M/s Genius Education Society, Mandi V. ACIT, C-2, (E), Chandigarh

ITA 238/CHANDI/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2657 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 22-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURINDER MEENA
• Assessee Lawyers: AJAY JAIN CA B M MONGA
• Keywords: Rectification of order; Benefit of exemption; Reassessment proceedings
• Section: 12A; 12AA; 10B; 147; 148; 12; 154; 11; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH A, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.238/CHD/2018 (ASSESSMENT YEAR : 2012-13) M/S GENIUS EDUCATION SOCIETY, VS. THE A.C.I.T., TANDA BALT, SADAR, MANDI, CIRCLE-2(EXEMPTIONS), HIMACHAL PRADESH. CHANDIGARH. PAN: AAAJG1473H (APPELLANT) (RESPONDENT) APPELLANT BY : S/SHRI AJAY JAIN, CA B.M. MONGA, ADV. RESPONDENT BY : SHRI SURINDER MEENA, JCIT DATE OF HEARING : 24.05.2018 DATE OF PRONOUNCEMENT : 20.08.2018 ORDER PER ANNAPURNA GUPTA, A.M . : THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS) (HEREINAFTER REFERRED TO AS LD.CIT(A)), PALAMPUR DATED 30.11.2017 RELATING TO ASSESSMENT YEAR 2012-1 3. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS: 1. THAT THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS AGAINST THE LAW AND FACTS OF THE CASE. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS GROSSLY ERRED IN UPHOLDING THE ACTION OF ASSESSING OFFICER IN REOPENINGU/S147-148, WHICH REOPENING/REASSESSMENT/NOTICE IS ITSELF ILLEGAL AND BARRED BY THE PROVISOS TO SECTION-12A OF THE INCOME TAX ACT, 1961. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) , HAS GROSSLY ERRED IN UPHOLDING THE REASSESSMENT PASSES BY THE ASSESSING OFFICER BY HOLDING THAT THE PROVISOS TO SECTION 12A ARE PROSPECTIVE IN NATURE, WHICH IS AGAINST THE WELL SETTLED LAW. ITA NO.238/CHD/2018 A.Y.2012-13 2 4. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUSTIFIED IN UPHOLDING THE ADDITION OF RS.54,02,845/- AS MADE BY THE ASSESSING OFFICER, WHICH IS AGAINST THE FACTS AND THE CIRCUMSTANCES OF THE CASE. 5. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS GROSSLY ERRED IN UPHOLDING THE ACTION OF ASSESSING OFFICER, WHEN THE REASSESSMENT FRAMED U/S 147-148 ITSELF IS ILLEGAL, WITHOUT PROPER SANCTION, VOID AB INITIO AND WITHOUT JURISDICTION. 6. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROUND OF APPEAL BEFORE THE APPEAL IS FINALLY HEARD AND DISPOSED OFF. 3. BRIEFLY FACTS RELATING TO THE CASE ARE THAT THE ASSESSEE HAD APPLIED FOR REGISTRATION U/S10(23C)(VI) OF THE ACT, ON 03- 05-2012 WHICH WAS DENIED BY THE CHIEF COMMISSIONER OF INCOME TAX, SHIMLA, VIDE ORDER DATED 15-05-2013. TH E ASSESSEE HAD ALSO APPLIED FOR REGISTRATION AS A CHA RITABLE SOCIETY U/S 12AA OF THE ACT, ON THE SAME DAY WHICH WAS GRANTED BY THE PRINCIPAL COMMISSIONER OF INCOME TAX , SHIMLA VIDE ORDER DATE 07-11-2012 WITH EFFECT FROM 01-04- 2012 EFFECTIVE FROM ASSESSMENT YEAR 2013-14.THE ASS ESSING OFFICER NOTICED THAT FOR THE IMPUGNED ASSESSMENT YE AR I.E. ASSESSMENT YEAR 2012-13, NO RETURN OF INCOME HAD BE EN FILED BY THE ASSESSEE AND THE ASSESSEES APPLICATION FOR APPROVAL U/S 10(23C)(VI) OF THE ACT HAD BEEN REJECT ED. CONSEQUENTLY REOPENING PROCEEDINGS WERE INITIATED BY ISSUING NOTICE U/S 148 OF THE ACT ON 27/28.05.2014. IN RESPONSE TO THE SAME THE ASSESSEE FILED NIL RETURN OF