Agricultural Market Committee, Nizamabad V. Income Tax Officer, Ward-2, Nizamabad

ITA 2059/Hyd/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9388 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 13-06-2019
• Assessment Year: 2005-2006
• Appeal Filed On: 22-10-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DINESH PADUCHURI
• Assessee Lawyers: S RAMA RAO
• Keywords: Charitable institution; Retrospective amendment; Condonation of delay
• Section: 143(3); 12A; 12AA; 205; 250; 147; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A , HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 2057 TO 2059 /HYD/201 8 ASSESSMENT YEAR S : 2004 - 05 TO 2005 - 06 AGRICULTURAL MARKET COMMITTEE, NIZAMABAD. PAN: AAALA 0689 F VS. INCOME TAX OFFICER, WARD - 2, NIZAMABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY: SRI S. RAMA RAO REVENUE BY: SHRI DINESH PADUCHURI, DR DATE OF HEARING: 13 /0 6 /2019 DATE OF PRONOUNCEMENT: /0 7 /2019 ORDER PER SMT. P. MADHAVI DEVI, J.M : ALL THESE THREE APPEALS ARE FILED BY THE ASSESSEE FOR THE ASSESSMENT YEARS 2004 - 05 AND 2005 - 06 AGAINST THE ORDERS OF THE CIT(A) - 5, HYDERABAD DATED 13/08/2018 RESPECTIVELY. SINCE THE ASSESSEE HAS RAISED IDENTICAL GROUNDS IN ALL THE THREE APPEALS, FOR THE S AKE OF ADJUDICATION, THE GROUNDS OF APPEAL RAISED FOR THE A.Y. 2004 - 05 ARE EXTRACTED AS UNDER: - 1) THE ORDER OF THE LD. CIT(A) IS ERRONEOUS BOTH ON FACTS AND IN LAW. 2) THE LD. CIT(A) ERRED IN REJECTING THE CLAIM FOR EXEMPTION U/S 11 OF THE IT ACT. 3) TH E LD. CIT(A) OUGHT TO HAVE CONSIDERED THE FACT THAT THE ASSESSMENT FOR THE A.Y. 2004 - 05 WAS COMPLETED ON 29/12/2009 AND WAS PENDING AS ON 01/04/2007 FROM WHICH DATE THE REGISTRATION U/S 12A WAS GRANTED. 2 4) THE LD. CIT(A) OUGHT TO HAVE SEEN THAT ACCORDING T O THE 1 ST PROVISO TO SUB - SECTION (2) OF SECTION 12A OF THE I.T. ACT, EXEMPTION U/S 11 IS AVAILABLE TO THE APPELLANT FOR THE ASSESSMENT YEAR 2004 - 05 AS THE ASSESSMENT FOR THE A.Y. 2004 - 05 WAS PENDING AS ON 01/04/2007 FROM WHICH DATE THE REGISTRATION U/S 12A WAS GRANTED. 2. IN ALL THESE APPEALS, THE GRIEVANCE OF ALL THE ASSESSEES IS THAT THE CIT(A) OUGHT TO HAVE CONSIDERED THE FACT THAT THE REGISTRATION U/S 12A WAS GRANTED W.E.F 01/4/2007 SINCE THE APPEALS AGAINST THE ASSESSMENTS COMPLETED U/S 143(3) WERE P ENDING AS ON 01/04/2007. AT THE TIME OF HEARING, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASES OF AGRICULTURAL MARKET COMMITTEE, BODHAN AND OTHERS IN ITA NOS. 394/HYD/2019 AND OTHERS AND SUBMITTED THAT THE DIT (E) HAS GRANTED REGISTRATION U/S 12A OF THE ACT TO THE ASSESSEE VIDE ORDER DATED 26 TH MAY, 2018 W.E.F. 01/04/2007 AND SINCE THE ASSESSMENTS WERE PENDING BEFORE THE ASSESSING OFFICER, THE PROVISO TO SECTION 12A OF THE ACT WAS APPLICABLE AND THE ASSESSEE SHOULD BE ALLOWED EXEMPTION U/S 11 OF THE ACT EVEN WITH REGARD TO THE ASSESSMENT YEARS PENDING BEFORE THE A.O. A COPY OF THE ORDER OF THE TRIBUNAL IS ALSO FILED BEFORE US. LEARNED DR WAS ALSO HEARD. 