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Income Tax Appellate Tribunal, RAIPUR BENCH: RAIPUR
Before: SHRI RAVISH SOOD & SHRI ARUN KHODPIA
आदेश / O R D E R PER ARUN KHODPIA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-1, Raipur, dated 23.08.2018, and pertains to assessment year 2015-16.
The assessee has raised the following grounds of appeal:
During the assessment proceedings Assessing Officer had made addition of Rs.19,08,939/- by declaring that assessee had not got registration u/s.12A of Income Tax Act ,1961 however assessee had applied for registration in F.Y. 2009-10 though till date Certificate of Registration has not been granted or rejection of application for registration order is also not yet received by the assessee.
2 :: 2. As per Section 12AA of Income Tax Act,1961 every order granting or refusing registration shall be passed before the expiry of six months from the end of the month in which the application was received. Order not passed within the said period will be deemed to be registration granted to the Trust u/s.12A. In either situation, rejection of application made for registration shall be passed by order in writing by following the principle of natural justice and such order is to be sent to the applicant. Assessee has neither received the certificate of registration nor received the rejection order passed by the Principal Commissioner or Commissioner.
3. With all these we urge before your honor to kindly allow us benefits of exemption u/s.11 of the Income Tax Act 1961 assuming us deemed charitable institution.
4. Kindly stay the demand till the disposal of appeal.
The Assessee reserves the lights to amend, alter, add or modify any of the grounds of the appeal either before or at the time of hearing of the case. Relief claimed in appeal Assessee had complied with all the pre-requisite (i.e. applied for registration, duly filed form 10, applied surplus earned for charitable purpose) required for claiming deduction u/s.11 and had filed the application for registration as Trust u/s.12A of Income Tax Act,1961 in F.Y. 2009-10 and the same was received by the Authorities of Income Tax Department on 25/03/2009. we urge before your honor to kindly allow us benefits of exemption u/s.11 of the Income Tax Act 1961 assuming us deemed charitable institution.
At the outset, the Registry pointed out that the appeal filed by the assessee is barred by limitation with a delay of 41 days. In this respect, the assessee has filed an Affidavit signed and verified by Mr.Gopal Krishna Agrawal, Chairman of the assessee’s Trust. The reasons explained in the affidavit was that of the assessee is a government agency required approval from various authorities for filing an appeal before the Tribunal that took time as the Chairman, Mr.Gopal Krishna Agrawal, of the Institute Management Committee, Women ITI, Narayanpur, under medical treatment and that has caused delay in filing of the appeal. Copy of prescription dated 01.11.2018 from doctor was also submitted. Considering this fact, the delay in filing of the appeal was found to be on 3 :: account of reasonable and sufficient reasons beyond the control of the assessee. Therefore, the delay in filing of the appeal was condoned and pronounced in the open court during hearing dated 17.01.2023.
At the beginning of the hearing today, it was noticed that the assessee was represented by ‘none’. However, since the appeal was already fixed for hearing 13 times, it was considered to be appropriate to dispose it off on the basis of merits and material available on record.
5. The brief facts of the case are that the assessee is a trust filed its return of income for the AY 2015-16 on 11.10.2015 declaring total income of Rs.NIL. The assessment of the assessee was completed u/s.143(3) of the Act on 29.11.2017. During the course of assessment proceedings, the AO has observed on perusal of the original return filed by the assessee. It is noticed that the assessee has, in the return of income, clearly mentioned the certificate u/s.12A of the Act, has not been granted to it. It is also noticed by the AO that the return filed was subsequently revised by the assessee, wherein, the registered number shown as 80, and date of registration is mentioned as 29.07.2009. When it is asked to file the certificate issued u/s.12A of the Act, the Ld.AR submitted till date he has not received any certificate. The AO has granted sufficient opportunities to the assessee, but the assessee was failed to file copy of certificate u/s.12AA of the Act. The AO further queried to the assessee that in absence of certificate u/s.12AA of the Act, that the total surplus should not be disallowed by treating this income from other sources. It was the 4 :: submission of the Ld.AR of the assessee before the AO that the assessee has applied for the certificate, but till date, not received any order nor have received any rejection of the application seeking registration u/s.12AA of the Act. Such submission of the assessee was not accepted by the AO and therefore, the replies shown by the assessee in absence of certificate u/s.12AA of the Act, denying u/s.11 & 12 of the Act, the AO made an addition of Rs.19,08,939/-. Aggrieved by the order of the AO, the assessee preferred an appeal before the Ld.CIT(A), wherein, the contentions of the assessee were dismissed by the Ld.CIT(A) by observing as under:
2.3 Appellant has claimed that it had applied for registration u/s.12AA with the Commissioner of Income Tax. However, it had not received any order regarding approval or registration of the application by the Department. Appellant has drawn the attention of the undersigned to the decisions of various Courts that if the assessee's application for registration u/s.12AA has not responded within the stipulated period of six months then the application will be deemed to have been allowed. Appellant has filed any evidences of making of application u/s.12AA. No Copy of receipt of application or any other evidence has been filed to show that the application was made has claimed by the assessee. Therefore, the facts on record merely show that the assessee has not been registered u/s.12AA due to which it is not eligible to deduction u/s.11. The assessment order is hereby sustained and appellant's grounds are rejected.
