Samast Gurjar Sagar Gnati, Bhavnath, Junagadh-Gujarat V. The Income Tax Officer, Ward-1, Junagadh-Gujarat

ITSSA 123/RJT/2017

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3112 (ITAT-RAJKOT)
• Duration Of Justice: 4 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 23-08-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 01-06-2022
• Assessment Year: 2010-2011
• Appeal Filed On: 30-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Benefit of exemption
• Section: 11; 143(3); 12A; 12AA; 274; 143(2); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “RAJKOT” BENCH, RAJKOT [Conducted through E-Court at Ahmedabad] BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMEBR & SHRI WASEEM AHMED, ACCOUNTANT MEMEBR आयकर अपील (SS) सं./I.T(SS) .A. No. 123/Rjt/2017 ( Assess ment Ye ar : 2010-11) Sa ma st G ur jar S a gar Gy ati Bh av nat h, T al . J un aga dh , Di st. J un ag ad h ब म/ V s . Th e I. T. O. W ar d – (1 ), Ju na ga dh यी ल सं./ ीआ आर सं./P A N / G IR N o . : A A K T S 2 0 0 3 D (Appellant) . . (Respondent) अपील र स /Appellant by : W ri tt en S ub mi ss io n य क र स / Respondent by : Shri Samir Tekriwal, CIT. DR स क र D a t e o f H e a r i n g 02/06/2022 !"# क र /D a t e o f P r o n o u n c e m e n t 24/08/2022 ORDER PER WASEEM AHMED - AM: The appeal has been preferred by the assessee against the order of the Commissioner of Income Tax (Appeals)-3, Rajkot (‘CIT(A)’ in short) vide Appeal No. CIT(A)-3/173/16-17 dated 04.09.2017 arising in the assessment order dated 28.03.2013 passed by the Assessing Officer (AO) under s. 143(3) of the Income Tax Act, 1961 (the Act) concerning AY 2010-11. IT(SS)A No. 123/Rjt/2017 (Samast Gurjar Sagar Gnati vs. ITO] A.Y. 2010-11 - 2 - 2. The grounds of appeal raised by assessee read as under: “1. The Ld. CIT(A) has erred in not following the guidelines given by the Hon. ITAT while restoring the appeal. The addition needs deletion. 2.1 The Ld. CIT(A) has erred in law and facts in confirming addition of Rs. 7,72,267/- (56,769/- + 65,315/- + 6,50,183/-). The addition needs deletion. 2.2. The Ld. CIT(A) has erred in law and facts in confirming addition of Rs. 56,769/- mentioning the same as rental income. The addition needs deletion. 2.3. The Ld. CIT(A) has erred in law and facts in confirming addition of Rs. 65,315/- mentioning the same as other income as per P & L account of audit report. The addition needs deletion. 2.4. The Ld. CIT(A) has erred in law and facts in confirming addition of Rs. 6,50,183/- mentioning the same as Bandh kam fund (Corpus fund). The addition needs deletion. 3. The Ld. CIT(A) has erred in law and facts in confirming addition of Rs. 7,72,267/- based on factual position which he described wrongly. The addition needs deletion. 4. The Ld. CIT(A) has erred in law and facts in confirming addition of Rs. 7,72,267/- erroneously treating the assessee as A.O.P. which he described wrongly. The addition needs deletion 5. The Ld. CIT(A) has erred in law and facts in confirming addition of Rs. 7,72,267/- based on presumption and surmises. The addition needs deletion. 6. The Ld. CIT(A) has erred in law and facts in confirming addition of Rs. 7,72,267/- merely considering the same as chargeable to tax without cogent reason. The addition needs deletion, since the accounts are audited and no defect is found by the Ld. CIT(A) in accounts as well as vouchers. 7. Taking into consideration the legal, statutory, factual and administrative aspects, no addition of an amount of Rs. 7,72,267/- ought to have been confirmed. The additions need deletion. 8. The Ld. CIT(A) has erred in law and facts in not allowing the expenses confirming that total allowable expenses – Nil. The same needs to be allowed. 9. The Ld. CIT(A) has erred in law and facts in not deleting demand raised of Rs.2,18,040/-. The same needs deletion.” 3. The only interconnected issue raised by the assessee is that the learned CIT-A erred in not granting the benefit of the exemption under section 11 of the Act on the reasoning that the assessee was not registered under section 12AA of the Act during the year under consideration. IT(SS)A No. 123/Rjt/2017 (Samast Gurjar Sagar Gnati vs. ITO] A.Y. 2010-11 - 3 - 4. The facts are that the assessee in the present case claimed to be a trust and accordingly claimed the benefit of exemption under section 11 of the Act. However, AO during the assessment proceedings found that the assessee has not furnished the registration certificate under section 12AA of the Act which is mandatory for claiming the exemption under section 