Rejection of 80G(5) Fund Approval: ITAT Restores Matter to CIT(E) Allowing Clause Correction Within Extended Filing Period [Read Order]

The Mumbai Bench of Income Tax Appellate Tribunal ( ITAT ) restored the matter to the file of Commissioner of Income Tax (Exemption)[CIT(E)] in the case of rejection of 80G(5)fund approval under Income Tax Act,1961 allowing correction of the clause selection and recognizing the application as filed within the extended period under Central Board of Direct Taxes (CBDT) Circular No. 7 of 2024.

Shri Guru Singh Sabha, appellant-assessee, through the counsel, stated that it was a charitable trust engaged in charitable activities, with its objects and activities not in dispute. The trust held registration under section 12AB and had provisional approval under section 80G.

It applied for regular approval of its fund in Form 10AB, but due to an inadvertent error by its counsel, clause (iii) was selected instead of clause (vi) of the first proviso to section 80G(5), leading to rejection of the application.

Another reason cited for rejection was that the application, filed on 30/11/2024, was allegedly beyond the permissible period, which required filing either within six months of the start of activities or at least six months before the expiry of provisional registration.

The CIT(E) rejected the application, noting that no compliance was made despite being given an opportunity. The counsel of the assessee contended that the application was actually filed on 10/06/2024, within the extended period allowed by the CBDT circular dated 25/04/2024.

It was submitted that the rejection was based on technical grounds, and the appeal should be restored to the file of CIT(E) with liberty to the assessee to correct the clause selection and have the order passed afresh.

The Departmental counsel supported the order of CIT(E).

The two member bench comprising Pawan Singh (Judicial Member) and Renu Jauhri (Accountant Member) examined the submissions of both parties and reviewed the order of Ld. CIT(E). It noted that the application of the assessee had been rejected on the ground that it was filed beyond the prescribed time limit, i.e., not within six months from the start of activities or six months before the expiry of provisional registration.

The appellate tribunal observed that CBDT, through Circular No. 7 of 2024, had extended the time limit for filing applications under section 80G(5), and directed CIT(E) to consider the application as filed within the extended period.

The tribunal also noted that the issue of selecting clause (iii) instead of clause (vi) of the First Proviso to section 80G(5) was a procedural irregularity and could be corrected by CIT(E). It directed CIT(E) to examine the application under the correct clause, i.e., clause (iii).

Since the order had not been decided on merit, the bench restored the matter to the file of CIT(E) to reconsider the application for approval of the fund and pass a fresh order in accordance with law, after giving the assessee a fair and reasonable opportunity.

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