Wrong Clause Selection Not Fatal to Proceedings': ITAT Grants Fresh Opportunity for 12AA Registration [Read Order]

The  Pune Bench of the Income Tax Appellate Tribunal (ITAT) held that the inadvertent selection of an incorrect clause in an application for registration under Section 12AA of the Income Tax Act, 1961, should not be grounds for outright rejection as it was not fatal to proceedings.

In this case, the assessee, Sri Sai Sanskar Trust, had appealed against the denial of registration by the Commissioner of Income Tax (Exemptions). 

The assessee, Sri Sai Sanskar Trust, a charitable organisation that was registered under the Maharashtra Public Trusts Act, 1950, had previously been granted provisional registration under Section 12A of the Income Tax Act. But, when applying for regular registration on Form 10AB, the trust mistakenly cited Clause (vi)-ITEM(B) of Section 12A(1)(ac) instead of the correct clause. The CIT (Exemptions) rejected the application, citing discrepancies in the trust's financial statements and its claim for deductions under Section 11, which rendered the selected clause inapplicable. 

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The assessee’s counsel contended that the rejection was based on a hyper-technical ground and requested for an opportunity to rectify the error. The assessee’s counsel referred to a similar case, Shree Swaminarayan Gadi Trust Vadtal (SVG) Vs. CIT (Exemptions), Ahmedabad in ITA Nos. 369 & 370/Srt/2024, dated 13.05.2024, in which the Surat Bench of ITAT had held that such inadvertent mistakes should not be fatal to the proceedings. 

 The Pune Bench of the ITAT stressed on the principles of natural justice, stating that the CIT (Exemptions) should have allowed the trust to correct the error rather than rejecting the application outright.

ITAT observed that ‘selection of the wrong clause by the appellant cannot be treated as fatal to the proceedings initiated after the filing of the application.’

The tribunal in conclusion, set aside the impugned order and directed the CIT (Exemptions) to reconsider the application afresh, giving the trust an opportunity to file the correct details and comply with any additional requirements. The trust was directed by the bench to avoid unnecessary adjournments and to cooperate fully with the proceedings. 

The tribunal, comprising Dr. Manish Borad (Accountant Member) and Ms. Astha Chandra (Judicial Member), allowed the assessee’s appeal for statistical purposes.

To Read the full text of the Order CLICK HERE

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