11 of the Act. Accordingly, the AO denied the exemption claimed by the assessee under section 11 of the Act and assessed the income vide its order dated 28 th of March 2013 under section 143(3) of the Act for an amount of ₹ 7,72,270.00 only. 5. Aggrieved assessee preferred an appeal to the learned CIT-A who confirmed the order of the AO by observing as under: “8. During the appellate proceedings the appellant has alongwith the submission submitted a copy of certificate under section 12AA dated 29.04.2016 granting registration u/s 12AA to the appellant w.e.f 29,03.2012 i.e. from assessment year 2012- 13 onward. It is apparent from this certificate that application for such certificate was made on 29.03.2012. The assessment order in appeal is for assessment order 2010-11. Hence the instant case is not eligible for exemption u/s 11, as Sub-Section 2 of section 12AA extends the benefit of the umbrella of 12AA to assessment year 2012-13 onward. 3.1 The appellant has not now sought shelter of Proviso to the sub-Section 12AA. It is apparent from the letter of Ld. AR that he is seeking relief only on the I of the amendments in Section 12A with effect from 1/4/2014. 4.1 The registration u/s. 12A was granted vide C1T certificate inter alia stating that provision of Section 11 and 12 will be applicable from AY 12-13 onwards. This application was made on 29.03.2012. 4.2 It is apparent that the A.O. concluded that the exemption claimed by the appellant u/s. 11 of the Act was not admissible since the 12AA registration certificate was not submitted by the appellant. Even now, the certificate is applicable from AY 2012-13 and not for the A.Y. 2010-11. The main submission of the appellant is that a proviso has been inserted below sub-section 12A(2) which provides that once a registration is granted in subsequent year, the same is to be considered as granted for preceding' year if scrutiny assessment is pending before A.O. as on the date. of such registration. The appellant relied on the decision of Hon'ble Calcutta High Court in the case of CIT vs. Virgin Creators in G.A. NO. 3200/2011 dated 23.11.2011 which provides that beneficial amendments can be considered as retrospective. He also added that this view has been followed the Hon'ble ITAT Ahmedabad in the case of M/s Alpha Projects and the Hon'ble IT AT Rajkot has also been pleased to follow the above views in the case of M/ Vijya Printers Jetpur (ITA No. 11/RJT/2012). Asserting his point, he added that the Hon'ble Calcutta High Court in the above decisions has followed the decisions of the Hon ble Supreme Court in the case of Allied Motors 224 ITR 677 (SC) & Alom Extrusions 319 ITR 306 (SC) 82 ITR 570 (SC) where it held that a provision which was inserted the remedy to make a provision workable requires to be treated with retrospective operation so that reasonable deduction can be given to the section as well. IT(SS)A No. 123/Rjt/2017 (Samast Gurjar Sagar Gnati vs. ITO] A.Y. 2010-11 - 4 - 4.3 The provision of Section 12A(2) and the proviso inserted below it are as under:- (Quote) "(2) Where an application has been made on or after the 1st day of June 2007 the provisions of section 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 are pending before the Assessing Officer as on the date of such registration and the objects and activities of such trust or institution remain the same for such preceding assessment year" (Unquote) 4.4 The date of grant is registration is 29.04.2016 and it was to be applicable for A.Y. 2012-13 onwards. As per assessment order, the notice u/s. 143(2) was issued on 25/9/2012 and assessment order itself was passed on 29.03.2013. As such proviso to S.12A(2) will not be attracted for A.Y. 2010-11 because on the date of grant of registration, the assessment proceedings was not pending. Hence on this ground only, the appeal fails. 4.5 Moresoever, this proviso came into existence w.e.f. 1/10/2014. Strictly speaking, only those cases will fall here which were registered subsequent to 1/10/2014. But the appellant is seeking its application even in its own case where registration was granted on 27/4/2016, i.e. much after passing of the assessment order. The AR's argument is that this proviso is basically clarificatory in nature and therefore following Virgin Creation's (supra) judgement of Hon'ble Kolkata High Court, operation of S.12A should be extended not only to A.Y. 2012-13 but also to earlier A.Y. 2010-11. I do not agree with the Ld. AR's logic that the provision is clarifactory in nature. Hon'ble Supreme