Prajapati Samaj Maoli Bazar, Navsari V. Additional/Joint/Deputy/Assistant Commissioner of Income Tax/Income Tax Officer, National e-Assessment Centre, Delhi

ITA 308/SRT/2022

AI Insights

The case involves Prajapati Samaj Maroli Bazar, a charitable trust, which appealed against the order of the National Faceless Appeal Centre (NFAC) denying them exemption under Section 11 of the Income Tax Act for the Assessment Year 2018-19. The trust had applied for registration under Section 12AA but was granted the registration after the relevant assessment year. The Assessing Officer initially denied the exemption citing the lack of registration during the assessment year in question. The Tribunal, however, found that the registration obtained during the pendency of the appeal should allow the trust to claim the exemption, referencing several Tribunal decisions that supported this interpretation.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 301570 (ITAT-SURAT)
• Duration Of Justice: 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 08-01-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 18-10-2022
• Other Referred Cases: Navsari Malesar Behdin Anjuman, Agiary Street, Malesar, Navsari Vs ITO(E), Punjab Educational Society Vs ITO, SNDP Yogam Vs Assistant Director of Income Tax (Exemption), ST. Jude's Convent School Vs ACIT, Sree Sree Ramkrishna Samity Vs DCIT, Shree Bhanushali Mitra Mandal Trust Vs ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution; Retrospective amendment; Benefit of exemption
• Section: 12; 11; 12AA; 250; 143(2); 64; 113

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH (SMC), SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER ITA No. 308/Srt/2022 (Assessment Year 2018-19) (Virtual hearing) Prajapati Samaj Maroli Bazar, C/o-Ganpatbhai Mistri, At Mahuvar, Post- Maroli Bazar, Taluka: Jalalpore, Navsari-396436. (Gujarat) PAN No. AABTP 2604 E Vs. Additional/Joint/Deputy/Assistant Commissioner of Income Tax/Income Tax Officer, National e-Assessment Centre, Delhi. Appellant/ assessee Respondent/ revenue Assessee represented by Shri Hiren Vepari, CA Department represented by Shri Ashok B Koli, CIT-DR Date of hearing 09/01/2023 Date of pronouncement 09/01/2023 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the assessee is directed against the order of National Faceless Appeal Centre, Delhi (NFAC)/learned Commissioner of Income Tax (Appeals), (in short, the ld. CIT(A)) dated 21/09/2022 for the Assessment year (AY) 2018-19 wherein the assessee has raised following grounds of appeal: 1. On the facts and circumstances of the case and as per law, the learned CIT(A) was not justified in confirming non-granting of exemption u/s 11 of the Act. 2. The learned CIT(A) ought to have appreciated proviso to Section 12A(2) and judicial finding while dealing with the issue. 3. Without prejudice to the above, even if addition were to be sustained, it could be only of the net income after reduction of expenses. 4. The appellant craves leave to add, alter or vary any of the grounds of appeal.” ITA No. 308/Srt/2022 Prajapati Samaj Maroli Bazar Vs Addl.CIT 2 2. Brief facts of the case are that the assessee is a charitable trust, engaged in the service of poor for imparting education and medical relief. The assessee filed its return of income for A.Y. 2018-19 on 14/09/2018 declaring total income at NIL. In the computation of income, the assessee claimed deduction under Section 11 and 12 of the Income Tax Act, 1961 (in short, the Act) to the extent of Rs. 1,12,590/-. During the assessment, the Assessing Officer noted that the assessee is not having registration under Section 12AA which is a condition precedent for allowing such deduction. The Assessing Officer thereby issued show cause notice for disallowance of such deduction. In response to show cause notice, the assessee filed its reply. In the reply, the assessee stated that they have applied for registration under Section 12AA of the Act on 24/04/2018 before the learned Commissioner of Income Tax (Exemptions) (in short, the ld. CIT(E)), Ahmedabad. Reply of assessee was not accepted by the Assessing officer. The Assessing Officer held that the assessee was granted registration under Section 12AA of the Act on 25/10/2018 effective from 24/04/2018 i.e. A.Y. 2019-20. Hence, the assessee is not eligible for deduction under Section 11 and 12 for the year under consideration. 