2020 (5) TMI 547 - AT - Income Tax

Grant of registration u/s 12AA denied - cash from undisclosed sources is being introduced in the society in the form of school fees - HELD THAT - Assessee society has been running a school and that the society is also having recognition from the Department of Education, Government of Haryana. As observed by the Ld. CIT (E) that the school was being run from premises that consisted of one hall and eight rooms only and was actually situated in a Gali . The Ld. CIT (Exemptions) has observed that it was unbelievable that receipts to the tune of nearly ₹ 1 crore are generated from such small premises. Thus, apparently the Ld. CIT (Exemptions) was having doubts regarding the genuineness of the activities but instead of having the same verified, he chose to straightway refuse the grant of registration. This, in our considered opinion, was not correct. If the Ld. CIT (Exemptions) was having any kind of doubts, he should have got the same verified. The issue needs a relook and reconsideration by the Ld. CIT (Exemptions) and, therefore, we deem it fit to restore the issue to the file of the Ld. CIT (Exemptions) for reconsidering - Decided in favour of assessee for statistical purposes.

Summary

Issues involved:
Appeal against rejection of registration u/s 12AA of the Income Tax Act, 1961.

Analysis:
The appeal was filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Exemptions) rejecting the application seeking registration u/s 12AA of the Act. The Assessee's representative argued that the observations made by the Ld. CIT (Exemptions) were incorrect and unjustified. The representative highlighted discrepancies in the Ld. CIT (Exemptions)'s findings regarding salary expenditure, gross receipts, and the genuineness of the Assessee's activities. It was emphasized that the Assessee had recognition from the Department of Education, Haryana, and the rejection was based on conjectures and surmises. The Assessee requested the tribunal to direct the grant of registration u/s 12AA.

The Ld. CIT-DR, representing the Respondent, supported the impugned order, arguing that the denial of registration was justified.

After considering the submissions and examining the records, the tribunal noted that the Assessee was running a school with recognition from the Department of Education, Haryana. The Ld. CIT (Exemptions) had refused registration suspecting the introduction of cash from undisclosed sources as school fees. The tribunal observed discrepancies in the premises where the school operated and the generated receipts, leading to doubts about the genuineness of activities. However, instead of verifying these doubts, the Ld. CIT (Exemptions) directly rejected the registration. The tribunal deemed this approach incorrect and ordered the issue to be reconsidered by the Ld. CIT (Exemptions) for proper verification and granting adequate opportunity to the Assessee. Consequently, the appeal was allowed for statistical purposes.

In conclusion, the tribunal found the Ld. CIT (Exemptions)'s decision to be hasty and lacking proper verification. The Assessee's appeal was allowed, and the issue was remanded for reconsideration to ensure a fair assessment of the registration application u/s 12AA of the Act.