S. 80G Application Rejected without Independent Scrutiny: ITAT Sets aside CIT(E) Orders [Read Order]

TheAhmedabad Bench of the Income Tax Appellate Tribunal ( ITAT ) has set aside the orders of the Commissioner of Income Tax (Exemption) [ CIT(E) ] citing that the application for income tax deduction under Section 80G of income tax act, 1961 was rejected without independent scrutiny.

Aruna Kishor Foundation (assessee) engaged in charitable activities applied for regular registration under Section 12AB and approval under Section 80G by filing Form 10AB. The assessee, which had been granted provisional registration under Section 12A filed its first set of applications on 16.01.2024 and 11.01.2024, respectively, which were rejected by the CIT(E).

The CIT(E) rejected the Section 12AB application by invoking clause (vi)(B) of Section 12A(1)(ac), stating that the assessee had claimed exemptions of Rs. 85,30,550 for FY 2021-22 and Rs. 2,11,82,097 for FY 2022-23 in its income tax returns.

Read More: Benefit of Exemption Claim u/s 12A of Income Tax Act should not have Denied merely on account of delay in furnishing audit report: Orissa HC [Read Order]

The CIT(E) failed to conclusively determine whether these exemptions were claimed under Sections 11, 12, or clause (23C) of Section 10. Then the assessee filed a second set of applications on 15.06.2024.

These applications were also rejected on 24.12.2024 and 25.12.2024, with the CIT(E) holding that the earlier rejection was on merits and not covered by the Circular. The CIT(E) Rejected the subsequent applications of Section 80G of the Act. Aggrieved by the CIT(E)’s orders, the assessee appealed to the ITAT.

The Counsel for the assessee argued that the CIT(E) erred in rejecting the applications without verifying the nature of exemptions and without providing sufficient opportunity to address procedural defects.

In addition, the counsel for the assessee contended that the rejection of the Section 12AB application was merely on procedural grounds. The counsel pleaded to restore for fresh adjudication after providing opportunity.

The two-member bench comprising Suchitra R. Kamble (Judicial Member) and Makarand V. Mahadeokar (Accountant Member) observed that the CIT(E)’s rejection of the Section 12AB application lacked verification of whether the exemptions were claimed under Sections 11, 12, or 10(23C) of the Income Tax Act.

The Tribunal further observed that the Section 80G application was rejected without independent scrutiny, violating statutory requirements for separate adjudication. The bench set aside the CIT(E)’s orders and remanded the matter to the CIT(E) for fresh adjudication.

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The tribunal directed for verification of the exemptions claimed and compliance with statutory conditions. It also directed the CIT(E) to provide the assessee a reasonable opportunity to be heard and to adjudicate the applications on merits. The appeals were allowed for statistical purposes.

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