Overruling the decision of the Commissioner of Income Tax (Exemptions), the Delhi bench of the Income Tax Appellate Tribunal (ITAT) held that the officer cannot reject the plea for registration under section 12AA of the Income Tax Act, 1961 merely on suspicion that the cash from undisclosed sources is being introduced in the society in the form of school fees. Such suspicion without verification, can’t be a reason to deny registration, the Tribunal said.
The assessee society is running a school and that society is also having recognition from the Department of Education, Government of Haryana. The CIT (E) refused the registration under section 12AA of the Act on grounds of suspicion that cash from undisclosed sources is being introduced in the society in the form of school fees. It has been observed by the Ld. CIT (E) that the school was being run from premises that consisted of one hall and eight rooms only and was actually situated in a Gali. The Ld. CIT (Exemptions) has observed that it was unbelievable that receipts to the tune of nearly Rs. 1 crore are generated from such small premises.
The assessee contended before the Tribunal that the Ld. CIT (E) has not doubted that the assessee was running a school but has also concluded that the activities of the assessee were not genuine which was, thus, contradictory.
Accepting the contentions of the assessee, the Tribunal held that“apparently the LdCIT (Exemptions) was having doubts regarding the genuineness of the activities but instead of having the same verified, he chose to straightway refuse the grant of registration. This, in our considered opinion, was not correct. If the Ld. CIT (Exemptions) was having any kind of doubts, he should have got the same verified. We feel that the issue needs a relook and reconsideration by the Ld. CIT (Exemptions) and, therefore, we deem it fit to restore the issue to the file of the Ld. CIT (Exemptions) for reconsidering the assessee’s application and, thereafter, for passing appropriate orders after getting the facts verified and after giving adequate opportunity to the assessee in this regard.”