Income addition deleted, expenses remanded for fresh consideration under sections 12AA & 40A(3).

The appeal was allowed for statistical purposes as the addition of income was deleted following the restoration of registration under section 12AA. The disallowance of expenses under section 40A(3) was remanded back to the AO for fresh consideration, providing the assessee with an opportunity to present its case and supporting documents.

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Issues:
Appeal against withdrawal of exemption u/s. 12AA, Addition of income, Disallowance of expenses under section 40A(3)

Withdrawal of Exemption u/s. 12AA:
The case involved an appeal against the withdrawal of exemption u/s. 12AA by the Ld. CIT, Dehradun, leading to the denial of benefits under section 11 of the I.T. Act. The AO observed discrepancies between the society's activities and its stated charitable objectives. The AO assessed the income at Rs. 6,34,440, which was confirmed by the Ld. CIT(A). The Ld. CIT(A) noted that the registration under section 12AA was withdrawn due to the society's commercial operations, leading to the taxation of surplus as business profits. However, the Tribunal's order dated 25.10.2016 in a related case highlighted that the registration under section 12AA was restored, indicating that the addition made was not sustainable. Consequently, the addition of Rs. 6,01,755 was deleted.

Addition of Income:
The AO had made an addition of Rs. 6,34,440 based on the withdrawal of exemption u/s. 12AA. The Ld. CIT(A) upheld this addition citing the withdrawal of registration and the society's commercial tour operations. However, the Tribunal's subsequent order restoring the registration under section 12AA led to the deletion of this addition, as the society became eligible for exemption u/s. 11 of the I.T. Act.

Disallowance of Expenses under Section 40A(3):
The Ld. CIT(A) confirmed the disallowance of expenses amounting to Rs. 32,685 under section 40A(3) as the assessee failed to provide any submissions or explanations regarding the infringement of the section. However, the ITAT directed the AO to re-examine this issue, allowing the assessee an opportunity to present its case and supporting documents. The AO was instructed to decide the matter afresh after considering the assessee's submissions.

In conclusion, the appeal was allowed for statistical purposes, with the addition of income being deleted due to the restoration of registration under section 12AA. The issue of disallowance of expenses under section 40A(3) was remanded back to the AO for fresh consideration.

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