3. On appeal before the ld. CIT(A), the assessee filed its written submissions. The submissions of assessee is incorporated in para 4 of order of ld. CIT(A)/NFAC. In the written submission, the assessee stated ITA No. 308/Srt/2022 Prajapati Samaj Maroli Bazar Vs Addl.CIT 3 that as per proviso to Section 12A(2), the benefit of Section 11 shall be extended even to the assessment year prior to grant of registration and for such assessment which are pending. The objects and activities of the trust was same as enabled to A.Y. 2018-19 and 2019-20. The assessee explained that their initial application for registration in March 2018 was rejected for technical reasons for digitalization of registration process. Second application was filed within 40 days. However, in the meantime, the assessment year was changed, this technicality was used by Assessing Officer to deny the exemption under Section 11 of the Act. Considering the broadminded view, the Assessing Officer ought to have allowed benefit, instead of taking narrow view, which is illegal and unsustainable view. The benefit of exemption under Section 11 should be extended to A.Y. 2018-19 as per first proviso to Section 12A(2) of the Act as amended by the Finance Act, 2018. To support their view, the assessee relied upon the decision of Tribunal in Navsari Malesar Behdin Anjuman, Agiary Street, Malesar, Navsari Vs ITO(E) in ITA No. 272/Srt/2018 order dated 07/02/2020. 4. The ld. CIT(A)/NFAC after considering the submission of assessee held that the application for registration under Section 12AA was filed before the ld. CIT(E) on 14/03/23018 and a subsequent application was filed on 24/04/2018. Final order for granting registration to the assessee trust was passed on 25/10/2018 w.e.f. 24/04/2018. The Assessing Officer ITA No. 308/Srt/2022 Prajapati Samaj Maroli Bazar Vs Addl.CIT 4 denied exemption on the ground that the registration was granted w.e.f. 24/04/2018 i.e. A.Y. 2019-20 and not from A.Y. 2018-19. The assessee has raised plea before him to allow the benefit of first proviso to Section 12A(2) of the Act which is specified that if registration has been granted to any trust or institution under Section 12AA, then the provisions of Section 11 and 12 of the Act shall also apply to such trust for the preceeding assessment year for which the assessment proceedings are pending before the Assessing Officer. No assessment was pending on the date of registration which is 25/10/2018 even the assessment proceedings were not initiated. The initial notice under Section 143(2) of the Act was issued only on 22/09/2019, hence, there is no applicability of first proviso to Section 12A(2) of the Act in case of assessee. Thus, all the case laws cited by the assessee are not applicable and the proviso provided in the Act itself is not helpful to the assessee. On such observation, the ld.CIT(A)/NFAC confirmed the action of Assessing officer. Further aggrieved, the assessee has filed the present appeal before the Tribunal. 5. I have heard the submissions of the learned Authorised Representative (ld. AR) of the assessee and the learned Commissioner of Income Tax- Departmental Representative (ld. CIT-DR) for the revenue and have gone through the orders of the lower authorities. The ld. AR of the assessee submits that the grounds of appeal raised by assessee in the present ITA No. 308/Srt/2022 Prajapati Samaj Maroli Bazar Vs Addl.CIT 5 appeal is squarely covered by the decision of Tribunal in Navsari Malesar Behdin Anjuman, Agiary Street, Malesar, Navsari Vs ITO(E) (supra), Punjab Educational Society Vs ITO (2017) 88 taxmann.com 113 (Amritsar-Trib) and SNDP Yogam Vs Assistant Director of Income Tax (Exemption) (2016) 68 taxmann.com 152 (Cochin Trib). 