Finding the order of the Ld.CIT(A) as erroneous by the assessee has now assailed the findings of the Ld.CIT(A) before us. The written submissions made by the assessee before us is extracted as under:
The appellant is registered with Society and also u/s 12A of the Income Tax Act 1961 is engaged in the management of an educational institution for women in tribal area. The Society had filed its return for the assessment year 2015-16 electronically on 11/10/2015 vide acknowledgement No. 85589621121015 declaring Nil Taxable income. The Trust is an Association of Persons (AOP) working for management of ITI (W) Narayanpur and had earned interest income during the year under review. Return Declaring Total Income of Rs. Nil Further it is also submitted that during the year under review the association had earned amounting to Rs.29,98,092/- out of which Rs.3,32,717/-has been utilized under the recurring nature of charitable expenses and had made capital expenditure total of Rs.3,12,294/- during the year was more than the income earned during the year under review, so that the earlier year's accumulation should have been utilized by the Association to meet out the requirement for the year under consideration. However, Ld.AO had made addition of Rs.19,08,939/- stating that assessee had not have Registration certificate u/s.12A.
:: 5 :: On aggrieved from the assessment order of A.O. the assessee preferred an appeal before Honorable Commissioner of Income Tax Appeal on the following grounds: - Addition of Rs. 19,08,939/- on Accounts of Non Availability of 12A certificate AO had made addition maintaining that we had not presented 12A certificate during the assessment proceedings hence we are not entitled to avail the benefit of Section 1 1 of The Income Tax Act, 1961 so that the income earned during the year under consideration should be treated as normal income and made addition of Rs.19,08,939/-, however at time of lent we had contained that - we applied for such registration in FY 2009-2010 while yet not got any registration Certificate or Rejection of application from the Income Tax Office. (Copy of Application in Form 10A is enclosed with this letter for your ready reference). Honorable Commissioner of Income Tax Appeal rejected on the following grounds: - 1) Assessee has filed Return of Income as Trust registered under section 12A. 2) Evidence regarding registration or application for registration under section 12A was not evident. But we appeal against the ground above mentioned because: 1) Return of Income mentions that we are registered under Section 12A. In the Form ITR-7 of Income Tax Return Regn No. for the Charitable institution registered U/s.12A was required while there was not any column for Deemed Registration Under Section 12A. So that we had provided a numerical code as Registration no. due to validate the ITR for the respective Asst. year. 2) We have submitted Form No 10 in our hearing before hon'ble CIT(Appeals) which is an evidence regarding application for registration under section 12A. We have relied on provision of Section 12AA of the Income Tax Act'1961 which states: (1) The Principal Commissioner or Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) or clause (aa) [or clause (ab)] of sub-section (I) of section 12A, shall— (a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf: and (b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he-— (i) shall pass an order in writing registering the trust or institution: (ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall he sent lo the applicant: provided that no order under sub-clause (ii) shall he passed unless the applicant has been given a reasonable opportunity of being heard. (IA) All applications, pending before the Principal Chief Commissioner or Chief Commissioner on which no order has been passed under clause (b) of sub-section (I) before the 1st day of June. 1999, shall stand transferred on that day to the Principal Commissioner or Commissioner and the Principal Commissioner or Commissioner may proceed with such applications under that sub-section from the stage at which they were on that day.