Court in the case of Allied Motors Pvt. Ltd. and also in Alom Extrusion Ltd. and Hon'ble Kolkata High Court in the case of Virgin Creations had ruled that if an already existing (beneficial) provision of law required a later amendment to make it workable, then that amendment should be treated as if existing from the date of birth of the provision itself. The basic intention of Legislature was to extend the benefit to the trust which sought and obtained registration from the date of application itself. Otherwise, it could have very easily made applicable for all those years where basic object of trust had not changed. This matter in the present case is totally different. Earlier, benefit of S.12A was available to the trust not only from the date of registration but also for the assessment year (prior to date of registration) in which application was made. Now the legislation had, by way of amendment, inserted a proviso to extend the benefit of Section 12AA to even earlier assessment year preceding the assessment year falling under section 12A(2). Thus this amendment is extending a new benefit which was not available earlier at all. It is not clarificatory in nature and thus no retrospective effect can be given to this provision. Hence the appeal is dismissed.” 6. Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before us. 6.1 The learned AR before us has filed the written submission wherein it was inter-alia contended that the registration application under section 12AA of the IT(SS)A No. 123/Rjt/2017 (Samast Gurjar Sagar Gnati vs. ITO] A.Y. 2010-11 - 5 - Act was pending as on the date of assessment and therefore the assessee is eligible for exemption under section 11 of the Act by virtue of the provisions of the proviso to subsection (2) of section 12A of the Act. According to the learned AR the proviso to sub-section (2) of section 12A of the Act was brought under the statute by the Finance Act 2014 but the same has been held as retrospective in nature. Thus, it was prayed to allow the exemption under section 11 of the Act. 6.2 On the other hand, the learned DR vehemently supported the order of the authorities below. 7. We have heard the ld. DR and perused the materials available on record. From the preceding discussion we note certain facts as detailed below: i. The application for registration under section 12AA of the Act was made dated 29 March 2012. ii. The registration was granted by the learned CIT(Exemption) under section 12AA of the Act vide order dated 29 April 2016 in pursuance to the direction of the ITAT in the own case of the assessee which was effective from 29 th of March 2012 corresponding to assessment year 2012-13 onwards. iii. The year in dispute before us relates to assessment year 2010-11. iv. The notice for the assessment year under consideration under section 143(2) of the Act was issued dated 25 September 2012 which came to be completed vide order dated 28 th of March 2013. 7.1 On perusal of the above facts, it appears that assessment proceedings for the year under consideration were not pending as on the date of grant of registration certificate under section 12AA of the Act. As such the assessment proceedings for the year under consideration came to an end by order dated 28 th of March 2013 whereas certificate for registration under section 12AA of the Act was granted dated 29 April 2016. Thus as on the date of grant of IT(SS)A No. 123/Rjt/2017 (Samast Gurjar Sagar Gnati vs. ITO] A.Y. 2010-11 - 6 - registration under section 12AA of the Act no assessment proceeding for the year under consideration was pending before the AO. Thus apparently the proviso of subsection (2) of section 12A of the Act does not rescue the assessee which reads as under: 16 [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 17 before the Assessing Officer as on the date of such registration and the objects and activities of such trust or institution remain the same for such preceding assessment year: 7.2 However, it is necessary to dwell upon the issue up-to what point of time, the assessment can be said pending. In the present case, we are dealing with the assessment proceedings and at the same time, we are also making a note of the registration proceedings under section 12AA of the Act side-by-side so as to find out whether the assessee can be granted the benefit of the proviso to subsection (2) of section 12A of the Act. 7.3 With respect to the issue of deciding the time limit for pending assessment, we refer to the judgment of Hon’ble Gujarat High Court in