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Facts
The assessee, a trust engaged in temple and Jivdaya activities, claimed exemptions under Sections 10, 11, and 12 for AY 2020-21, despite its initial application for 12AA registration being rejected. The Assessing Officer denied the exemptions and made an addition of Rs. 23,98,804/- under Section 69A, treating it as unexplained money due to the assessee's failure to provide documentary evidence for receipts and expenses. The CIT(A) confirmed the AO's order.
Held
The Tribunal observed that the assessee's 12A registration was subsequently granted (effective from AY 2022-23), and the assessment for AY 2020-21 was pending at the time of this grant. Citing CBDT Circular No. 01/2015 and the second proviso to section 12A(2) (prior to its omission), the Tribunal held that the assessee is eligible for exemptions under Sections 10, 11, and 12. However, due to insufficient evidence provided earlier, the case is remitted back to the AO for the limited purpose of re-examining the receipts of Rs. 23,98,804/- in light of these sections.
Key Issues
Whether a trust whose 12AA registration was initially rejected but subsequently granted (effective from a later year) is eligible for exemptions under Sections 10, 11, and 12 for an earlier assessment year where proceedings were pending, and the validity of an addition under Section 69A for unexplained money due to lack of documentation.
Sections Cited
143(3), 144B, 12A, 11, 69A, 10, 12, 12AA, 12AA(1)(ii)(b), 142(1), 139(1), 12A(1)(ac)(i), 147, 12AB, 115BBE
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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: DR. ARJUN LAL SAINI & SHRI DINESH MOHAN SINHA
Captioned appeal filed by the assessee, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short ‘NFAC/Ld. CIT(A)’], dated 28.03.2024, which in turn arises out of an assessment order passed by the Assessing Officer (AO) under Section 143(3) r.w.s 144B of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), vide order dated 09.09.2022.
The grievances raised by the assessee are as follows:
“1. The learned Commissioner of Income-tax (Appeals), Income Tax Department NFAC, Delhi erred in confirming the action of assessing officer in not treating the assessee as registered u/s 12A of the Act and in not granting exemption u/s 11 of the Act claimed by the Appellant in the return of income filed for the year.
The learned Commissioner of Income-tax (Appeals), Income Tax Department NFAC, Delhi erred in confirming the action of assessing officer in making addition of Rs. 23,98,804/- by treating entire income earned during the year as unexplained money u/s 69A of the Act.
The learned Commissioner of Income-tax (Appeals), Income Tax Department NFAC, Delhi failed to appreciate that alternatively, only net income ought to have been taxable as income under the Act and not the gross receipts/income of the Appellant for the year.
The appellant craves leave to add, amend, alter and withdraw any ground of appeal anytime up to the hearing of this appeal.”
Briefly stated, the relevant material facts are as follows. The assessee before us is a trust and filed its income tax return, electronically on 19.01.2021, declaring income at Rs. 2,48,620/-. During the year under consideration, assessee-trust is engaged in the activity to run and maintain temple and Jivdaya activities. The assessee`s case was selected for complete scrutiny, under National Faceless Assessment Centre (NFAC). The reason for compulsory scrutiny with rational and underlying information was the registration of the trust u/s 12A was cancelled and despite that the assessee is still claiming exemption u/s 10,11 and 12 of the Act.
4.On perusal of details, it was noticed by the assessing officer that assessee has applied for registration u/s 12AA and the order u/s 12AA(1)(ii)(b) of the Act, was passed by the jurisdictional Ld. CIT(Exemptions) on 29.01.2021, rejecting the application of the assessee and denying assessee`s registration u/s 12AA to the assessee and order was duly served upon assessee-trust. Despite the application for registration u/s 12AA of the assessee was rejected, the assessee is still filing ITR-7 and claiming benefits, as per charitable and religious trust. Therefore, the assessing officer was of the view that assessee`s case is a case of intentional wrong claiming of benefits. Considering the wrong filing of return by the assessee and incorrect claim of exemptions by the assessee, vide notice u/s 142(1) of the Act, various details were asked from the assessee, including the details regarding the receipts shown by the assessee, bifurcation of the receipts, nature of receipts, details regarding expenditure claimed, bills and vouchers in support of claim and documentary evidences in support of claim of expenditure.