INCOME ON 31-03-2015. DURING ASSESSMENT PROCEEDINGS THE AS SESSEE CONTENDED THAT HAVING BEEN GRANTED REGISTRATION U/S 12AA EFFECTIVE FROM ASSESSMENT YEAR 2013-14, THE BENEFIT OF THE SAME WAS AVAILABLE TO IT IN THE IMPUGNED YEAR ALSO BY THE ITA NO.238/CHD/2018 A.Y.2012-13 3 VIRTUE OF THE FIRST PROVISO TO SECTION 12A(2) OF T HE ACT. THE ASSESSING OFFICER REJECTED THIS CONTENTION OF THE A SSESSEE HOLDING THAT THE SAID BENEFIT WAS AVAILABLE ONLY IF THE PROCEEDINGS RELATED TO THE IMPUGNED YEAR WERE PEND ING AS ON THE DATE OF GRANT OF REGISTRATION U/S 12AA OF TH E ACT AND SINCE REGISTRATION IN THE PRESENT CASE WAS GRANTED ON 07-11- 2012 WHILE THE PROCEEDINGS FOR THE IMPUGNED YEAR WE RE INITIATED BY WAY OF ISSUING NOTICE U/S 148 ONLY TH EREAFTER, ON 27/28-05-2014, THE ASSESSEE WAS NOT ENTITLED FOR THE BENEFIT OF THE FIRST PROVISO TO SECTION 12A(2).ACCO RDINGLY THE NET PROFIT SHOWN BY THE ASSESSEE OF RS.1,42,21,024/ - WAS HELD AS TAXABLE INCOME FOR THE YEAR. 4. THE MATTER WAS CARRIED IN APPEAL BEFORE THE LD. CIT(A), WHO UPHELD THE ORDER OF THE ASSESSING OFFICER HOLDI NG THAT THE BENEFIT OF THE FIRST PROVISO TO SECTION 12A(2) WAS NOT AVAILABLE TO ASSESSEE SINCE NO ASSESSMENT PROCEEDIN GS WERE PENDING ON THE DATE OF GRANT OF REGISTRATION U/S 12 A OF THE ACT. FURTHER, THE ASSESSEE RAISED ANOTHER CONTENTIO N BEFORE THE CIT(A), THAT ITS CASE WAS COVERED UNDER THE SEC OND PROVISO TO SECTION 12A (2) OF THE ACT. IT WAS POINT ED OUT THAT THE SAID PROVISO BARS THE ASSESSING OFFICER FROM IN ITIATING ACTION U/S 147 TO MAKE THE INCOME OF PRECEDING YEAR S TAXABLE IN CASE OF TRUSTS WHICH HAD BEEN GRANTED REGISTRATION. THE CIT(A) REJECTED THIS CONTENTION O F THE ASSESSEE ALSO, STATING THAT THE BENEFIT OF SECOND P ROVISO IS NOT AVAILABLE TO THE ASSESSEE SINCE IN THE PRESENT CASE THE ASSESSEE WAS INELIGIBLE TO CLAIM EXEMPTION NOT ON A CCOUNT OF ITA NO.238/CHD/2018 A.Y.2012-13 4 ABSENCE OF REGISTRATION U/S 12A OF THE ACT, BUT BE CAUSE OF THE FACT THAT ASSESSEE HAD FAILED TO FILE ITS RETUR N OF INCOME AND REPORT OF AUDIT, AS REQUIRED UNDER THE PROVISIO NS OF SECTION 12A(B) OF THE ACT. FURTHER THE CIT(A) TOOK NOTE OF THE FACT THAT THE INCOME ASSESSED OF THE ASSESSEE SOCI ETY HAD BEEN REDUCED TO RS.54,02,845/- BY WAY OF RECTIFICAT ION ORDER PASSED U/S 154 OF THE ACT AS AGAINST RS.1,42,21,000 /- ASSESSED EARLIER. THE RELEVANT FINDINGS OF THE CIT(A) AT PARA 7 OF T HE ORDER IS AS UNDER: 7.(I) I HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS OF THE APPELLANT. THE APPELLANT APPLIED FOR REGISTRATION U/S 10(23C)(VI) ON 03-05- 2012 WHICH WAS DENIED BY WORTHY CCIT, SHIMLA, VIDE ORDER DATED 15-05- 2013. NO APPEAL AGAINST THE ABOVE ORDER IS STATED TO HAVE BEEN FILED BEFORE HON'BLE ITAT. THE APPELLANT ALSO APPLIED FOR REGISTRATION U/S 12AA ON THE SAME DATE WHICH WAS GRANTED BY PR. CIT, SHIMLA, VIDE HIS ORDER DATED 07 - 11-2012, W.E.F. 01-04-2012 AND EFFECTIVE FROM ASSESSMENT YEAR 2013-14. (II) NO REGULAR RETURN OF INCOME U/S 139 WAS FILED BY THE APPELLANT FOR ASSESSMENT YEAR 2012-13. CONSEQUENT TO REFUSAL OF REGISTRATION U/S 10(23C)(VI), A NOTICE U/S 148 OF THE ACT WAS ACCORDINGLY ISSUED TO THE APPELLANT ON 27/28-05- 2014. IN RESPONSE, A RETURN OF INCOME WAS FILED ON 31-03-2015 DECLARING INCOME AT RS. NIL. (III) DURING ASSESSMENT PROCEEDINGS, THE APPELLANT SUBMITTED