2024 (12) TMI 1728 - AT - Income Tax

Proviso to section 12A(2) extends exemption benefits for pending earlier-year assessments, subject to verification of unchanged objects and activities.

Delay of 43 days in filing the appeal was condoned on a liberal, justice-oriented view after the explanation that the school staff was engaged in ... Denial of exemption u/s 11 - Retrospective application of registration under proviso to section 12A(2) - Pending assessment proceedings - Charitable exemption - assessee is negligent in filing return within the time fixed by AO - HELD THAT:- The Tribunal held that, although the assessee had failed to file its return within the time specified in the notice under section 142(1), that lapse did not conclude the question of eligibility to exemption. Since registration under section 12A had been granted while the assessment for AY 2017-18 was still pending, the assessee was entitled to seek the benefit of the proviso to section 12A(2). The determinative requirement was that the objects and activities of the assessee for the year under consideration should remain the same as those on the basis of which registration was granted. As the claim to exemption under sections 11 and 12 also required verification of the working relating to application and accumulation of income, the matter was restored to the Assessing Officer for these limited verifications and for grant of admissible exemption. [Paras 8] The denial of exemption was not sustained outright; the matter was remanded to the Assessing Officer to verify continuity of objects and activities and to allow exemption under sections 11 and 12 as admissible. Final Conclusion: The Tribunal held that the assessee's claim to exemption for AY 2017-18 required consideration under the proviso to section 12A(2) and restored the matter to the Assessing Officer for verification and grant of admissible exemption. Issues: (i) Whether the delay of 43 days in filing the appeal should be condoned. (ii) Whether the assessee was entitled to exemption under sections 11 and 12 of the Income-tax Act, 1961 in view of the proviso to section 12A(2), and whether the matter required verification by the Assessing Officer.Issue (i): Whether the delay of 43 days in filing the appeal should be condoned.Analysis: The explanation for the delay was that the school staff was occupied with examinations and the appeal was filed when the new session commenced. The assessee also had a meritorious claim on the substantive tax issue. Applying a liberal, justice-oriented approach, the delay was treated as sufficiently explained.Conclusion: The delay was condoned.Issue (ii): Whether the assessee was entitled to exemption under sections 11 and 12 of the Income-tax Act, 1961 in view of the proviso to section 12A(2), and whether the matter required verification by the Assessing Officer.Analysis: The assessee had obtained registration under section 12A during pendency of the assessment for the earlier year. The proviso to section 12A(2) applies where registration is granted and assessment proceedings for the preceding year are pending on that date, provided the objects and activities remain the same. At the same time, the factual verification of continuity of objects and activities, and the working of exemption under sections 11 and 12, required examination by the Assessing Officer.Conclusion: The assessee was entitled to consideration of exemption under sections 11 and 12, and the matter was remitted to the Assessing Officer for verification and consequential allowance as admissible.Final Conclusion: The appeal succeeded in part, the delay was condoned, and the exemption claim was sent back for fresh verification, resulting in a remand with directions and costs.Ratio Decidendi: Where registration under section 12A is granted while assessment proceedings for an earlier year remain pending, the proviso to section 12A(2) extends the benefit of sections 11 and 12 to that year, subject to verification that the objects and activities remain unchanged.