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TMI Blog2024 (9) TMI 279X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings for Assessment Year 2018-19 and the object & activities of the appellant remained same as compared to the year of registration and therefore, the appellant was eligible for benefit of section 11 and 12 as per section 12A of the Income- tax Act, 1961 for Assessment Year 2018-19 also. That on the facts and in the circumstances of the case and in law, the Ld CIT(A) erred confirming the action of the Ld Assessing Officer in denying the benefit of exemption under section 11 and 12 of the income-tax Act, 1961 and assessing the total income of the appellant at Rs. 7,56,19,050/- by stating that the appellant has not claimed exemption under section 11 and 12 of the Act by way of filing of revised income-tax return even when the appellant had duly longed additional claim to allow exemption under section 11 and 12 of the Act as eligible to the appellant during the course of assessment proceedings itself. 3. That on the facts and in the circumstances of the case and in law, the Ld CIT(A) erred confirming the action of the Ld Assessing Officer in denying the benefit of exemption under section 11 and 12 of the income-tax Act, 1961 and assessing the total income of the appellant a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.2021 made a claim of exemption u/s 11 & 12 of the Act. Ld. AR has referred to the proviso to section 12A(2) of the Act and submitted that the provisions of section 11 & 12 shall apply in respect of the income derived from the property held under the trust of any assessment year preceding the assessment year for which the registration u/s 12A has been granted and the assessment proceeding of the preceding assessment year is pending before the AO as on the date of such registration subject to the conditions that objects and activities of such trust or institution remain the same. Thus, Ld. AR has submitted that when the registration u/s 12A was granted to the assessee during the pending of the assessment year under consideration then the claim of exemption u/s 11 & 12 cannot be denied by the AO on the ground of non-filing of revised return of income. Ld. AR has thus submitted that the assessee reiterated its claim of exemption u/s 11 & 12 before the CIT(A) but it was not accepted even by the CIT(A) which has no embargo for entertaining the claim not made in the return of income. Thus, Ld. AR has submitted that in view of second proviso of 12A(2) of the Act the assessee is entitled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mistake incurred in filing income tax return, Society members relied on professional assuming he will correctly file societies income tax return. Mistake in filing the return was unintentional and not on part of the society but consultant who on wrong assumption thought society being education institute income is exempt from tax under provisions of sections 10(23C) without appreciating that gross receipt of the society is more than 1 cr. Society is now filing before you revised computation of income, Audit Report in form 10B and proof of Tax and Interest paid with request to accept this revised computation in assessment proceedings. Society is engaged in education activities which are covered u/s 2(15) of Income Tax Act. It is registered under section 12AA and entitled to claim deduction/exemption under section 11. Society request that since they have paid tax along with interest no penalty be levied on them as society is running education institute which are already suffering from financial stress due to covid 19 pandemic/Society prays that lenient view be taken in the case having regard to the fact and circumstance of the case and voluntary tax payment made by the society." In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) to allow the claim of exemption u/s 11 & 12 of the Act if the assessee satisfies the conditions provided u/s 12A(2) read with proviso to the said section. The twin conditions as provided in the proviso to section 12A(2) are that the assessment proceedings are pending at the time of granting registration u/s 12AA of the Act and second that the activities and objects of the assessee remains unchanged for the year under consideration as well as time of granting registration u/s 12A/12AA of the Act. The CIT(Exemption) while granting registration u/s 12AA has duly considered this fact of activities and objects of the assessee are not changed since its inception and a certificate to this effect was submitted by the assessee before the CIT(E) placed at page no.70 of the paper book as under: "Declaration I Jawed Akhtar, secretary of Akshay Academy, hereby declare that there is no change in the objects and activities of society as mentioned in the bye -laws of the society since its inception." 5.3 Even the AO has not disputed or raised any doubt about the activities and objects of the assessee remained same without any change during this period. Hence, as contemplated by the first pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also observe that the provisions of section 11/12 grant exemption to the assessee and such exemption, if not allowed, would result in illegal collection of tax from the assessee, which is never an objective of the Income-tax Act, 1961. In view of this position of law, we do not find any difficulty in accepting the alternative claim of assessee to allow exemption u/s 11/12. However, the claim of exemption u/s 11/12 involves a different type of working based on application and accumulation of income. Therefore, we feel that it would be more appropriate to refer this matter back to Ld. AO who shall give an opportunity to the assessee to provide the necessary information for computation of exemption u/s 11/12. Based on such information, the Ld. AO shall allow the exemption as admissible u/s 11/12 to the assessee." 