6. The ld. AR for the assessee further submits that in the present appeal, the assessment year involved is 2018-19, the assessee filed application for registration of trust under Section 12AA on 24/04/2018, the registration was granted vide order dated 25/10/2018 w.e.f. A.Y. 2019- 20. The assessment order was passed on 23/03/2021. The ld. AR submits that the appeal is the continuation of assessment proceedings. In Navsari Malesar Behdin Anjuman, Agiary Street, Malesar, Navsari Vs ITO(E) (supra), the Tribunal clearly held that when the assessee has obtained registration under Section 12AA during the pendency of appeal, the assessee is entitled to claim exemption under Section 11 of the Act. Similarly, in case of SNDP Yogam Vs Assistant Director of Income Tax (Exemption) (supra), the application was made during the assessment proceedings, however, the registration under Section 12AA was granted subsequent to the conclusion of assessment proceedings, the Tribunal held that the relief under Section 11 cannot be denied, even if the registration was obtained during the pendency of appeal before the ld. CIT(E). Similar view was taken in ST. Jude’s Convent School Vs ACIT ITA No. 308/Srt/2022 Prajapati Samaj Maroli Bazar Vs Addl.CIT 6 (2017) 77 taxmann.com 173 (Amrtisar-Trib). The ld. AR for the assessee while concluding his submission submits that he is also relying on the decision of Kolkata Tribunal in Sree Sree Ramkrishna Samity Vs DCIT (2015) 64 taxmann.com 330 (Kol-Trib) and Shree Bhanushali Mitra Mandal Trust Vs ITO (2016) 68 taxmann.com 250 (Ahd-Trib). 7. On the other hand, the ld. CIT-DR for the revenue supported the orders of lower authorities. The ld. CIT-DR for the revenue submits that during the assessment, the assessee was not having registration under Section 12AA of the Act which is a condition precedent for granting benefit of Section 11 of the Act. The assessee was granted registration under Section 12AA of the Act vide order dated 25/10/2018 which is applicable w.e.f. 25/04/2018 for A.Y. 2019-20. In absence of registration under Section 12AA of the Act for the year under consideration, the order passed by the lower authorities may be upheld. 8. I have considered the submissions of both the parties and have gone through the orders of lower authorities carefully. I have also deliberated on the materials placed before me. I have also deliberated on various case laws cited before me. There is no dispute that the notice under Section 143(2) was issued to the assessee on 22/09/2019 for selecting return of income for scrutiny. The assessment was completed on 23/02/2021. In the meantime, the registration under Section 12AA of the Act vide order dated 25/10/2018 was granted to the assessee i.e. w.e.f. ITA No. 308/Srt/2022 Prajapati Samaj Maroli Bazar Vs Addl.CIT 7 A.Y. 2019-20. As recorded above, the lower authorities denied the benefit of Section 11/12 of the Act to the assessee by taking a view that the assessee was not having registration under Section 12AA of the Act for the year under consideration. The ld. AR of the assessee while making submission vehemently relied upon the decision of Tribunal in Navsari Malesar Behdin Anjuman, Agiary Street, Malesar, Navsari Vs ITO(E) (supra), wherein the Coordinate Bench of Tribunal while relying upon the decision of Punjab Educational Society Vs ITO (supra) held that benefit of first proviso to Section 12A(2) of the Act would be applicable to the facts of the said case. Benefit of Section 11 is to be given if the registration is obtained even during the pendency of appeal before the ld. CIT(A). Again coming to the fact of the case, I find that the assessment in the present case was completed on 23/02/2021, before that date, the registration was granted vide order dated 25/10/2018. 9. In find that coordinate bench of Cochin Tribunal in SNDP Yogum Vs ACIT (supra) held that proviso to section 12A(2) inserted from .01.10.2014 has retrospective effect thus, and there should be no denial of relief under section 11 to a trust if it had obtained registration during the pendency of appeal. Similar view was also taken by Ahmedabad bench in Shree Bahnushali Mitra Mandal Trust Vs ITO (supra). Thus, respectfully following the decisions of coordinate benches, I find that the assessee is also eligible for first proviso to Section 12A(2) of the Act. ITA No. 308/Srt/2022 Prajapati Samaj Maroli Bazar Vs Addl.CIT 8 10. In the result, the grounds of appeal raised by the assessee is allowed. 11. In the result, this appeal of assessee is allowed. Order pronounced in the open court on 09 th January, 2023. Sd/- (PAWAN SINGH) JUDICIAL MEMBER Surat, Dated: 09/01/2023 *Ranjan Copy to: 1. Assessee – 2. Revenue - 3. CIT(A) 4. CIT 5. DR 6. Guard File By order Sr. Private Secretary, ITAT, Surat