M/S PREM PRAKASH MANDAL SEWA TRUST,BALODA BAZAR(C.G0 vs. THE INCOME TAX OFFICER (EXEMPTION) -1, RAIPUR (CG)

2. The Hon'ble CIT(A) erred in holding that assessee is not eligible for benefit of income being exempted u/s 11 of I.T. Act 1961.

Brief facts of the case are that the assessee is a trust, engaged in social and religious activities. The assessee filed its return of income for the A.Y. 2008-09 on 07/01/2009 declaring NIL income. The return was processed under section 1431 on 21/08/2009. Subsequently, the assessment was reopened under section 147. Notice under section 148 was issued on 11/07/2013. In response to notice issued under section 148, the assessee filed its reply dated 06/08/2013 and stated that return filed original on 07/01/2009 may be treated as return in response to notice under section 148. The AO after serving statutory notices under section 143(2) & 142(1) proceeded for reassessment. The AO during the re- assessment noted that assessee-trust is registered with Registrar Sub- Divisional, Bhatpara (CG) vide registration No. 2/001, dated 09/10/2001, however, the assessee has no registration under section 12A. The main source of income of assessee is donation and membership in Mandir. During the relevant financial year the assessee has received donation for corpus and building fund of Rs. 6,31,444/-. The AO in absence of Prem Prakash Mandal Sewa Trust & 263/RPR/2016 registration under section 12A treated the receipt of building fund of Rs. 321,351/- as income of the assessee.

On appeal before CIT(A), the action of the AO was upheld. During the pendency of appeal before ld CIT(A), the assessee applied for registration under section 12AA and the assessee was granted registration vide order dated 09.05.2016 with effect from 01.04.2015. Before, ld CIT(A) the assessee pleaded that the assessee as per the Proviso to section 12AA(2), when the application of the trust is pending registration, the registration will apply to the pending assessment. The plea of the assessee was not accepted by the ld CIT(A) by taking view that before granting the registration under section 12AA, the assessment for AY 2008-09 was completed on 31.03.2015 and for AY 2011-12 assessment completed on 27.03.2015. Further aggrieved the assessee has filed present appeal before Tribunal.

We have heard the submission of learned AR for the assessee and the learned CIT-DR for the Revenue. The learned AR for the assessee submits that the assessee is a charitable trust. The assessee is registered with Sub-Registrar, Bhatapara, Chhattisgarh. The assessee initially applied for registration under s.12A on 31.03.2004. The outcome of application of assessee was never communicated to the assessee. The assessee filed a reminder letter before CIT (Exemption), Bhopal on 02.07.2014. Even then no outcome of assessee’s application under s.12A Prem Prakash Mandal Sewa Trust & 263/RPR/2016 was communicated. The assessee applied for fresh registration under s.12AA vide application dated 27.11.2015 under prescribed format and furnished all relevant information. The assessee was granted registration under s.12AA on 09.05.2015 w.e.f. 01.04.2015. During the pendency of appeal, the assessee was granted registration, therefore the assessee’s case is covered under “deemed registration” as per the decision of Hon’ble Supreme Court in case of Promotion of Education Adventure Sport & Conservation of Environment dated 16.02.2016. The learned AR for the assessee further submitted the assessee is granted registration during the pendency before CIT(A), therefore the assessee is entitled for the benefit of first Proviso to Section 12A(2). To support his submission the learned AR for the assessee relied on the decision of SNDP Yogam vs. ADIT 186 TTJ 227 (Cochin) & Badhte Kadam 203 TTJ 597 (Raipur Tribunal).

On the other hand, the learned DR for the Revenue by referring the provision of Section 12A(2) and its first proviso submits that when assessment was completed the assessee was not having registration under section 12AA. The subsequent registration under s.12AA will not helpful to the assessee. The learned DR for the Revenue prayed for the dismissal of the appeals of the assessee.

We have considered the rival submissions of the parties and have gone through the orders of the lower authorities. In our view the short question for our consideration is whether the ld. CIT (A) is justified in confirming Prem Prakash Mandal Sewa Trust & 263/RPR/2016 the AO action, for both the assessment years under consideration, in assessing the corpus of building donation as incomes of the assessee. For appreciation of facts the same is reproduced below:

Further it would be relevant to reproduce the explanatory note to the provisions of the Finance (No.,2) Act 2014 as given in CBDT No.1/15 dated 21.1.2015 "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."

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 Prem Prakash Mandal Sewa Trust & 263/RPR/2016 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 provide that no action under section 147 could be taken by the AO merely for non- registration of trust for earlier years.

Now adverting to the facts of the present cases. The ld AR for the assessee vehemently submitted that the assessee is entitled first Proviso to section 12A(2) of the Act. It is admitted position under the law that the appeal is continuation of original proceedings. Even otherwise the ld CIT(A) has co-terminus power with that of the assessing officer. 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 proceedings pending before the assessing officer' within the meaning of that term as 7 Prem Prakash Mandal Sewa Trust & 263/RPR/2016 envisaged under the proviso. It follows there-from that the assessee who obtained registration under section 12AA of the Act during the pendency of appeal was entitled for exemption claimed under section 11of the Act.

Thus taking the above facts and circumstances of the issue, we are of the view that the ld CIT(A) was also not justified in taking a similar stand that of the AO, without taking cognizance and intention of the amendment to section 12A of the Act. If no judicious or a liberal view is not taken either by the assessing authority or the appellate authority as in the case under consideration, the very purpose for which such an amendment to section 12A would be defeated.

We find that similar view was taken by Coordinate bench in Badhte Kadam Vs DCIT (2020) 203 TTJ (Raipur) 597 and Kolkata Bench of Tribunal in case of Sree Sree Ramkrishna Samity vs D CIT [2016] 156 ITD 646/[2015] 64 taxmann.com 330 where it was held that amendment to Section 12A w.e.f. 01.10.2014 is retrospective. The relevant finding of the Hon'ble Kolkata Bench in case of Sree Sree Ramkrishna Samity (supra) read as follows: