IN THE ITAT CHENNAI BENCH ‘D’
Sadras Venkatarama Chetty’s Charities
V/s.
Deputy Director of Income-tax (Exemptions)-II, Chennai
IT APPEAL NO. 2075 (MDS.) OF 2011
[ASSESSMENT YEAR 2002-03]
APRIL 16, 2012
ORDER
Challa Nagendra Prasad, Judicial Member
This is an appeal filed by the assessee against the order of the CIT(A) XII, Chennai dated 22.11.2011 in ITA No. 61/2009-10 for the assessment year 2002-03. Shri J. Prabhakar, F.C.A. represented on behalf of the assessee and Shri K.E.B. Rengarajan, Jr. Standing Counsel represented on behalf of the Revenue.
2. The assessee has raised several grounds of appeal and one of the grounds is against reopening of assessment under section 147 of the Act by the Assessing Officer, which was confirmed by the CIT(A).
3. The assessee filed return of income on 30.10.2002 for the assessment year 2002-03 admitting NIL income after claiming exemption under section 11 of the Act. The Assessing Officer issued notice under section 148 of the Act on 30.03.2009 as the Assessing Officer came to know that the assessee trust was not registered under section 12AA of the Act. The assessee trust filed a letter on 30.04.2009 requesting to treat the return field on 30.12.2002 as if return filed in response to notice issued under section 148. During the course of assessment proceedings, the assessee has not offered any explanation as to why the assessee trust should not be denied exemption under sections 11 and 12 of the Act in the absence of registration under section 12AA of the Act. Therefore, the Assessing Officer completed the assessment denying the exemption under sections 11 and 12 of the Act and completed the assessment determining the income of the assessee at Rs. 2,52,060/-. While doing so, the Assessing Officer considered the gross receipts of Rs. 2,59,650/- as income of the assessee and allowed expenses of Rs. 7,595/- from such gross receipt.
4. The assessee filed an appeal before the CIT(A) contending that the reopening of the assessment under section 147 of the Act is not justified. The assessee also contended that the provisions of section 12AA are not applicable to the facts of the assessee trust and the Assessing Officer is not justified in treating the assessee trust as unregistered trust in terms of sections 11 to 13 of the Act without examining the provisions of law as it existed when the trust was formed in the year 1939.
5. The CIT(A) upheld the order of the Assessing Officer in reopening of the assessment under section 147. The CIT(A) sustained the order of the Assessing Officer, who denied the exemption under sections 11 and 12 of the Act in the absence of registration under section 12 or 12AA of the Act. Against this order of the CIT(A), the assessee came up in appeal before us by raising several grounds and one of such ground is reopening of the assessment under section 147 of the Act.
6. The ld. Counsel for the assessee submitted that the reopening of the assessment is not proper and justified.
7. The ld. DR supported the orders of lower authorities.
8. We have heard both the sides, considered the materials available on record and orders of lower authorities as well as paper book filed by the assessee. The CIT(A) held that the assessee claimed deduction under section 11 of the Act without registration under section 12A or any other relevant provisions of the Act, which is a preliminary requisite for claiming deduction under section 11 of the Act. The CIT(A) also held that the returns were not subjected to scrutiny in earlier years and therefore, there was no occasion for the Assessing Officer to examine and disallow the claim of exemption made under section 11 of the Act. Only after noticing that the assessee is not entitled to deduction under section 11, the Assessing Officer reopened the assessment under section 148. The CIT(A) held that the reopening was valid because, there was an escapement of assessment by way of claiming excess relief within the meaning of clause (b) of Explanation 2 to section 147 of the Act. It was also held that since no assessment was done earlier, the case can be reopened at any time before the expiry of six years from the end of the assessment year. Therefore, the CIT(A) concluded that the reopening is within the time limit and the rule of “change of opinion” cannot be applied in this case since it was not subjected to scrutiny assessment earlier either under section 143(3) or 143(3) r.w.s. 147 of the Act.
9. On going through the orders of the lower authorities, in so far as the reopening of the assessment under section 147 is concerned, we are of the considered view that the Assessing Officer has rightly reopened the assessment under section 147, which was confirmed by the CIT(A). Therefore, we sustain the order of the CIT(A) and dismiss the ground of appeal of the assessee on this issue.
10. On merits, the ld. Counsel for the assessee submitted that the assessee is a public charitable trust established on 26.10.1939 and is engaged in various charitable activities since then. The assessee submitted that the trust has been filing returns of income since its inception claiming exemption under section 11 and the Department was allowing such exemption under section 11 for all these assessment years till 2001-02. Only in the assessment year 2002-03, the Assessing Officer denied exemption under sections 11 and 12 for want of registration under section 12AA. The assessee’s counsel submitted that the assessee trust was registered under section 12A and since no orders were passed by the CIT or the Director of Income Tax (Exemptions) withdrawing the registration under section 12A, at any point of time in earlier assessment years prior to insertion of section 12AA w.e.f. 01.04.1997, there is no need for the assessee trust for applying and getting the registration under section 12AA once again. The assessee’s counsel submitted that prior to 1972, there was no condition for administering the trust under the provisions of Income Tax Act. In other words, charitable and religious trusts having such objects are subjected to assessment and on fulfillment of condition that 75% of their income from property held under the trust were applied to charitable or religious purposes, as the case may be, were granted relief from taxation under the provisions of sections 11 to 13 of the Act. The unapplied portion of income below the threshold limit of 75% were allowed to be applied or deferred, subject to fulfillment of conditions there under. The assessee’s counsel submits that the provisions of section 12A were brought into the statute book by the Finance Act, 1972 w.e.f. 01.04.1973, whereby the trusts were required to be registered under the said section by filing a copy of the trust deed and the competent authority being the Commissioner of Income Tax then was authorized to acknowledge the receipt of such document and allot the registration number in the record of the Department, which was called “C” number.
11. The ld. AR further submits that there is no requirement under section 12A to go into merits of the objects at the time of filing for registration and what is required under this section is to merely bring on record the fact of existence of a trust to the notice of the concerned CIT to create a record in the repository of the Department. It was also submitted that in fact there were oral trusts in existence at that point of time and the trustees were made to condense the objects and activities in writing and file the same before the CIT for recognition under section 12A of the Act. The ld AR further submitted that the provisions of section 12AA would not apply to the facts of the assessee’s case in as much as registration sought for has already been granted under the unamended provisions of section 12A by accepting on record the fact of receipt of application there under and assigning the registration number in the record of the Department, no formal order was passed for grant of registration in accordance with the provisions of section 12A as existed during the period prior to 01.07.1973.
12. The ld. Counsel for the assessee invited our attention to a letter dated 26.08.2010 addressed by the office of the DIT(E), [page 24 of the paper book], which reads as under:
