2019 (9) TMI 1053 - AT - Income Tax

Application for registration u/s 12A rejected - HELD THAT - Admittedly before declining the registration u/s 12 of the Act, no reasonable opportunity was provided to the Applicant, which is mandatory, hence on this ground as well, the order under challenge is liable to be set aside. To meet the substantial justice, in our considered view, appropriate course would be to set aside the order impugned and remand back the case to the file of the CIT(E) for decision afresh. The Applicant society shall be under obligation to demonstrate the relevant details/documents to the satisfaction of the LD. CIT(E) qua land and building being used for running the school by the society and also to submit the affiliation with the CBSE, Delhi, failing which the CIT(Exemptions) shall be at liberty to draw the adverse interference if any. CIT(E) shall be at liberty to consider all issues already raised or to be raised further and otherwise feel, fit and appropriate for consideration for proper adjudication of application for registration u/s 12AA of the Act. Appeal filed by the assessee allowed for statistical purposes.

Summary

Issues:
Challenge to rejection of registration under section 12A of the Income Tax Act based on lack of proof of affiliation, financial statements, expenditure details, and building information.

Analysis:
The appeal challenges the rejection of registration under section 12A of the Income Tax Act due to various deficiencies. The assessee society, operational since 2012, applied for registration on 09/03/2017. The rejection was based on the absence of proof of school affiliation, financial statements, expenditure details, and building information. The society's activities were deemed commercial, lacking charitable purpose, as evidenced by substantial income and profit motives. The rejection highlighted the lack of financial statements since inception, raising doubts about genuineness. The rejection was based on the Commissioner's power to verify the society's activities and aims before registration under section 12AA.

The appellant argued that no queries were raised regarding school affiliation or building details. Affiliation with CBSE was presented, but building specifics were not conclusively proven. The lease deed details were provided, but the schedule was missing, hindering a clear finding on land and building verification. The society's lack of financial statements was explained by only maintaining accounts since operations began, which were submitted to the CIT(A). The rejection did not question the society's aims and objects, but failed to provide an opportunity for the society to further clarify or defend its case, violating principles of natural justice.

Section 12AA mandates giving a reasonable opportunity to be heard before refusing registration. The absence of this opportunity in the current case renders the rejection invalid. To ensure substantial justice, the order was set aside, and the case remanded for a fresh decision. The society must provide necessary details for the CIT(E) to reevaluate the registration application thoroughly. Failure to comply may lead to adverse inferences. The CIT(E) is empowered to consider all issues for proper adjudication of the registration application under section 12AA. The appeal was allowed for statistical purposes, emphasizing the need for a fair and just process in registration decisions.