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Issues: Whether, on the facts of the case, the reopening of assessments for earlier years was barred by the first and second provisos to section 12A(2) of the Income-tax Act, 1961, once registration under section 12AA had been granted subsequently.
Analysis: The statutory amendment inserting the provisos to section 12A(2) was examined along with the CBDT explanatory circular and the legislative object of removing hardship to genuine charitable trusts. The provision was construed as beneficial and retrospective in operation so that, where registration is later granted and the objects and activities remain the same, the benefit of sections 11 and 12 extends to earlier assessment years with pending proceedings. The second proviso was read as prohibiting action under section 147 for such earlier years merely on the ground of non-registration. In the present case, the reassessments were initiated for years preceding the registration year only because registration was not available for those years.
Conclusion: The reopening under section 147 for the earlier assessment years was not sustainable, and the legal issue was answered in favour of the assessee.
Ratio Decidendi: The provisos to section 12A(2) operate retrospectively to protect genuine charitable trusts and bar reassessment under section 147 for prior years solely on the ground of absence of registration, where registration is later granted and the trust's objects and activities remain unchanged.
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