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TMI Blog2023 (8) TMI 1574X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT-'A' has erred in holding that Assessing Officer was justified in making addition of surplus of Rs. 22,97,578/- to the income of assessee in status of A. O. P. and charging tax at Maximum Marginal Rate. The said finding is illegal & unjustified. The assessee was not liable for payment of any tax on surplus as he was entitled to benefit of Section 11 read with Section 12AA of the Income Tax Act. 3. That the learned CIT-'A' was not justified in ignoring the binding judgement of the Jurisdictional Rajasthan High Court in Case of CIT(Exemption) v. Shree Shyam Mandir Committee 400 ITR 466(Raj.) where it was held that appeal is a continuation of original proceedings & assessment proceedings pending before appellate authority should be deemed to be assessment proceedings pending before Assessing Officer within meaning of Section 12A. The said action is illegal & unjustified. 3. That action of lower authorities in treating surplus of Rs. 22,97,578/- as income & charging tax at Maximum Marginal Rate is illegal & unjustified. 4. That charging of interest Under Section 234B is illegal." 2.1. Apropos Ground Nos. 1 to 3 of the assessee, brief facts of the case are that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 12AA of the Act, taxing the surplus and assessing it as AOP respectively. Ground no. 6 challenges the levy of interest u/s 234 of the Act. This being consequential in nature, Ground no. 6 is worth dismissal, and is dismissed. 5.1. to 5.1.9............. 5.1.10 However, it is found that in the present case the important facts are that the assessment year for the year under consideration i.e. A.Y. 2010-11 was complete on 2-03-2016 when the registration u/s 12AA was not granted to the appellant trust. The application seeking registration was moved on 19-01-2016 and the registration was granted on 08-07-2016 by the CIT(Exemptions). Thus in the light of above referred CBDT Circular No. 1/2015 dated 21-01-2015 and on which reliance was placed upon by the appellant, particularly the following para 8.3 reproduced for ready reference, as below ''8.3 In order to provide relief of such trusts and remove hardship in genuine cases, section 12A of the Income Tax Act has been amended to provide 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C, in the first appellate proceeding, for caption assessment year, had been granted fresh registration under Section 12AA, benefit of such exemption should be given even for the captioned assessment year. 7. However, such appeal of assessee trust was dismissed by NFAC, vide order dated 18.11.2022, denying the benefit of Section 11 to the assessee trust. 8. Chronological of event are tabulated below:- Particular Date CIT(A) order Page Date of order of ld. AO, in reassessment proceedings. 30.09.2017 Page 1 Date of filing of appeal by assessee trust before NFAC 16.11.2017 Page 1 Date of grant of registration by ld. CIT(E) to the assessee trust under section 12AA 27.10.2018 Page 1 Date of order passed by NFAC in case of assessee trust in appellate proceeding 18.11.2022 Page 1 9. At time of passing of the order by ld. AO on 30.09.2017, assessee trust had not been granted fresh registration under Section 12AA. However, the same was granted on 27.10.2018, i.e. before order was passed by NFAC, in the first appellate proceedings. 10. Attention is drawn toward Section 12A(2) of the ITA. Relevant extract of such Sub-Section is set out are under:- "Where an application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforementioned legal position was submitted before the NFAC during the first appellate proceedings; however, those were simply rejected by NFAC by stating as under at Page 17 of its order: " 5.1.10 However, it is found that in the present case the important facts are that the Assessment for the year under consideration I.e., A.Y. 2010-11 was complete on 22.03.2016 when the registration u/s 12AA was not granted to the appellant trust. The application seeking registration was moved on 19.01.2016 and the registration was granted on 08.07.2016 by the CIT(Exemptions). Thus, in light of the above-referred CBDT Circular no, 1/2015 dated 21.01.2015 and on which reliance was placed upon by the appellant, particularly the following para 8.3, reproduced for ready reference, as below:- "8.3 In order to provide relief to such trusts and remove hardship in genuine cases, section 12A of the Income-tax Act has been amended to provide 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 assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... * Bharatpur Royal Family Religious & Ceremonial Trust Moti Mahal vs. CIT (2021) 130 taxmann.com 406 (Jaipur Trib.) * Shiv Kumar Sumitra Devi Smarak Shikshan Sansthan vs. CIT(E) (2022) 138 taxmann.com 197 (SC) * CIT(E) vs. Shiv Kumar Sumitra Devi Smarak Shikshan Sansthan (2020) 113 taxmann.com 334 (Allhabad H.C.) * U.P. Forest Corporation vs. DCIT (2007) 165 Taxman 533 (SC) * Bhagawan Sree Mahayogi Lakshmamma Educational Society, Adoni vs. ITO (2022) 135 taxmann.com 310 (Hyderabad-Trib.). 