Team Colours Foundation Vadlamuru Vs ITO (Exemption) (ITAT Visakhapatnam)
Wrong Assumption of Section 12AB Cancellation Vitiates Assessment: ITAT Visakhapatnam Restores Trust’s Case for Limited Verification
The Visakhapatnam SMC Bench of the Income Tax Appellate Tribunal, Visakhapatnam Bench allowed the appeal of Team Colours Foundation for AY 2023-24 for statistical purposes and remanded the matter to the Assessing Officer for fresh consideration on a limited issue.
The Tribunal found that both the AO and the CIT(A) proceeded on an incorrect assumption that the Trust’s provisional registration u/s 12AB had been cancelled or withdrawn, whereas no such cancellation order existed on record. Despite the AO recording that no variation was proposed to the returned income, the computation sheet taxed the entire voluntary donations as income without allowing deduction of expenditure incurred for the Trust’s objects. The CIT(A) compounded the error by confirming the addition on the same mistaken premise and by treating the donations as taxable corpus.
Accepting the assessee’s contention, the ITAT held that the CIT(A)’s reasoning was prima facie erroneous, the case-law relied upon was inapplicable, and the assessment suffered from internal inconsistency. Accordingly, the Tribunal set aside the orders of the lower authorities and restored the matter to the AO, restricting the scope to verification of the validity of registration u/s 12AB (the sole reason for scrutiny). If the registration is found valid for the year, the AO was directed to allow exemption u/s 11 as per law.
FULL TEXT OF THE ORDER OF ITAT VISAKHAPATNAM
