Technical Error in Charitable Institution Registration Application: ITAT Set Asides 3-Year Gap Cancellation Order, Remands Matter [Read Order]

The Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) has set aside the order of the Commissioner of Income Tax (Exemptions) [CIT(E)] which cancelled the registration granted under Section 12AB of the Income Tax Act, 1961 citing technical error in charitable institution registration application.

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Karnataka state Diploma in Nursing Examination Board (assessee), a society established under the Karnataka Societies Registration Act, 1960, on 01.04.1995, operates with the objective of preparing professional nurses and maintaining high standards of nursing education and practice. The assessee was granted registration under Section 12AB of the Income Tax Act.

The CIT(E) initiated proceedings after more than three years and alleged that the registration was invalid. The CIT(E) contended that the assessee had no prior registration under Section 12A or 12AA of the act.

Therefore, the assessee should have applied for provisional registration under Section 12A(1)(ac)(ii) instead of Section 12A(1)(ac)(i), under which the registration was obtained. The CIT(E) cancelled the registration, citing the use of an incorrect section code in Form 10A.

Aggrieved by the CIT(E)’s order, the assessee appealed to the ITAT. The counsel for the assessee argued that the error in quoting Section 12A(1)(ac)(i) instead of Section 12A(1)(ac)(ii) was a typographical mistake.

The counsel further contended that the CIT(E) passed the cancellation order without providing an opportunity for a hearing, violating the principles of natural justice. The counsel for the assessee relied on the order of the Pune ITAT in Kimaya Ashram Charitable Trust vs. Commissioner of Income Tax (Exemption) where a similar technical error was rectified by remanding the matter.

The two-member bench comprising Laxmi Prasad Sahu (Accountant Member) and Keshav Dubey (Judicial Member) observed that the CIT(E) cancelled the registration solely on the basis of the technical error without providing the assessee an opportunity to rectify the mistake.

The tribunal observed that the assessee had no prior registration under Section 12A or 12AA, and the application in Form 10A was filed under the incorrect section code due to a typographical error.

The tribunal found that the CIT(E)’s action after a three-year gap was unjustified. The tribunal held that the CIT(E) should have allowed the assessee to correct the section code and proceed with the registration process.

The tribunal set aside the CIT(E)’s order and remanded the matter back to the CIT(E) with directions to treat the assessee’s original application as filed under Section 12A(1)(ac)(ii) and to decide the issue afresh.

The tribunal further directed the assessee to file Form 10AB for final registration within 30 days from the date of receipt of the order. The tribunal directed the CIT(E) to verify the genuineness of the trust by examining necessary documents, financials, and reports, while ensuring a reasonable opportunity of being heard for the assessee.

The appeal of the assessee was allowed for statistical purposes.

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