Order denying Section 80G approval remanded due to registration

Order denying Section 80G approval remanded due to registration status and lack of opportunity.

Issue

Whether the rejection of Form 10AB for approval under Section 80G(5)(ii) by CIT(E) was sustainable when the trust held a valid Section 12AB registration on the date of the order and was not given an opportunity to respond to the alleged violation of Section 80G(5B).
Whether an application under Form 10AB can be rejected without providing an opportunity to rectify procedural errors or present submissions regarding religious expenditure limits.

Facts

Background & Provisional Approval: The assessee is a charitable and religious trust that initially obtained approval under the new regime via clause (i) of the first proviso to Section 80G(5) from the Central Processing Centre (CPC).
Application under Form 10AB: The trust subsequently filed Form 10AB seeking regular renewal/approval under Section 80G(5)(ii).
Grounds of Rejection by CIT(E): The Commissioner of Income Tax (Exemptions) rejected the application on three grounds:
- The trust selected an incorrect clause in the form.
- The trust was allegedly not in possession of a valid registration under Section 12AB.
- Expenditure incurred on religious activities exceeded 5 per cent of total income, violating Section 80G(5B).
Factual Discrepancies:
- On the date the impugned order was passed, the assessee had already been granted registration under Section 12AB(1)(b).
- The CIT(E) did not put the assessee on notice regarding the alleged violation of the 5 per cent cap under Section 80G(5B) prior to rejection.

Decision

Setting Aside the Impugned Order: The rejection order passed by the CIT(E) was set aside as it was passed without considering the updated Section 12AB registration status and without affording natural justice regarding Section 80G(5B). (Matter remanded)
Remand for Fresh Adjudication: The matter was remanded to the CIT(E) for fresh consideration on merits. (Matter remanded)
Liberty to Rectify Errors: The assessee was granted liberty to rectify any procedural mistakes in Form 10AB and submit necessary clarifications. (Matter remanded)

Key Takeaways

Opportunity to Heard (Natural Justice): CIT(E) cannot reject an 80G application on grounds of statutory threshold violations (e.g., religious expenditure under Section 80G(5B)) without issuing a show-cause notice and giving the trust an opportunity to explain.
Procedural/Clerical Errors: Selecting an incorrect clause in Form 10AB is a curable technical defect and should not automatically result in outright rejection without granting an opportunity to rectify.
Interdependence of Registration: Validity of registration under Section 12AB on the date of deciding the Section 80G application must be factored in by the competent authority before concluding non-compliance.

IN THE ITAT INDORE BENCH

Shree Golalaria Digamer Jain Samaj Nyas

Commissioner of Income-tax Exemption

Paresh M. Joshi, Judicial Member
and Arvind Soni, Accountant Member

IT Appeal No. 785 (Ind) of 2026

AUGUST 18, 2026

Milind Wadhwani, CA and Ms. Shradha Piplodia, Adv. for the Appellant. Anup Singh, CIT DR for the Respondent.

ORDER

Paresh M Joshi, Judicial Member. – This is an Appeal filed by the Assessee under section 253 of the income tax Act 1961, [hereinafter referred to as the Act for sake of brevity] before this tribunal as and by way of an appeal. The Assessee is aggrieved by the order bearing number: – ITBA/EXM/F/EXM45/2025-26/1087910274(1) dated 25.03.2026, which is hereinafter referred to as the “Impugned order”.

2. Factual Matrix

2.1 The Assessee is a trust and is engaged in charitable and religious activities.

2.2 That the Assessee trust had earlier obtained an approval under the new regime under clause (i) of the first proviso to section 80G(5) from CPC vide order dated 04.04.2022.

2.3 Thereafter the Assessee trust filed form 10AB seeking renewal/approval under section 80G(5) (ii) of the Act.

2.4 That the Ld. CIT(E) had also rejected the application on the ground that the assessee trust had not obtained approval u/s 80G prior to 01/04/2021 that the wrong clause was selected in the application and that the trust was allegedly not in possession of a valid registration u/s 12A/12AA/12AB.

2.5 That the Ld. CIT (E) also basis perusal of P/L A/C found that expenditure over religious activities is more than 5% of total income.

2.6 That Impugned Order reads as under:-

“The assessee has filed application in Form 10AB for renewal of registration/approval u/s 80G(5)(ii) of the Act under the new provisions of the Income Tax Act, 1961. Notices were issued to the assessee and various details were called for, to process the application and to verify the eligibility of the assessee. The assessee has submitted the relevant documents along with its reply which have been considered and are placed on record.

Earlier, the assessee society got the approval in new regime under Clause (i) of first proviso to sub-section (5) of section 80G from the CPC vide Dated: 04.04.2022 for the period from AY 2022-23 to 2026-27 in automatic manner.

Vide instant application, the assessee has sought renewal of approval u/s 80G(5) (ii). However after giving multiple opportunities, assessee has not furnished copy of approval u/s 80G obtained before 01.04.2021.

From above discussion, it is inferred that assessee has not obtained any approval u/s 80G of the Act before 01.04.2021 and filed the instant application under wrong clause.

Further, on perusal of the Income & Expenditure account, it is found that expenditure over religious activities is more than 5% of the total Income.