:: 6 :: (2) Every order granting or refusing registration under clause (b) of sub-section (I) shall be passed before the expiry of six months from the end of the month in which the application was received under clause (a) or clause (aa) [or clause (ab)] of sub-section (1) of section 12A. (3) Where a trust or an institution has been grunted registration under clause (b) of sub- section (1) or has obtained registration at any time under section 12A as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996) and subsequently the Principal Commissioner or Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may he. he shall pass an order in writing cancelling the registration of such trust or institution: Provided that no order under this sub-section shall he passed unless such trust or institution has been given a reasonable opportunity of being heard. (4) Without prejudice to the provisions of sub-section (3), where a trust or an institution has been granted registration under clause (h) of sub-section (I) or has obtained registration at any lime under section 12A /as it stood before its amendment hv the Finance (No. 2) Act, 1996 (33 of 1996)] and subsequently it is not noticed that the activities of the trust or the institution are being carried out in a manner that the provisions of sections 11 and 12 do not apply to exclude either whole or any part of the income of such Trust or institution due to operation of sub-section (I) of section 13, then, the Principal Commissioner or the Commissioner may by an order in writing cancel the registration of such trust or institution: Provided that the registration shall not be cancelled under this sub-section, if the trust or institution proves that there was a reasonable cause for the activities to be carried out in the said manner. In the our case we had applied for registration u/s 12A in form No. 10 vide application darted 25/03/2009 however after that we were not in receipt of any approval or rejection form the department. If no order is passed within the said six months then it shall be deemed that the Trust has been registered. In contention to the addition made by the Ld AO we would also like to quote following case laws :- In the recent case of Commissioner of Income Tax And Another vs. Society for the Promotion of Education Society [(2016) 95 CCH 0116 ISCC and (2016) 382 ITR 0006 (SC)] Hon’ble Supreme Court had suggested that - "Once application for registration u/s 12AA was made and in case same was not responded to within stipulated period of six months, application for registration was to be deemed to have been allowed." in the case. (Facts of the case are enclosed with this letter for your ready reference). Hon'ble Allahabad High Court has held that - "'faking the view that non-consideration of the registration application within the time fixed by s. 12AA(2) would result in deemed registration, may at the worst cause loss of some revenue or income-tax payable by the individual assessee. On the other hand, taking the contrary view and holding that not taking a decision within the time fixed by s. 12AA(2) is of no consequence would leave the assessee totally at the mercy of the IT authorities, inasmuch as the assessee has not been provided any remedy under the Act against non-decision. Besides, the above view does not create any irreversible situtation, because under s. 12AA(3). the registration can always be cancelled by the CIT. if he is satisfied that the objects of such trust or institution are not genuine or the activities are not being carried out in accordance with the objects of the trust or institution. The only drawback is that such cancellation would operate only prospectively. Therefore, if a view is taken that non-consideration of the registration application within the time fixed by s. 12AA(2) would amount to deemed grant of registration, the only adverse consequence likely to flow from such a view in respect of any case of that assessee arising in future would at best be some loss of revenue from that individual assessee from the date of expiry of the limitation under s.!2AA(3) till the date of cancellation of that registration, if such cancellation is called for. Moreover, this view furthers the object and purpose of the 7 :: aforesaid statutory provision. For the interpretation of a statute 'purposive construction' of the enactment which gives effect to the legislative purpose/intendment. if necessary must be followed and applied. Considering the pros and cons of the two views by far the better interpretation would be to hold that the effect of non-consideration of the application for registration within the time fixed by s. 12AA(2) would be a deemed grant of registration. There is no good reason to make the assessee suffer merely because the IT Department is not able to keep its officers under check and control, so as to take timely decisions in such simple matters such as consideration of applications for registration even within the large six month period provided by s.12AA(2). Accordingly, the respondents are directed, subject to any order which may be passed under s. 12AA(3), to treat the petitioner society as an institution duly approved and registered under s. 12AA and to recompute its income by applying the provision of s.
