2023 (1) TMI 1290 - AT - Income Tax

Exemption u/s 11 - rejecting the application seeking registration u/s.12AA - CIT(E) after verifying the documents provided by the assessee-society found that the assessee society is generating substantial surpluses - HELD THAT - On perusal of the impugned order, we found that the CIT(E) has provided only one opportunity to the assessee to provide the details as sought for, for which, as per assessee could not submit the details within the time. Looking to the above facts and circumstances of the case and in the interest of principle of natural justice, as fairly admitted by both the sides, we set aside the issue to the file of CIT(E) to re-adjudicate the same after providing adequate opportunity of hearing to the assessee. Appeal of assessee is allowed for statistical purposes.

Summary

Issues:
1. Rejection of registration u/s.12AA of the Income-tax Act, 1961 by CIT(E) for an assessee engaged in charitable activities.
2. Allegation of lack of proper opportunity and violation of natural justice by CIT(E) in refusing registration.
3. Assessment of substantial surpluses and loans by the assessee society leading to the rejection of registration u/s.12A of the Act.
4. Appeal against the CIT(E) order by the assessee.

Analysis:
1. The appeal was filed against the rejection of registration u/s.12AA by the CIT(E) for an assessee involved in charitable activities. The CIT(E) found that the assessee society, registered for open school examinations and distant education, was generating substantial surpluses and providing loans, indicating commercial operations rather than charitable activities. Consequently, the registration was denied based on the assessment of the society's financial dealings.

2. The appellant contended that the CIT(E) erred in denying registration without providing a proper opportunity for compliance, which was requested within a short timeframe. The appellant argued that the CIT(E) acted against statutory provisions and principles of natural justice by not allowing sufficient time for submission of relevant details. The appellant sought dismissal of the order on grounds of illegality and lack of natural justice.

3. Upon hearing both sides, the ITAT noted that the CIT(E) had only given one opportunity for submission of details, which the appellant could not meet within the stipulated time. Acknowledging the importance of natural justice, the ITAT set aside the issue for the CIT(E) to reconsider after providing adequate hearing opportunities to the appellant. The ITAT directed the appellant to furnish the required documents and cooperate for a prompt resolution of the matter, emphasizing the importance of procedural fairness.

4. Ultimately, the ITAT allowed the appeal for statistical purposes, indicating a procedural victory for the appellant based on the need for a fair opportunity to present their case. The decision highlighted the significance of adherence to principles of natural justice in administrative proceedings, ensuring that parties are given sufficient chances to be heard and provide necessary documentation for a just determination.