THAT THOUGH IT HAD BEEN REFUSED APPROVAL US 10(23C)(VI) OF THE ACT, BUT IT WAS IN POSSESSION OF REGISTRATION U/S 12AA OF THE ACT GRANTED W.E.F. 01-04-2012 AND EFFECTIVE FROM ASSESSMENT YEAR 2013-14. HENCE, ITS CASE WAS COVERED UNDER 1 ST PROVISO TO SECTION 12A(2) AND THE BENEFIT OF REGISTRATION WAS AVAILABLE TO IT RETROSPECTIVELY FO R ASSESSMENT YEAR 2012-13 AS WELL. I HAVE CONSIDERED ABOVE CONTENTION. IT IS HELD THAT LEARNE D ASSESSING OFFICER RIGHTLY REJECTED THIS CONTENTION OF THE APPELLANT BY HOLDING THAT ITS CASE WAS NOT COVERED UNDER THE 1 ST PROVISO TO SECTION 12A(2) OF THE ACT. THE PROVISO IS APPLICABLE ONLY TO ITA NO.238/CHD/2018 A.Y.2012-13 5 ASSESSMENT PROCEEDINGS PENDING BEFORE THE ASSESSING OFFICER AS ON THE DATE OF GRANT OF REGISTRATION U/S 12AA OF THE ACT PROVIDED THE OBJECTS AND ACTIVITIES OF THE INSTITUTION WERE THE SAME DURING THE PRECEDING ASSESSMENT YEARS ASSESSMENT FOR WHICH IS PENDING COMPLETION AS DURING THE ASSESSMENT YEAR FOR WHICH THE INSTITUTION HAS BEEN GRANTED REGISTRATION U/S 12AA. IN THE CASE OF THE APPELLANT, NO RETURN OF INCOME HAD BEEN FILED BY IT U/S 139 OF THE ACT FOR ASSESSMENT YEAR 2012-13. THE RETURN OF INCOME WAS FILED BY IT ONLY ON 31-03-2015 IN RESPONSE TO NOTICE U/S 148 ISSUED ON 27/28-05-2014. HENCE, LEARNED ASSESSING OFFICER HAS RIGHTLY HELD THAT NO ASSESSMENT WAS PENDING ON THE DATE OF REGISTRATION U/S 12AA, I. E., ON 07-11 2012 AND THE 1 ST PROVISO TO SECTION 12A(2) WAS NOT APPLICABLE IN THE CASE OF THE APPELLANT. (IV) ANOTHER PLEA TAKEN BY THE APPELLANT DURING APPEAL IS THAT ITS CASE WAS ALSO COVERED UNDER THE 2 ND PROVISO TO SECTION 12A(2) OF THE ACT. IT HAS BEEN ARGUED THAT THE 2 ND PROVISO BARS THE ASSESSING OFFICER FROM INITIATING ACTION U/S 147 OF THE ACT I N CASE OF SUCH TRUST OR INSTITUTION TO WHICH REGISTRATION HAS BEEN GRANTED FOR ANY ASSESSMENT YEAR PRECEDING THE ASSESSMENT YEAR FOR WHICH REGISTRATION HAS BEEN GRANTED U/S 12AA OF THE ACT ONLY FOR NON- REGISTRATION FOR THE SAID ASSESSMENT YEAR. IN THIS CASE, LEARNED ASSESSING OFFICER HAS RECORDED REASONS U/S 147 BY MENTIONING ONLY THE REFUSAL OF APPROVAL U/S 10(23C)(VI). NO MENTION HAS BEEN MADE OF THE GRANT OF REGISTRATION U/S 12AA OF THE ACT ON 07-11-2012 W.E.F.01.04.2012 AND FROM ASSESSMENT YEAR 2013-14. IT HAS BEEN ARGUED THAT IN VIEW OF THE 2 ND PROVISO OF THE ACT, LEARNED ASSESSING OFFICER WAS NOT JUSTIFIED TO INITIATE PROCEEDINGS U/S 147/148 OF THE ACT FOR ASSESSMENT YEAR 2012-13. I HAVE CONSIDERED THE ABOVE CONTENTION OF THE APPELLANT AND FIND THAT IT IS NOT TENABLE. THE PROVISIONS OF SECTION 11, 12, 12A, 12AA AND 13 GOVERNING INCOME FROM PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSES MUST BE READ AS A WHOLE SUCH THAT NO PROVISION OF ANY SECTION BECOMES REDUNDANT. THE 1 ST AND 2 ND PROVISOS TO SECTION 12A(2) HAVE BEEN INSERTED TO ALLOW BENEFIT OF REGISTRATION TO SUCH TRUSTS/SOCIETIES WHICH ARE GRANTED REGISTRATION U/S 12AA AT ANY PARTICULAR POINT OF TIME IN RESPECT OF THEIR PENDING OR COMPLETED OR UN- OPENED ASSESSMENTS AS WELL. THE MANDATE OF THE 1 ST PROVISO IS THAT SUCH BENEFIT OF REGISTRATION WILL ALSO BE GIVEN IN ALL ASSESSMENTS PENDING COMPLETION ON THE DATE OF REGISTRATION. THE INTENT BEHIND 2 ND PROVISO IS ONLY TO BAR THE ITA NO.238/CHD/2018 A.Y.2012-13 6 ASSESSING OFFICER FROM TAKING RECOURSE TO PROVISION