Considering the produced documents & facts of the case, the application of the assessee for approval u/s 80G(5) (ii) of the Income Tax Act is hereby rejected on merit, since the assessee is not in possession of valid registration u/s 12A/12AA/10(23C)(iv) /(v)/(vi)(via) of the Act and also not no fulfil the condition laid by section 80G(5B) of the Act”.

2.7 That the assessee being aggrieved by the “Impugned Order” has preferred in the instant appeal in form 36 before this tribunal and has raised the following grounds of appeal which are as under:-

“1. That on the facts and circumstances of the case the learned CIT Exemption erred in rejecting the application for approval under section 80G 5 ii of the Income Tax Act, 1961.

2. That the learned CIT Exemption grossly erred in holding that the appellant trust was not in possession of valid registration under section 12A OR 12AA OR 12AB despite the appellant already being granted registration under section 12AB 1 b vide order dated 25.03.2026.

3. That the learned CIT Exemption failed to appreciate that rejection merely on account of alleged filing under wrong clause is technical in nature and the same cannot be a ground for denial of substantive benefit under section 80G.

4. That the learned CIT Exemption erred in rejecting the application on alleged violation of section 80G 5B without properly appreciating the nature, objects and activities of the trust.”

3. Record of Hearing

3.1 The hearing in the matter took place before this Tribunal on 10.08.2026 when the Ld. AR for & on behalf of the Assessee appeared before us & interalia contended that the “Impugned Order” is bad in law, illegal & not Proper. It is in the violation of the principles of natural justice. It therefore deserves to be set aside.

3.2 The Ld. AR at the outset and at the threshold stated that while submitting the application for benefit u/s 80G in the form no 10AB which was for “Renewal of Retistration/approval’ wrong clause was selected i.e. 80G (5) (ii) instead of 80G (5)(i). The mistake/error on the part of the assessee was procedural in nature. It was prayed that the Impugned Order should be set aside and matter should be remanded back to the Ld. CIT (E) as wrong clause was selected. Our attention was invited to appeal memo page 21 which is a copy of the show cause notice dated 11.03.2026 where in no issue was raised on 80G. The Ld. DR for and on the behalf of the revenue stated that nothing prevents the assessee for applying a fresh under correct clause. The Ld. AR has placed on record of this tribunal a short synopsis dated 10.08.2026 wherein it is stated at Para3.1 “The appellant did not possess approval u/s 80G prior to 01.04.2021and while filing form no. 10AB, an incorrect clause was in advertently selected”. It is also stated in Para 3.2 “Accordingly the Impugned Order may kindly be set aside to the file of the Ld. CIT (E) with a direction to consider the application under applicable clause and adjudicate the appellant’s eligibility on merits in accordance with law”. In brief synopsis other contentions too are raised like assessee trust has registration u/s 12AB(i)(b) vide order dated 25.03.2026 by same authority i.e. the Ld. CIT (E) on very date of impugned order. Hence finding of the Ld. CIT (E) is wrong on this score too. The violation of 80G (5B) was not confronted in the show cause notice to the assessee and basis thereof is not disclosed in the “Impugned Order”. Hearing was over and concluded.

4. Observations Findings & conclusions

4.1 We have to decide the legality, validity and proprietary of the “Impugned Order” basis records of the case & the rival submission canvassed before us.

4.2 We have carefully perused the records of the case and have heard the submissions.

4.3 We basis records of the case & after hearing & further upon examining the rival contentions of the Ld. AR & the Ld. DR canvassed before us are of the considered opinion that in the Impugned Order the application under 10AB ought to have been under clause 80G(5)(i) accordingly to the LD. AR and that same was a procedural error and 80 G(5)(i) was wrongly mentioned. We are of the considered view that assessee trust ought to have remained vigilante at the time of making application under 10AB and such belated plea has no basis in law as it was assessee trust’s application and they should know what they are doing, they cannot turn around after Impugned Order is passed. Be that as it may page 9 of appeal memo we notice that registration u/s 12AB (i) (b) was granted to the assessee trust on date of impugned order. Further assessee trust was not put to notice on charge u/s 80G(5B) in this regard we have seen page 21 of appeal memo which is a copy of show cause notice dated 11.03.2026 to which our attention was invited during hearing. We have analysed the contention of the LD. DR that nothing prevents assessee trust from applying a fresh too.

4.4 In view of the premises drawn up by us as aforesaid we are of the considered opinion that “Impugned Order” should be set aside and matter should be remanded back to the LD. CIT(E) on De novo basis to enable him to pass a fresh order on merits of the case with liberty granted to the assessee trust to rectify the mistake in the Form 10AB. Assessee trust to file all material before the Ld. CIT (E) and to cooperate with department. They are directed not to seek any adjournment on any flimsy grounds whatsoever. They are also admonished that such mistake should not occur in future. Accordingly Impugned Order is set aside as and by way of remand to CIT (E) on de novo basis. Ordered Accordingly.

5. Order

5.1 In result the “Impugned Order” is set aside as and by way of remand back to the file of the Ld. CIT (E) with directions as aforesaid.

5.2 The appeal of the Assessee is allowed for statistical purpose.