DUSSEHRA COMMITTEE AMRITSAR NORTH,AMRITSAR vs. ASSISTANT COMMISIONER OF INCOME TAX, (CPC), BANGLORE

Briefly stated, the facts of the case are that the assessee society filed its return of income for the impugned assessment year u/s 139 on 12.02.2015 claiming exemption u/s 11 and 12 of the Act. Prior to that, the assessee society had moved an application u/s 12AA before ld. CIT(E), Amritsar on 19.08.2014 seeking the registration u/s 12AA of the Act. The said registration was granted by the ld.CIT(E), Chandigarh vide order dated 20.02.2015. Subsequently, the return of income so filed by the assessee society was processed by the CPC u/s 143(1) on 16.03.2016 denying exemption u/s 11 and 12 of the Act whereby the entire gross receipts were brought to tax and demand of Rs. 11,95,960/- was raised on the assessee society. Against the said intimation cum demand notice u/s 143(1), the assessee moved an appeal before the ld. CIT(A) and submissions were made drawing support from the first proviso to section 12AA of the Act.

The ld CIT(A) referring to first proviso to section 12AA of the Act agreed that at the time of grant of registration u/s 12AA to the assessee society by the CIT(E), the processing of the return of income of Assessment Year 2014-15 was pending. However, in the proceedings u/s 143(1) of the Act, the Assessing Officer could make only limited adjustments enumerated in section 143(1)(a) of the Act but was not empowered to examine the objects and activities of the assessee society as to whether the objects are same in the relevant earlier assessment year and the assessment year relevant to the year of grant of registration and could not examine the books of account bill and vouchers of the appellant, which the Assessing Officer is empowered to do only in the scrutiny assessment u/s 143(3) of the Act. Accordingly, the ld CIT(A) held that there is no error in the order u/s 143(1)

No one appeared on behalf of the assessee, however, an adjournment application was filed by the ld.AR stating that he is away to Delhi for some urgent work, hence he will not be able to attend to the scheduled hearing. pending hearing after taking into consideration. We find that in the past, the matter has been adjourned on number of occasions and no useful purpose would be served by adjourning matter any further. It was accordingly decided to reject the adjournment application and decide the matter on merit after considering the material available on record.

We have heard the contentions of the ld DR and perused the material available on record. The relevant provisions under consideration are contained in section 12A(2) of the Act which reads as under:- “(2) Where an application has been made on or after the 1st day of June, 2007, the provisions of sections 11and 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 proceedings 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:

Undisputedly, the assessee society has been granted registration u/s 12AA by order of the ld CIT(E) dated 20.02.2015 and as on the said date of grant of registration u/s 12AA of the Act, the assessment proceedings in respect of return of income filed on 12.02.2015 for A.Y 2014-15 were pending. Therefore, the first limb of the second proviso is satisfied in the instant case.

As regards the second limb which requires the objects and activities to be the same for the impugned assessment year and the assessment year relevant to the year of grant of registration, the ld CIT(A) has stated that the powers of the AO u/s 143(1) are limited as compared to section 143(3) and the said facts cannot be examined. In this regard, we refer to section 143(1) which provides that where the return has been filed u/s 139, the return shall be processed and total income or loss after making adjustment towards any arithmetical error or any incorrect claim apparent from any information in the return. The term “incorrect claim” has been defined in the explanation which reads as under:- “Explanation- For the purposes of this sub-section-

The incorrect claim thus includes a claim in respect of which the information required to be furnished under this Act to substantiate such entry has not been so furnished. In the instant case, the assessee has claimed exemption under section 11 and 12 while filing the return and at that time, the application seeking registration u/s 12AA was already filed and given that registration was pending, the details regarding such registration were apparently not filed. Therefore, such claim was made on the belief that the assessee society shall be granted registration and the said registration will be equally applicable for the impugned assessment year in terms of second proviso to section 12A(2). Therefore, the basis of such claim of exemption u/s 11 and 12 is grant of registration u/s 12AA with a retrospective effect. To our mind, such basis of claim is in consonance with the spirit and language of section 12A which provides that once registration has been granted u/s 12AA of the Act, the same will be equally applicable to pending assessment proceedings.

Now, coming back to the contentions of the Revenue, if we were to agree with the findings of the ld CIT(A), the provisions of section 12A read with second proviso thereto will become otiose where there are no regular assessment proceedings under section 143(3) of the Act. The Courts have