2024 (2) TMI 602 - AT - Income Tax

Reopening of assessment u/s 147 - eligibility of exemption u/s 11 - AO invoked the provisions of section 12A(1)(b) as per which assessee has failed to get its accounts audited and furnish the return of income along with the audited report, in case of failure the assessee is not eligible to get the exemption u/s 11 - HELD THAT - AO himself observed in his order that assessee had in fact filed its return of income on 13.12.2013. From the above it is also clear that the reason for reopening itself fails in this case, prima facie the assessment was reopened with the wrong reasoning that assessee has not filed its return of income by merely observing from IT Portal. Assessee has filed its return of income and AO has accepted the same. On this count itself the assessment made by the AO with wrong reasoning is deserves to be quashed. Eligibility to claim deduction u/s 11 - CIT(A) has applied the amendment made in the provisions of section in the A.Y. 2018-19. Since the amendment was made in A.Y. 2018-19, in our view, this amendment cannot be applied for the A.Y. 2010-11. Therefore, the appellate order passed by applying provisions, which were not relevant for the assessment year under consideration is bad in law. Accordingly, we hold that the assessment order is bad in law for reopening the assessment with the wrong reasons and appellate order passed with the amended provisions under section 12A(1)(ba) is also bad in law. Assessee appeal allowed.

Summary

Issues Involved:

1. Validity of reopening the assessment under section 147 of the Income-tax Act, 1961.
2. Eligibility to claim deduction under section 11 of the Income-tax Act, 1961, despite the belated filing of the return of income and audit report.
3. Applicability of the amended provisions of section 12A(1)(ba) for Assessment Year 2010-11.

Summary:

1. Validity of Reopening the Assessment Under Section 147:

The assessee's case was reopened under section 147 of the Income-tax Act, 1961, on the grounds that the assessee had not filed its return of income for A.Y. 2010-11. The Assessing Officer (AO) issued a notice under section 148, and the assessee subsequently filed its return of income. However, it was observed that the assessee had already filed its return on 13.12.2013, which was beyond the period of limitation under section 139(4A). The Tribunal noted that the reopening of the assessment was based on incorrect reasoning, as the assessee had indeed filed its return of income. Therefore, the reopening of the assessment was quashed as it was based on a wrong premise.

2. Eligibility to Claim Deduction Under Section 11:

The assessee, a registered trust under section 12A, claimed deductions under section 11. The AO denied the exemption on the grounds that the return of income and audit report were filed belatedly. The CIT(A) upheld this decision, relying on the provisions of section 12A(1)(ba) introduced by the Finance Act, 2017, applicable from A.Y. 2018-19. The Tribunal observed that the relevant assessment year was 2010-11, and the provisions of section 12A(1)(ba) were not applicable retrospectively. Therefore, the denial of exemption under section 11 based on the amended provisions was incorrect.

3. Applicability of Amended Provisions of Section 12A(1)(ba):

The CIT(A) applied the provisions of section 12A(1)(ba) to deny the exemption under section 11, which were introduced from A.Y. 2018-19. The Tribunal held that these provisions could not be applied retrospectively to A.Y. 2010-11. The case law relied upon by the CIT(A) related to A.Y. 2019-20 and was not relevant for the assessment year under consideration. Consequently, the appellate order passed by applying the amended provisions was deemed bad in law.

Conclusion:

The Tribunal concluded that the reopening of the assessment was invalid as it was based on incorrect reasoning. Additionally, the denial of exemption under section 11 based on the belated filing of the return and audit report was incorrect, as the relevant provisions were not applicable retrospectively. Therefore, the assessment order and the appellate order were quashed, and the appeals filed by the assessee were allowed. The decision for A.Y. 2010-11 was also applied mutatis mutandis to A.Y. 2011-12, resulting in the allowance of both appeals.