2022 (1) TMI 654 - HC - Income Tax

Reopening of assessment u/s 147 - absence of registration u/s 12A - whether Tribunal s order can be said as perverse in law in quashing reassessment order by merely relied upon proviso to Section 12A(2) of the Act and Circular No.1 of 2015 to quash the re- assessment order ignoring materials on record and factual matrix of the case? - HELD THAT - On combined reading of the aforesaid provisions with the Circular vis- -vis the material facts of the case it cannot be gainsaid that the case on hand would not fall under any of the exceptions carved out in the provisos as contemplated under Section 12A(2) of the Act. Moreover the interpretation given by the authorities to the Circular issued by the CBDT not being justifiable the Tribunal has rightly held that the provisos to Section 12A(2) of the Act are applicable to the case on hand. Reasons would indicate that the only reason for reopening of assessment is the absence of registration under Section 12A of the Act. Further the assessee has not filed return of income for the assessment year in question. A finding has been recorded on the facts of the case by the Tribunal on this aspect and the allegation that the assessee was claiming deductions under Sections 11 and 12 of the Act is held to be against the facts available on record. Having regard to these factual aspects and the provisos to Section 12A(2) of the Act we are of the considered view that the findings recorded by the Tribunal cannot be held to be perverse or arbitrary. We find no substantial questions of law arising for our consideration.

Summary

Issues:
1. Validity of Tribunal's order quashing reassessment under Section 260A of the Income Tax Act, 1961.
2. Interpretation of provisos to Section 12A(2) of the Act in relation to Trust's registration and exemption under Sections 11 and 12.
3. Consideration of Circular No.1/2015 by CBDT in the context of Trust's registration and tax liability.

Issue 1: Validity of Tribunal's order quashing reassessment under Section 260A:
The appeal was filed by the Revenue challenging the Tribunal's order quashing reassessment for the assessment year 2013-14. The Tribunal held the reassessment order as bad in law for violating the provisos to Section 12A(2) of the Act. The Revenue contended that the Tribunal's order did not conform with the provisions of Sections 11 and 12 of the Act. The Tribunal's decision was based on reliance on the provisos and Circular No.1/2015, ignoring the materials on record. However, the Senior counsel for the respondent argued that the Tribunal rightly set aside the reassessment order, as per the provisions of the Act.

Issue 2: Interpretation of provisos to Section 12A(2) in relation to Trust's registration and exemptions:
The Trust claimed to be a Trust and the reassessment order was passed under Section 143(3) read with Section 148 of the Act. The Assessing Officer found that the Trust had accumulated income without obtaining registration under Section 12AA of the Act. The Tribunal allowed the appeal and quashed the reassessment order, citing violation of the provisos to Section 12A(2) of the Act. The first proviso states that if registration is granted to the Trust under Section 12AA, Sections 11 and 12 shall apply to income from preceding assessment years. The second proviso prohibits action under Section 147 for non-registration of the Trust for the said assessment year. The Senior counsel for the respondent justified the Tribunal's decision based on these provisions.

Issue 3: Consideration of Circular No.1/2015 by CBDT in the context of Trust's registration and tax liability:
Circular No.1/2015 clarified the provisions of Section 12A of the Act, emphasizing that registration is required for claiming exemptions under Sections 11 and 12. The Circular aimed to provide relief to Trusts facing tax liability due to non-registration, allowing benefits retrospectively upon registration. The Circular also prohibits reopening assessments under Section 147 for non-registration of Trusts. The Tribunal, after considering the Circular and relevant provisions, held that the provisos to Section 12A(2) were applicable in the case, rejecting the Revenue's appeal. The Court concurred with the Tribunal's decision, dismissing the appeal.

In conclusion, the High Court upheld the Tribunal's decision to quash the reassessment order, emphasizing the application of the provisos to Section 12A(2) and Circular No.1/2015 in determining the Trust's registration and tax liability. The Court found no substantial questions of law warranting interference, ultimately dismissing the Revenue's appeal.