5.4 A similar view has been taken by this Tribunal in case of Madhya Pradesh Council for Vocational Eeducation & Training vs. CIT(E) (supra) in para 9 to 11 as under: "9. The assessee claims that it is entitled to benefit of exemption on the basis of 1st Proviso to section 12A(2). For ready reference, the provision of section 12A(2) as existing at the relevant time, is re- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling identical controversy in M/s. Barkatullah Vishwavidyalaya, Bhopal Vs. PCIT, ITA No.924/Ind/2018, order dated 30.06.2022, relevant paras are reproduced below: "8. Ld. AR, thereafter, made an alternative claim that the assessee has also received registration u/s 12A(1)(aa) read with section 12AA from AY 2019-20 onwards vide Order No. ITBA/EXM/S/12AA/2019-20/ 1016373495(1) dated 17.06.2019 issued by CIT(Exemption), Bhopal. Ld. AR invited our attention to the copy of registration-order. Ld. AR then referred to the section 12A(2) which reads as under: "12A(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 assessment year preceding the aforesaid assessment year, for which assessment proceedings are pending before the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or institution which was refused registration or the registration granted to it was cancelled at any time under section 12AA.]" 7.2 It is also relevant to reproduce the explanatory notes to the provisions of Finance (No.2) Act, 2014 as given in CBDT Circular No.01/2015 dated 21.01.2015 in reference F.No.142/13/2014-TPL, which read as follows: "Para 8.2 Non-application of registration for the period prior to the year of registration caused genuine hardship to charitable organizations. Due to absence of registration, tax liability is fastened even though they may otherwise be eligible for exemption and fulfill other substantive conditions. However, the power of condonation of delay in seeking registration was not available." This clearly goes to prove that the first proviso to section 12A(2) was brought in the statute only as a retrospective effect with a view not to affect genuine charitable trusts and societies carrying on genuine charitable objects in the earlier years and substantive conditions stipulated in section 11 to 13 have been duly fulfilled by the said trust. The benefit of retrospective application alone could be the intention of the legislature and this point i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey were eligible for exemption by fulfilling other substantive conditions that the amendment was brought in. That being so, denying such benefit to a trust like the assessee who had obtained registration u/s 12AA during the pendency of the appeals filed against the orders of the assessing authority, by narrowly interpreting the term, 'pending before the assessing officer' so as to exclude its pendency before the appellate authority, will be doing violence to the provisions of the Statute and, as such, liable to be interfered with. Moreover, under the Scheme of the Act, sections 11 and 12 are substantive provisions which provide for exemptions to a religious or charitable trust. Sections 12A and 12AA detail the procedural requirements for making an application to claim exemptions under sections 11 and 12 by the assessee and the grant or rejection of such application by the commissioner. Thus, in my view, sections 12A and 12AA are only procedural in nature. Hence, it is not the registration u/s 12AA by itself that offers immunity from taxation. A receipt whether it is revenue or capital in nature is to be decided at the assessment stage. Being procedural in nature, in my vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overnment grant is just 3.50% and therefore the assessee is very far from the entitlement of section 10(23C)(iiiab). Accordingly, Ld. DR requested to uphold the disallowance made by lower authorities. However, the Ld. DR did not make any opposition to the alternative claim of exemption u/s 11/12 made by Ld. AR. 10. We have considered rival submissions of both sides, perused the records, considered the provisions of law and judicial precedents. We would first deal with the claim of exemption u/s 10(23C)(iiiab). XXX (not reproduced being ir-relevant in present appeal). 11. Now we proceed to examine the alternative claim of exemption u/s 11/12 demanded by the assessee. On perusal of the Proviso to section 12A(2) and the decision of Hon'ble Co-ordinate Bench of ITAT, Ahmedabad in Shri Bhanushali Mitra Mandal Trust (supra), we agree to the proposition that the assessee is entitled to the benefit of exemption u/s 11/12 for the assessment-year 2014-15 under consideration as the requirements prescribed in the Proviso stand satisfied, viz. (i) the revenue had already granted registration u/s 12AA from assessment-year 2019-20, (ii) the assessment-year under consideration is 2014-15 whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee should remain same for preceding assessment year i.e. AY 2016-17 and 2017-18 in these cases. Ld. AR submitted that the assessee is a Govt. owned society and its object and activities remained same year after year. We prima facie find merit in the submission of Ld. AR but still the AO should get an opportunity to verify this condition (iii). Moreover, the claim of exemption u/s 11/12 involves a different type of working based on application and accumulation of income which the AO has not verified till now because he did not grant exemption for want of registration u/s 12A. For these reasons, we feel it most appropriate to remand these matters back to the file of AO for carrying out verification of fulfillment of condition (iii) discussed above and if that is held to be satisfied, to verify and allow exemption u/s 11/12. Needless to mention that the AO shall give necessary opportunities to assessee and pass order in accordance with law without being influenced by his previous order. Ordered accordingly. 5.5 Accordingly in the facts and circumstances of the case as discussed above and following the earlier decisions of this Tribunal we hold that the assessee is entitled for ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot take away appellate remedy. To fortify this submission, Ld. AR relied upon Para 5.6 of the judgement of Hon'ble Gujrat High Court in Indian Panel Board Manufacturer Vs. DCIT Tax Appeal No. 655 of 2022 dated 21.03.2023 where it has been held thus: "5.6 The tribunal further committed an error in appreciating the import of Section 119 2(b) of the Act inasmuch as the application contemplated thereunder is only additional remedy for the assessee which could not be said to be compulsorily resorted to, by the assessee. The circular No. 7/18 dated 20.12.2018 issued u/s 119 of the Act could not be, therefore, said to have taken away the appellate remedy." 8. We have heard rival contentions of both sides and examined the present controversy in the light of judicial decisions. In view of settled judicial rulings noted in foregoing paragraphs, we find that the assessee can't be denied the benefit of exemption u/s 11/12 as claimed in return of income for mere delay in filing of audit-report (Form No. 10B), when the assessee has in fact filed such report though after filing of return. We, therefore, deem it fit to remand this matter back to the file of AO for a fresh assessment after ..... X X X X Extracts X X X X X X X X Extracts X X X X
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