2012 (8) TMI 222 - AT - Income Tax

Charitable trust - denial of exemption under section 11 of the Act Held that - In the absence of any such cancellation of registration under section 12A - there is no justification in denying the exemption allowable under section 11 to the assessee while completing the assessment - assessee is allowed for statistical purposes.

Issues Involved:
1. Reopening of assessment under section 147 of the Income Tax Act.
2. Denial of exemption under sections 11 and 12 due to lack of registration under section 12AA.
3. Historical registration and compliance under section 12A.

Issue-wise Detailed Analysis:

1. Reopening of Assessment under Section 147:

The assessee contended that the reopening of the assessment under section 147 was not justified. The Assessing Officer had issued a notice under section 148 on 30.03.2009, as it was discovered that the trust was not registered under section 12AA, a prerequisite for claiming exemptions under sections 11 and 12. The CIT(A) upheld the reopening, stating that the returns had not been scrutinized in earlier years, and thus, there was no prior opportunity to disallow the exemption claims. The CIT(A) concluded that the reopening was valid due to the escapement of assessment, as defined under clause (b) of Explanation 2 to section 147, and within the six-year time limit. The Tribunal agreed with this view, sustaining the CIT(A)'s decision and dismissing the assessee's appeal on this issue.

2. Denial of Exemption under Sections 11 and 12 due to Lack of Registration under Section 12AA:

The assessee argued that it was a public charitable trust established in 1939 and had been claiming exemptions under section 11 since its inception, with the Department accepting such claims until the assessment year 2002-03. The trust claimed it was registered under section 12A and that there was no need for re-registration under section 12AA, introduced later. The assessee provided a letter from the DIT(E) confirming that no specific orders under section 12A were passed historically, but the Department had acknowledged the application and made assessments on that basis. The Tribunal noted that the provisions of section 12AA, effective from 01.04.1997, required a written order for registration, unlike section 12A. Since the CIT had not canceled the registration under section 12A, the Tribunal found no justification for denying the exemption under section 11. The Tribunal remitted the issue back to the Assessing Officer to verify the historical records and determine the trust's registration status under section 12A.

3. Historical Registration and Compliance under Section 12A:

The Tribunal examined the historical context, noting that prior to 1972, there were no specific requirements for trust administration under the Income Tax Act. The Finance Act, 1972, introduced section 12A, requiring trusts to register by submitting trust deeds, with the Commissioner of Income Tax acknowledging receipt and assigning a registration number. The Tribunal emphasized that the procedure for registration under section 12A did not necessitate a formal order, unlike section 12AA. The Tribunal directed the Assessing Officer to verify whether the assessee had filed for registration under section 12A and if a registration number was assigned, as claimed by the assessee. The Tribunal concluded that if the assessee was indeed registered under section 12A, the denial of exemption under section 11 for the assessment year 2002-03 was unjustified.

Conclusion:

The Tribunal set aside the orders of the lower authorities and remitted the issue to the Assessing Officer for fresh examination, directing verification of the assessee's historical registration under section 12A. The other grounds of appeal were deemed academic and were also remitted to the Assessing Officer for fresh consideration. The appeal was allowed for statistical purposes.

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