2022 (6) TMI 515 - AT - Income Tax

Tribunal overturns Commissioner's decision, grants 80G exemption to assessee with 12AA registration.

The Tribunal allowed the appeal, overturning the Commissioner's decision to deny exemption under section 80G of the Income Tax Act. The Tribunal held that ... Approval under section 80G - registration under section 12AA - genuineness of activities - rejection of 80G after 12AA registration granted - reliance on inspection reports and surplus for denial of exemptionApproval under section 80G - registration under section 12AA - rejection of 80G after 12AA registration granted - reliance on inspection reports and surplus for denial of exemption - Validity of denial of approval under section 80G to the society which holds continuing registration under section 12AA - HELD THAT: - The Tribunal examined whether the Commissioner of Income Tax (Exemption) was justified in rejecting the assessee's application for approval under section 80G despite the assessee having been granted registration under section 12AA which continued and had not been cancelled. The Tribunal followed the reasoning of a co-ordinate Bench which held that when registration under section 12AA has been granted after examination of genuineness of activities and remains in force, it is not proper for the Commissioner to refuse approval under section 80G by re-assessing genuineness. The Tribunal found that the adverse observations relied upon by the ld. CIT(E) - absence of a signboard, non-production of audited account for one year at the time of inspection, and existence of surplus from fees - were not sufficient legal grounds to deny 80G approval where 12AA registration exists and there were no adverse findings in assessment proceedings. Applying that principle, the Tribunal set aside the order of the ld. CIT(E) and directed grant of approval under section 80G to the assessee. [Paras 13, 14]Order of ld. CIT(E) denying approval under section 80G is set aside and ld. CIT(E) is directed to grant approval; appeal allowed.Final Conclusion: The Tribunal allowed the appeal, set aside the CIT(E)'s order denying section 80G approval, and directed the Commissioner to grant approval to the assessee in view of its continuing section 12AA registration and absence of adverse findings warranting denial. Issues:1. Denial of exemption under section 80G of the Income Tax Act, 1961 by the Commissioner of Income Tax (Exemption), Bhopal.Analysis:The appeal was filed by the assessee challenging the order of the Commissioner of Income Tax (Exemption) denying approval under section 80G of the Income Tax Act for the assessment year 2018-19. The Commissioner observed deficiencies in the application, including the lack of justification for seeking exemption under section 80G, the surplus income generated by the Society, and discrepancies found during spot verification. The Income Tax Inspector noted discrepancies such as the absence of a signboard at the society's office and the Director's inability to produce the audited report. The Commissioner, based on these findings, denied approval under section 80G.During the appeal, the assessee argued that they already had approval under section 12AA of the Income Tax Act and fulfilled all requirements. The absence of a signboard and surplus income should not be grounds for denial under section 80G. The assessee also cited a decision of the Punjab and Haryana High Court emphasizing that having a surplus should not be a reason to deny registration under section 80G. Additionally, a Co-ordinate Bench decision highlighted that once registration under section 12AA is granted and not revoked, it is improper to reject the application for section 80G benefits. The Co-ordinate Bench directed the Commissioner to grant approval under section 80G.Considering the arguments and precedents cited, the Tribunal held that the assessee was eligible for approval under section 80G since they had a valid 12AA registration and no adverse observations were made in previous assessments. The Tribunal followed the Co-ordinate Bench decision and directed the Commissioner to grant approval under section 80G. As a result, the appeal of the assessee was allowed, overturning the Commissioner's decision to deny exemption under section 80G of the Income Tax Act, 1961.