2023 (9) TMI 1517 - AT - Income Tax

Rejection of application for registration u/s 12AB - assessee favoured some students though fee concession etc. which was held as against stated objects of the society - the assessee in view of amended provisions of registration u/s 12AB applied before the CIT(E) invoking section 12A(1)(ac)(v) with fresh application - CIT(E) under above procedure rejected the application of the assessee observing that no change or modification in the objects off the society was made HELD THAT - As in view of registration u/s 12AA granted post facto for the period from AY 2017-18 to AY 2020-21, the assessee society has now become eligible for applying for registration u/s 12AB of the Act making application under section 12A(1)(ac)(i) of the Act. Accordingly, we set-aside the impugned order and restore the matter back to him for deciding afresh in the light of order of ld CIT(E) invoking the provision of section 12AB(1)(a) of the Act. The Grounds raised by the assessee are accordingly, allowed for statistical purposes.

Summary

Issues Involved:
1. Whether the Ld. CIT(E) erred in rejecting the application for registration under section 12AB of the Income Tax Act, 1961.
2. Whether the Ld. CIT(E) considered the reply filed in response to the notice issued.
3. Whether the activity of the appellant being exclusively educational justifies refusal of registration.
4. Additional grounds raised by the assessee.

Issue-wise Detailed Analysis:

1. Rejection of Application for Registration under Section 12AB:
The assessee society, "Shri Guru Tegbhadur Education Society," had applied for registration under section 12AA of the Income Tax Act on 20/12/2016, which was initially rejected by the Ld. CIT(E) due to alleged favoritism towards some students through fee concessions, deemed contrary to the society's stated objectives. Upon appeal, the Tribunal remanded the matter back to the Ld. CIT(E) for reconsideration. Subsequently, the assessee applied for registration under the amended provisions of section 12AB, invoking section 12A(1)(ac)(v) of the Act. The Ld. CIT(E) rejected this application, stating that there was no change or modification in the society's objects that warranted application under section 12A(1)(ac)(v).

2. Consideration of Reply Filed in Response to Notice:
The Ld. CIT(E) issued an opportunity letter to the assessee, calling for various documents to process the application and verify the society's objects and activities. Despite the assessee's submission of a reply and relevant documents, the Ld. CIT(E) observed no change or modification in the society's objects, leading to the rejection of the application.

3. Justification of Refusal Based on Educational Activity:
The assessee argued that its activities were exclusively educational, and thus, the refusal of registration was unjustified. However, the Ld. CIT(E) focused on procedural compliance, specifically the lack of modification in the society's objects, as the basis for rejection.

4. Additional Grounds Raised by the Assessee:
The assessee sought to raise additional grounds to establish that the order was flawed. The Tribunal considered the registration granted post facto for the period from AY 2017-18 to AY 2020-21, making the society eligible for applying under section 12AB. The Tribunal set aside the impugned order dated 01/09/2022 and remanded the matter back to the Ld. CIT(E) for fresh consideration in light of the new order dated 27/02/2023, invoking the provisions of section 12AB(1)(a).

Conclusion:
The appeal filed by the assessee was allowed for statistical purposes, with the Tribunal directing the Ld. CIT(E) to reconsider the application for registration under section 12AB, taking into account the order dated 27/02/2023 and the provisions of section 12AB(1)(a) of the Act. The Tribunal emphasized the need for a fresh decision based on the updated procedural context.