2013 (6) TMI 503 - AT - Income Tax

Application for grant of registration u/s 12AA & exemption under Section 80G(5) denied - Held that - CIT did not provide reasonable opportunity of hearing in this regard. The ITO (Tech.) has called the details from the assessee. The CIT examined these details only on 07.08.2012 and the order passed at Kanpur which itself appears that the assessee was not provided sufficient opportunity of hearing. The proviso of Section 12AA(1) provides that no order shall be passed unless the society has been given a reasonable opportunity of hearing. Thus send back the issue before CIT to decide denovo, in accordance with law, after providing reasonable opportunity of hearing to the assessee - appeals of the assessee allowed for statistical purposes.

Summary

Issues:
1. Rejection of application for registration under Section 12AA of the Act.
2. Rejection of application for grant of exemption under Section 80G(5) of the Act.

Issue 1: Rejection of application for registration under Section 12AA of the Act:

The appellant filed appeals against the rejection of its registration application under Section 12AA of the Act. The CIT rejected the application based on the appellant's failure to provide evidence regarding fee concessions claimed for certain students and the lack of explanation on criteria governing such concessions. The CIT also noted discrepancies in the distribution of scholarships and observed that the appellant earned substantial profits from charging fees, indicating a commercial basis rather than charitable activities. The CIT emphasized that educational institutions must demonstrate charity in their activities to qualify as charitable institutions. The CIT referred to a previous ITAT order to support the decision. The appellant argued that reasonable hearing opportunity was not provided, citing order-sheets as evidence. The ITAT found the CIT did not provide sufficient hearing opportunity as required by law. The ITAT decided to send the issue back to the CIT for a fresh decision with proper hearing opportunity.

Issue 2: Rejection of application for grant of exemption under Section 80G(5) of the Act:

The second appeal was against the rejection of the application for exemption under Section 80G(5) of the Act. The rejection was based on similar grounds as the first issue, highlighting the lack of charity in the appellant's educational activities and the substantial profits earned. The CIT found the appellant did not engage in the charitable activities listed in its object clause. The appellant argued that since the CIT did not doubt the object or genuineness of its activities, registration under Section 12AA and approval for exemption under Section 80G(5) should be granted. The ITAT observed that the CIT did not provide a reasonable hearing opportunity, as required by law. The ITAT directed the issue to be reconsidered by the CIT with proper hearing procedures.

In conclusion, the ITAT allowed both appeals for statistical purposes, directing a fresh decision by the CIT after providing the appellant with a reasonable opportunity of hearing as mandated by law.