Case Law Details
Ujjawal Sawera Samiti Vs ITO (ITAT Delhi)
ITAT Delhi: Exemption u/s 11 Cannot Be Denied When 12AA Registration Exists; Revenue Must Follow Rule of Consistency
Delhi Tribunal has held that once the charitable society continues to hold valid registration u/s 12AA, exemption u/s 11 cannot be denied merely on the basis of assumptions. Tribunal emphasized that the Revenue must follow the rule of consistency when exemption has been allowed in earlier & subsequent years in the absence of any change in facts.
Assessee, a charitable society registered u/s 12A since 2011, filed return declaring Nil income. AO denied exemption u/s 11 & assessed income of ₹3.79 Cr on the ground that the registration had been withdrawn, raising tax demand of ₹1.72 Cr. NFAC upheld the AO’s order.
Before the Tribunal, Assessee produced its registration certificate dated 28.02.2011, pointing out that it had never been cancelled. It was argued that exemption was granted in AYs 2016-17, 2018-19, 2021-22, 2022-23 & 2023-24 & the principle of consistency must be followed. Reliance was placed on Lal Chand Bhagat Ambika Ram v. CIT (37 ITR 288, SC), Radhasoami Satsang v. CIT (193 ITR 321, SC), DIT(E) v. Escorts Cardiac Diseases (300 ITR 75, Del) & CIT v. ARJ Securities Printers (264 ITR 276, Del).
Tribunal observed that there was no evidence on record of cancellation of 12AA registration. Since exemption had been allowed consistently in earlier & later years, denial in the impugned year was unjustified. However, the matter was restored to AO for verification of documents submitted by the Assessee. Accordingly, the orders of AO & NFAC were set aside and the appeal was allowed for statistical purposes.
When registration u/s 12AA continues to subsist, exemption u/s 11 cannot be denied. Revenue is bound to follow consistency unless there is a change in facts or withdrawal of registration.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal by the assessee is directed against the order of the National Faceless Appeal Centre Delhi [hereinafter referred to as “Ld. NFAC)”] vide order dated 19.02.2024 pertaining to A.Y.2019-20 arising out the assessment order dated 16.09.2021 u/s.144 read with section 144B of the Income-tax Act, 1961, (in short ‘the Act’).
2. The assessee has raised following grounds of appeal :-
1. That the CIT(A) / NFAC has erred on facts and in law in confirming the disallowance of exemption/ deduction of Rs.3,82,52,019/-claimed u/s. 11 of I. T. Act.
2. That the CIT(A)/NFAC and the Assessing Officer have erred on facts and in law in denying exemption/deduction of Rs.3,82,52,019 u/s 11 of I.T. Act because the Appellant is eligible for exemption u/s 11 for the year under consideration as per Registration Certificate u/s 12AA of I.T. Act vide Registration No. 12A/CIT-GZB/2010-11/3970 dated 28/02/2011 issued by Commissioner of Income Tax Ghaziabad to the Appellant Society which has never been withdrawn/cancelled as per section 12AA(3) of I.T. Act.
3. That the CIT(A)/NFAC has erred on facts and in law in denying exemption/deduction of Rs.3,82,52,019 u/s 11 of I.T. Act for the year under consideration as exemption/deduction deserves to be allowed as per Rules of Consistency because the same has always been allowed to the Appellant in earlier years as well as in subsequent years.
4. That the total income assessed at Rs. 3,79,10,249 and the total income tax demand created thereon at Rs.1,72,90,230 is wholly unjustified and illegal.
5. That the Appellant craves leave to add, alter, substitute or amend any of the above grounds of appeal at any time before or at the time of hearing of appeal.
3. The appeal is time barred by 231 days. In the application the assessee stated that the appeal should have filed within 60 days but filed 231 days of delay. He further stated that assessee has sufficient cause for not filing the appeal within the time limit. The assessee has shown the sufficient cause not to file the appeal within time. We find merit of the contention of the assessee, and condoned the delay in filing the appeal and admit the appeal for adjudication on merits.
4. The brief facts of the case are that assessee is a Charitable Society dully registered under section 12A of the Act. The assessee filed its return of income for AY 2019-20 on 25-09-2019 declaring total income Nil. The case of the assessee was selected for complete scrutiny under compulsory criteria for the reason that registration u/s 12A has been withdrawn. The AO completed the assessment after making the addition of Rs.3,82,53,019/-holding that the registration of the trust has already been rejected.
5. Aggrieved the order of the ld. AO the assessee preferred the appeal before the Ld. NFAC who vide his order dated 19.02.2024 dismissed the appeal. Being aggrieved the order of the Ld. NFAC the assessee is in appeal before the Tribunal.
6. AR of the assesse submitted that the registration certificate dated 28-02-2011 granted u/s 12AA of the Act was never cancelled, therefore the assessee is entitled to exemption u/s 11 of the Act. Assessee filed the registration certificate (PB –page no. 22) before the Ld. NFAC which was never rejected. In the case of Lal Chand Bhagat Ambika Ram v. CIT(Supreme Court)37 ITR 288 the court held that on no account should the Tribunal base its findings on suspicious , conjecture or surmises nor should it act on no evidence at all or on improper rejection of material and relevant evidence or partly on evidence or partly on suspicious, conjectures or surmises and if it does noting of that sort, its findings even though on question of facts will be liable to be set aside by this court.”
Reliance also placed on the followings decisions:
(i) Radhasoami Satsang v. CIT , 193 ITR 321
(ii) Director of Income Tax (E) v. Escorts cardic Diseases 300 ITR 75
(iii) CIT v ARJ Securities Printers 264 ITR 276
7. Ld. DR relied upon the order of the lower authorities. We have heard the parties and perused the material available on record. Ld. AR submitted that the registration of the trust never rejected. The assessee has filed the registration certificate (PB-page 22) before the authorities but there is no evidence on the file when this registration certificate was rejected. The department has accepted the return of income filed by the assessee for the A.Y. 2021-22, 2022-23, 2023-24, 2018-19 and 2016-17. There is no change of circumstances during the year under consideration as compared to earlier and subsequent years therefore, we are the considered view that the Revenue must follow a consistent pattern and should allowed the exemption as claimed by the assessee. The documents submitted by the assesse is to be verified by the assessing officer, therefore, considering the totality of the facts and circumstances of the case and in the interest of justice, we deem it proper to restore the issue to the file of the Assessing officer with a direction to verify the documents submitted by the assessee and decide the issue as per fact and law. The assessee is also directed to appear before the Ld. Assessing Officer and co-operate in the proceedings. The orders passed by the lower authorities are set aside and the grounds raised by the assessee are accordingly allowed for statistical purposes.
8. In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court 26.08.2025.
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