2022 (6) TMI 124 - AT - Income Tax

Exemption u/s 11 - denial of registration u/s.12A - denial of recognition u/s.80G - HELD THAT - For the period prior to the application for registration, the assessee has produced the required statutory audit report as required under sub-clause(e) of sub-rule(1) of Rule 17A. There is absolutely no requirement to produce the physical books of account and bills vouchers under Rule 17A. This being so, as all the details called for by the CIT(E) has been produced before him and as the books of account and bills and vouchers as called for by the ld CIT(E) is beyond the purview of the requirement for registration u/s.12A r.w Rule 17A, we are of the view that the assessee has complied with all the requirements for registration u/s.12A of the Act. Consequently, the order of the ld CIT (E) denying the assessee registration u/s.12A is set aside and the ld CIT(E) is hereby directed to register the assessee as charitable institution u/s.12A of the Act in the Register of the Revenue. The registration u/s.12A granted to the assessee does not preclude the AO from verification of the accounts and compliance thereof under the provisions of sections 11,12 13 of the Income tax Act, 1961 in the course of assessment. In these circumstances, the appeal of the assessee stands allowed. Coming to the issue of recognition u/s.80G of the Act, as we have already granted the assessee registration u/s.12A of the Act and as the requirement of producing physical books and accounts and bills and vouchers are not a requirement for granting recognition u/s.80G as also on the ground that the statutory audit report has been produced before the CIT(E), the order of the ld CIT(E) denying the recognition u/s.80G is set aside and the CIT(E) is hereby directed to grant the assessee recognition u/s.80G under the Income Tax Act, 1961. The grant of recognition u/s.80G does not preclude the AO from doing the necessary verification in respect of compliance of the provisions of section 80G in the course of assessment. Appeal of assessee allowed.

Summary

Issues:
1. Denial of registration u/s.12A of the Act
2. Denial of recognition u/s.80G of the Act

Analysis:

Issue 1: Denial of registration u/s.12A of the Act
The assessee appealed against the denial of registration u/s.12A of the Act by the CIT(E), Hyderabad. The assessee's representative argued that all required evidences, including audited accounts, were submitted before the CIT(E) during the hearing. It was contended that physical books of account and bills and vouchers were not mandatory under Rule 17A for registration u/s.12A. The Tribunal observed that the statutory audit report and necessary documents were provided to the CIT(E), fulfilling the requirements. The Tribunal held that the denial of registration was unjust as the assessee had complied with all necessary conditions. Consequently, the order denying registration u/s.12A was set aside, directing the registration of the assessee as a charitable institution.

Issue 2: Denial of recognition u/s.80G of the Act
The denial of recognition u/s.80G was also challenged by the assessee based on similar grounds regarding the production of physical books of account and bills and vouchers. The Tribunal noted that since registration u/s.12A had been granted and statutory audit reports were submitted, the denial of recognition u/s.80G was unfounded. It was emphasized that physical books and vouchers were not mandatory for recognition u/s.80G. Therefore, the order denying recognition u/s.80G was set aside, directing the CIT(E) to grant recognition to the assessee. The Tribunal clarified that the grant of recognition u/s.80G did not exempt the Assessing Officer from verifying compliance during assessment proceedings.

In conclusion, both appeals of the assessee were allowed, ensuring registration u/s.12A and recognition u/s.80G under the Income Tax Act, 1961. The Tribunal highlighted that while the registrations were granted, the Assessing Officer retained the authority to verify compliance with relevant provisions during assessment procedures.