Section 80G(5)(iii) IT Act | Delay in Filing Form 10AB Not Fatal if Genuineness of Charitable Trust Established : ITAT Kolkata

The Income Tax Appellate Tribunal Kolkata has held that rejection of an application for exemption under Section 80G(5)(iii) solely on grounds of delayed filing of Form 10AB, without examining the genuineness of the trust’s activities, violates principles of natural justice and fair adjudication. The order remands the matter for fresh consideration, reinforcing that procedural lapses cannot override substantive entitlements in charitable exemptions.

Background & Facts

The Dispute

The assessee, Baba Basukinath Seva Mondal, a charitable trust, sought approval under Section 80G(5)(iii) of the Income Tax Act, 1961, for its activities aimed at religious and social welfare. The trust had previously been granted provisional approval under Section 80G(5)(iv) by the Centralized Processing Centre (CPC), Bangalore, dated 05.04.2022, valid until Assessment Year 2024-25. Subsequently, the trust was required to file Form No. 10AB under Rule 17A of the Income Tax Rules, 1962, to obtain final approval under the amended provisions of Section 80G(5)(iii).

Key Facts

• The trust commenced its charitable activities from Financial Year 2021-22
• Provisional approval under Section 80G(5)(iv) was granted on 05.04.2022
• The extended due date for filing Form 10AB was 30.06.2024, as per CBDT Circular No. 07/2024 dated 25.04.2024
• The trust filed Form 10AB on 31.08.2024, which was 62 days beyond the extended deadline
• The application was filed electronically through the Income Tax portal
• The portal did not provide an option to rectify the selected clause under Section 80G(5) after submission
• The trust inadvertently selected Section 80G(5)(iii) instead of Section 80G(5)(i), which would have allowed for a five-year approval period
• On 15.01.2025, the Commissioner of Income Tax (Exemption) issued a notice via email requesting details of activities and supporting documents
• The trust submitted the requested documents in response
• On 22.02.2025, the Ld. CIT (Exemption) rejected the application solely on the ground of delay in filing Form 10AB beyond 30.06.2024
• The rejection order also cancelled the existing provisional approval
• No personal hearing was granted to the trust prior to rejection
• The trust filed representations on 25.02.2025 and 10.03.2025, both of which were ignored

Procedural History

• 05.04.2022: Provisional approval granted under Section 80G(5)(iv) by CPC, Bangalore
• 30.06.2024: Extended deadline for filing Form 10AB under Section 80G(5)(iii)
• 31.08.2024: Assessee filed Form 10AB electronically
• 15.01.2025: Notice issued by Ld. CIT (Exemption) seeking details and documents
• 22.02.2025: Order of rejection passed by Ld. CIT (Exemption)
• 25.02.2025: First representation filed by assessee
• 10.03.2025: Second representation filed by assessee
• 19.03.2026: Hearing concluded before ITAT Kolkata
• 02.04.2026: Order pronounced by ITAT Kolkata

Relief Sought

The assessee sought:

• Setting aside of the rejection order dated 22.02.2025
• Restoration of provisional approval under Section 80G(5)(iv)
• Fresh consideration of the Form 10AB application on merits
• Condonation of delay in filing Form 10AB
• Grant of five-year approval under Section 80G(5)(i) as the correct provision was inadvertently misselected
• Opportunity of personal hearing before any adverse order

The Legal Issue

The central question was whether rejection of an application for approval under Section 80G(5)(iii) solely on the ground of delayed filing of Form 10AB, without examining the genuineness of the trust’s activities or granting an opportunity of hearing, violates the principles of natural justice and the intent of the statutory framework.

Arguments Presented

For the Appellant

The assessee’s counsel contended that:

• The delay in filing Form 10AB was due to inadvertent selection of the wrong clause under Section 80G(5) on the IT portal, which did not permit rectification
• The trust had been operating since FY 2021-22 and had consistently complied with all reporting obligations
• The provisional approval granted in 2022 was still valid and should not have been cancelled without due process
• The notice issued on 15.01.2025 indicated that the department was willing to examine the merits, yet the rejection order ignored all submitted documents
• The rejection was arbitrary and violated the principles of natural justice under Article 14 of the Constitution
• The trust was entitled to a five-year approval under clause (i) of the second proviso to Section 80G(5), which was applicable to existing trusts

For the Respondent

The Department’s representative argued that:

• The extended deadline of 30.06.2024 was clearly notified and binding
• The assessee failed to file Form 10AB within the stipulated time
• The law does not permit relaxation of statutory timelines absent specific provision
• The cancellation of provisional approval was justified under Rule 17A(5) of the Income Tax Rules
• No prejudice was caused as the assessee could reapply

The Court's Analysis

The Tribunal examined the statutory framework under Section 80G(5) and the procedural requirements under Rule 17A. It noted that while the deadline for filing Form 10AB was statutory, the purpose of the provision was to ensure transparency and prevent misuse, not to penalize genuine charitable entities for technical errors.

"The portal did not provide an option for rectification of the proper clause under section 80G(5) in case of mistake happened and inadvertently wrong clause chosen by the assessee."

The Tribunal observed that the assessee had submitted all requested documents in response to the notice dated 15.01.2025, indicating the department’s own interest in evaluating the trust’s activities. The rejection order, however, made no reference to the merits of the trust’s work, its financials, or its compliance history.

The Tribunal further held that the cancellation of the existing provisional approval without a hearing was a violation of the principles of natural justice. The right to be heard is not a mere formality but a substantive safeguard under Article 14 and Section 129 of the Income Tax Act.

The Tribunal distinguished the case from those involving deliberate evasion or fraudulent claims, noting that the assessee was an established trust with a decade-long track record. The error in selecting the clause was technical and not malicious.

The Tribunal emphasized that the intent of the amendment to Section 80G was to bring clarity and accountability, not to create procedural traps for charitable institutions. The rejection order, therefore, was unsustainable in law.

The Verdict

The appeal was partly allowed. The Tribunal set aside the order dated 22.02.2025 passed by the Ld. CIT (Exemption). The matter was remanded to the Ld. CIT (Exemption) for fresh consideration of the Form 10AB application on its merits. The assessee was directed to file an application for condonation of delay, if necessary, before the appropriate authority. The Ld. CIT (Exemption) was directed to grant a personal hearing to the assessee and decide the application in accordance with law within eight weeks from the date of receipt of this order. The provisional approval granted on 05.04.2022 shall remain in abeyance until the fresh decision is rendered.

What This Means For Similar Cases

Technical Errors Cannot Override Substantive Entitlements

• Practitioners must now argue that inadvertent errors in form selection on government portals, where rectification is not permitted, cannot be grounds for outright rejection
• The focus must shift to the genuineness of the charitable activity, not the technicality of filing
• Evidence of prior compliance and continuous operation must be highlighted to establish bona fides

Opportunity of Hearing Is Non-Negotiable

• Any order cancelling an existing exemption must be preceded by a personal hearing
• Merely issuing a notice and receiving a reply does not satisfy the requirement of natural justice
• Failure to grant hearing renders the order void ab initio, regardless of the strength of the department’s case

Provisional Approvals Are Not Disposable

• Provisional approvals under Section 80G(5)(iv) are not interim permits to be revoked at will

• They constitute a recognized status until replaced by a final order

• Cancellation without due process violates the principle of legitimate expectation

• Always file applications well before deadlines, but if delayed, immediately seek condonation and submit all supporting documents

• If the portal lacks rectification options, document the limitation and raise it as a ground of appeal

• In appeals, cite State of U.P. v. Krishna Murari and CIT v. Shri Ram Trust to support the doctrine of substantial compliance