ITAT Grants 5-Year Registration Under Section 12AB(1)(a), Sets Aside Provisional 3-Year Registration

The ITAT Chennai set aside the CIT(A)'s order granting only provisional registration for three years under section 12A(1)(ac)(vi) and directed that the assessee's application filed under section 12A(1)(ac)(i) be treated as valid for registration under section 12AB(1)(a) for five years from AY 2022-23. The Tribunal held that the assessee, an old trust registered since 1994, had made a bona fide mistake by applying under the incorrect provision, and thus was entitled to automatic registration from AY 2021-22. The CPC's objection to denial of exemption under section 11 for failure to disclose registration details in the RoI was overruled. The CIT(A)'s rejection based on a minor delay in filing the audit report was also set aside, following precedent that such filing is directory if completed before assessment. Exemption under section 11 was accordingly granted.

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ISSUES:

Whether exemption under section 11 of the Income Tax Act, 1961 can be denied solely on the ground of non-furnishing details of registration under section 12AB in the return of income.Whether the delay in filing the Audit Report in Form 10AB is a valid ground for denial of exemption under section 11 of the Act.Whether the provisional registration granted under section 12AB for three years instead of five years to an old Trust was valid, and the effect of inadvertent application under incorrect sub-clause of section 12A(1)(ac) of the Act.Whether the appellate authority has the power to condone delay in filing Form 10AB and the consequences of refusal to exercise such power.

RULINGS / HOLDINGS:

The denial of exemption under section 11 of the Act on the sole ground that the assessee failed to fill the column showing details of registration under section 12AB in the return of income is not sustainable, especially where the assessee had valid registration under section 12AA and had applied for fresh registration under section 12AB.The delay of less than one month in filing the Audit Report in Form 10AB is directory in nature and does not disentitle the assessee from claiming exemption under section 11; hence, rejection of exemption on this ground is erroneous.The provisional registration granted under section 12AB for three years instead of five years due to a bona fide mistake in applying under sub-clause (vi) instead of sub-clause (i) of section 12A(1)(ac) is to be rectified, and the application is to be treated as made under the correct sub-clause, entitling the Trust to registration for five years.The appellate authority (Additional Commissioner) does not have the power to condone delay in filing Form 10AB, which is vested with the Commissioner or Principal Commissioner, but refusal to condone delay on a ground not raised by the assessing authority and contrary to judicial precedents is an error.

RATIONALE:

The Court applied the amended provisions of sections 11, 12A, and 12AB of the Income Tax Act, 1961, as amended by the Taxation Laws (Amendment) Ordinance, 2020, effective from 1.4.2021, requiring fresh registration under section 12AB for exemption eligibility.The Court relied on binding High Court precedents holding that filing of Form 10AB (Audit Report) is directory and that delay in filing beyond due date does not automatically disentitle exemption claims if filed before completion of assessment.The Court recognized the principle of rectifying bona fide mistakes in statutory applications, holding that inadvertent filing under an incorrect sub-clause should be treated as if filed under the correct provision to protect substantive rights of the assessee.The Court emphasized that the appellate authority must decide appeals on grounds raised by the assessing authority and not on new or unrelated grounds, especially when such grounds are contrary to settled law.

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