2.6 In the case of the assessee, the ld. AR distinguished the case laws relied upon the ld. DR which are mentioned as under:- ''1. Effect of dismissal of SLP against the order of Hon'ble Allahabad High Court 1.1. Ld. DR has placed heavy reliance on the judgment of the Hon'ble Allahabad High Court in the case of CIT (E) v. Shiv Kumar Sumitra Devi Smarak Shikshan Sansthan [2020] 422 ITR 468 (Allahabad) wherein the Hon'ble High Court had held that benefit under sections 11 and 12 would be available to assessee from assessment year following financial year in which application for registration under section 12A was given and not from any previous year. 1.2. Ld. DR has argued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion under article 136 of the Constitution. That certainly could not be so when appeal is dismissed though by a non-speaking order. Here the doctrine of merger applies. In that case, the Supreme Court upholds the decision of the High Court or of the Tribunal from which the appeal is provided under clause (3) of article 133, This doctrine of merger does not apply in the case of dismissal of special leave petition under article 136. When appeal is dismissed order of the High Court is merged with that of the Supreme Court. We quote the following paragraph from the judgment of this court in the case of Supreme Court Employees' Welfare Association v. Union of India & Anr. MANU/SC/0582/1989." 1.5. ii. State of Punjab v. Davinder Pal Singh Bhullar and Ors. AIR 2012 SC 364 "A large number of judicial pronouncements made by this Court leave no manner of doubt that the dismissal of the Special Leave Petition in limine does not mean that the reasoning of the judgment of the High Court against which the Special Leave Petition had been filed before this Court stands affirmed or the judgment and order impugned merges with such order of this Court on dismissal of the petition. It simply me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Shiv Kumar Sumitra Devi Smarak Shikshan Sansthan [2020] 422 ITR 468 (Allahabad) 2.3. In such a scenario the order of the jurisdictional High Court would prevail and would be binding on the Hon'ble ITAT, Jaipur Bench. 2.4. It is also submitted that as per our research the Department has not filed any SLP against the order of the Hon'ble Rajasthan High Court in Shree Shyam Mandir Committee (Supra). Therefore, it amounts to Department having accepted the decision of the Hon'ble Rajasthan High Court. 3. Bharatpur Royal Family Religious & Ceremonial Trust Moti Mahal v. CIT [2021] 92 ITR(T) 690 (Jaipur-Trib.) 3.1. Ld. DR has also placed reliance on the judgment of Bharatpur Royal Family Religious & Ceremonial Trust Moti Mahal v. CIT [2021] 92 ITR(T) 690 (Jaipur- Trib.). The said judgment is clearly distinguishable for the following reasons: a) The benefit of subsequent registration granted under section 12A on 05/09/2016 was not allowed for assessment year 2011-12 because the Trust Deed was amended on 03/08/2016. b) In respect of applicability of the proviso the Hon'ble ITAT, Jaipur Bench, in its order dated 13/07/2021 has simply followed the earlier order i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me for the year under consideration and as per information available with the Department, the society had received interest and rent of Rs.19,27,637/-. It is also noted that return of income was filed by the assessee trust on 17-04-2017 in response to notice issued u/s 148 of the Act. Thereafter notices u/s 143(2) and 142(1) of the Act alongwith query letters were issued. In response thereto, the ld. AR of the assessee attended the proceedings from time to time and furnished the requisite details / submissions. Books of accounts produced during the course of assessment proceedings were examined on test check basis with reference to details filed. It is further noted that the during the year under consideration the assessee the assessee trust is engaged in the running of the temple of Bhagwan Krishan in the name of Krishna Parnami Mandir and earning income from rent of immovable property owned by it. During the year under consideration, the Sansthan has shown surplus of Rs. 22,97,578/- and total receipt at Rs.50,36,914/-. The assessee had claimed exemption u/s 12 of the I.T. Act and claimed capital expenditure as an application of income for which the assessee was requested to file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order by the AO yet the same was granted before passing the order by NFAC, in the first appellate proceedings. Resultantly, the NFAC should have given the benefit of Section 11 to the assessee trust by considering it to be registered u/s 12AA of the Act but the ld. CIT(A), NFAC dismissed the appeal of the assessee trust by confirming the order of the AO whose relevant para is reproduced as under:- ''5.1.11 In light of the above discussion, it is found that the action of ld. AO in not granting the benefit u/s 11 to the appellant trust for A.Y. 2010-11 and making the impugned addition of entire surplus of Rs. 22,97,578/- and that too in status of AOP at maximum marginal rate is sustainable in the facts of the case and in law. The action of ld. AO is, therefore, confirmed and ground No. 2,3 & 4 is, thus dismissed." Taking into consideration all the facts and circumstances of the case as well as case laws cited by the respective parties, the Bench feels that the ld. CIT(A) should have allowed the benefit of Section 11 of the Act as the assessee trust has already been granted registration u/s 12AA of the Act by the ld. CIT(E) vide order dated 27-10-2018. This view is also taken b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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