5.In this connection, the assessee submitted its reply on 24.01.2022 and 02.03.2022. In its reply assessee submitted a few details and documents but no details have been submitted by the assessee regarding the nature and source of receipts and the details regarding expenditure. Therefore, assessing officer noted that assessee has failed to submit single documentary evidence substantiating the source of such receipts and nature of such receipts. In this connection, a Show cause notice was issued to the assessee on 26.03.2022 In response to the show cause notice assessee submitted its response on 30.03.2022 and on 26.08.2022.
6.However, the assessing officer rejected the contention of the assessee and observed that the assessee has claimed that it already holds 12A registration and its registration has been renewed by the CIT (exemption) from the next year. During the year under consideration, it`s 12A registration application was rejected due to non- compliance and no other reason was there. This contention of the assessee, even if, accepted does not absolve assessee of its liability to furnish true return during the year under consideration. During the year under consideration, assessee does not hold registration u/s 12A, hence it is not eligible to claim exemption u/s 11 and 12 of the Act, still assessee is claiming the same despite cancellation of 12A registration. Merely holding the registration certificate in past and renewal of certificate from future date does not mean the existence of registration for the year under consideration. No retrospective registration has been granted to the assessee; hence it was held by the assessing officer that assessee is not eligible to claim exemption u/s 11 and 12 of the Act. The assessing officer, also observed that the assessee in its submission has merely presented hand- made vouchers to substantiate its source of receipts and expenses. No valid documentary evidences like bill, invoices and confirmation have been submitted by the assessee, hence the receipts and expenditure claimed by the assessee remains unexplained. Considering the above facts, it was held by the assessing officer that the claim made by the assessee by way of filing of return with respect to receipts shown by the assessee and expenditure claimed by the assessee is incorrect and without any documentary evidence for the reasons discussed below:
(i) Assessee knew that the application for registration u/s 12AA of the Act, in its case has been rejected by CIT(Exemptions) and therefore it is not eligible for exemption u/s 11 and 12 but still assessee claimed itself to be a charitable trust by filing ITR-7 and claimed the exemptions available therein, thus a clear and intentional act.
(ii)Since the registration of the assessee has been rejected hence the assessee was taxable as an AOP and the assessee was bound to show the receipts as business receipts and tax the same accordingly. Further assessee was required to fulfill all the prescribed conditions relating to deduction and deposition of TDS as an auditable business is required to do so, but assessee failed to fulfill its obligation.
(iii). The assessee in its return has claimed total expenses to the tune of Rs. 8,84,214/-, which includes expenditure on religious activities return of income. In connection to the expense's assessee was asked to submit the details of expenses, bills and vouchers and other documentary evidences. However, the assessee has failed to submit a single documentary evidence and any detail substantiating the allowability of the expense, as claimed by it. Further, the assessee has failed to submit the proof regarding the deduction and deposition of TDS on such expenses. The assessee even has failed to explain the nature and bifurcation of such religious expenses claimed. All the above facts prove that the expense claimed by the assessee are non-genuine and without any documentary evidence which point to the fact that all the transactions shown by the assessee in its ITR are manipulated to adjust unaccounted money of the assessee in the form of unaccounted receipts to enjoy conceal income.
(iv). Assessee has shown receipts of Rs. 23,98,804/- during the year under consideration but during assessment proceedings it has failed to submit a single documentary evidence, substantiating the source of the same. Further the assessee has failed to disclose the nature and bifurcation of such receipts. Without any documentary evidence the receipts shown by the assessee are unexplained entries in the hands of the assessee and is liable to be treated as unexplained money u/s 69A of the Income Tax Act, 1961.
Therefore, the assessing officer held that since assessee has failed to prove the source of such receipts and the books of the assessee as submitted by it are manipulated to accommodate unaccounted money of the assessee, therefore, the entire receipts of the assessee of Rs. 23,98,804/- was treated as unexplained money u/s 69A r.w.s. 115BBE of the Income Tax Act, 1961 in the hands of the assessee and the same was added to the total income of the assessee for the year under consideration.
