ITAT Pune Restores Section 12A and 80G Applications: Second Chance Granted to Charitable Trust Despite Procedural Lapses

In a significant ruling favoring the principles of natural justice over technical non-compliance, the Income Tax Appellate Tribunal (ITAT), Pune Bench, has provided relief to a long-standing educational trust. The Tribunal set aside the order of the Commissioner of Income Tax (Exemption) [CIT(E)], which had rejected the assessee's application for registration under Section 12A and approval under Section 80G.

The case, titled Shikshan Prasarak Mandal Vs CIT, underscores the judiciary's lenient approach towards charitable institutions compared to commercial entities, particularly regarding the condonation of delay and procedural defaults arising from technical glitches or counsel errors.

Background of the Case

The assessee, Shikshan Prasarak Mandal, is a charitable trust established in 1965. Its primary objective is to provide education and hostel facilities to Adivasi students, for which it receives government grants.

To formalize its tax-exempt status under the new regime, the assessee filed an application in Form No. 10AB seeking registration under clause (iii) of Section 12A(1)(ac) of the Income Tax Act 1961 on November 25, 2022. Subsequently, a separate application for approval under Section 80G(5) was filed on November 28, 2022.

The Rejection by CIT (Exemption)

During the verification process, the CIT (Exemption) issued an initial notice via the ITBA portal on March 3, 2023, requesting specific information and clarifications. The assessee successfully complied with this first notice. However, upon reviewing the submission, the CIT (Exemption) identified discrepancies and issued a second notice on May 20, 2023.

The assessee failed to respond to this subsequent notice. Consequently, the CIT (Exemption) invoked Section 12AB(1)(b)(i) read with Rule 17A(2) of the Income Tax Rules, rejecting the registration application and cancelling the provisional registration previously granted under Section 12A(1)(ac)(vi). Following this, the approval sought under Section 80G was also denied.

Aggrieved by these orders dated May 30, 2023, and May 31, 2023, the assessee approached the Tribunal.

The Issue of Condonation of Delay

A preliminary hurdle in this litigation was the delay in filing the appeals before the ITAT. The Revenue, represented by the Ld. Departmental Representative (DR), vehemently opposed the admission of the appeals, arguing that the delay should not be condoned.