Timely Application for Final Approval u/s 80G: ITAT Quashes CIT(E)’s Rejection [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal(ITAT) quashed Commissioner of Income Tax(Exemption)[CIT(E)]'s rejection of the timely application for final approval under Section 80G of Income Tax Act,1961, ruling that the application was filed within the prescribed time limit based on the provisional approval granted in 2021.

Agrasain Bhawan Trust Regd.,appellant-assessee, appealed against the order dated 26.03.2024 passed by the CIT(E). The CIT(E) rejected the assessee’s Form 10AB application for final approval under Section 80G, stating it was filed late and after the trust had already started its activities before obtaining provisional approval.

The assessee raised five grounds, all related to the rejection of the application, with the main issue being whether the CIT(E) correctly deemed the Form 10AB as belated.

The assessee's counsel argued that the Ld. CIT(E) had not properly considered the evidence and wrongly denied the registration under Section 80G(5)(iii).

The assessee was initially registered on 05.09.1980 and received original approval in 2007, valid until 31.03.2009. After that, the trust did not apply for renewal, and due to changes in the law, its approval continued until withdrawn. The trust was later granted provisional approval on 02.10.2021, valid until 31.03.2025, and applied for final approval on 21.09.2023, within the six-month limit.

Are You Filing Tax Appeals the Right Way? Learn the Proper Legal Procedures!, Click Here

The counsel argued that the CIT(E) mistakenly rejected the final approval application, stating it was filed too late. However, since the trust’s activities began in 1980, the six-month limit from the start of activities did not apply, and the application was made on time based on the provisional approval period.

The Revenue counsel supported the CIT(E)’s order.

In the impugned order, the CIT(E) stated that the assessee’s activities began before provisional approval was granted, and the application for final approval was not filed on time. The order mentioned that the application did not meet the deadlines set by Central Board of Direct Taxes(CBDT)’s circulars and should be rejected.

The assessee counsel argued that the main issue was whether the application, filed on 21.09.2023, was submitted within the correct time limit. The counsel claimed the application was filed on time and was not time-barred.

The counsel referred to an ITAT Pune order (ITA No. 1177/PUN/2024) to support the case. The ITAT clarified that the time limit for registration under Section 80G(5) applied only to trusts applying after provisional approval expired, not those already operating before provisional approval.

The ITAT highlighted that accepting the CIT(E)'s view would lead to unreasonable results. It referred to a Supreme Court ruling that laws should avoid such absurd outcomes.

Are You Filing Tax Appeals the Right Way? Learn the Proper Legal Procedures!, Click Here

The ITAT concluded that the assessee applied on time and that the application was valid. Since there were no violations, the rejection was not justified. The ITAT directed the CIT(E) to accept the application and check the Trust's eligibility, allowing submission of necessary documents.

The CIT(E) noted that the assessee was originally registered on 05.09.1980 and received provisional approval on 02.10.2021 for the period up to AY 2024-25. The CIT(E) observed that the assessee had started its activities before obtaining provisional approval but rejected the application without sufficient reasoning and without addressing the merits.

It was concluded that the assessee was not migrating from the old regime, as its approval had lapsed in 2009 and was renewed in 2021. The assessee’s application for final approval, filed on 21.09.2023, was within the prescribed time limit.

The two member bench comprising Sudhir Pareek(Judicial Member) and S.Rifaur Rahman( Accountant Member ), after considering the rival submissions, concluded that procedural rules should assist in administering justice, not penalize anyone. The rules are meant to serve justice fairly.

The appellate tribunal accepted the assessee’s plea and sent the matter back to the CIT(E) for a fresh decision .As a result, the ITAT set aside and quashed the CIT(E)’s order, directing the matter to be decided quickly, treating the application as filed within the statutory time limit, and ensuring the assessee had a meaningful opportunity to be heard within three months from receiving the order.

In short, the appeal filed by the assessee was allowed for statistical purposes.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates