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2022 (11) TMI 627 - HC - Income TaxExemption u/s 11 - application of income - genuineness of the conduct of the charitable activity u/s 2(15) r.w.s 12AA - absence of formal recognition of the school by the competent authority - ITAT allowed the claim of assessee - HELD THAT - There is no dispute raised in the appeal to the finding of ITAT that the Assessee is in fact running the Rainbow Kids Valley School. Further, the Respondent confirmed on written instructions that no scrutiny assessment was made in the case of the Respondent, Assessee, for Assessment Year (AY) 2017-18 which is relevant for FY 2016-17 when the cash deposits were made in the bank account of the Respondent, Assessee. There is, therefore, no adverse finding of the AO against the Assessee with respect to the said cash deposits. The scope of the application was to examine the genuineness of the objects of the society and to ascertain if the said objects are charitable or not. Learned senior standing counsel for Revenue, has failed to show any infirmity in the findings of the ITAT which hold that the objects of the Assessee are charitable.
Issues:
Challenge to order of Income Tax Appellate Tribunal (ITAT) directing registration of Assessee Society under Section 12AA of the Income Tax Act, 1961 based on doubts regarding genuineness of activities and lack of formal recognition of school by Department of Education, Government of NCT of Delhi. Analysis: 1. Challenge to ITAT Order: The appeal was filed to challenge the ITAT order directing the Commissioner of Income Tax (Exemptions) to register the Assessee Society under Section 12AA of the Income Tax Act, 1961. The senior standing counsel for Revenue argued that the ITAT erred in directing registration due to doubts about the genuineness of the society's activities. He highlighted cash deposits in the society's bank account and lack of formal recognition for the school by the Department of Education, Government of NCT of Delhi. 2. Observations by ITAT: The ITAT noted that the society was engaged in imparting education through Rainbow Kids Valley School. The CIT(E) rejected the registration application under Section 12AA based on concerns about cash deposits and lack of formal school recognition. However, the ITAT held that the CIT(E) should not examine the application of income at the registration stage, which is the Assessing Officer's responsibility during annual assessments. 3. Legal Principles Applied by ITAT: The ITAT relied on legal precedents to support its decision, emphasizing that the registration process under Section 12AA does not involve scrutinizing the income application. The ITAT found the society's objectives charitable, as they aimed to provide education to underprivileged children. The ITAT's decision was based on the charitable nature of the society's activities and the absence of evidence questioning the genuineness of its charitable objectives. 4. Confirmation of School Operation: It was confirmed that the Assessee was running Rainbow Kids Valley School, and no adverse findings were made by the Assessing Officer regarding the cash deposits. The focus of the registration application was on verifying the charitable nature of the society's objectives, which the ITAT found to be valid. The senior standing counsel for Revenue failed to identify any flaws in the ITAT's findings regarding the charitable nature of the society's activities. 5. Dismissal of Appeal: After reviewing the facts and legal arguments, the High Court concluded that the ITAT's assessment was accurate, and no substantial legal question arose from the case. Therefore, the appeal was dismissed as lacking merit, affirming the ITAT's decision to grant registration under Section 12AA to the Assessee Society. In summary, the High Court upheld the ITAT's decision to grant registration under Section 12AA to the Assessee Society, rejecting the appeal challenging the registration based on doubts about the genuineness of activities and lack of formal school recognition. The Court found no substantial legal issues and dismissed the appeal accordingly.
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