the case of CIT Vs. Mayur Foundation reported in 274 ITR 562 wherein it was held as under: “In the case of Rambhai Jethabhai Patel v. CIT [1977] 108 ITR 771 , this court was called upon to decide the question as to till what point of time an assessment can be said to be pending. This court referred to various interpretations of the word "pending" at page 784 of the reported decision, and ultimately, relied upon the decision of the apex court in the case of Asgarali Nazarali v. State of Bombay, AIR 1957 SC 503, to hold that it can safely be said that a matter can be said to be pending in a court of justice when any proceedings can be taken in it and that is the test to be applied. In Stroud's Judicial Dictionary, Fourth Edition, Volume 4, at page 1975, it is stated : "A legal proceeding is 'pending' as soon as commenced and until it is concluded, i.e. , so long as the court having original cognisance of it can make an order on the matters in issue, or to be dealt with, therein." Applying the aforesaid principle, can it be stated that when the matter is pending before the Tribunal by way of an appeal, the assessment proceeding is IT(SS)A No. 123/Rjt/2017 (Samast Gurjar Sagar Gnati vs. ITO] A.Y. 2010-11 - 7 - pending? The answer has to be in the affirmative. The assessing authority is empowered and is duty bound, to pass an order giving effect to the order of the Tribunal for the purposes of assessing the tax liability of the assessee for the assessment year which was under consideration before the Tribunal. In these circumstances, it cannot be contended on behalf of the Revenue that the assessment proceedings come to an end when the assessment order is framed. The contention on behalf of the Revenue to equate the assessment order with assessment proceeding is based on a fallacious premise.” 7.4 The ratio laid down by the Hon’ble Gujarat High Court in the case cited above is directly applicable to the present facts of the case. As for is registration proceedings under section 12AA of the Act came to an end by the order of the learned CIT(Exemption) in pursuance to the direction of the ITAT as discussed above, dated 29 April 2016 whereas the last order of the learned CIT-A with respect to the assessment proceedings for the year under consideration was passed dated 4 th of September 2017. Thus it can be safely concluded that assessment proceedings were pending at the time of grant of registration certificate under section 12AA of the Act. Thus, the proviso provided under subsection (2) of section 12AA of the Act comes to rescue the assessee. 7.5 At this juncture, we are also inclined deal with one more issue whether the impugned proviso which was brought by the Finance Act No. 2014 with effect from 1 October 2014 can be applied retrospectively for the year under consideration. This question has been answered by Ahmedabad tribunal in the case of Shri Bhanushali Mitra Mandal Trust Vs ITO reported in 68 Taxman.com 250 wherein it was held as under: “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 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 registration 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 specific reasons. The statute also goes on to IT(SS)A No. 123/Rjt/2017 (Samast Gurjar Sagar Gnati vs. ITO] A.Y. 2010-11 - 8 - provide that no action u/s147 could be taken by the AO merely for non- registration of trust for earlier years.” 7.6 In view of the above, it can be safely concluded that the assessee is entitled for the benefit of the provisions of section 11 of the Act for the year under consideration. It is also significant to note that the genuineness of the activities has nowhere been doubted by the authorities below. Likewise, there was no allegation that there was change in the objects and the activities of the trust for the year under consideration and the year when certificate of registration under section 12AA was granted by the learned CIT(Exemption). Hence the ground of appeal of the assessee is allowed. 8. In the result, the appeal filed by the assessee is allowed. Sd/- Sd/- (MAHAVIR PRASAD) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad: Dated 24/08/2022 True Copy S.K.SINHA आदेश े / Copy of Order Forwarded to:- $. र / Revenue 2. आ दक / Assessee '. सं(ं)* आयकर आय + / Concerned CIT 4. आयकर आय + - अपील / CIT (A) .. / 0 1ीय 2 2 )*3 आयकर अपील य अ)*कर#3 अ45द ( द / DR, ITAT, Ahmedabad 6. 1 78 9 ल / Guard file. By order/आद श स 3 D e p u t y / A s s t t . R e g i s t r a r I T A T , R a j k o t This Order pronounced in Open Court on 24/08/2022