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Issues involved: Rejection of application for registration u/s 12A of the Income Tax Act, 1961 and rejection of application for grant of approval u/s 80G of the Income Tax Act, 1961.
Issue 1: Rejection of application for registration u/s 12A: The assessee's application for registration u/s 12A was rejected by the CIT, Faizabad, due to lack of sufficient evidence supporting the genuineness of charitable activities. The CIT pointed out deficiencies in the documentation provided by the assessee, including unsupported expenses and insufficient proof of charitable activities beyond land ownership and construction agreements. The CIT emphasized the need for verifiable details of donors, expenses, and charitable activities to establish eligibility for registration u/s 12A. The assessee contended that its activities, particularly in education, were charitable, and expenses were nominal. The ITAT observed that while some expenses lacked cash memos, they were relatively small and did not justify rejection. The ITAT also noted the CIT's failure to adequately consider the charitable nature of the assessee's main objectives. Consequently, the ITAT set aside the rejection and remanded the issue to the CIT for reevaluation with proper hearing for the assessee. Issue 2: Rejection of application for grant of approval u/s 80G: The rejection of the application for registration u/s 12A led to the rejection of the application for approval u/s 80G by the CIT. As the issue of registration u/s 12A was set aside for reassessment, the ITAT also directed the CIT to reconsider the approval u/s 80G after providing a fair opportunity for the assessee to present its case. Ultimately, the appeals were allowed for statistical purposes. (The order was pronounced in the open court on 12/01/2011)
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