Commissioner (Exemption) should not have rejected the assessee’s application for final approval under Section 80G(5) solely due to an inadvertent mistake in mentioning the incorrect sub-clause.
Issue:
Whether the Commissioner (Exemption) is justified in rejecting an assessee’s application for final approval under Section 80G(5) purely on the ground that the application was filed under an incorrect sub-clause of the first proviso to Section 80G(5), even though the assessee had already been granted provisional approval and the correct provision was evident from the records.
Facts:
- The assessee had applied for final approval under Section 80G(5) of the Income-tax Act, 1961.
- The application was rejected by the Commissioner (Exemption).
- The reason for rejection was that the assessee had applied under an incorrect clause, specifically clause (iv) of the first proviso to Section 80G(5).
- It was an undisputed fact that the assessee had already been granted provisional approval under Section 80G(5).
- The correct clause under which the application for final approval ought to have been moved by the assessee was sub-clause (iii) of the first proviso to Section 80G(5).
- All these relevant facts, including the provisional registration, were already on record before the Commissioner (Exemption).
- The provisional registration was, in fact, granted to the assessee by the Commissioner (Exemption) himself.
Decision:
The court held in favor of the assessee. It ruled that the Commissioner (Exemption) ought not to have rejected the assessee’s application for an inadvertent mistake of mentioning the incorrect sub-clause. Instead, the Commissioner should have considered the application in light of the correct provisions of law. Therefore, the Commissioner (Exemption) was directed to consider the application of the assessee as having been made as per the applicable provision of law (i.e., sub-clause (iii) of the first proviso to Section 80G(5)) and, thereafter, pass an order regarding the grant of final approval in accordance with law.
Key Takeaways:
- Substance Over Form: This judgment emphasizes the principle of “substance over form.” A genuine application for a statutory benefit should not be rejected merely on a technical or procedural error, especially when the correct legal position is discernible from the existing records and the error is inadvertent.
- Duty of the Authority: When dealing with applications for approvals/registrations, particularly for charitable institutions, the tax authorities are expected to adopt a facilitative approach rather than a hyper-technical one. The Commissioner (Exemption), having himself granted provisional approval, was well aware of the assessee’s status and the correct provision applicable for final approval.
- No Prejudice to Revenue: Rejecting an application on such a technical ground, without examining the substantive eligibility of the trust, would not serve the purpose of the law and would cause undue hardship to the assessee and potential donors.
- Specific Clauses under 80G(5) Proviso:
- Clause (iii): This clause generally deals with applications for final approval by institutions or funds that have already received provisional approval.
- Clause (iv): This clause typically refers to applications for provisional approval (for new institutions or those seeking 80G approval for the first time). The assessee’s mistake was applying for final approval under the provisional approval clause.
- Remand for Correct Adjudication: The court’s direction to remand the matter with a specific instruction to treat the application under the correct clause ensures that the Commissioner now proceeds to adjudicate the application on its merits (i.e., whether the trust fulfills all conditions for final 80G approval), rather than getting bogged down by a technicality.
IN THE ITAT AHMEDABAD BENCH ‘D’
Gandhinagar Ayyapa Pooja Samiti
v.
Commissioner of Income-tax (Exemption)
Smt. Annapurna Gupta, Accountant Member
and Ms. Suchitra Kamble, Judicial Member
and Ms. Suchitra Kamble, Judicial Member
IT Appeal No. 368 (Ahd.) of 2025
MAY 21, 2025
M.K. Patel, Adv. for the Appellant. Aashish Rajesh Rewar, CIT. DR for the Respondent.
ORDER
Smt. Annapurna Gupta, Accountant Member.- The present appeal has been filed by the assessee against order passed by the Commissioner of Income Tax (Exemption), Ahmedabad (in short ‘the CIT(E)’), dated 20.08.2024, denying grant of approval under Section 80G(5) of the Income Tax Act, 1961 (in short ‘the Act’).
