2022 (10) TMI 386 - AT - Income Tax

Exemption u/s 11 - Reopening of assessment u/s 147 - whether jurisdiction was vested on the ld. CIT(E) and not with the Territorial Commissioner? - trust has claimed the exemption under section 11 12 in the return after filing the application of registration u/s 12AA - Whether assessment beyond jurisdiction and the assessment orders are nonest ? - assessee computed capital gain tax by ascertaining the cost of acquisition on basis of the valuation of property through registered valuer - HELD THAT - Jurisdiction point is explained in this way that the territorial jurisdiction is overruled by the concurrent jurisdiction which is covered by the said notification of the CBDT. Furthermore the registration U/s 12AA is in action from the year of application. So the year of application is considered as deemed registration and the claim of deduction u/s 11 and 12 should be applicable accordingly. Accordingly the assessing authority had acted beyond jurisdiction. The grounds of related to the jurisdictional issue are in favour of the assessee. Applicability of section 11(1A) of the Act and exemption of capital gain arising out of compulsory acquisition of assessee s land - In adjudication of valuation of cost of acquisition it is very clear that a land was purchased before 01.04.1981. The base rate of index is started from 01.04.1981 as per the Act. The valuation of the property should not be the same on the date of acquisition beyond 01.04.1981 on the date 01/04/1981. We relied in the judgment Govindaraju vs. ITO Ward 8-(2) Bangalore 2015 (8) TMI 271 - KARNATAKA HIGH COURT Where assessee determined fair market value of property according to valuation report of a registered valuer Assessing Officer could not have arrived at fair market value of property ignoring valuation report on record. So the report drawn by the Government Valuer is very much accepted. Mr. Sehgal also mentioned that both the revenue authorities did not take contingence of any other valuation report from any of the authority. So this particular report is accepted. As the benefit of section 12A is applicable in both the years. Mr. Sehgal specially mentioned the judgment in the case of Prem Prakash Mandal vs. ITO 2021 (8) TMI 744 - ITAT RAIPUR with following observation Where assessee-trust engaged in social and religious activities was denied exemption under section 11 on ground of non-registration under section 12A however during pendency of appeal filed by assessee before CIT (A) against same assessee obtained registration under section 12A assessee s case would be covered under deemed registration and thus assessee would be entitled to claim exemption under section 11. Assessee appeal allowed.

Summary

Issues Involved:
1. Validity of jurisdiction of the Assessing Officer (AO).
2. Applicability of exemption under section 10(37) of the Income Tax Act.
3. Exemption of capital gain under section 11(1A) of the Income Tax Act.
4. Applicability of section 96 of the RFCTLARR Act.
5. Valuation of cost of acquisition of land.
6. Status of the assessee as AOP (Trust).
7. Benefit of registration under section 12A of the Income Tax Act.

Detailed Analysis:

Issue 1: Validity of Jurisdiction of the Assessing Officer (AO)
The assessee argued that the AO did not hold valid jurisdiction over them, citing that the jurisdiction should have shifted to the Commissioner of Income Tax (Exemption) [CIT(E)] due to their application for exemption under section 12AA. The Tribunal observed that the assessee's application for exemption was filed before the return of income. The Tribunal concluded that the AO acted beyond jurisdiction as the concurrent jurisdiction was vested with CIT(E) due to the notification No. 52/2014 dated 22.10.2014. Thus, the grounds related to jurisdictional issues were decided in favor of the assessee.

Issue 2: Applicability of Exemption under Section 10(37)
The assessee claimed that the amount received on the acquisition of land was not subject to tax under section 10(37) of the Act. However, the Tribunal did not find specific details in the judgment regarding the final decision on this issue, focusing more on the jurisdiction and registration aspects.

Issue 3: Exemption of Capital Gain under Section 11(1A)
The Tribunal noted that the assessee had invested the net consideration from the acquisition of land into another agricultural land, claiming exemption under section 11(1A). The Tribunal held that since the assessee was deemed to be registered under section 12AA for the relevant assessment years, they were eligible for the exemption under section 11(1A). The expenses related to Golak donation and interest were also to be considered under section 11.

Issue 4: Applicability of Section 96 of the RFCTLARR Act
The assessee claimed that the provisions of section 96 of the RFCTLARR Act applied to their case, making the amount received from the government on the acquisition of land non-taxable. The Tribunal did not provide a specific ruling on this issue within the detailed analysis, focusing instead on the broader jurisdictional and registration issues.

Issue 5: Valuation of Cost of Acquisition of Land
The assessee presented a valuation report from a government-approved valuer to ascertain the cost of acquisition as of 01.04.1981. The AO rejected this valuation, using a different basis for calculation. The Tribunal accepted the assessee's valuation report, stating that the AO did not provide any alternative valuation report. The Tribunal relied on the judgment in Govindaraju vs. ITO, which supported the acceptance of a registered valuer's report.

Issue 6: Status of the Assessee as AOP (Trust)
The AO assessed the status of the assessee as an Association of Persons (AOP) instead of a trust. The Tribunal found that the assessee was incorporated as a trust and had applied for registration under section 12AA. Therefore, the status of the assessee should be considered as a trust, not as an AOP.

Issue 7: Benefit of Registration under Section 12A
The Tribunal held that the assessee was entitled to the benefit of registration under section 12A for the assessment years 2014-15 and 2015-16, as the application for registration was filed within the relevant period, and the registration was subsequently granted. The Tribunal directed the AO to grant the benefit of sections 11 and 12 for the relevant assessment years.

Conclusion:
The Tribunal allowed the appeals, directing the AO to grant the benefits of sections 11 and 12 for the assessment years 2014-15 and 2015-16, and accepted the assessee's valuation report for the cost of acquisition of land. The jurisdictional issues were decided in favor of the assessee, confirming that the AO acted beyond their jurisdiction.