2019 (9) TMI 1003 - AT - Income Tax

Assessment u/s 154 - AO rejected the appellant s rectification application against the intimation u/s 143(1) denying exemption claimed by the assessee u/s. 11 - whether the AO could have denied the benefit of exemption claimed u/s 11 by the appellant while processing the return of income u/s. 143(1) which otherwise permits the AO to only make the following adjustments to the income returned? - HELD THAT - Since the facts of the appellant s case are admittedly analogous to the facts involved in the case of Indian Chamber of Commerce 2014 (12) TMI 256 - ITAT KOLKATA we hold that no material change took place in the legal position even after the amendment was brought in Section 2(15) by the Finance Act, 2008. We therefore do not find merit in the findings of the CIT(A) that the assessee would not be eligible for exemption u/s 11 because it is primarily set up with the object of promoting trade commerce. Since we find that the objects and the activities of the appellant were for charitable purpose, then there should be no reason for the Revenue to reject the appellant s application for registration u/s 12A of the Act and therby deny the benefit of Section 11 which was admittedly granted till AY 2009/10. As regards the AO s case that the appellant was not eligible for exemption u/s 11 in absence of grant of registration certificate u/s 12A by the Ld. CIT, we find that this issue is dealt by the Hon ble Allahabad High Court in its judgment in the case of Society for the Promotion of Education, Adventure Sport Conservation of Environment Vs CIT 2008 (4) TMI 700 - ALLAHABAD HIGH COURT as held that if the application for registration u/s 12A is not disposed by the Commissioner within six months then the registration will be deemed to have been granted. Also confirmed by SC 2016 (2) TMI 672 - SC ORDER We find merit in the ld. AR s claim that the application dated 28.06.1973 ought to have been disposed by the Commissioner with six months i.e. on or before 28.12.1973 and in its absence the registration was deemed to be granted to the appellant on expiry of the said period of six months. We therefore hold that the order u/s 143(1) denying the benefit of exemption u/s 11 of the Act was contrary to the legal principle laid down by the Hon ble Supreme Court (supra). Consequently therefore we do not find merit in the orders of the lower authorities upholding the intimation u/s 143(1) and rejecting the appellant s application for rectification u/s 154 of the Act. For the reasons set out in the foregoing therefore the orders of the lower authorities as well as the adjustments carried out by the AO in the intimation u/s 143(1) are set aside. - Decided in favour of assessee

Summary

Issues Involved:
1. Denial of exemption under Section 11 of the Income-tax Act, 1961.
2. Rejection of the appellant's rectification application under Section 154.
3. Short credit of TDS allowed by the AO in the intimation under Section 143(1).

Detailed Analysis:

1. Denial of Exemption under Section 11:
The appellant, a non-profit organization established in 1893, claimed exemption under Section 11 of the Income-tax Act, 1961, for the assessment years (AYs) 2011-12 and 2012-13. The appellant argued that it had always been considered a charitable institution and had complied with the statutory requirements by applying for registration under Section 12A on 28.06.1973. Despite this, the Commissioner of Income Tax (CIT) did not dispose of the application. The appellant's claim for exemption was denied by the Assessing Officer (AO) on the grounds that the appellant did not possess a registration certificate under Section 12A.

The tribunal noted that the appellant’s application for registration remained pending, and no action was taken by the CIT. The tribunal referred to the judgment of the Hon’ble Supreme Court in the case of CIT Vs Society for the Promotion of Education, Adventure Sport & Conservation of Environment, which established that if an application for registration under Section 12AA is not disposed of within six months, the registration is deemed to be granted. Consequently, the tribunal held that the appellant was deemed to have been granted registration under Section 12A from 28.12.1973 and was therefore eligible for exemption under Section 11.

2. Rejection of the Appellant's Rectification Application under Section 154:
The appellant filed a rectification application under Section 154 against the intimation under Section 143(1), which denied the exemption claimed under Section 11. The AO rejected this application, stating that the absence of a registration certificate under Section 12A did not constitute an apparent mistake on the record. The CIT(A) upheld this decision.

The tribunal found that the AO's denial of exemption under Section 11 while processing the return under Section 143(1) required the application of mind and was beyond the scope of permissible adjustments under Section 143(1). The tribunal emphasized that the appellant had complied with the statutory requirements by filing an application for registration under Section 12A, and the inaction of the CIT could not penalize the appellant. Therefore, the tribunal set aside the orders of the lower authorities and allowed the appellant's rectification application under Section 154.

3. Short Credit of TDS Allowed by the AO in the Intimation under Section 143(1):
The appellant contended that the AO allowed short credit of Tax Deducted at Source (TDS) in the intimation under Section 143(1). The tribunal directed the AO to grant credit of TDS as per law, thereby allowing this ground for statistical purposes.

Conclusion:
The tribunal allowed both appeals of the appellant for AYs 2011-12 and 2012-13. It directed the AO to vacate the adjustments made in the intimation issued under Section 143(1) and to grant credit for TDS as per law. The tribunal's decision was based on the principle that the appellant was deemed to have been granted registration under Section 12A, and therefore, the denial of exemption under Section 11 was not justified.