2019 (5) TMI 618 - AT - Income Tax

Exemption u/s.11 - deemed registration u/s 12AA - applicability of Proviso to Section 12A sub-section (2) during appeal proceedings or restricted to assessment proceedings - registration granted to the assessee u/s.12AA during the pendency of proceedings before the ld. CIT(A) - HELD THAT - What AO can do, can be done by CIT(A) in an appeal before him. Even what the AO could have done but failed to do, can also be done by him. It shows that the powers of a CIT(A) in an appeal against an assessment order are almost similar to those of an AO. If extend this analogy to the provisions of section 12A(2), an irresistible conclusion which follows is that the benefit of the proviso is available not only when the assessment proceedings are pending before the AO but also when an appeal against the assessment order is pending before the ld. CIT(A). It is so for the reason that the appeal proceedings are nothing but continuation of the assessment proceedings. As at the time of granting registration by the ld. CIT (Exemptions) to the assessee, the appeal of the assessee was pending before the ld. CIT(A), in my considered opinion, the benefit of first proviso to section 12A(2) ought to have been granted. My view is fortified by the judgment of Hon ble Rajasthan High Court in CIT (Exemptions) Vs. Shree Shyam Mandir Committee 2017 (10) TMI 1450 - RAJASTHAN HIGH COURT in which it has been held that An assessment proceedings which is pending in appeal before the appellate authority should be deemed to be assessment proceedings pending before the AO. within the meaning of the term as envisaged under the proviso. It follows there from that the assessee which obtained registration u/s.12AA of the Act during the pending of appeal was entitled for exemption claimed u/s.11. The additional ground thus raised is allowed by holding that the assessee would be entitled to exemption u/ss. 11 and 12 of the Act for the year under consideration on the reason that the registration was, in fact, granted to the assessee u/s.12AA during the pendency of proceedings before the ld. CIT(A). In the light of my above conclusion on the additional ground, the impugned order is set-aside and the matter is restored to the file of AO for framing a de novo assessment as per law after allowing a reasonable opportunity of hearing to the assessee. Needless to say, the assessee in such assessment proceedings would be considered to have been granted registration and the provisions of sections 11 and 12 shall apply pro tanto. Appeal is allowed for statistical purposes.

Summary

Issues:
1. Whether the appellant, granted registration under section 12AA during pending proceedings before CIT(A), is entitled to exemption under section 11 for the assessment year 2014-15?

Analysis:
1. The appeal concerns an additional ground raised by the assessee regarding the entitlement to exemption under section 11 of the Income Tax Act for the year 2014-15 due to being granted registration under section 12AA during the pendency of proceedings before CIT(A).

2. The factual background reveals that the assessee trust filed a return declaring total income as Nil. The Assessing Officer (AO) assessed the total income at ?5,60,430 due to lack of registration under section 12AA. The CIT(A) upheld the assessment, leading to the appeal before the Tribunal.

3. The key legal issue revolves around the interpretation of the proviso to section 12A(2), which allows the application of sections 11 and 12 for preceding assessment years if registration is granted during pending assessment proceedings. The timing of registration and pendency of proceedings are crucial factors in determining the applicability of the proviso.

4. The Tribunal analyzed the powers of the CIT(A) in appeal proceedings, highlighting that the CIT(A) can consider new issues arising from assessment proceedings and has similar powers to an AO. The appeal proceedings are seen as a continuation of the assessment proceedings, supporting the extension of benefits under the proviso.

5. Referring to the objective of the proviso to promote genuine charitable activities, the Tribunal emphasized that the benefit should be extended to appeal proceedings to fulfill the legislative intent. Citing a judgment, the Tribunal held that registration during appeal proceedings should be considered as pending assessment for the proviso's application.

6. Consequently, the Tribunal allowed the additional ground raised by the assessee, concluding that the assessee is entitled to exemption under sections 11 and 12 for the year in question due to being granted registration during the pendency of proceedings before CIT(A).

7. The Tribunal set aside the impugned order and remanded the matter to the AO for a fresh assessment, ensuring the assessee is treated as having been granted registration for the application of sections 11 and 12. The appeal was allowed for statistical purposes.

This detailed analysis provides a comprehensive understanding of the legal judgment, focusing on the issues raised and the Tribunal's interpretation of relevant provisions and precedents.