2. The Registry has noted delay in filing of the present appeal by 109 days. The assessee has filed an application seeking condonation of delay stating on oath, by way of an affidavit, that the delay was attributable to the fact that the trustee of the assessee trust is a senior citizen, aged 62 years, who is not conversant with Income Tax matters nor is conversant with computer technology, through which all communication with the department have happened and, therefore, he was not aware of the passing of the order by the Ld.CIT(E) rejecting assessee’s application seeking approval u/s.80G(5) of the Act.That he became aware of it only in the month of January 2025 through other trustees of similar trusts whose applications were also rejected. That immediately thereafter, he took step to address the issue and filed appeal before the ITAT. The delay, he contended, therefore, occurred for bonafide reasons and unavoidable circumstances and he pleaded condonation of the same. The trustee, Ravindran Nair P.P, stated the above on oath by way of an affidavit, the contents of which are reproduced hereunder:
” I Ravindran Nair P.P, aged about 62 years, being Trustee of the Gandhinagar Ayyapa Pooja Samiti, and presently residing at B-702, Pramukh Parisar Sargasam Gandhinagar, do hereby state on oath and solemn affirmation as under:
That I am not at all conversant with the Income Tax matters nor do I operate computers or log in to the Income Tax Portal. Our Trust has never faced Income Tax litigation in the past. It was only recently in the month of January, 2025, that I came to know about rejection of Registration u/s 12A/ Approval u/s 80G(5)(iv) of the Act through some other Trustees of similar Trusts wherein also similar applications stood rejected. Then, immediately, we contacted our CA at Gandhinagar. Thereupon, we were advised that we have to file appeal before Hon’ble ITAT against the said order, and we entrusted the matter to Advocate at Ahmedabad to prepare and file the appeal before Hon’ble ITAT, Ahmedabad Bench.
Hence, the delay has occurred due to this bonafide reason and unavoidable circumstances, and in the interest of justice, the delay in filing this appeal, may kindly be condoned, and appeal may kindly be decided on merits, and oblige. “
3. Ld. DR objected to the condonation of delay.
4. Having heard both the parties, we are of the view that the assessee has demonstrated sufficient cause for the delay of 109 days in filing of the appeal, as being attributable to the order of the Ld.CIT(E) not coming to the knowledge of the trustees of the assessee trust due to their lack of knowledge relating to both tax matters and computer technology. Though the reason is not justifiable but the trustee of the assessee trust having fairly acknowledged his lack of awareness of technology and tax matters due to his advanced age on oath, and the Revenue being unable to demonstrate the explanation as being outrightly false, we see no reason to disbelieve the same. The delay therefore is for sufficient cause and not deliberate or on account of any laxity on the part of the assessee.
5. Courts have been unanimous in holding that the word ‘sufficient cause’ as per section 5 of the Limitation Act should receive a liberal construction so as to advance substantial justice and that merely because there is some lapse of the litigant concerned, that alone is not enough to shut the door of justice to him. That as long as the explanation of the assessee does not smack of malafides or it is not put forth as part of a dilatory strategy, the court must show utmost consideration and when there is reasonable ground to think that the delay was occasioned by the party deliberately to gain time, then the court should lean against acceptance of the explanation. While holding so, the courts have considered that ordinarily a litigant does not stand to benefit by lodging an appeal late and by refusing the condonation of delay it can result in a meritorious matter being thrown out at the very threshold, defeating the cause of justice. That when substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred. It has also been noted that there is no presumption that delay is occasioned deliberately, or on account of culpable negligence. A litigant doesn’t stand to benefit by resorting to delay. We make a reference in this regard to the decision of Hon’ble Apex Court in the case of Collector Land Acquisition v. Mst. Katiji & Others, Collector, Land Acquisition v. Mst. Katiji 1987 /1987 AIR 1353.
6. Considering the judicial decisions as above and noting that the assessee had adduced sufficient cause for the delay, we consider it a fit case for condoning the delay of 109 days and admitting the appeal of the assessee for adjudication.
7. Ld. Counsel for the assessee contended that his solitary contention against the order passed by the Ld. CIT(E) rejecting assessee’s application seeking approval u/s.80G(5) of the Act, was that the assessee had inadvertently mentioned the incorrect clause of Section 80G(5) in which the application was filed and though all the facts were, therefore, on record before the Ld. CIT(E) which revealed that the assessee’s application should have been rightly made in another clause 80G(5) of the Act, he however, rejected the assessee’s application stating that the application was made under an incorrect clause of Section 80G(5) of the Act.
8. Ld. Counsel for the assessee pointed out that the provision of law seeking approval u/s 80G(5) of the Act underwent major amendment vide Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, which were inserted by way of proviso to the section.