Accordingly, a formal certificate of approval will be issued forthwith to the petitioner by the respondent No. 2.— Chet Ram Vashist vs. Municipal Corporation AIR 1981 SC 653 distinguished; R. (Haw) vs. Secretary of State for the Home Department (2006) 3 All ER 428 applied." Society for the promotion of education adventure sport & conservation of environment vs. Commissioner of income tax & ors. [(2008) 76 CCH 0493 AllHC] It is also submitted that in the year under consideration, we had made surplus of expenditure over the revenue generated, so that Form No. 10 filed with the IT department. To justify the same, facts and document were produced before the Ld.AO, henceforth the contention of the Ld.AO is far away from the facts of cases and should be repealed. The assessing officer has made a lump sum addition without proper basis and proper evidence. The addition was made merely on guess work. The Hon'ble Supreme Court has held that Making addition merely on guesswork is not correct "Dhakeswari Cotton Mills Ltd. v CIT (1954) 26 ITR 775(SC)". Hence the disallowance of Rs 19,08,939/- should be deleted. With the above submissions we request your kind honor to delete the additions made by the Assessing Officer and oblige.
Contradicting submissions of the assessee, the Sr. DR vehemently supported the order of the AO & the Ld.CIT(A) and has requested to dispose of the matter in accordance with its facts on merits.
We have heard rival submissions, perused the material available on record, orders of Revenue authorities and the case laws relied upon by the parties. On perusal of the order of the Ld.CIT(A), it is apparent that while making the submissions before the Ld.CIT(A), the assessee had submitted copy of an application seeking registration u/s.12AA of the Act, in the prescribed Form No.10 on 25.03.2009. it was further submitted by the assessee that the assessee has not received any order from the office of Ld 8 :: PCIT regarding approval or rejection of the said application of the assessee till date, even after lapse of considerable time for more than six months as prescribed under the statute for this purpose. The assessee placed reliance on judgment of the Hon’ble Supreme Court in the case of CIT v. Society for Promotion of Education Society reported in [2016] 382 ITR 2006, wherein the Hon’ble Supreme Court had held that once application for registration u/s.12AA of the Act was made, in case the same was not responded within the stipulated period of six months, application of registration was to be deemed to have been allowed. Accordingly, it was the contentions of the assessee that since the requisite application was submitted by the assessee but the same was neither disposed off by the department within the stipulated time period of 6 months nor the department has brought on record anything contrary to the contention of the assessee, in support of this contention assessee had furnished copy of such application in Form No.10A before the Ld. AO as well as the Ld.CIT(A), therefore, the decision of the Hon’ble Supreme Court is squarely applicable in the case of the assessee. Consequently, the order of the AO and the Ld.CIT(A) deserves to be repealed. On these contentions of the assessee, which was not found favour with the Ld.CIT(A), though the same has been agreed to, the Ld.CIT(A) observed that the assessee has drawn his attention to the decision of various courts that if the assessee’s application for registration u/s.12AA of the Act has not been responded within the stipulated period of six months. This application will be deemed to have been allowed. The 9 :: Ld.CIT(A) has disregarded this contention of the assessee on the ground that the assessee has not filed any evidence of making application u/s.12AA of the Act, no copy of receipt of application or any other evidence has been filed to show that the application was made as claimed by the assessee. Such observation of the Ld.CIT(A) was found to be contrary to the submissions of the assessee stating that copy of application was furnished before the Ld CIT(A) a/w written submissions, which were reproduced in the order of the Ld.CIT(A). Under such circumstances, wherein facts of the case emerging from the assessee’s submission were neither denied nor correctly examined appreciated by the Ld CIT(A), we are of the considered opinion that, it would be appropriate to remit the matter back to the file of the Ld.CIT(A) to re-adjudicate the issue afresh taking into consideration the copy of application filed by the assessee in Form No.10 dated 25.03.2009 for seeking registration u/s.12AA of the Act, status of the same is also subject matter of investigation, thus, needs to be verified form the office of concerned PCIT. In our view, it is imperative upon the department to make such verification and thereafter decide the issue in accordance with facts of the case and with application of the extant law. Needless to say, assessee, shall be granted with reasonable opportunity of being heard and is directed to attend the appellate proceedings and assist the department in this process, failing which the adjudication may be completed and necessary orders be passed in accordance with law.
10 :: 10. In the result, appeal filed by the assessee is partly allowed for statistical purposes in terms of our observations hereinabove.
Order pronounced on the 22nd day of August 2023, in Raipur.