S OF SECTION 147 /148 TO MAKE THE INCOME OF THE PRECEDING YEARS TAXABLE IN CASE OF TRUSTS / SOCIETIES WHICH HAVE BEEN GRANTED REGISTRATION. AS PER THE 3 RD PROVISO, THE ABOVE BENEFITS ARE NOT AVAILABLE IN THE CASE OF ANY TRUST OR INSTITUTION WHICH IS REFUSED REGISTRATION OR WHERE REGISTRATION IN CANCELLED AT ANY TIME U/S 12AA OF THE ACT. HOWEVER, THE 2 ND PROVISO CANNOT BE CONSTRUED TO IMPLY THAT LEARNED ASSESSING OFFICER IS BARRED IN ANY MANNER FROM EVEN CALLING FOR THE RETURN OF INCOME U/S 147 WHERE NO RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE U/S 139 OF THE ACT. IT ONLY BARS THE ASSESSING OFFICER FROM ASSESSING THE SURPLUS AS TAXABLE INCOME OF THE TRUST WHERE IT HAS BEEN GRANTED REGISTRATION U/S 12A FOR A SUBSEQUENT ASSESSMENT YEAR BUT IT HAD NO REGISTRATION IN THE PRECEDING ASSESSMENT YEARS THOUGH ITS OBJECTS AND ACTIVITIES WERE THE SAME. IN THE PRESENT CASE, AS NO RETURN OF INCOME HAD BEEN FILED BY THE APPELLANT U/S 139 FOR ASSESSMENT YEAR 2012-13, LEARNED ASSESSING OFFICER WAS JUSTIFIED TO ISSUE A NOTICE U/S 148 ON 27/28-05-2014 CALLING FOR THE RETURN OF INCOME. THE SAID RETURN WAS FILED ON 31.03.2015 DECLARING NIL INCOME U/S 11 / 12 OF THE I.T. ACT. HOWEVER, SECTIO N 11 AND SECTION 12 SHALL NOT APPLY IN RELATION TO TH E INCOME OF ANY TRUST OR INSTITUTION UNLESS THE CONDITIONS OF THE CLAUSES (AA) AND (B) OF SECTION 12A(1) OF THE ACT ARE CUMULATIVELY MET. SECTION 12A(2) AND THE THREE PROVISOS TO THIS SECTION FURTH ER GOVERN THE CONDITION LAID DOWN IN CLAUSE (AA) ONLY. THE CONDITION AS LAID DOWN BY CLAUSE (B) OPERATES IN ITS OWN RIGHT AND HAS TO BE MET SEPARATELY. AS PER CLAUSE (B), WHERE THE TOTAL INCOME OF THE TRUST OR INSTITUTION AS COMPUTED UNDER THIS ACT WITHOUT GIVING EFFECT TO THE PROVISIONS OF SECTION 11 AND SECTION 12 EXCEEDS THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO INCOME TAX IN ANY PREVIOUS YEAR, THE ACCOUNTS OF THE TRUST OR INSTITUTIONS FOR THAT YEAR HAVE TO BE AUDITED AND THE REPORT OF SUCH AUDIT IN THE PRESCRIBED FORM HAS TO BE FURNISHED ALONG WITH THE RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR. THE RETURN OF INCOME FOR ASSESSMENT YEAR 2012-13 COULD BE FILED BY THE APPELLANT ONLY UPTO 31.03.2013. HOWEVER, NEITHER THE RETURN OF INCOME NOR THE AUDIT REPORT WAS FURNISHED UPTO 31.03.2013. IN VIEW OF ABOVE, THE APPELLANT WAS NOT ENTITLE TO CLAIM BENEFIT OF SECTI ON 11/12 OF THE ACT IN RESPECT OF ASSESSMENT YEAR 2012-13 AS IT DID NOT MEET THE CONDITION OF SECTION 12A(1)(B). SECTION 12A(1) BEGINS WITH 'THE PROVISIONS OF SECTION 11 AND SECTION 12 SHALL NOT APPLY IN RELATION TO..... UNLESS THE FOLLOWING ITA NO.238/CHD/2018 A.Y.2012-13 7 CONDITIONS ARE FULFILLED.AND THUS HAS AN OVERRIDING EFFECT. IN VIEW OF THE ABOVE, IT IS HELD THAT THE SURPLUS OF RS.54,02,845/- (RS.1,42,21,000 MINUS RS.88,18,160/- AS PER THE RECTIFICATION ORDER DATED 08.08.2016) WAS TAXABLE INCOME OF THE APPELLANT FOR THE ASSESSMENT YEAR 2012-13. GROUNDS OF APPEAL 1 & 2 ARE DISMISSED. AS MENTIONED BY THE APPELLANT IN ITS WRITTEN SUBMISSIONS, LEARNED ASSESSING OFFICER HAS ALREADY PASSED THE RECTIFICATION ORDER U/S 154 ON 08.08.2016 AND ASSESSED THE INCOME AT RS. 54,02,845/- BY REDUCING THE ADVANCE FEES OF RS. 88,18,160/- RECEIVED DURING ASSESSMENT YEAR 2011-12. GROUND OF APPEAL-3 BECOMES INFRUCTUOUS. GROUND OF APPEAL 4 IS GENERAL IN NATURE. NO ADDITION/ALTERATION TO GROUNDS HAS BEEN MADE DURING APPEAL. 