2022 (2) TMI 104 - AT - Income Tax

Exemption u/s 11 - primary reason for rejecting the application of the assessee is that he held that the assessee was not registered u/s. 12A of the Act and therefore it had violated various provisions of the Act and had wrongly claimed the income to be exempted u/s. 12A - HELD THAT - We find that while rejecting the application of the assessee the CIT(E) has not commented on the object clause of the assessee and neither he had commented adversely on the activities being carried out by the assessee whereas the requirement of the Act is that at the time of grant of registration to assessee the ld. CIT(E) has to examine the objects of the assessee as well as the genuineness of activities of the assessee. Therefore in view of these facts and circumstances we deem it appropriate to remit the matter back to ld. CIT(E) who should pass a fresh order in accordance with the provisions of law and after providing sufficient opportunity to the assessee of being heard. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
- Rejection of application for registration u/s. 12A of the Income Tax Act
- Incorrect filing of returns and audit reports by the assessee
- Compliance with statutory requirements for registration

Analysis:
1. The appeal was filed against the order of the ld. CIT(E) rejecting the assessee's application for registration u/s. 12A of the Act. The ld. AR argued that the rejection was based on the assessee not having registration u/s. 12AA, leading to incorrect filing of returns in ITR-7. The AR contended that as the registration application was not disposed of within six months, a deemed grant of registration should apply, as per a judgment cited. The AR emphasized that the rejection was not in line with the law, as the objects and activities of the assessee were not adversely commented upon by the ld. CIT(E).

2. The ld. CIT (DR) supported the rejection, stating that the ld. CIT(E) had appropriately dealt with the application and prayed for the dismissal of the appeal. The Tribunal noted that the primary reason for rejection was the lack of registration u/s. 12A, leading to the incorrect claim of income exemption. The findings of the ld. CIT(E) highlighted errors in the accounts submitted by the applicant, including incorrect filing of returns, audit reports, and misreporting of income. The ld. CIT(E) also pointed out non-compliance with the provisions of the Income Tax Act and Rules.

3. The Tribunal observed that the ld. CIT(E) did not comment on the objects or activities of the assessee while rejecting the application. The Tribunal emphasized that the law requires the examination of both the objects and activities of the assessee during the registration process. Therefore, the Tribunal decided to remit the matter back to the ld. CIT(E) for a fresh order in compliance with the legal provisions and after providing the assessee with a fair opportunity to be heard.

4. Consequently, the appeal of the assessee was allowed for statistical purposes, with the Tribunal's order pronounced in the open court on 20/01/2022. The judgment highlighted the importance of adherence to statutory requirements, proper examination of applications for registration, and the necessity of providing a fair hearing to the concerned parties in such matters.