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TMI Blog2018 (10) TMI 671X X X X Extracts X X X X X X X X Extracts X X X X ..... ) that the assessee having not filed its return within the prescribed time it had failed to comply with the requirement prescribed, is not tenable. As for the requirement of filing report of audit in the prescribed form, the said condition has been held by courts to be merely procedural and therefore directory in nature and not mandatory for the purpose of claiming exemption u/s 11 & 12 of the Act. The reassessment framed is therefore set aside. As a consequence the addition made is deleted. - Decided in favor of assessee. - ITA No.238/Chd/2018 - - - Dated:- 20-8-2018 - SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER For The Appellant : S/Shri Ajay Jain, CA B.M. Monga, Adv. For The Respondent : Shri Surinder Meena, JCIT ORDER Ms. Annapurna Gupta, A M : The present appeal has been preferred by the assessee against the order of Ld. Commissioner of Income Tax (Appeals) (hereinafter referred to as Ld.CIT(A) ), Palampur dated 30.11.2017 relating to assessment year 2012-13. 2. The assessee has raised following grounds: 1. That the order of Learned Commissioner of Income Tax (Appeals) is against the law and facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee holding that the said benefit was available only if the proceedings related to the impugned year were pending as on the date of grant of registration u/s 12AA of the Act and since registration in the present case was granted on 07-11-2012 while the proceedings for the impugned year were initiated by way of issuing notice u/s 148 only thereafter, on 27/28-05-2014, the assessee was not entitled for the benefit of the first proviso to Section 12A(2).Accordingly the Net Profit shown by the assessee of ₹ 1,42,21,024/- was held as taxable income for the year. 4. The matter was carried in appeal before the Ld. CIT(A), who upheld the order of the Assessing Officer holding that the benefit of the first Proviso to Section 12A(2) was not available to assessee since no assessment proceedings were pending on the date of grant of registration u/s 12A of the Act. Further, the assessee raised another contention before the CIT(A), that its case was covered under the Second Proviso to Section 12A(2) of the Act. It was pointed out that the said proviso bars the Assessing Officer from initiating action u/s 147 to make the income of preceding years taxable in case of trusts wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of registration u/s 12AA of the Act provided the objects and activities of the institution were the same during the preceding assessment years assessment for which is pending completion as during the assessment year for which the institution has been granted registration u/s 12AA. In the case of the appellant, no return of income had been filed by it u/s 139 of the Act for Assessment Year 2012-13. The return of income was filed by it only on 31-03-2015 in response to notice u/s 148 issued on 27/28-05-2014. Hence, Learned Assessing Officer has rightly held that no assessment was pending on the date of registration u/s 12AA, i. e., on 07-11 2012 and the 1st proviso to section 12A(2) was not applicable in the case of the appellant. (iv) Another plea taken by the appellant during appeal is that its case was also covered under the 2nd Proviso to section 12A(2) of the Act. It has been argued that the 2nd proviso bars the Assessing Officer from initiating action u/s 147 of the Act in case of such trust or institution to which registration has been granted for any assessment year preceding the assessment year for which registration has been granted u/s 12AA of the Act only for non- r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income. The said return was filed on 31.03.2015 declaring Nil income u/s 11/12 of the I.T. Act. However, section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the conditions of the clauses (aa) and (b) of section 12A(1) of the Act are cumulatively met. Section 12A(2) and the three provisos to this section further govern the condition laid down in clause (aa) only. The condition as laid down by clause (b) operates in its own right and has to be met separately. As per clause (b), where the total income of the trust or institution as computed under this Act without giving effect to the provisions of section 11 and section 12 exceeds the maximum amount which is not chargeable to Income Tax in any previous year, the accounts of the trust or institutions for that year have to be audited and the report of such audit in the prescribed form has to be furnished along with the return of income for the relevant assessment year. The return of income for Assessment Year 2012-13 could be filed by the appellant only upto 31.03.2013. However, neither the return of income nor the audit report was furnished upto 31.03.2013. In view of above, the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovide that in a case where a trust or institution has been granted registration under section 12AA of the Income-tax Act, the benefit of sections 11 and 12 of the said Act shall be available in respect of any income derived from property held under trust in any assessment proceeding for an earlier assessment year which is pending before the Assessing Officer as on the date of such registration, if the objects and activities of such trust or institutions in the relevant earlier Assessment Year are the same as those on the basis of which such registration has been granted. Further, it has been provided that no action for reopening of an assessment under section 147 of the Income-tax Act shall be taken by the Assessing Officer in the case of such trust or institution for any assessment year preceding the first assessment year for which the registration applies, merely for the reason that such trust or institution has not obtained the registration under section 12AA for the said assessment year. 6. Ld. D.R. on the other hand relied on the order of the CIT(Appeals) stating that no benefit can be derived by the assessee from the Second proviso to section 12A(2) ,since in the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his juncture. 12A (1) The provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely: (a) the person in receipt of the income has made an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the Principal Commissioner or Commissioner before the 1st day of July, 1973, or before the expiry of a period of one year from the date of the creation of the trust or the establishment of the institution, [whichever is later and such trust or institution is registered under section 12AA]: [ Provided that where an application for registration of the trust or institution is made after the expiry of the period aforesaid, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution,- (b) where the total income of the trust or institution as computed under this Act without giving effect to the [provisions of section 11 and section 12 exceeds the maximum amount which is not chargeable to income-tax in any previous year], the accounts of the trust or institution for that year h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Income of the assessee was put to tax. Order of the ITO was upheld by the CIT(A) against which assessee filed further appeal before the Tribunal which was accepted. On these facts, it was held that the IT authority had taken hyper-technical view of the matter where the assessee has complied with the provisions of the Act in the course of assessment by curing the defect in the return by filing an audit report. The ITO cannot ignore such audit report or the return in completing the assessment. The delay in getting the account audited and in filing the return (sic-report) in Form No. 10B did not defeat any object of the Act and, therefore, the provision was directory in nature. It also referred to the circular of the Board dt. 9th Feb., 1978. 11. Gujarat High Court in Gujarat Oil Allied Industries case (supra) was considering s. 80J(6A). Gujarat High Court took the view put by this Court in Jaideep Industries case (supra). It was held that the provision about furnishing of the auditor s report along with the return has to be treated as procedural provision and, therefore, directory in nature. 12. Provisions of s. 80J(6A) and s. 12A of the Act are para materia. The rati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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