2022 (1) TMI 990 - AT - Income Tax

Exemption u/s 11 - Reject the application for grant of registration u/s. 12AA - HELD THAT - The assessee in all fairness if it expects the grant of Registration on a subsequent date is necessarily required to ensure that the necessary criteria is fully met in law and spirit. Infact the adjudicating authority expecting that their orders are respected and complied with per force expect self corrective actions as maintainable in law. Applications seeking Registration on same set of facts may warrant dismissal on this ground, however, where the taxpayer takes necessary steps to comply with the requirements, the application in a subsequent year cannot be outrightly dismissed. There is no bar to a taxpayer to ensure that he complies with the requirements of law on facts and then files a fresh application which has been done. CIT-DR was specifically required to bring to our notice any statutory bar or legal impediment. No provision of law supporting the view or any decision was brought to our notice by the Revenue. Considering the facts and the law, we hold that dismissal of the assessee's application on this ground per-se is contrary to the legal position as we understand. It is seen that the ld. CIT(Exemption) takes note of the fact that the assessee claims that its operations have started from 27.12.2020, however, he fails to consider the copy of the Balance Sheet which was stated to have been filed before the said Authority and shown to us. The said document demonstrates that expenditure for building a capital asset as claimed had started. The expenditure was for building a hospital needs verification on facts. Since filing of the Balance Sheet by itself may not be sufficient to fully demonstrate this claim and the facts need to be considered fully and correctly, accordingly, we set aside the impugned order back to the file of the CIT(E) directing the assessee to place full facts on record qua the alleged stated construction activity of a hospital in Bhopal alongwith all necessary approvals/permissions sought from the appropriate Regulatory Authorities required for setting up a hospital. CIT(E) shall consider all necessary evidences filed and if need be, call forth for further supporting documentation and thereafter, shall pass an order in accordance with law after considering the assessee. Said order was pronounced in the presence of the parties via Webex. Appeal of the assessee is allowed for statistical purposes.

Issues:
1. Correctness of order rejecting registration u/s. 12AA
2. Discrepancies in rejection of registration application
3. Requirement of appeal against earlier rejection
4. Compliance with necessary criteria for registration
5. Consideration of fresh application after addressing shortcomings
6. Verification of facts regarding construction activity of hospital
7. Legal position on dismissing application based on same facts

Analysis:
1. The appeal challenged the order rejecting registration u/s. 12AA, contending that the rejection was against law and facts. The appellant argued that the earlier rejection in 2017 was unjustified as no appeal was filed against it. The appellant, a Society, aimed to promote medical activities and hospitals. The CIT(E) dismissed the application in 2020, despite the appellant starting construction activities for a hospital in line with its objectives. The appellant argued that the dismissal was arbitrary and failed to consider the change in circumstances. The Tribunal held that dismissing the application solely based on the previous rejection was incorrect, emphasizing that compliance with legal requirements and self-corrective actions are essential for registration.

2. The Tribunal addressed the discrepancies in the rejection of the registration application, noting that the CIT(E) failed to consider the appellant's construction activities for a hospital. The Tribunal emphasized the importance of verifying facts and ensuring that necessary approvals and permissions for setting up a hospital are in place. The order was set aside for the CIT(E) to reevaluate the application based on the full facts provided by the appellant regarding the construction activity in Bhopal.

3. The Tribunal discussed the requirement of appealing against the earlier rejection and the necessity of complying with the necessary criteria for registration. It clarified that if a taxpayer agrees with the CIT(E)'s findings and takes corrective actions to meet the requirements, filing a fresh application is permissible. The Tribunal highlighted that dismissing an application solely based on the previous rejection without considering the changed circumstances is contrary to the legal position.

4. The Tribunal emphasized the importance of complying with legal requirements for registration and self-corrective actions to meet the necessary criteria. It held that dismissing an application based on the same facts without considering the changed circumstances is not in line with the legal position. The Tribunal directed the appellant to provide full facts and necessary approvals for the construction activity of a hospital in Bhopal for reevaluation by the CIT(E).

5. The Tribunal highlighted the necessity of considering fresh applications after addressing shortcomings and ensuring compliance with legal requirements for registration. It emphasized the importance of verifying facts regarding the construction activity of a hospital and directed the CIT(E) to reevaluate the application based on all necessary evidence provided by the appellant.

6. The Tribunal allowed the appeal for statistical purposes, emphasizing the importance of complying with legal requirements and providing necessary documentation for reevaluation of the registration application. The order was pronounced on 4th January 2022, setting aside the previous rejection and directing the reevaluation of the application based on the full facts provided by the appellant regarding the construction activity of a hospital in Bhopal.

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