2022 (8) TMI 1071 - AT - Income Tax

Exemption u/s 11 - cancellation of the registration u/s. 12AA - HELD THAT - We find that since the Hon ble Tribunal has restored the registration u/s. 12A of the Act, the assessee is entitled to claim exemption u/s. 11 of the Act and hence the Ld. CIT(A() has rightly directed the AO to delete the additions made by the Ld AO. Accordingly, we therefore find no infirmity in the order of the Ld. CIT(A) on this ground and dismiss the grounds raised by the Revenue.

Summary

Issues involved:
- Appeal against order of Learned Commissioner of Income Tax (Appeals) regarding cancellation of registration under section 12AA of the Income Tax Act, 1961 for AY 2007-08.
- Determination of whether activities of the assessee authority are charitable in nature.
- Consideration of additional grounds of appeal raised by the assessee.
- Claiming exemption under section 11 of the Act.
- Validity of restoration of registration under section 12A by the Hon'ble ITAT.
- Allowance of deductions and additions made by the Assessing Officer.

Analysis:

1. Cancellation of Registration under Section 12AA:
The appeal by the Revenue was against the order of the Learned Commissioner of Income Tax (Appeals) regarding the cancellation of registration under section 12AA of the Income Tax Act, 1961 for the assessment year 2007-08. The assessee, an Urban Development Authority, had its registration canceled due to engaging in commercial activities with a profit motive. The CIT(A) allowed the appeal of the assessee, directing the Assessing Officer (AO) to delete all additions. The Revenue challenged this decision, arguing that the activities of the assessee were not charitable in nature as per the proviso to section 2(15) of the Act.

2. Additional Grounds of Appeal:
The assessee raised additional grounds of appeal before the CIT(A), which were admitted. The CIT(A) allowed these additional grounds and directed the AO to delete all additions. The Revenue contended that the CIT(A) did not consider the observations regarding the commercial nature of the assessee's activities and the fact that the assessee was auctioning lands, indicating non-genuine activities.

3. Exemption under Section 11 and Restoration of Registration:
The Hon'ble ITAT restored the registration under section 12A to the assessee, allowing them to claim exemption under section 11 of the Act. The Revenue challenged this restoration before the High Court, but until a final decision is reached, the directions of the CIT(A) to delete the additions are considered valid. The CIT(A) rightly followed the directions of the ITAT and allowed the deductions claimed by the assessee.

4. Conclusion:
The Tribunal upheld the decision of the CIT(A) and dismissed the appeal of the Revenue. The restoration of registration by the ITAT entitled the assessee to claim deductions under section 11 of the Act. The Tribunal found no infirmity in the order of the CIT(A) and concluded that no interference was required in the matter. The appeal was ultimately dismissed, affirming the directions of the CIT(A) to delete the additions made by the AO.