South Asian Fraternity’s Appeal Against Rejection of 12AA Registration by CIT(Exemption), New Delhi

Income Tax Appellate Tribunal Delhi Bench ‘G’ Reviews South Asian Fraternity’s Appeal Against Rejection of 12AA Registration

In the case of ITA No. 6573/DEL/2019, the appellant, South Asian Fraternity, New Delhi, contested the rejection of their application for registration under Section 12AA of the Income Tax Act, 1961, by the Commissioner of Income Tax (Exemption), New Delhi. The order was passed on 15.05.2019, and the case was heard and decided by the Income Tax Appellate Tribunal (ITAT), Delhi Bench ‘G’, on 14.06.2023.

Background of the Case

South Asian Fraternity, a New Delhi-based organization, applied for registration under Section 12AA of the Income Tax Act, 1961. This registration is crucial for entities that seek to operate as charitable organizations and benefit from income tax exemptions. Alongside the 12AA registration, the organization also sought approval under Section 80G, which allows donors to claim tax deductions on donations made to the entity.

The application was submitted to the CIT(Exemption), New Delhi. However, the CIT(E) rejected the application, leading to the subsequent appeal by South Asian Fraternity.

Grounds for Appeal

The appellant raised several grounds in their appeal, challenging the CIT(E)’s decision. The key points of contention were:

1. The order passed by the CIT(E) was deemed to be legally flawed and factually incorrect.
2. The CIT(E) allegedly rejected the application for registration under Section 12AA despite the appellant providing all required details.
3. The appellant reserved the right to add, alter, or amend the grounds of appeal during the hearing process.

Arguments Presented

During the hearing, the appellant’s representative argued that a letter dated 07.05.2019, which requested additional details to be submitted by 13.05.2019, was never received by the organization. They further contended that all necessary information, including an affidavit, financial statements, and the Memorandum of Association, had been submitted to the CIT(E) through a letter dated 04.01.2019.

The respondent, represented by the Senior Departmental Representative (DR), supported the CIT(E)’s decision but could not adequately justify the failure to discuss or acknowledge the evidence already on record.

Tribunal’s Findings

The ITAT, after reviewing the submissions and evidence, found that the CIT(E) had erred by not discussing the evidence provided by the appellant. The Tribunal noted that the CIT(E) failed to specify what additional information was required or how the lack of this information justified the rejection of the application.

The Tribunal emphasized that the CIT(E)’s order could not be sustained because it did not provide a clear rationale for the rejection, especially in light of the evidence that had been submitted. The ITAT criticized the CIT(E) for not adequately considering the affidavit, financials, and Memorandum of Association that were part of the submission.

Conclusion and Order

The ITAT concluded that the grounds raised by the appellant were valid and allowed the appeal for statistical purposes. The case was remanded back to the CIT(E) for a fresh review of the application. The Tribunal directed the CIT(E) to reassess the matter based on the evidence already submitted and any additional information that may be required. The CIT(E) was also given the liberty to conduct further inquiries if necessary.

The Tribunal’s decision underscores the importance of a thorough and reasoned review process by tax authorities, particularly when dealing with applications for charitable status under Section 12AA. The failure to adequately consider submitted evidence can lead to unnecessary litigation and delay in the approval process.

This case serves as a reminder to both tax authorities and applicants of the need for clear communication and meticulous documentation in the application process for tax exemptions and approvals.

Order pronounced in the open court on 14.06.2023.

Sd/-
(ANIL CHATURVEDI)
ACCOUNTANT MEMBER

Sd/-
(ANUBHAV SHARMA)
JUDICIAL MEMBER

Date: 14.06.2023

South Asian Fraternity’s Appeal Against Rejection of 12AA Registration by CIT(Exemption), New Delhi