2022 (11) TMI 1210 - AT - Income Tax

Exemption u/s 11 - Claiming of benefit of exemption for the assessment years which were pending on the date of registration u/s 12A - intimation u/s.143(1) denying benefit of deduction under section 11 - scope of powers of CPC - HELD THAT - Where the registration has been granted to the Trust under Section 12AA, then, the provisions of Sections 11 and 12 shall apply in respect of any income derived from property held under Trust of any assessment year preceding the aforesaid assessment year, for which assessment proceedings are pending before the AO as on the date of such registration. The objects and activities of such Trust remain the same for such preceding assessment year. The intimation u/s.143(1) does not spell out the reason as to why the benefit of Sec.11 of the Act was not given to the Assessee for AY 2018-19. The submissions of the parties were made on the premise that it is only for want of registration u/s.12A of the Act, that the benefit of exemption u/s.11 was not given to the Assessee. In terms of the 1st proviso to Sec.12A (2) of the Act, the action of the revenue authorities cannot be sustained. DR made reference to CBDT Circular No.1/2015 dated 21.1.2015 wherein the purpose of the first proviso has been explained as a measure to remove hardship in genuine cases, where the application for registration u/s.12A is unduly delayed by the revenue authority and such facts do not exist in the present case.On a plain reading of the proviso, such condition for claiming the benefits of the proviso has not been laid down therein. Hence, the argument advanced by the learned DR cannot be accepted. In the light of the fact that benefit of registration granted u/s.12A of the Act from AY 2019-20, would be available for earlier years also that are pending as on the date of grant of registration as per the 1st proviso to Sec.12A(2) the denial of benefit of exemption u/s.11 on the ground of absence of registration u/s.12A of the Act, cannot be sustained. We therefore hold that the adjustment made in the intimation u/s.143(1)(a) of the Act, cannot be sustained as it is beyond the scope of powers u/s.143(1)(a) of the Act and the adjustment so made is directed to be deleted. The appeal of the Assessee is accordingly allowed.

Summary

Issues:
1. Denial of exemption u/s.11 of the Income Tax Act, 1961 for Assessment Year 2018-19.
2. Validity of intimation u/s.143(1) of the Act dated 30.09.2019.
3. Interpretation of provisions under Section 12A(2) of the Act regarding registration benefits for pending assessments.

Analysis:
1. The Assessee, a Trust registered under section 12AA of the Act, filed a return for Assessment Year 2018-19 declaring Nil income. However, the Assessing Officer denied the claim for exemption u/s.11 of the Act amounting to Rs.26,30,538/-. The intimation u/s.143(1) did not provide reasons for the denial, leading to an appeal by the Assessee before the CIT(A) and subsequently before the Tribunal.

2. The Tribunal noted that the denial of exemption was seemingly due to the lack of registration u/s.12A of the Act at the time of assessment. However, the Assessee had applied for registration on 31.8.2019 and was granted registration on 20.9.2019, albeit valid only for AY 2019-20. The Tribunal referred to the first proviso to Sec.12A(2) of the Act, which allows benefits of registration to pending assessments immediately preceding the assessment year for which registration is granted. The Tribunal held that the denial of exemption based on the absence of registration for AY 2018-19 was not sustainable, as the registration granted for AY 2019-20 should extend to pending assessments.

3. The Tribunal further analyzed the scope of powers under Sec.143(1)(a) of the Act concerning adjustments in processing returns. It highlighted that the only clause possibly applicable was clause (ii), which deals with incorrect claims apparent from the return. Given the provisions of the first proviso to Sec.12A(2) extending registration benefits to pending assessments, the denial of exemption u/s.11 based on registration status was deemed beyond the scope of powers under Sec.143(1)(a). Consequently, the Tribunal directed the deletion of the adjustment made in the intimation u/s.143(1)(a) and allowed the Assessee's appeal.

In conclusion, the Tribunal allowed the Assessee's appeal, emphasizing the statutory provisions under Section 12A(2) and Sec.143(1)(a) of the Act to grant the benefit of exemption u/s.11 for Assessment Year 2018-19 despite the timing of registration under Section 12A. The judgment clarified the interplay between registration requirements and the processing of returns, ensuring fair treatment for taxpayers in line with legal provisions.