Case Law Details
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:
| “D.I.T. (E) No. 2(443)/98-99 The Honorary SecretaryNarayana Guruviah Chetty’s Estate & Charities,49 Varadamuthiappan St.Chennai 600 001Sir, |
Dated 28.6.2000 | |
Sub: Registration under s. 12AA of the above Trust – reg.
Ref: Your application in Form No. l0A filed on 2.5.1973 2. Your fresh application filed on 16-9-1999
Please refer to the above.
2. By reference to this office records it is confirmed that you had applied in Form No. 10A on 2-5-1973 for s.12A registration. No specific order under s.12A was being passed in those days and only an acknowledgment for the receipt of the application used to be given. In your case also, no order was passed. However, the fact of registration was accepted and assessments have been made on that basis.
3. In view of the above position, no fresh order under s. 12AA is now passed.
Yours faithfully
Sd/-
(A. SELVARAJ)
Director of Incometax
(Exemptions) : Chennai.”
13. Referring to the above letter, the ld. Counsel for the assessee submitted that no specific order under section 12A was passed on those days granting registration under section 12A to the charitable trust/institutions, who have filed application for registration under section 12A of the Act. It was submitted that only acknowledgement for the receipt of the application was given to the assessees. It is also submitted by the assessee’s counsel that there is no need for the assessee to obtain registration under section 12AA when the trust already filed an application for registration under section 12A and when the Department is accepting all the returns filed by the assessee claiming exemption under sections 11 and 12 of the Act. He submitted that the DIT(E) himself made it clear in his letter dated 28.06.2000 addressed to Narayana Guruviah Chetty’s Estate & Charities that no fresh order under section 12A is required and registration was accepted and assessments were made on that basis for the said institution. Therefore, the ld. Counsel for the assessee submitted that in its case, the assessments were made or for that matter registration procedure under section 12A since 1973 recognizes the fact that the assessee is a registered charitable trust and benefits of section 11 were bestowed on the trust by accepting the return on face value and in the absence of any suspicions on record as to the application of income by the assessee trust for its objects, there is no justification in denying the exemption under section 11 for the assessment year 2002-03 by the Assessing Officer on the ground that the assessee is not a registered trust under section 12AA of the Act.
14. The ld. DR relied on the orders of lower authorities and submitted that the Assessing Officer has rightly denied the exemption under section 11 in the absence of Registration under section 12AA of the Act and supported the orders of the CIT(A).
15. We have heard both the sides, perused the materials placed on record. The Assessing Officer denied exemption under section 11 of the Act on the ground that the assessee is not a registered trust under section 12AA of the Act. The assessee is a public charitable trust established in the year 1939 and engaged in the charitable activities since then. The assessee trust filed returns of income regularly claiming exemption under section 11, wherever applicable and the Department seems to have been accepted the returns filed by the assessee in all the assessment years prior to the assessment year 2002-03. The assessee seems to have filed an application for registration under section 12A and the Department allotted registration number to the assessee, as per the procedure followed for registration under section 12A at that time and entered such number into the separate register maintained by the Department for registered trusts.
16. On going through the provisions of sections 12A and 12AA, we see that the provisions of section 12AA, which were inserted w.e.f. 01.04.1997 provides for procedure to be followed for registration under section 12AA. The provisions of section 12AA provides that the CIT shall pass an order in writing either granting or refusing to grant registration under section 12AA, whereas no such specific requirement of passing an order in writing is provided under the provisions of section 12A. Provisions of sub-section 3 of section 12AA provides that registration granted to the trust/institution either under section 12AA after 01.04.1997 or registration granted under section 12A prior to 01.04.1997 shall be cancelled by the CIT by passing an order in writing if the Commissioner is satisfied that the activities of such trust or institutions are not genuine or are not being carried out in accordance with the objects of the trust or institution. However, in the assessee’s case, no such order has been passed by the CIT withdrawing the registration under section 12A, which was granted to the assessee on filing of an application after 01.04.1973. Keeping in view all the facts and peculiar circumstances in this case, we are of the opinion that the Assessing Officer is not correct in denying the exemption under section 11 of the Act to the assessee stating that the assessee is not a registered trust under section 12AA of the Act. Without verifying earlier years record, without ascertaining as to whether the assessee was granted registration under section 12A as contended by the assessee that the trust was not communicated in writing that it was registered under section 12A, but accepted their application for registration and separate number was allotted and recorded in the register maintained by the Department for such registered trust. We also see that the provisions of section 12AA(3) provides for cancellation of registration of trust by the CIT either the registration granted under section 12A or registration granted under section 12AA and in the absence of any such cancellation of registration under section 12A in assessee’s case by the CIT, there is no justification in denying the exemption allowable under section 11 to the assessee while completing the assessment. The Assessing Officer should have caused enquires in the Office of the CIT and should have found out whether the assessee filed an application for registration, any registration number is granted and recorded in the register maintained by the Department before coming to the conclusion that the assessee is not a registered trust and not entitled for exemption under section 11 particularly when the assessee was allowed exemption under section 11 for all the assessment years prior to the assessment year 2002-03 considering the assessee as a charitable trust.
17. In the circumstances, we set aside the orders of lower authorities and remit the issue to the Assessing Officer to examine this issue afresh as per our above observations, in accordance with law, after providing adequate opportunity of being heard to the assessee.
18. Since we are setting aside the issue of allowance of exemption under section 11 r.w.s. 12A to the file of the Assessing Officer to examine afresh, the other grounds of appeal raised by the assessee becomes academic and therefore, no need for adjudication by us. We, therefore, set aside the other grounds of appeal other than the ground raised against reopening of assessment under section 147 to the file of the Assessing Officer to decide afresh in accordance with law.
19. In the result, the appeal of the assessee is allowed for statistical purposes.
in mumbai income tax commissioner Mr sanjeev dutt rejecting 12A application because in our trust deed under section bombay trust act 1950 no dissolution clause as per B T A 1950 there is Amalgamation clause …this clause is necessary for 12 A … plz reply on admin@wcwf.net