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2022 (10) TMI 1108 - AT - Income TaxExemption u/s 11 - CIT cancelled the registration issued to the assessee u/s 12A - AO disallowed exemption as assessee has received substantial amount as donation which in turn are transferred to the three parties and the redonation was compulsion to the assessee as per the terms and conditions of getting donations from the donors - HELD THAT - We find the CIT(A) upheld the action of the Assessing Officer. It is the submission of assessee that since the Tribunal has restored the registration u/s 12A which was cancelled by the PCIT and since the PCIT has passed consequential order by granting registration u/s 12A, therefore, the denial of exemption u/s 11 is not justified. AO in the instant case denied exemption u/s 11 for the impugned A.Y and following this order he also rejected the claim of benefit u/s 11 for the A.Y 2016-17. After the orders passed by the AO for the A.Ys 2015-16 and 2016-17, the Pr.CIT cancelled the registration issued to the assessee u/s 12A. We find on appeal by the assessee, the Tribunal 2021 (9) TMI 1435 - ITAT HYDERABAD restored the registration u/s 12AA of the I.T. Act and the CIT has given the appeal effect and has granted registration u/s 12AA of the I.T. Act. Under these circumstances, we deem it proper to restore the issue to the file of the Assessing Officer with a direction to grant one more opportunity to the assessee to substantiate his case and decide the issue as per fact and law. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.
Issues Involved:
1. Validity of the cancellation of registration under section 12AA of the Income Tax Act. 2. Eligibility for exemption under section 11 of the Income Tax Act. 3. Allegations of money laundering and adherence to the aims and objectives of the assessee society. Issue-wise Detailed Analysis: 1. Validity of the Cancellation of Registration under Section 12AA: The assessee, a charitable society engaged in scientific research and registered under section 12A of the Income Tax Act, had its registration canceled by the Principal Commissioner of Income Tax (PCIT). The Tribunal (ITAT) had previously restored this registration, as indicated in ITA No.361/Hyd/2019 dated 07.09.2021. The CIT (Exemption) subsequently granted the registration under section 12AA on 08.06.2022. The Tribunal noted that since the registration was restored, the denial of exemption under section 11 for the assessment years under consideration (2015-16 and 2016-17) was not justified. The issue was remanded back to the Assessing Officer for fresh adjudication, considering the restored registration. 2. Eligibility for Exemption under Section 11: The assessee declared a total income of 'Nil' for the assessment years 2015-16 and 2016-17. During the assessment proceedings, the Assessing Officer observed that the assessee received substantial donations, a significant portion of which was transferred to three other parties. The Assessing Officer disallowed the exemption under section 11, arguing that the donations were re-donated under compulsion and that the assessee did not benefit from the research work purportedly carried out by these parties. The CIT (A) upheld this view, stating that the expenditure on project sponsorship was not meant for achieving the assessee's aims and objects. However, the Tribunal directed the Assessing Officer to re-examine the issue, especially in light of the restored registration under section 12AA, and provide the assessee with another opportunity to substantiate its claims. 3. Allegations of Money Laundering and Adherence to Aims and Objectives: The Assessing Officer accused the assessee of money laundering, claiming that the funds were transferred to three parties as per the donors' conditions, which included retaining a portion of the donations and transferring the rest. The Assessing Officer argued that this arrangement was a form of money laundering, as the assessee acted as an intermediary without conducting any research work. The CIT (A) supported this view, stating that the assessee's activities did not align with its stated aims and objectives, and thus, the denial of exemption was justified. However, the Tribunal, considering the restored registration and the need for a thorough re-evaluation, remanded the matter back to the Assessing Officer for fresh adjudication, allowing the assessee to present additional evidence to support its case. Conclusion: The Tribunal restored the issues to the file of the Assessing Officer for fresh adjudication, taking into account the restored registration under section 12AA and giving the assessee another opportunity to substantiate its claims regarding the eligibility for exemption under section 11 and adherence to its aims and objectives. The appeals for both assessment years (2015-16 and 2016-17) were allowed for statistical purposes.
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