3. HAVI NG REGARD TO THE RIVAL CONTENTIONS AND ON PERUSAL OF THE MATERIAL ON RECORD, WE FIND THAT IN THE SIMILAR SET OF FACTS, THIS TRIBUNAL VIDE ORDER DATED 29 TH MAY, 2019 HAS HELD HAS UNDER: 3 3. UPON HEARING BOTH THE PARTIES, WE FIND THAT UNDER THE PROVISO TO S UB - SECTION (2) TO SECTION 12A OF THE ACT, THE PROVISIONS OF SECTION 11 & 12 SHALL APPLY EVEN IN RESPECT OF THE ASSESSMENT YEARS PRIOR TO THE YEAR IN WHICH THE REGISTRATION U/S 12A WAS GRANTED, PROVIDED THE ASSESSMENTS FOR THOSE YEARS ARE PENDING AS ON THE DATE OF REGISTRATION AND THE OBJECTS AND ACTIVITIES OF SUCH TRUST OR INSTITUTION REMAIN THE SAME FOR SUCH PRECEDING A.Y. THE SECOND PROVISO PROHIBITS ANY ACTION U/S 147 FOR ANY A.Y. PRECEDING THE A.Y. IN WHICH REGISTRATION IS GRANTED ONLY FOR NON - REGISTRA TION OF SUCH TRUST OR INSTITUTION FOR THE SAID AYS AND THE THIRD PROVISO STATES THAT THE FIRST AND SECOND PROVISOS SHALL NOT APPLY IN CASE OF ANY TRUST OR INSTITUTION WHICH HAS BEEN REFUSED REGISTRATION OR THE REGISTRATION GRANTED WAS CANCELLED AT ANY TIME U/S 12AA OF THE ACT. THE SMC BENCH OF ITAT AT AHMEDABAD HAS CONSIDERED THE EFFECT OF THESE PROVISOS IN THE CASE OF SHREE BHANUSHALI MITRA MANDAL TRUST VS. ITO [2016] 68 TAXMANN.COM 250 (AHMEDABAD - TRIB.) AND AT PARAS 7.2 TO 7.4 HAS HELD AS UNDER: 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 SUBSTANT IVE 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 G ENUINE 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 IS FURTHER STRENGTHENED BY THE EXPLANATORY NOTES TO FINANCE (NO.2) ACT, 2014 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES VIDE ITS CIRCULAR NO. 01/2015 DATED 21.1.2015. APPARENTLY THE STATUTE PROVIDES THAT RE GISTRATION ONCE GRANTED IN SUBSEQUENT YEAR, THE BENEFIT OF THE SAME HAS TO BE APPLIED IN THE EARLIER ASSESSMENT YEARS FOR WHICH ASSESSMENT PROCEEDINGS ARE PENDING BEFORE THE LD. A.O., UNLESS THE REGISTRATION GRANTED EARLIER IS CANCELLED OR REFUSED FOR SPEC IFIC REASONS. THE STATUTE ALSO GOES ON TO PROVIDE THAT NO ACTION U/S147 COULD BE TAKEN BY THE AO MERELY FOR NON - REGISTRATION OF TRUST FOR EARLIER YEARS. 7.3 IN THE INSTANT CASE, IT IS NOT IN DISPUTE THAT REGISTRATION WAS GRANTED W.E.F. 17.12.2013 BY THE O RDER OF CIT(A) DATED 08.05.2014. IT IS ALSO NOT IN DISPUTE THAT OBJECTS AND ACTIVITIES OF THE ASSESSEE TRUST ARE CHARITABLE IN NATURE DURING THE RELEVANT FINANCIAL YEAR. WHEN SECTION 12A OF THE ACT WAS AMENDED BY INTRODUCING NEW PROVISOS TO SUB - SECTION (2) OF SECTION 12A BY FINANCE ACT, 2014 WITH EFFECT 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 G RANTED REGISTRATION U/S. 12AA OF THE ACT ON 17.12.2013 W.E.F. THE ASSESSMENT YEAR 2013 - 14. THE APPEAL IS 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 WE RE 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 PROCEED INGS 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 4 REGISTRATION U/S 12AA OF THE ACT DURING THE PENDENCY OF APPEAL WAS ENTITLED FOR EXEMPTION CLAI MED U/S 11 OF THE ACT. 7.4 THE EXPLANATORY