ITAT Pune Rules Incorrect Clause Selection in Form 10AB for Section 80G Approval is a Curable Defect
The registration and approval processes for charitable institutions under the Income Tax Act 1961 have undergone significant digital and procedural transformations in recent years. While the transition aims to streamline the administration of exemptions, it has also led to instances where an assessee might inadvertently select an incorrect statutory code or clause while filing online forms. A recurring legal question is whether such clerical errors should lead to the outright rejection of an exemption application or if they constitute curable defects that can be rectified in the interest of substantive justice.
In a significant ruling, the Income Tax Appellate Tribunal (ITAT), Pune Bench, addressed this exact controversy in the case of Skilletz Foundation Vs CIT, Exemption (ITAT Pune). The Tribunal determined that selecting the wrong sub-clause in Form No. 10AB while applying for regular registration under Section 80G is a technical anomaly and a curable defect, provided the application is otherwise filed within the stipulated timeframe and no adverse findings exist on the merits of the charitable activities.
Background of the Dispute
The procedural matrix of the case revolves around the application for regular approval filed by the assessee, Skilletz Foundation. On 16.04.2024, the assessee submitted Form No. 10AB seeking registration under Section 80G of the Income Tax Act 1961. However, during the electronic filing process, the application was inadvertently submitted under sub-clause (B) of clause (iv) of the first proviso to Section 80G(5).
To evaluate the authenticity of the trust's activities and ensure compliance with the statutory conditions outlined in clauses (i) through (v) of Section 80G(5), the Commissioner of Income Tax (Exemption) [CIT(E)], Pune, initiated verification proceedings. A notice was issued via the Income Tax Business Application (ITBA) portal on 06.06.2024, mandating the assessee to provide specific clarifications and upload relevant documentation by 21.06.2024.
The assessee complied with the directive and submitted the requested particulars. Upon reviewing the submissions, the CIT(E) identified certain anomalies and issued a subsequent notice seeking further clarification by 05.10.2024. Crucially, the CIT(E) pointed out that the assessee had applied under sub-clause (B) of clause (iv) of the first proviso to Section 80G(5), a provision that was statutorily inapplicable to the specific profile of the assessee.
The Assessee's Admission and Request for Rectification
Responding to the observations made by the tax authorities on 14.10.2024, the assessee acknowledged the discrepancy. The trust explained that the selection of the incorrect clause was a genuine clerical error that occurred during the digital submission of Form No. 10AB for regular approval.
To remedy the situation, the assessee formally requested the CIT(E) to evaluate the application under the correct statutory provision, specifically clause (iii) of the first proviso to Section 80G(5) of the Income Tax Act 1961. The assessee argued that a mere typographical or clerical mistake in selecting a dropdown code should not result in the cancellation or rejection of final regular approval, invoking the principles of natural justice.