5. BEFORE US, THE SOLE CONTENTION RAISED BY THE LD. COUNSEL FOR THE ASSESSEE WAS THAT THE REOPENING COULD NOT HAVE BEEN RESORTED TO ON ACCOUNT OF THE SPECIFIC PROVISION OF THE SECOND PROVISO TO SECTION 12A(2) OF THE ACT, DEBARRING RES ORT TO THE SAME FOR THE YEAR PRECEDING THE ASSESSMENT YEAR FOR WHICH REGISTRATION U/S 12A OF THE ACT IS GRANTED. OUR AT TENTION WAS DRAWN TO THE RELEVANT PROVISO AND THE CBDT CIRC ULAR NO.01 OF 2015, F.NO. 142/13/2014-TPL CONTAINING THE EXPLANATORY NOTES TO THE INTRODUCTION TO THE RELEVA NT PROVISIONS BY WAY OF FINANCE ACT (2) (2014) AS UNDE R: 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 O R INSTITUTION FROM THE ASSESSMENT YEAR IMMEDIATELY FOLLOWING THE FINA NCIAL YEAR IN WHICH SUCH APPLICATION IS MADE.] PROVIDED FURTHER THAT NO ACTION UNDER SECTION 147 SHALL BE TAKEN BY THE ASSESSING OFFICER IN CASE OF SUCH TRUS T OR INSTITUTION FOR ANY ASSESSMENT YEAR PRECEDING THE AF ORESAID ASSESSMENT YEAR ONLY FOR NON-REGISTRATION OF SUCH TRU ST OR INSTITUTION FOR THE SAID ASSESSMENT YEAR: ITA NO.238/CHD/2018 A.Y.2012-13 8 CBDT CIRCULAR NO.01 OF 2015,F.NO. 142/13/2014-TPL IN ORDER TO PROVIDE RELIEF AND REMOVE HARDSHIP IN GENUINE CASES SECTION 12A OF THE INCOME-TAX ACT HAS BEEN AMENDED TO PROVIDE THAT IN A CASE WHERE A TRUST OR INSTITUTION HAS BEEN GRANTED REGISTRATIO N UNDER SECTION 12AA OF THE INCOME-TAX ACT, THE BENEFIT OF SECTIONS 11 AND 12 OF THE SAID ACT SHALL BE AVAILABLE IN RESPECT OF ANY INCOME DERIVED FROM PROPERTY HELD UNDER TRUST IN ANY ASSESSMENT PROCEEDING FOR AN EARLIER ASSESSMENT YEAR WHICH IS PENDING BEFORE THE ASSESSING OFFICER AS ON THE DATE OF SUCH REGISTRATION, IF THE OBJECTS AND ACTIVITIES OF SUCH TRUST OR INSTITUTIONS IN THE RELEVANT EARLIER ASSESSMENT YEAR ARE THE SAME AS THOSE ON THE BASIS OF WHICH SUCH REGISTRATION HAS BEEN GRANTED. FURTHER, IT HAS BEEN PROVIDED THAT NO ACTION FOR REOPENING OF AN ASSESSMENT UNDER SECTION 147 OF THE INCOME-TAX ACT SHALL BE TAKEN BY THE ASSESSING OFFICER IN THE CASE OF SUCH TRUST OR INSTITUTION FO R ANY ASSESSMENT YEAR PRECEDING THE FIRST ASSESSMENT YEAR FOR WHICH THE REGISTRATION APPLIES, MERELY FOR THE REASON THAT SUCH TRUST OR INSTITUTIO N HAS NOT OBTAINED THE REGISTRATION UNDER SECTION 12AA FOR THE SAID ASSESSMENT YEAR. 6. LD. D.R. ON THE OTHER HAND RELIED ON THE ORDER O F THE CIT(APPEALS) STATING THAT NO BENEFIT CAN BE DERIVE D BY THE ASSESSEE FROM THE SECOND PROVISO TO SECTION 12A(2) ,SINCE IN THE PRESENT CASE THE ASSESSEE WAS INELIGIBLE TO CLA IM EXEMPTION NOT ON ACCOUNT OF ABSENCE OF REGISTRATI ON U/S 12A OF THE ACT, BUT BECAUSE OF THE FACT THAT ASSESS EE HAD FAILED TO FILE ITS RETURN OF INCOME AND REPORT OF AUDIT, AS REQUIRED UNDER THE PROVISIONS OF SECTION 12A(B) OF THE ACT. 7. WE HAVE HEARD THE CONTENTION OF BOTH THE PARTIES AND PERUSED THE ORDER OF THE AUTHORITIES BELOW. ADMITTE DLY THE REOPENING IN THE PRESENT CASE WAS RESORTED TO FOR T HE REASON THAT THE ASSESSEE HAD BEEN REFUSED APPROVAL U/S 10( 23C)(VI) OF THE ACT AND HAD NOT FILED ITS RETURN OF INCOME . IT IS NOT ITA NO.238/CHD/2018 A.Y.2012-13 9 DISPUTED THAT THE ASSESSEE HAD BEEN GRANTED REGISTR ATION U/S 12AA FOR THE SUBSEQUENT ASSESSMENT YEAR I.E. A.Y 20 13-14. THE CONTENTION OF THE ASSESSEE