ITAT Directs CIT(E) to Consider Form 10AB Application on Merits Despite Error in Clause Selection

Sri Ramajayam Educational Trust Vs CIT (Exemption) (ITAT Chennai)

ITAT Chennai addressed an appeal by Sri Ramajayam Educational Trust regarding the rejection of its Form 10AB application for approval under Section 10(23C) of the Income Tax Act, 1961. The CIT(E) rejected the application on 27.06.2024, stating that the trust should have applied under clause (iii) instead of clause (ii) of the first proviso to Section 10(23C). The Tribunal observed that the rejection was based solely on a technical error, as the trust had already obtained provisional approval for AY 2024-25 to AY 2026-27 and was seeking permanent registration. ITAT noted that the trust was not given an opportunity to rectify the mistake, violating the principles of natural justice. Furthermore, despite the CBDT’s extension of the Form 10AB filing deadline to 30.06.2024, the trust was advised to reapply rather than being allowed to amend the existing application. ITAT directed CIT(E) to consider the application under the correct clause and review it on merit. The appeal was allowed for statistical purposes.

FULL TEXT OF THE ORDER OF ITAT CHENNAI

Aggrieved by rejection of application filed in Form No.10AB on 02.01.2024 for seeking approval under clause (ii) of first proviso to section 10(23C) of the Income Tax Act, 1961 (‘ACT’ in short) vide impugned order dated 27.06.2024, the assessee is in appeal before us. The registry has noted a delay of 28 days in the appeal, the condonation of which has been sought by Ld. AR on the strength of affidavit of Managing trustee of the assessee trust. We have perused the reasons and condoned the delay. The appeal is admitted for adjudication.

2. It has been stated that the application was rejected on the ground that the assessee ought to have applied under clause (iii) of first proviso to Section 10(23C) but it wrongly applied under clause (ii). However, while processing the application filed in Form No.10AB on 02.01.2024, the ld.CIT(E) noticed from the assessee’s Form 10AC that the applicant has been granted provisional approval (fresh approval) for the approval period from AY 2024-25 to AY 2026-27. Therefore, the ld. CIT(E) held that the applicant / assessee ought to have filed its application under clause (iii) of the first proviso to section 10(23C) but the applicant has erroneously filed its present application in Form 10AB seeking approval under clause (ii) of the first proviso to section 10(23C) which covers the cases of trusts which are already approved and seeking re-approval. Hence the ld.CIT(E) held the present application under clause (ii) of the first proviso to section 10(23C) seeking approval is prima-facie non-maintainable.

3. As is evident, the assessee was been granted provisional approval from approval period from AY 2024-25 to AY 2026-27. The Ld. CIT(E) held that application filed under Clause (ii) would not be maintainable since the application was to be filed in Clause (iii) in assessee’ case. Aggrieved, the assessee is in further appeal before us.

4. We find that the application has been rejected merely on technical ground. It is clear that the assessee had obtained provisional approval and it sought permanent registration. By inadvertent mistake, the assessee preferred application under wrong Clause (ii) instead of Clause (iii). The assessee ought to have been granted an opportunity to rectify the same but in this case none. We also note that the ld. CIT(E) vide impugned order dated 27.06.2024 (near fag end of 30.06.3024) advised the assessee to file fresh application in the light of the CBDT Circular No.07/2024 dated 25.04.2024 extending the due date for filing Form 10AB from 30.09.2023 to 30.06.2024. We find that from 02.01.2024 i.e; the date of filing application in Form No.10AB till date of impugned order dated 27.06.2024, assessee has not been granted an opportunity to correct the mistakes well within the time period of 30.06.2024 which clearly violates principle of natural justice. Hence, we direct Ld. CIT(E) to treat the present application under clause (ii) of the first proviso to section 10(23C) filed on 02.01.2024 as filed under clause (iii) of the first proviso to section 10(23C) and consider the same on merits. The assessee is directed to substantiate its application. The appeal stand allowed for statistical purposes.

5. In result, appeal of the assessee stand allowed for statistical purposes.

Order pronounced in the open court on 10th day of December, 2024.