2013 (4) TMI 67 - AT - Income Tax

Rejection of registration u/s. 12AA of the Income Tax Act - As per the reports furnished by AO and Jt.CIT, it is stated that as per the activity report filed by the applicant, the only activity of the society is managing a School affiliated to CBSE. But as per the income side of the Income & Expenditure statement, the society has been receiving entrance coaching fee from Viet and Brilliant during all the previous years. Further, the Society has no property of it own. No building or room is taken on rent/lease for the functioning of the Society. - Held that - The case of the assessee is that the said reports were not put before it and hence the opportunity was not provided to it to submit its view on the adverse remarks, if any, made by the lower authorities. The said action of Ld CIT violates the principles of natural justice. Under these circumstances, as observed in the decision of the Hon ble Jurisdictional Kerala High Court in the case of Adarsha Vidyanidhi Trust vs. CIT (2007 (1) TMI 148 - KERALA High Court) the order passed by the Ld. CIT cannot be treated as a valid one and is liable to be quashed.

Summary

Issues:
Registration u/s. 12AA of the Income Tax Act - Refusal by Ld. CIT - Violation of principles of natural justice.

Analysis:
The appeal before the Appellate Tribunal ITAT Cochin was against the order of the Ld. CIT, Kottayam, rejecting the registration u/s. 12AA of the Income Tax Act. The Ld. CIT based the rejection on reports from the Assessing Officer and the Jt. Commissioner of Income Tax, questioning the genuineness of the activities of the society. The Ld. Counsel for the assessee argued that the decision was against natural justice as the assessee was not given an opportunity to explain the adverse remarks in the reports, citing the Adarsha Vidyanidhi Trust case. On the other hand, the Ld. DR contended that the society's receipt of entrance coaching fees did not align with the definition of charitable activity under u/s. 2(15) of the Act.

The Tribunal noted that the Ld. CIT made the decision solely based on reports without allowing the assessee to respond to any adverse remarks. It was observed that the assessee was not given a chance to present its views on the reports obtained from the lower authorities. The Tribunal found this to be a violation of natural justice principles. Citing the Adarsha Vidyanidhi Trust case again, the Tribunal held that the Ld. CIT's order was invalid and needed to be quashed. Consequently, the Tribunal set aside the Ld. CIT's order and directed a fresh consideration of the application after providing the necessary opportunity for the assessee to be heard and respond to the reports submitted by the lower authorities.

In conclusion, the appeal by the assessee was treated as allowed for statistical purposes, and the matter was remanded back to the Ld. CIT for a reevaluation of the registration application in compliance with the principles of natural justice and in accordance with the law.