Aggrieved by the order of the assessing officer, the assessee carried the matter in appeal before the Ld. CIT(A), who has confirmed the action of the assessing officer. The ld CIT(A) observed that during the assessment proceedings and during the appellate proceedings, no details of the nature of receipts and deployment of funds, the objects of the assessee and the nature of activities undertaken have been furnished. In the assessment order the assessing officer has also observed that the new application of the assessee for registration u/s 12AA was rejected by the CIT (Exemption) due to similar attitude and non-disclosure of material facts by the assessee. In view of the repeated non- submission of material facts and documents by the assessee at multiple fora and in different statutory proceedings the ld CIT(A) held that the so-called evidence in the form of a scan of purported old certificate and some past lower deduction certificates that are submitted in present proceedings do not have any credence. The ld CIT(A) also held that merely wrong quoting of the section 69A is held to be not fatal to the case of the Revenue. This way, the ld. CIT(A) confirmed the addition made by the assessing officer.
Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us.
Shri D. M. Rindani, Ld. Counsel for the assessee, at the outset, submitted before the Bench, the relevant dates, which are important to adjudicate the issue, which reads as follows:
Shri Rindani, submitted in brief that section 12AA registration number was available with the assessee and the same was accepted by the assessing officer in assessments up to assessment year (A.Y.) 2019-20. The Registration, though denied once, is subsequently granted by the Department, (though effective from A.Y. 2022-23). Before passing order u/s 143(3), the present registration was granted, hence benefit of first Proviso to section 12A is clearly available, to the assessee, as the assessment was pending, on the date of registration, which was granted by the Department. Even during appeal pendency, benefit of Proviso can be granted. There was no break in registration as the first application under old law, was made to obtain a certificate of an existing number, as the certificate was misplaced, in earthquake tragedy, being a very old Trust. Besides, Section 69A cannot be invoked, by both, CIT(A) and A.O. and Ld. Counsel for the assessee also relied on the Circular No.01/2015, dated 21.01.2015 and stated that assessee is eligible to claim exemptions under sections 10, 11 and 12 of the Act.
On the other hand, Ld. DR for the Revenue submitted that first of all copy of the assessment orders submitted by the assessee seems to be fabricated, and it is not certain whether these assessment orders are in the assessee’s case under consideration or not. The Ld. DR also took us through paper book Page No.3 and stated that assessee claimed that in 1969, the trust was allotted PAN number. However, in the year 1969, the Income Tax Department had not allotted any PAN number, to anybody. In the year 1969, the Income Tax Department used to issue GIR number. The Department had started to issue PAN number after the year 1995, therefore, the PAN number submitted by the ld. Counsel, before the Bench, seems to be fabricated. Therefore, all the documents submitted by the assessee seems to fabricated documents.
The ld. DR also pointed out that when the certificate of registration was lost in earthquake tragedy, then the assessee has right to apply for duplicate certificate rather than to apply a fresh certificate for registration for the trust. If the registration certificate was lost in the earthquake tragedy, the assessee -trust would have to file the RTI to get the duplicate certificate of the registration from the department. Therefore, to apply for new registration raises doubt and hence the assessee’s case under consideration, falls under dubious activities. Therefore, Ld. DR submitted that assessee`s appeal may be dismissed.
We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. We find that CBDT had issued the Circular No.01/2015, dated 21.01.2015, wherein Para No.8.3 of the Circular is favouring to the assessee and squarely applicable in the case of the assessee, under consideration, the relevant part of the Circular is reproduced below:
“8. Applicability of the registration granted to a trust or institution to earlier years 8.1 The provisions of section 12A of the Income-tax Act, before amendment by the Act, provided that a trust or an Institution can claim exemption under sections 11 and 12 only after registration under section 12AA of the said Act has been granted. In case of trusts or institutions which apply for registration after 1st June, 2007, the registration shall be effective only prospectively. 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 fulfil other substantive conditions. However, the power of condonation of delay in seeking registration was not available. 8.3 In order to provide relief to such trusts 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 registration 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 institution in the relevant earlier assessment year are the same as those on the basis of which such registration has been granted. 8.4 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 for any assessment year preceding the first assessment year for which the registration applies, merely for the reason that such trust or institution has not obtained the registration under section 12AA for the said assessment year. 8.5 However, the above benefits would not be available in the case of any trust or institution which at any time had applied for registration and the same was refused under section 12AA of the Income-tax Act or a registration once granted was cancelled. 8.6 Applicability: - These amendments take effect from 1 October, 2014.”
