2019 (9) TMI 758 - AT - Income Tax

Validity of the proceedings u/s 147/148 - assessee failed to produce the copy of certificate under section 12AA - HELD THAT - In the present case it is an admitted fact that the A.O. while framing the original assessment under section 143(3) of the Act, vide assessment order dt. 31/01/2013 accepted that the assessee was having registration under section 12A he observed in the said order that the assessee had submitted a copy of order of the ITAT in assessee s own case for the A.Y. 2006-07 wherein the ITAT had mentioned that the assessee was registered with the CIT under section 12AA of the Act. In the present case, during the course of original assessment proceedings, it was also stated before the A.O. that the original certificate of registration was misplaced and the assessee has applied for registration afresh Claim of the assessee was that the assessee had been registered u/s 12A with the Department, the register in which the names of the charitable institution are entered lies with the Department and as to whether the assessee had been registered u/s 12A of the Act or not, could have been easily verified by the Assessing Officer from the record of the Department / from the register containing the entries of registration and from other relevant record. Assessing Officer neither during the original assessment proceedings verified the said facts from the record nor the said record has been verified before reopening of the assessment. Thus, no tangible information had come into the possession of the Assessing Officer to substantiate that the assessee was not registered u/s 12A of the Act for the assessment year under consideration. Therefore, merely on this basis that the assessee has applied for registration afresh subsequently may arise a suspicion or doubt in the mind of the Assessing Officer that the assessee was not registered u/s 12A of the Act, however, on the basis of the mere suspicion or doubt, the reopening of the assessment cannot be held to be justified, especially when, the said doubt could have been clarified by the Assessing Officer by consulting/ verifying from the Department s record. Since the reopening of the assessment for the assessment year under consideration has been made merely on assumption and without verification of the relevant fact and without any tangible information coming into the possession of the Assessing Officer that the assessee was not registered u/s 12A of the Act, the reopening cannot be held to be valid - Decided in favour of assessee

Issues Involved:
1. Validity of proceedings under section 147/148 of the Income Tax Act, 1961.
2. Justification of not allowing the exemption under section 11 of the Income Tax Act, 1961.
3. Evaluation of the actions of the CIT(A) and AO against the law and facts of the case.

Issue-wise Detailed Analysis:

1. Validity of proceedings under section 147/148 of the Income Tax Act, 1961:

The assessee challenged the validity of the proceedings initiated under section 147/148 of the Income Tax Act, 1961. The facts revealed that the assessee society, registered on 06/03/2003 under the Societies Registration Act, 1860, had filed its return of income showing NIL income, which was accepted by the AO under section 143(3) on 31/10/2013. However, the AO later observed that the assessee did not have registration under section 12AA of the Act, leading to the reopening of the assessment under section 147. The AO made an addition of ?1,35,12,586/- as the assessee failed to produce the certificate under section 12AA.

The CIT(A) upheld the AO's action, noting that the reassessment was justified as the assessee was not registered under section 12AA. The assessee argued that the reopening was based on a change of opinion and not on any tangible material. It was contended that the AO was already aware of the facts during the original assessment and that the reopening was not valid.

The Tribunal found that the AO had reopened the assessment without verifying from the Department’s records whether the assessee was registered under section 12AA. The Tribunal held that the reopening was based on mere suspicion or doubt, which could have been clarified by the AO by consulting the Department’s records. Therefore, the reopening of the assessment was not justified and was quashed.

2. Justification of not allowing the exemption under section 11 of the Income Tax Act, 1961:

The AO disallowed the exemption claimed under section 11 of the Act, as the assessee failed to produce the certificate of registration under section 12AA. The CIT(A) upheld this disallowance, noting that the assessee was not registered under section 12AA and had applied for fresh registration, which was rejected by the CIT.

The Tribunal observed that during the original assessment, the AO had accepted the assessee's claim of exemption under section 11 based on the ITAT’s order for the assessment year 2006-07, which mentioned that the assessee was registered under section 12AA. The Tribunal noted that the Department had not brought any material on record to prove that the assessee was not registered under section 12AA for the year under consideration. Therefore, the disallowance of exemption under section 11 was not justified.

3. Evaluation of the actions of the CIT(A) and AO against the law and facts of the case:

The assessee argued that the actions of the CIT(A) and AO were against the law and facts of the case. The Tribunal found merit in the assessee’s submissions, noting that the AO had reopened the assessment without any tangible material and based on mere suspicion. The Tribunal also observed that the AO did not verify the relevant facts from the Department’s records before reopening the assessment. The Tribunal quashed the reopening of the assessment and allowed the appeal of the assessee.

Conclusion:

The Tribunal held that the reopening of the assessment under section 147/148 was not valid as it was based on mere suspicion and without any tangible material. The disallowance of exemption under section 11 was also not justified as the Department failed to prove that the assessee was not registered under section 12AA. The appeal of the assessee was allowed.

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