9. The first & second proviso to section 80G(5), he pointed out prescribes the manner of seeking& granting approval under the said section by/for various entities in varying situations. Our attention was drawn to the relevant proviso to section 80G(5) as under:
“(5) This section applies to donations to any institution or fund referred to in sub-clause (iv) of clause (a) of sub-section (2), only if it is established in India for a charitable purpose and if it fulfils the following conditions, namely”-
……………………
……………………
(vi) in relation to donations made after the 31st day of March, 1992, the institution or fund is for the time being “[approved by the Principal Commissioner or Commissioner:]
……………………
……………………
Provided that the institution or fund referred to in clause (vi) shall make an application in the prescribed form and manner to the Principal Commissioner or Commissioner, for grant of approval,-
| (i) | where the institution or fund is approved under clause (vi) [as it stood amendment by the Taxation and Other Laws immediately before its amend (Relaxation and Amendment of Certain Provisions) Act, 2020) within three months from the Ist day of April, 2021; |
| (ii) | where the institution or fund is approved and the period of such approval is due to expire, at least six months prior to expiry of the said period; |
| (iii) | where the institution or fund has been provisionally approved, at least six months prior to expiry of the period of the provisional approval or within six months of commencement of its activities, whichever is earlier, [or] |
| [(iv) | [***] where activities of the institution or fund have- |
| (A) | not commenced, at least one month prior to the commencement of the previous year relevant to the assessment year from which the said approval is sought; |
| (B) | commenced [*] at any time after the commencement of such activities:] |
Provided further that the Principal Commissioner or Commissioner, on receipt of an application made under the first proviso, shall,-
| (i) | where the application is made under clause (1) of the said proviso, pass an order in writing granting it approval for a period of five years; |
| (ii) | where the application is made under clause (ii) or clause (iii) [or sub-clause (B) of clause (iv)) of the said proviso,- |
| (a) | call for such documents or information from it or make such inquiries as he thinks necessary in order to satisfy himself about- |
| (A) | the genuineness of activities of such institution or fund and |
| (B) | the fulfilment of all the conditions laid down in clauses (1) to (v); |
| (b) | after satisfying himself about the genuineness of activities under item (A), and the fulfilment of all the conditions under item (B), of sub-clause (a),- |
| (A) | pass an order in writing granting it approval for a period of five years; or |
| (B) | if he is not so satisfied, pass an order in writing, rejecting such application and cancelling its approval, if any, after affording it a reasonable opportunity of being heard |
| (ii) | where the application is made under sub-clause (A) of clause (iv) of the said proviso or the application is made under clause (iv) of the said proviso as it stood immediately before its amendment vide the Finance Act, 2023, pass an order in writing granting it approval provisionally for a period of three years from the assessment year from which the approval is sought.] |
and send a copy of such order to the institution or fund: “
10. Referring to the above it was pointed out that separate forms and timelines are prescribed for funds/institutions seeking approval for the first time and those which were already approved earlier. He pointed out that the scheme categorized funds/ institutions as:
| • | already approved under the old law on the date of amendment, (sub clause(i)) |
| • | new funds/ institutions which have not commenced any activity on the date of filing application and (sub clause (iv) A) |
| • | Old Funds/ institutions already carrying out activities but seeking approval for the first time. (sub clause (iv) B) |
11. That the already approved funds were to be granted approval for 5 years, the new ones yet to commence activity were to be granted provisional registration and the old ones carrying out activities were to be granted approval for 5 years after making all verification about the genuineness of their activities. Separate forms were also prescribed for the same.
12. Ld.Counsel for the assessee pointed out that the assessees case was where provisional approval had been granted and was required to seek final approval as per sub clause(iii) of the proviso but the assessee had inadvertently sought approval under sub clause (iv).
13. He however pointed out that it was well within the knowledge of the Ld.PCIT that the mentioning of sub clause (iv) in the application was an inadvertent mistake since the provisional approval had been granted by his office itself vide Registration Certificate dated 01.10.2021 from 01.10.2021 to A.Y. 2024-25.
14. He drew our attention to Form No.10AC, being order for provisional approval granted to the assessee under Clause (iv) first proviso to sub-section (5) of Section 80G of the Act, dated 01.10.2021, copy of which was placed before us.
15. Ld. Counsel for the assessee contended that the assessee had inadvertently mentioned Sub-clause (iv) of the First Proviso to Section 80G(5) of the Act and the Ld. CIT(E) had rejected the assessee’s application merely for the wrong mentioning of Clause under which approval was sought, that too when, he pointed out, all facts were before him which revealed that the mentioning of Clause (iv) was an inadvertent mistake and the assessee ought to have sought final approval as per Clause (iii) of First Proviso to Section 80G(5) of the Act. He contended, therefore, that the rejection of the assessee’s application by the Ld. CIT(E) for an inadvertent mistake of mentioning of wrong Clause was, therefore, unjustified and he pleaded that the assessee’s application be restored back to the Ld. CIT(E) to be considered in the light of the correct provision of law in this regard. He pointed out that the ITAT, Mumbai Bench, in Rotary Charity Trust v. CIT (Exemption) (Mumbai – Trib.)/ITA No.6133/Mum/2024 dated 09.01.2025 had decided an identical issue restoring the matter back to the Ld. CIT(E) for perusal of the application afresh. Copy of the order was placed before us and our attention was drawn to the findings of the ITAT at Para Nos. 5 to 7 of the order as under:
