2015 (1) TMI 397 - HC - Income Tax

Rejection of application for Registration u/s 12A - non-compliance of requirement of filing the audited accounts - Scope of Accountant for the purpose of Audit - Held that - tribunal allowing the appeal of the assessee has observed that, assessee has got the accounts audited, but according to the CIT the auditor does not conform to the definition of accountant in terms of explanation below section 288(2). Section 288 permits an ssessee to be represented before the appellate tribunal or any income-tax representative as that term is defined in sub-section (2). The said Seciton has nothing to do in case of grant of registration u/s. 12A. In view of the above, we hold that the order of the CIT in refusing registration on the above ground is not in order. Considering the provisions of Sections 288 and 12A of the Act as well as the documents placed on record, we are of the opinion that the Tribunal is justified in coming to the conclusion that the view taken by the CIT is erroneous. The assessee has got the accounts audited and it is for the CIT to satisfy himself about the object of the Trust that he calls for such documents pursuant to the application. We are in complete agreement with the reasonings adopted and finding of facts arrived at by the Tribunal. - order of the Commissioner rejecting the application for registration u/s 12A of the Act on the ground of noncompliance of requirement of filing the audited accounts was bad and thereby was justified in directing the CIT to grant registration, if other conditions are fulfilled - Decided against Revenue.

Summary

Issues:
Challenge to order rejecting registration under section 12A of the Income Tax Act based on non-compliance with filing audited accounts.

Detailed Analysis:

Issue 1: Challenge to Order
The appellant-revenue challenged the order passed by the Income-tax Appellate Tribunal, Rajkot Bench, in ITA No. 434/Rjt/2006. The substantial question of law framed by the Court was whether the Tribunal was correct in directing the Commissioner to grant registration under section 12A despite the rejection based on non-compliance with filing audited accounts.

Issue 2: Compliance with Section 12A
The assessee filed an application for registration under section 12A(a) of the Act, which was rejected by the CIT(A) for not fulfilling conditions under section 12A(b). The Tribunal overturned the CIT(A)'s decision, leading to the revenue's appeal. The contention was that the assessee failed to get the accounts audited by a qualified Accountant as required by section 12A(b) if the Trust's income exceeded a specified threshold.

Issue 3: Interpretation of Provisions
The Tribunal held that filing audited accounts along with the application for registration under section 12AA was not a legal requirement. The Tribunal emphasized that the CIT's role was to assess the trust's activities and object, not to demand audited accounts upfront. The Tribunal found the CIT's rejection on this ground erroneous and directed the CIT to grant registration if other conditions were met.

Issue 4: Tribunal's Decision
Considering the provisions of Sections 288 and 12A of the Act, the Tribunal's decision was deemed justified. The Tribunal's reasoning that the CIT erred in refusing registration based on the absence of audited accounts was upheld. The Tribunal's view that the CIT should assess the trust's object and activities before demanding specific documents was supported.

Conclusion:
The High Court upheld the Tribunal's decision, ruling in favor of the assessee and against the revenue. The Court affirmed that the order rejecting registration under section 12A due to non-compliance with filing audited accounts was incorrect. The Court endorsed the Tribunal's direction to grant registration if all other conditions were satisfied, dismissing the revenue's appeal accordingly.