CHALLENGING THE REOP ENING IS THAT THE SECOND PROVISO TO SECTION 12A(2) OF THE A CT, DEBARS RESORTING TO REOPENING U/S 147 OF THE ACT, FOR SUBJ ECTING TO TAX THE INCOME FOR THE IMPUGNED YEAR MERELY ON ACC OUNT OF ABSENCE OF REGISTRATION U/S 12A. 8. THE CONTENTION OF THE REVENUE ON THE OTHER HAND IS THAT SINCE THE ASSESSEE FAILED TO FULFILL THE CONDITION STIPULATED FOR CLAIMING EXEMPTION U/S 11 &12 OF THE ACT OF FIL ING RETURN OF INCOME ALONGWITH REPORT OF AUDIT, U/S 12A(1)(B) OF THE ACT, ITS INCOME FOR THE IMPUGNED YEAR WAS TAXABLE AND TH E REOPENING THEREFORE WAS VALID. 9. EVIDENTLY IT IS NOT THE CASE OF THE REVENUE THAT THE REOPENING WAS VALID ON THE GROUND OF ABSENCE OF REG ISTRATION U/S 12A OF THE ACT FOR THE IMPUGNED YEAR AND THEREF ORE ITS INCOME BECOMING TAXABLE. IN FACT, WE FIND, THAT THE CIT(A) HAS ACCEPTED THAT REOPENING COULD NOT HAVE BEEN RES ORTED TO ON ACCOUNT OF ABSENCE OF REGISTRATION U/S 12A FOR T HE IMPUGNED YEAR ON ACCOUNT OF THE SECOND PROVISO TO S ECTION 12A(2) OF THE ACT. THEREFORE THE CONTENTION OF THE ASSESSEE ON THIS COUNT, WE FIND, STANDS ACCEPTED BY THE REVE NUE. BUT THE ARGUMENT OF THE REVENUE WE FIND IS THAT, BECAUS E THE ASSESSEE FAILED TO COMPLY WITH THE CONDITIONS OF SE CTION 12A(1)(B) OF THE ACT, WHICH WAS NECESSARY FOR CLAIM ING EXEMPTION U/S 11 & 12 OF THE ACT, ITS INCOME FOR T HE IMPUGNED YEAR WAS TAXABLE, WHICH HAD THUS ESCAPED ITA NO.238/CHD/2018 A.Y.2012-13 10 ASSESSMENT AND THEREFORE THE REOPENING WAS VALID. T HE SAID CONDITIONS, AS POINTED OUT BY THE LD.CIT(A), ARE TH E FILING OF RETURN OF INCOME ACCOMPANIED WITH THE REPORT OF AN AUDITOR IN THE PRESCRIBED FORM. IT IS RELEVANT TO REPRODUCE THE PROVISIONS OF SECTION 12A(1)(A) &(B) OF THE ACT AT THIS JUNCTURE. 12A (1) THE PROVISIONS OF SECTION 11 AND SECTION 12 SHALL NOT APPLY IN RELATION TO THE INCOME OF ANY TRUST OR INS TITUTION UNLESS THE FOLLOWING CONDITIONS ARE FULFILLED, NAMELY:- (A) THE PERSON IN RECEIPT OF THE INCOME HAS MADE A N APPLICATION FOR REGISTRATION OF THE TRUST OR INSTITU TION IN THE PRESCRIBED FORM AND IN THE PRESCRIBED MANNER TO THE PRINCIPAL COMMISSIONER OR] COMMISSIONER BEFORE T HE 1ST DAY OF JULY, 1973 , OR BEFORE THE EXPIRY OF A PERI OD OF ONE YEAR FROM THE DATE OF THE CREATION OF THE TR UST OR THE ESTABLISHMENT OF THE INSTITUTION, [WHICHEVER IS LA TER AND SUCH TRUST OR INSTITUTION IS REGISTERED UNDER SE CTION 12AA]: [ PROVIDED THAT WHERE AN APPLICATION FOR REGISTRATION OF THE TRUST OR INSTITUTION IS MADE AFTER THE EXPIRY OF THE PERIOD AFORESAID, THE PROVISIONS OF SECTIONS 11 AND 12 SHALL APPLY IN RELATION TO THE INCOME OF SUCH TRUST OR INSTITUTION,- (B) WHERE THE TOTAL INCOME OF THE TRUST OR INSTITUTION AS COMPUTED UNDER THIS ACT WITHOUT GIVING EFFECT TO THE [PROVISIONS OF SECTION 11 AND SECTION 12 EXCEEDS TH E MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO INCOME-TAX IN ANY PREVIOUS YEAR], THE ACCOUNTS OF THE TRUST OR INSTITUTION FOR THAT YEAR HAVE BEEN AUDITED BY AN ACCOUNTANT AS DEFINED IN THE EXPLANATION BELOW SUB- SECTION (2) OF SECTION 288 AND THE PERSON IN RECEIPT OF TH E INCOME FURNISHES ALONG WITH THE RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR THE REPORT OF SUCH AUDIT IN THE PRESCRIBED FORM DULY SIGNED AND VERIFIED BY SUCH ACCOUNTANT AND SETTING FORTH SUCH PARTICULARS AS MAY BE PRESCRIBED.] 