TMI Blog2016 (8) TMI 1000X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee is a charitable trust. The assessee filed its return of income for the assessment year 2011-12 declaring loss of ₹ 5,42,718/-. The return of the assessee was processed u/s. 143(1) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) on 18-07-2013. At the time of filing of return of income, the assessee was not registered u/s. 12A of the Act. The assessee had filed an application for registration u/s. 12AA of the Act in the prescribed form on 16-01-2013. The Commissioner of Income Tax vide order dated 25-03-2014 granted registration to the assessee u/s. 12AA w.e.f. assessment year 2014-15. Notice u/s. 148 was issued to the assessee on 22-03-2013. The assessee was provided with reasons for issuing notice u/s. 148 for the assessment year 2011-12 vide letter dated 18-06-2013. The assessee filed objections against the issuing of notie u/s. 148, which were disposed off by the Assessing Officer on 23-08-2013. The Assessing Officer, thereafter, vide order dated 27-01-2014 passed order u/s. 143(3) r.w.s. 147 of the Act making addition of ₹ 40,92,239/- on account of disallowance of deduction u/s. 57 of the Act. Aggrieved by the assessment order, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o adverse findings with regard to existence of assessee society for charitable purposes, benefit of exemption u/s. 11 has to be given. 4.1 The ld. AR submitted that the Commissioner of Income Tax (Appeals) while dealing with the issue of reopening has erred in holding that the reassessment proceedings were valid. The ld. AR pointed out that the reasons recorded for reopening were factually incorrect. In the reasons recorded for issuing of notice u/s. 148 communicated to the assessee vide letter dated 18-06-2013, it is mentioned that during the year the assessee has received donations of ₹ 40,77,937/- and has claimed expenses of ₹ 39,21,244/-. Thus, there is a surplus of ₹ 1,56,693/-. In fact, the amount of ₹ 1,56,693/- is deficit and not surplus. The ld. AR referred to income and expenditure account for the year ending on 31-03-2011 at page 16 of the paper book. The ld. AR pointed that the income of the assessee from donations, bank interest and sale of Shenkhat (cow dung) is ₹ 40,77,937/-, against the expenditure of ₹ 42,34,630/-. The assessee has claimed income from sale of Shenkhat as agricultural income exempt from tax. Thus, the total inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... puted fact that at the time of filing of return of income and passing of order u/s. 143(1) the assessee was not registered u/s. 12A of the Act. The assessee made application for registration on 16-01-2013. The assessee was granted registration by the Commissioner of Income Tax on 25-03-2014 w.e.f. assessment year 2014-15. The notice u/s. 148 was issued to the assessee on 22-03-2013. The conditions for applicability of section 11 and 12 of the Act are contained in section 12A of the Act. The provisions of subsection (2) of section 12A of the Act were amended by the Finance (No. 2) Act, 2014. Proviso to sub-section (2) were inserted by amendment which reads as under : (2) Where an application has been made on or after the 1st day of June, 2007, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution from the assessment year immediately following the financial year in which such application is made. Provided that where registration has been granted to the trust or institution under section 12AA, then, the provisions of sections 11 and 12 shall apply in respect of any income derived from property held under trust of any assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t from 01.10.2014, the assessment orders passed by the assessing officer in respect of the present assessee were pending in appeal before the first appellate authority. During such pendency, the assessee was granted registration u/s 12AA of the Act on 29.07.2013 w.e.f. the assessment year 2013-14. Those appeals were the continuation of the original proceedings and that the power of the Commissioner of Income-tax was co-terminus with that of the assessing officer [ADIT (Exemption) in the present case] were two well established principles of law. In view of the above and going by the principle of purposive interpretation of statues, an assessment proceeding which is pending in appeal before the appellate authority should be deemed to be assessment proceedings pending before the assessing officer within the meaning of that term as envisaged under the proviso. It follows there-from that the assessee which obtained registration u/s 12AA of the Act during the pendency of appeal was entitled for exemption claimed u/s 11of the Act. 7.3. The explanatory Memorandum to Finance (No.2) Bill, 2014 which sought to amend section 12A explains the objects and reasons for making such amendmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SC). The Commissioner of Income Tax (Appeals) held : 11. This leaves the matter of computation of income which has been complicated by applying the provisions u/s. 57 of Income-tax Act. Voluntary contributions or Donations by their inherent nature do not fall the category of 'Income' unlike other income. These contributions have been deemed as income by virtue of Sec. 12(1) of Income-tax Act. Voluntary contributions received towards corpus of the trust are excluded u/s. 11(1)(a) from the scope of income u/s. 11(1) of Incometax Act. Therefore, even if exemption is not allowable in view of non registration u/s. 12AA of Income-tax Act, the income of the Trust is required to be computed not in accordance with the provisions of Act but in accordance with the provisions of Act but in accordance with the normal rule of accountancy, in a commercial sense without reference to the head of income specified in See. 14. This is a matter of settled law. The Hon'ble Supreme Court in CIT Vs. Programme for community organization, 248 ITR 1 (SC) had approved Kerala High Court s decision in the same case in 228 ITR 620 (Ker) as to the manner of computation stating that income has t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove fats, I have therefore, reasons to believe that the income chargeable to the tax for A.Y. 2011-12 has escaped assessment within the meaning of section 147 of the IT Act, 1961 to the extent of ₹ 6,99,411/-. 13. The ld. AR has further pointed that in the reasons recorded it has been wrongly mentioned that there is surplus of ₹ 1,56,693/-, whereas, it is a deficit. In support of his submissions the ld. AR has drawn our attention to the income and expenditure account for the year ended on 31-03-2011 at page 16 of the paper book. We find merit in the submissions of the ld. AR of the assessee. A further perusal of the assessment order shows that the addition has been made on account of disallowance u/s. 57 of the Act. The total expenditure claimed by the assessee is ₹ 42,34,630/- out of said expenditure the amount on establishment, miscellaneous and said expenses ₹ 1,42,393/- was allowed to the assessee u/s. 57(iii) by the Assessing Officer and the balance amount of ₹ 40,92,237/- was disallowed. Thus, the addition made by the Assessing Officer is incoherent to the reasons recorded for issuing notice u/s. 148 of the Act. 14. The Hon'ble Bomb ..... X X X X Extracts X X X X X X X X Extracts X X X X
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