MEMORANDUM TO FINANCE (NO.2) BILL, 2014, WHICH SOUGHT TO AMEND SECTION 12A EXPLAINS THE OBJECTS AND REASONS FOR MAKING SUCH AMENDMENTS. THE EXPLANATION MAKES IT CLEAR THAT IT WAS IN ORDER TO PROVIDE RELIEF TO SUC H TRUSTS IN RESPECT OF WHICH, DUE TO ABSENCE OF REGISTRATION U/S 12AA TAX LIABILITY GOT ATTACHED THOUGH OTHERWISE THEY WERE ELIGIBLE FOR EXEMPTION BY FULFILLING OTHER SUBSTANTIVE CONDITIONS THAT THE AMENDMENT WAS BROUGHT IN. THAT BEING SO, DENYING SUCH BEN EFIT 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 T O 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 PROC EDURAL IN NATURE, IN MY VIEW, LIBERAL INTERPRETATION WILL GIVE EFFECT TO THE INTENTION OF THE AMENDMENT, THEREBY REMOVING THE HARDSHIP IN GENUINE CASES LIKE THE PRESENT ASSESSEE UNDER CONSIDERATION. 4. IN THE CASE OF HMDA, THE COORDINATE BENCH OF THIS TRI BUNAL, WHEREIN ONE OF US (JM) IS A SIGNATORY TO THE ORDER, CONSIDERED THE ABOVE DECISION AND HAS HELD THAT ONCE REGISTRATION IS GRANTED, PROVISO TO SECTION 12A(2) WAS APPLICABLE EVEN TO THE PENDING APPEALS FOR THE ASSESSMENT YEARS PRIOR TO REGISTRATION. F OR THE SAKE OF CONVENIENCE AND READY REFERENCE, THE RELEVANT PORTION OF THE TRIBUNALS ORDER IS REPRODUCED HEREUNDER: 13. HOWEVER, SINCE THIS ISSUE IS TO BE CONSIDERED IN THE ASSESSMENTS U/S 143(3) OF THE IT ACT, WE REFRAIN FROM GIVING ANY FINDING ON THIS ISSUE AT THIS STAGE. AS REGARDS THE ASSESSEES PRAYER TO GRANT REGISTRATION W.E.F. 01 - 04 - 2002 AS THE ASSESSMENTS FOR THE RELEVANT ASSESSMENT YEARS WERE PENDING AS ON THE DATE OF REGISTRATION IS CONCERNED, WE FIND THAT THE ASSESSEE HAS PLACED RELIANCE UPO N THE DECISION OF THE SINGLE MEMBER CASE SMC AT AHMADABAD IN THE CASE OF SHRI BHANUSHALI MITRAMANDALI TRUST VS ITO REPORTED IN (2016) 68 TAXMAN.COM 205 AHMADABAD TRIBUNAL WHEREIN IT WAS HELD THAT WHERE THE REGISTRATION IS GRANTED IN THE SUBSEQUENT YEAR, THE BENEFIT OF THE SAME HAS TO BE APPLIED IN THE EARLIER ASSESSMENT YEARS ALSO UNDER THE FIRST PROVISO TO SEC. 12A(2) OF THE ACT, AND THAT SUCH PROVISO IS APPLICABLE EVEN TO APPEALS PENDING BEFORE THE CIT(E). 14. THE LD. COUNSEL FOR THE ASSESSEE HAD SUBMITTED THAT THE APPLICATION U/S 12A OF THE IT ACT WAS INITIALLY REJECTED BY THE CIT(E) AND THE ISSUE WAS RESTORED TO THE FILE OF THE CIT(A) BY THE ITAT, AND THEREFORE, THE EARLIER ORDER OF THE CIT(E) GOT NULLIFIED AN D THE ASSESSEES APPLICATION FOR REGISTRATION GOT RESTORED AND HAS TO BE CONSIDERED AS PENDING FOR CONSIDERATION BY THE CIT(E). HE SUBMITTED THAT AT THE TIME WHEN THE CIT(E) WAS CONSIDERING THE ASSESSEES APPLICATION AFRESH, THE ASSESSEE HAD FILED A LETTE R SEEKING REGISTRATION W.E.F. 01 - 04 - 2002 AND THEREFORE THE ISSUE WAS VERY MUCH BEFORE THE CIT(E) WHILE GRANTING REGISTRATION W.E.F. A.Y 2007 - 08. HE SUBMITTED THAT AS PER THE FIRST PROVISO OF 12A(2) OF THE IT ACT, THE REGISTRATION GRANTED IN THE SUBSEQUENT YEAR SHALL BE APPLIED TO THE EARLIER ASSESSMENT YEARS ALSO, WHEREVER THE ASSESSMENT PROCEEDINGS ARE PENDING BEFORE THE A.O. HE SUBMITTED THAT THE ASSESSMENTS IN THE 5 CASE OF THE ASSESSEE FOR ALL THE ASSESSMENT YEARS FROM 2003 - 04 ON WARDS WERE PENDING BEFO RE THE A.O AND HENCE THE PROVISO WAS APPLICABLE AND ASSESSEE SHOULD BE GRANTED REGISTRATION W.E.F 01 - 04 - 2002. 