10. UNDOUBTEDLY THE REQUIREMENT OF FILING OF RETURN OF INCOME AND THE REPORT OF AUDIT HAVE BEEN SPECIFIED FOR BEING ELIGIBLE FOR CLAIMING EXEMPTION U/S 11 & 12 OF THE ACT, ALONGWITH THE GRANT OF REGISTRATION U/S 12AA OF THE ACT. IN THE CASE OF THE ASSESSEE, WE FIND, THAT THE RETURN OF I NCOME HAS BEEN ITA NO.238/CHD/2018 A.Y.2012-13 11 FILED IN RESPONSE TO NOTICE U/S 148 OF THE ACT. THE REFORE THE CONDITION OF FILING OF RETURN OF INCOME STANDS FULF ILLED. THE SECTION, WE FIND, NOWHERE PRESCRIBES THE FILING OF RETURN BY ANY DUE DATE, THEREFORE THE FINDINGS OF THE CIT(A) THAT THE ASSESSEE HAVING NOT FILED ITS RETURN WITHIN THE PR ESCRIBED TIME IT HAD FAILED TO COMPLY WITH THE REQUIREMENT P RESCRIBED, IS NOT TENABLE. AS FOR THE REQUIREMENT OF FILING RE PORT OF AUDIT IN THE PRESCRIBED FORM, THE SAID CONDITION HAS BEEN HELD BY COURTS TO BE MERELY PROCEDURAL AND THEREFORE DIRECT ORY IN NATURE AND NOT MANDATORY FOR THE PURPOSE OF CLAIMIN G EXEMPTION U/S 11 & 12 OF THE ACT. THE HONBLE JURIS DICTIONAL HIGH COURT IN THE CASE OF CIT VS SHAHZADANAND CHARI TY TRUST REPORTED IN 228 ITR 292,HAS CATEGORICALLY HEL D SO IN PARA 10-14 OF ITS ORDER AS UNDER: 10. CALCUTTA HIGH COURT IN RAI BAHADUR BISSESSWARLALS CASE (SUPRA) WHILE INTERPRETING S. 12A(B) HELD THAT THE PROVISIO N WAS DIRECTORY IN NATURE AND THE AO COULD ALLOW THE ASSESSE E TO FILE THE AUDIT REPORT, AT ANY TIME BEFORE THE COMPLETION OF THE ASSESSMENT. IN THIS CASE THE ASSESSEE, A CHARITABLE TRU ST REGISTERED WITH THE CIT FILED ITS RETURN ON 17TH SEPT., 1984, DECLARING A DEFICIT OF RS. 1,61,452. THE RETURN SO FILED WAS NOT ACCOMPANIED BY AUDITED ACCOUNTS AND AUDIT REPORT IN FORM NO. 10B AS REQUIRED UNDER S. 12A OF THE ACT. THE AUDIT REPORT DT. 12TH NOV., 1984 WAS, HOWEVER, FILED BY THE ASSESSEE IN THE PRESCRIBED FORM ON 6TH MARCH, 19897, BEFORE THE COMPLETION OF THE ASSESSMENT. THE ITO WHILE COMPLETING THE ASSESS MENT REFUSED TO ALLOW THE BENEFIT OF EXEMPTION UNDER S. 11 OF THE ACT TO THE ASSESSEE ON THE GROUND THAT AUDIT REPORT IN FORM NO. 10B WAS NOT FILED ALONG WITH THE RETURN. INCOME OF THE ASSESSEE WAS PUT TO TAX. ORDER OF THE ITO WAS UPHELD BY THE CIT(A) AGAINST WHICH ASSESSEE FILED FURTHER APPEAL BEF ORE THE TRIBUNAL WHICH WAS ACCEPTED. ON THESE FACTS, IT WAS HELD THAT THE IT AUTHORITY HAD TAKEN HYPER-TECHNICAL VIEW OF TH E MATTER WHERE THE ASSESSEE HAS COMPLIED WITH THE PROVISIONS OF THE ACT IN THE COURSE OF ASSESSMENT BY CURING THE DEFECT IN THE RETURN BY FILING AN AUDIT REPORT. THE ITO CANNOT IGNO RE SUCH AUDIT REPORT OR THE RETURN IN COMPLETING THE ASSESSME NT. THE DELAY IN GETTING THE ACCOUNT AUDITED AND IN FILING THE RETURN (SIC-REPORT) IN FORM NO. 10B DID NOT DEFEAT ANY OBJECT OF THE ITA NO.238/CHD/2018 A.Y.2012-13 12 ACT AND, THEREFORE, THE PROVISION WAS DIRECTORY IN NAT URE. IT ALSO REFERRED TO THE CIRCULAR OF THE BOARD DT. 9TH FEB., 1978. 11. GUJARAT HIGH COURT IN GUJARAT OIL & ALLIED INDUSTRIE S CASE (SUPRA) WAS CONSIDERING S. 80J(6A). GUJARAT HIGH COURT TOOK THE VIEW PUT BY THIS COURT IN JAIDEEP INDUSTRIES CA SE (SUPRA). IT WAS HELD THAT THE PROVISION ABOUT FURNISHING OF TH E AUDITORS REPORT ALONG WITH THE RETURN HAS TO BE TREATED AS PRO CEDURAL PROVISION AND, THEREFORE, DIRECTORY IN NATURE. 