach of the principles of natural justice.

5. The learned AR further submitted that the controversy is squarely covered by the decisions of the co-ordinate Benches. Reliance was placed on the decision in Rotary Charity Trust v. CIT (Exemption) 211 ITD 297 (Mumbai – Trib.), wherein the Bench held that an inadvertent selection of an incorrect statutory provision while filing Form No.10AB could not be made the basis for rejecting the application and restored the matter to the file of the Commissioner (Exemption) for considering the application under the correct provision if the assessee was otherwise eligible. Reliance was also placed upon the decision in Della Foundation v. CIT (Exemptions) (Mumbai – Trib.), wherein the Bench held that where the assessee was not confronted with the defect in the application, the Commissioner (Exemption) ought either to treat the application as having been filed under the correct statutory provision or grant an opportunity to the assessee to rectify the application before deciding the matter on merits.

6. Per contra, the learned Departmental Representative relied upon the findings recorded by the learned CIT(E). However, he fairly submitted that if the Bench was inclined to restore the matter to the file of the learned CIT(E) for fresh adjudication after granting an opportunity to the assessee, he had no serious objection to such a course being adopted.

7. We have considered the rival submissions and perused the material placed before us. We have also carefully gone through the impugned order and the judicial precedents relied upon by the learned AR.

8. The short controversy before us is whether the application seeking renewal of registration under section 12AB could have been rejected merely because, while filing Form No.10AB electronically, the assessee inadvertently selected section 12A(1)(ac)(iii) instead of section 12A(1)(ac)(ii).

9. From the impugned order itself, it is evident that the learned CIT(E) has not doubted either the charitable nature of the objects of the assessee or the genuineness of its activities. The rejection has been made solely on the ground that the application was filed under an incorrect statutory clause. It is equally evident from the record that the learned CIT(E) did not issue any specific show cause notice proposing rejection of the application on this ground nor was any opportunity afforded to the assessee to explain that the incorrect selection of the statutory provision was merely an inadvertent typographical error.

10. We find that the issue is substantially covered by the decisions of the co-ordinate Benches relied upon by the learned AR. In Rotary Charity Trust (supra), the Bench held that an inadvertent selection of an incorrect statutory provision while filing Form No.10AB cannot defeat the substantive claim of the assessee and restored the matter to the file of the Commissioner (Exemption) with appropriate directions. Likewise, in Della Foundation (supra), though arising in the converse factual situation, the Bench laid down the salutary principle that where the defect in the application is merely technical and the assessee has not been confronted with such defect, the Commissioner (Exemption) ought either to treat the application as having been filed under the correct statutory provision or grant an opportunity to the assessee to rectify the mistake instead of rejecting the application outright.

11. We are in respectful agreement with the aforesaid principles. Procedural provisions are intended to facilitate adjudication of substantive rights and not to defeat them. Once the materials available before the learned CIT(E) clearly disclosed that the assessee was seeking renewal of its existing registration, the application ought not to have been rejected merely because of an inadvertent selection of an incorrect statutory clause in the electronic form. At the very least, the assessee ought to have been confronted with the proposed defect and afforded an effective opportunity to explain or rectify the mistake before an adverse order was passed. Such an approach alone would be consistent with the principles of natural justice and the object underlying the provisions governing registration of charitable institutions.

12. In view of the foregoing discussion, and respectfully following the aforesaid decisions of the co-ordinate Benches, we set aside the impugned order dated 26.03.2026 passed by the learned CIT(E) and restore the matter to his file with a direction to treat the assessee’s application as one filed under the appropriate provision, namely section 12A(1)(ac)(ii), or alternatively permit the assessee to rectify the application, and thereafter adjudicate the application afresh in accordance with law after affording adequate opportunity of being heard to the assessee. We make it clear that we have not expressed any opinion on the merits of the assessee’s entitlement to registration and all issues are left open for consideration by the learned CIT(E).

13. In the result, the appeal of the assessee is allowed for statistical purposes.