15. THE LD. SR. STANDING COUNSEL FOR THE DEPARTMENT, ON THE OTHER HAND, SUBMITTED THAT ASSESSEES APPLICATION WAS ALREADY REJECTED BY THE CIT(E) AND IN THE EARLIER APPLICATION THE ASSESSEE HAD NEVER CLAIMED THE EXEMPTION W.E.F 01 - 04 - 2002 NOR HAS IT FILED ANY APPLICATION FOR CONDONATION OF DELAY GIVING REASONS AS TO WHY THE APPLICATION COULD NOT BE FILED EARLIER. 16. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT BY VIRTUE OF REMAND TO THE CIT(E) FOR RE - CONSIDERATION OF THE ASSESSEES APPLICATION FOR REGISTRATION U/S 12A OF THE IT ACT, THE ASSESSEES APPLICATION HAS BEEN REVIVED. AS ON THE DATE WHEN THE CIT(E) WAS CONSIDERING THE APPLICATION FOR REGISTRATION PURSUANT TO THE REMAND BY THE ITAT, THE PROVISO TO SEC. 12A(2) OF THE IT ACT HAS COME INTO THE STATUTE BOOK AND THEREFORE IT IS VERY MUCH APPLICABLE TO ALL THE PENDING ASSESSMENTS BEFORE THE A.O. THE SMC BE NCH OF THIS TRIBUNAL AT AHMADABAD, IN THE CASE OF SHRI BHANUSHALI MITRAMANDALI TRUST VS ITO (CITED SUPRA) HAS ALSO HELD SO. PARTICULARLY IN THE CASE OF HAND, WE FIND THAT THERE IS NO CHANGE IN THE OBJECTS OF THE ASSESSEE FROM THE EARLIER AND IN THE SUBSEQ UENT ASSESSMENT YEARS AND THERE IS NO FINDING THAT THE ASSESSEE HAS CARRIED ON ANY ACTIVITY NOT IN ACCORDANCE WITH ITS OBJECTIVES. IN VIEW OF THE SAME, WE ARE OF THE OPINION THAT THE ASSESSEE IS ELIGIBLE FOR REGISTRATION U/S 12A OF THE IT ACT W.E.F 01 - 04 - 2002 AND ACCORDINGLY, WE DIRECT THE CIT(E) TO MODIFY THE ORDER OF REGISTRATION U/S 12AA OF THE ACT W.E.F. 01 - 04 - 2002 I.E FROM A.Y 2003 - 04 ONWARDS. IN THE RESULT THE ASSESSEE APPEAL IN ITA NO. 03/HYD/2017 IS ALLOWED. 5. FOLLOWING THE ABOVE DECISION, WE SE T - ASIDE THE ASSESSMENTS AND REMAND THE SAME TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO ALLOW THE ASSESSEES CLAIM OF EXEMPTION U/S 11 OF THE ACT EVEN FOR THE ASSESSMENT YEARS PRIOR TO THE DATE OF REGISTRATION WHERE THE ASSESSMENTS WERE PENDING OR WERE REOPENED SUBSEQUENTLY U/S 147 OF THE ACT, PROVIDED, THE ASSESSEE SATISFIED THE OTHER CONDITIONS OF SECTION 11, PARTICULARLY, SINCE THE APPLICATION FOR GRANT OF REGISTRATION W.E.F 01/04/2012 IS STILL PENDING BEFORE THE DIT (E). THEREFORE, ALL THE APPEALS OF THE RESPECTIVE ASSESSEES ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 4 . IN THE RESULT, ALL THE APPEALS FILED BY THE ASSESSEE S ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 03 RD JULY , 2019. SD/ - SD/ - (S. RIFAUR RAHMAN) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 03/07/ 2019 OKK 6 COPY TO: - 1) AGRICULTURAL MARKET COMMITTEE, 2 - 103, PITLAM, DISTRICT: NIZAMABAD. 2) INCOME TAX OFFICER, WARD - 2, SUBHASH NAGAR, NIZAMABAD. 3) THE CIT(A) - 5 , HYDERABAD 4) THE PR. CIT - 5 , HYDERABAD 5) THE DR, ITAT, HYDERABAD 6) GUARD FILE