“5. We have heard the parties and perused the material on record. Before we proceed to examine the facts in assessee’s case, it is important to first look at the relevant provisions of first proviso to subsection (5) of section 80G which read as under –
Provided that the institution or fund referred to in clause (vi) shall make an application in the prescribed form and manner to the Principal Commissioner or Commissioner, for grant of approval,-
| (i) | where the institution or fund is approved under clause (vi) [as it stood immediately before its amendment by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020], within three months from the Ist day of April, 2021; |
| (ii) | where the institution or fund is approved and the period of such approval is due to expire, at least six months prior to expiry of the said period; |
| (iii) | where the institution or fund has been provisionally approved, at least six months prior to expiry of the period of the provisional approval or within six months of commencement of its activities, whichever is earlier: [or] |
| [(iv) | [***] where activities of the institution or fund have— |
| (A) | not commenced, at least one month prior to the commencement of the previous year relevant to the assessment year from which the said approval is sought; |
| (B) | commenced [*** Jat any time after the commencement of such activities:] |
6. Aessee, in terms of the above provisions, first applied for a provisional approval under sub-clause (B) of clause (iv) of first proviso to subsection (5) of section 80G within and subsequently (refer clause 2 in Form 10A) and was given the provisional registration up to AY 2024-25 on 04.04.2022. In the application for final approval in Form 10AB, it is noticed that assessee has once again mentioned same section i.e. sub-clause (B) of clause (iv) of first proviso to subsection (5) of section SOG whereas the correct section code under which the assessee ought to have selected is clause (iii) of first proviso to subsection (5) of section 80G. We also noticed that ld. CIT(E) has treated the application as one filed under sub-clause (B) of clause (iv) of first proviso to subsection (5) of section 80G and accordingly rejected the application for not fulfilling the stipulated conditions prescribed for filing application for approval in Form 10AB.
6.1. From the perusal of forms filed and the facts of the case, in our considered view, there is merit in claim of the ld. AR that assessee has selected the wrong section code inadvertently while filing the application for final registration in Form 10AB. Further, we notice that assessee did not have the opportunity of being heard before ld. CIT(E) due to incorrect course of action advised, which otherwise assessee might have explained the facts to avoid the impugned rejection. In view of these discussions and respectfully following the above decision of the Kolkata Bench in the case of North Eastern Social Research Centre (supra), we remit the issue back to the file of ld. CIT(E), with a direction to grant final approval to assessee under Clause (iii) to first proviso to section 80G(5) of the Act, if assessee is otherwise found eligible. We also direct ld. CIT(E) to decide the application of the assessee for final approval as quickly as possible before the expiry of the provisional approval granted in order to enable the assessee to have the benefit of section 80G without any break. It is ordered accordingly.
7. In the result, appeal of the assessee is allowed for statistical purposes.”
16. Ld. DR, though heavily supported the order of the Ld. CIT(E), was unable to controvert the fact pointed out by the Ld. Counsel for the assessee that incorrect Clause of 80G(5) First Proviso, mentioned in assessee’s application seeking approval u/s.80G(5) of the Act,was an inadvertent error and all facts were there before the Ld. CIT(E) which revealed this mistake committed by the assessee and which ought to have prompted the Ld. CIT(E) to have considered the application in the correct Clause.
17. We have heard both the parties. Undisputedly, the assessee’s application seeking approval u/s.80G(5) of the Act has been rejected for the reason that the assessee has applied under an incorrect Clause of the First Proviso to Section 80G(5) of the Act. The Clause which the assessee has applied is Clause (iv) of the First Proviso of Section 80G(5) of the Act. It is not denied that the assessee had already been granted provisional approval u/s.80G(5) of the Act and the correct clause in which the application ought to have been moved by the assessee was Sub clause (iii) of First Proviso to Section 80G of the Act. All these facts were there on record before the Ld. CIT(E) is also not denied. In fact, the provisional registration was granted to the assessee by the Ld. CIT(E) himself. It is abundantly clearly, therefore, the assessee’s application seeking approval u/s.80G(5) of the Act has been denied merely for an inadvertent mistake of mentioning incorrect Sub-Clause in which the application was made, which Ld. CIT(E) himself could have corrected and considered in the light of the fact that he was aware of the fact and situation in which the application was filed by the assessee. We, therefore, find merit in the contention of the Ld. Counsel for the assessee that the Ld. CIT(E) ought not to have rejected the assessee’s application but should have considered it in the light of the correct provisions of law. The issue we find is squarely covered by the decision of the ITAT, Mumbai Bench in the case of Rotary Charity Trust (supra), wherein they have decided an identical issue in favour of the assessee and restored the matter back to the Ld. CIT(E) for consideration afresh in terms of the correct provision of law treating the application to have been made in terms of the correct provisions of law.
18. In the light of the above, we direct the Ld. CIT(E) to consider the application of the assessee to have been made as per the applicable provision of law and, thereafter, pass order regarding grant of final approval u/s.80G(5) of the Act in accordance with law.
19. In the result, appeal filed by the assessee is allowed for statistical purposes.