2018 (2) TMI 2044 - AT - Income Tax

Exemption u/s 11 - denial of registration u/s. 12AA as well as approval u/s. 80G(5) - HELD THAT - We are conscious that an applicant can only be granted opportunity for hearing, which has been afforded in abundance by the ld. CIT(E). A show cause by the competent authority to the applicant must however reflect the consideration of the latter s reply, absent in the instant case. That is, the show cause dated 11/8/2017 gets vitiated by the non-consideration of the appellant s reply furnished before the ITO(E). The impugned order, for the reasons afore-said, is thus not sustainable in law. We, accordingly, set aside the impugned order u/s. 12AA(1)(b)(ii), and direct the ld. CIT(E) to consider the assessee s application for registration afresh on merits, in accordance with law. The assessee-appellant shall extend full cooperation in the matter, even as assured by the ld. AR, furnishing all the details and information as may be called for. The approval u/s. 80G is largely consequential, as also apparent from the impugned order denying the same. In any case, the same would require reconsideration in view of the assessee s application for registration being, in consequence to this order, being required to be adjudicated afresh. The order denying approval u/s. 80G is accordingly also set aside on the same terms. Assessee's appeals are allowed for statistical purposes

Summary

Issues: Denial of registration u/s. 12AA and approval u/s. 80G(5) of the Income Tax Act, 1961

Denial of Registration u/s. 12AA:
The appellant, a Trust formed in 2016, contested the denial of registration u/s. 12AA and approval u/s. 80G(5) by the CIT(E) due to non-compliance and premature application concerns. The denial was based on the Income Tax Officer's report stating the application was premature as the trust's activities had not commenced. However, the Tribunal disagreed, emphasizing that registration should be granted from the application date and any income received before registration would not qualify for exemption u/s. 11. The Tribunal found the objection of premature application invalid, stating that activities were contemplated, evidenced by the ongoing construction for educational purposes. The Tribunal highlighted the necessity for the CIT(E) to assess the trust's objects for charitable purposes under the Act, which was not adequately addressed in the original order, rendering it inchoate. The Tribunal also criticized the lack of compliance by the assessee but acknowledged the promise of cooperation for fresh consideration.

Approval u/s. 80G(5):
The denial of approval u/s. 80G was deemed consequential to the registration denial. The Tribunal set aside the order denying approval, requiring reconsideration once the registration application is re-evaluated. The Tribunal directed the CIT(E) to review the registration application afresh, emphasizing the need for full cooperation from the appellant. The Tribunal concluded by allowing the appeals for statistical purposes, setting aside both the registration and approval denials.

In conclusion, the Tribunal found the original order denying registration and approval unsustainable in law due to premature application concerns, inadequate assessment of charitable objects, and procedural flaws in the show cause process. The Tribunal directed a fresh evaluation of the registration application and approval request, emphasizing compliance and cooperation from the appellant for a comprehensive review.