Delay In Final Approval Filing Not Adverse Where Caused By Confusion In Amended Law: ITAT Ahmedabad

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT), has held that delay in filing an application for final approval cannot be held against a taxpayer where such delay arises due to genuine confusion created by newly amended statutory provisions and procedural uncertainty during the transition period.

The Bench comprising Judicial Member Sanjay Garg and Accountant Member Annapurna Gupta while dealing with the case of Navsarjan Education Trust, observed that both taxpayers and tax authorities faced genuine difficulty in interpreting the amended regime introduced with effect from 1 April 2021. It recorded:

“........It is pertinent to mention here that there was a lot of confusion regarding the interpretation of the amended provisions introduced in the Act w.e.f. 01/04/2021 relating to registration u/s.12A of the Act and approval u/s.80G of the Act including about the dates, prescribed forms and certificates of approval, etc. to be issued and the CBDT had to issue Circulars and Clarifications from time-to-time in this respect. This type of confusion was not only among the assessees but also among the income-tax authorities.........”

Navsarjan Education Trust, a charitable trust engaged in imparting education since 1991, was granted provisional registration and provisional approval in July 2021. It thereafter applied for final approval, which the Commissioner (Exemption) rejected on the ground that the application was time-barred.

Setting aside the rejection, the Tribunal noted that the amended regime had created considerable uncertainty regarding timelines, procedures, prescribed forms, and issuance of certificates. It also observed that even the tax authorities faced interpretational difficulties, as reflected in the impugned order, and that the Central Board of Direct Taxes had to issue multiple clarifications from time to time.

The Bench held that any delay in filing the application for final approval after grant of provisional approval could not be held against Navsarjan Trust. It concluded that the application had to be treated as filed within limitation. It stated:

“.......Therefore, if there is some delay occurred by the assessee in filing the application for final approval, after grant of provisional approval on 09/07/2021, no adverse view is required to be taken against the assessee. Therefore, it is held that the present application by the assessee for final approval has been filed within the limitation period.........”

Accordingly, the ITAT set aside the order of the Commissioner (Exemption) and remanded the matter for fresh adjudication.

For Appellant: Brijesh Parekh, AR

For Respondent: Vijay Kumar Singh, CIT-DR