From the above circular of CBDT, it is vivid that in order to provide relief to such trusts 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 registration 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 institution in the relevant earlier assessment year are the same as those on the basis of which such registration has been granted. It is a settled law that the Circulars issued by CBDT are binding on the Revenue. This position was confirmed by the Apex Court in the case of Commissioner of Customs vs Indian Oil Corporation Ltd. reported in 267 ITR 272 wherein their Lordships examined the earlier decisions of the Apex Court with regard to binding nature of the Circular and laid down that when a circular issued by the Board remains in operation then the Revenue is bound by it and cannot be allowed to plead that it is not valid or that it is contrary to the terms of the statute. 15.For the sake of clarity and also being pertinent, we reproduce, the second proviso to sub-section (2) of section 12A of the Income Tax Act, which was omitted by the Finance Act, 2023, with effect from 01.04.2023, prior to its omission, it reads as follows: “Provided further that where registration has been granted to the trust or institution under section 12AA or section 12AB, 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”
16.Third proviso to sub-section (2) of section 12A of the Income Tax Act, which was omitted by the Finance Act, 2023, with effect from 01.04.2023, prior to its omission, it reads as follows: “Provided also that no action under section 147 shall be taken by the assessing officer in case of such trust or institution for any assessment year preceding the aforesaid assessment year only for non-registration of such trust or institution for the said assessment year”
We find that above provisos, which were omitted by the Finance Act, 2023, are applicable to the assessee under consideration, as the assessee`s assessment year is 2020-21. That is, the said, second proviso, to section 12A of the Act, was effective, for the assessment year under consideration, hence, the assessee is entitled to take the benefit of the above proviso. The same view was taken by the ITAT Ahmedabad Bench, in the case of Shri Bhanushali Mitra Mandal trust, 68 taxmann.com 250, where in, it was held that when the statute provides that registration once granted in subsequent year, the benefit of the same has to be applied in earlier assessment years for which assessment proceedings are pending before the assessing officer, 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 of the Act could be taken by the assessing officer merely for non-registration of trust for earlier years.
18.Based on the facts and circumstances of the case, as narrated above, and considering the events explained by the ld. Counsel, we note that in assessee`s case under consideration, the assessee had filed the return of income under section 139(1), one, as per extended date, on 31.01.2021. The second application for registration, under section 12A, in Form No. 10A was filed by the assessee -trust, under amended law, on 08.10.2021. The order of registration under section 12A (1) (ac) (i) of the Act, granting registration, under section 12A, of the Act to the assessee- trust, from assessment year 2022-23 to A.Y. 2026-27, was granted on 15.10.2021. However, the assessment order, under section 143(3) of the Act, (impugned order) was framed by the assessing officer on 09.09.2022 and on this date, the registration of the trust was effective,( in-force). Hence, we note that the registration was effective, at all the times, therefore, we are of the view that the assessee-trust, is eligible to take the exemption under Sections 10, 11 & 12 of the Act.
On merit, we note that before assessing officer, as well as before Ld. CIT(A), the assessee has not submitted the sufficient evidences to prove its claim. Therefore, we are of the view that the matter may be remitted back to the file of the assessing officer, for limited purpose to examine the receipts of the assessee of Rs. 23,98,804/-, for the purpose of claiming exemption Sections 10, 11 & 12 of the Act.
Before parting, we make it clear that since we have already taken the view that assessee- trust, is eligible to take the exemption under Sections 10, 11 & 12 of the Act, in the assessment year 2020–21, under consideration. Therefore, the case is remitted back to the file of the assessing officer, only for Limited purpose, to examine the correctness of receipts of the assessee-trust of Rs. 23,98,804/-, in the light of the provisions of Sections 10, 11 & 12 of the Act.
21.In the result, appeal filed by the assessee is allowed for statistical purpose, in above terms.
Order is pronounced in the open court on 06/01/2025
Sd/- Sd/- (DINESH MOHAN SINHA) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER Rajkot �दनांक/ Date: 06/01/2025 Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. Pr. CIT 5. DR/AR, ITAT, Rajkot 6. Guard File By order
Assistant Registrar/Sr. PS/PS ITAT, Rajkot
Draft dictated on (dictation sheet is enclosed with main file.) 09.10.2024 2. Draft placed before author 10.10.2024 3. Draft proposed & placed before the second member 4. Draft discussed/approved by Second Member. 5. Approved Draft comes to the Sr.PS/PS 6. Kept for pronouncement on 7. After Pronouncement fair order comes to the Sr.PS/PS on 8. File sent to the Bench Clerk 9. Date on which file goes to the AR 10. Date on which file goes to the Head Clerk. 11. Date of dispatch of Order. 12. Draft dictation sheets are attached