12. PROVISIONS OF S. 80J(6A) AND S. 12A OF THE ACT ARE P ARA MATERIA. THE RATIO OF THE LAW LAID DOWN IN JAIDEEP IND USTRIES CASE (SUPRA) WOULD HAVE BEEN APPLICABLE TO THE FACTS OF THE PRESENT CASE AS WELL HAD THE CBDT NOT ISSUED THE CIR CULAR DT. 9TH FEB., 1978, REPRODUCED IN THE EARLIER PART OF THE JUDGMENT. AS PER THIS CIRCULAR, IT IS NOT MANDATORY UNDER. S. 12A (B) TO FILE THE AUDIT REPORT ALONG WITH RETURN OF INCOME . NORMALLY, A CHARITABLE RELIGIOUS TRUST OR INSTITUTION IS EXPECTED TO FILE AUDITORS REPORT ALONG WITH THE RETURN BUT IN CASES WHE RE FOR REASONS BEYOND THE CONTROL OF THE ASSESSEE SOME DELA Y HAS OCCURRED IN FILING THE SAID REPORT, THE ITO, FOR REAS ONS TO BE RECORDED, HAS BEEN AUTHORISED TO CONDONE THE DELAY I N FURNISHING THE AUDITORS REPORT AND ACCEPTING THE SAM E AT A BELATED STAGE. IT HAS BEEN CLARIFIED THAT THE EXEMPTI ON AVAILABLE TO THE TRUST UNDER S. 11 MAY NOT BE DENIED MERELY ON ACCOUNT OF DELAY IN FURNISHING THE AUDITORS REPORT. TH E WORD 'SHALL' OCCURRING IN S. 12A CANNOT, UNDER THE CIRCUMST ANCES, BE READ AS A 'MUST' MAKING IT MANDATORY FOR THE TRUST T O FURNISH THE AUDITORS REPORT ALONG WITH THE FILING OF THE RETUR N. IF FOR CERTAIN UNAVOIDABLE CIRCUMSTANCES, THE ASSESSEE IS UN ABLE TO FURNISH THE AUDITORS REPORT ALONG WITH THE RETURN THE N THE SAME CAN BE FURNISHED AT A LATER DATE WITH THE PERM ISSION OF THE AO WHO MAY PERMIT THE ASSESSEE TO DO SO AFTER RE CORDING ITS REASONS FOR SO DOING. 13. COUNSEL APPEARING FOR THE REVENUE THEN ARGUED THAT A S PER THIS CIRCULAR, THE AUDITORS REPORT COULD ONLY BE FU RNISHED UPTO THE STAGE OF FRAMING OF ASSESSMENT AS THE POWE R TO CONDONE THE DELAY FOR ACCEPTING THE AUDITORS REPORT AT A LATER DATE HAS ONLY BEEN GIVEN TO THE ITO AND NOT THEREAF TER, I.E., AT THE APPELLATE STAGE. WE FIND NO MERIT IN THIS SUBMISS ION. THE CBDT BY ISSUING THE CIRCULAR DT. 9TH FEB., 1978 HAS TR EATED THE PROVISION REGARDING FURNISHING OF AUDITORS REPO RT ALONG WITH THE RETURN TO BE PROCEDURAL AND, THEREFORE, DIREC TORY IN NATURE. BY SHOWING SUFFICIENT CAUSE, THE AUDITORS REP ORT COULD BE PRODUCED AT ANY LATER STAGE EITHER BEFORE THE ITO OR BEFORE THE APPELLATE AUTHORITY. 14. IN VIEW OF THE BOARDS CIRCULAR DT. 9TH FEB., 1978, TH E REQUIREMENT OF FILING AUDITORS REPORT IN FORM 10B AS PROVIDED IN S. 12A(B) R/W R. 17B OF THE RULES, THE RATIO OF THE L AW LAID DOWN BY THIS COURT IN JAIDEEP INDUSTRIES CASE (SUPRA) WOULD NOT APPLY TO THE PRESENT CASE. ITA NO.238/CHD/2018 A.Y.2012-13 13 11. IN VIEW OF THE ABOVE THEREFORE WE FIND NO MERIT IN THE ARGUMENT OF THE REVENUE THAT THE ASSESSEE WAS NOT E LIGIBLE FOR EXEMPTION U/S 11 &12 ON ACCOUNT OF NOT HAVING C OMPLIED WITH THE REQUIREMENTS OF SECTION 12A(1)(B) OF THE A CT. SINCE THIS WAS THE SOLE BASIS FOR UPHOLDING THE VALIDITY OF THE REASSESSMENT PROCEEDINGS RESORTED TO, WE HOLD THAT THE REASSESSMENT RESORTED TO IN THE PRESENT CASE WAS IN VALID, ON ACCOUNT OF THE SECOND PROVISO TO SECTION 12A(2) OF THE ACT, WHICH SPECIFICALLY DEBARRED RESORT TO THE SAME IN V IEW OF REGISTRATION HAVING BEEN GRANTED FROM THE IMMEDIATE LY SUCCEEDING ASSESSMENT YEAR. THE REASSESSMENT FRAMED IS THEREFORE SET ASIDE. AS A CONSEQUENCE THE ADDITION MADE IS DELETED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED IN ABOVE TERMS. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 20 TH AUGUST, 2018 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH