Exemption under sections 11 and 12 restored; prior 12A registration prevails despite pending 12AB renewal, 143(1)(a) adjustment invalid

ITAT Ahmedabad allowed the appeal of the assessee-trust and restored exemption u/s 11 and 12. It held that the trust possessed a valid and subsisting registration u/s 12A during the relevant previous year and that subsequent re-registration u/s 12AB from AY 2022-23 did not extinguish or interrupt the earlier registration. Applying the proviso to s.12A(2), the Tribunal ruled that exemption cannot be denied for an intervening year merely because renewal was pending or later granted, nor for the technical omission of the new registration number in the ITR. The CPC's adjustment u/s 143(1)(a) and CIT(A)'s confirmation were held unsustainable.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether exemption under sections 11 and 12 was admissible for the relevant assessment year despite non-mention of registration/approval details under section 12AB in the return of income.

1.2 Whether, in view of the transitional scheme from sections 12A/12AA to section 12AB, the assessee's existing registration under section 12A and subsequent re-registration in Form 10AC entitled it to continuity of exemption for the relevant assessment year.

1.3 Whether denial of exemption under sections 11 and 12 while processing the return under section 143(1)(a) and reiterating it in rectification under section 154 was legally sustainable on the facts of the case.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Entitlement to exemption under sections 11 and 12 in the transitional regime from section 12A/12AA to section 12AB

Legal framework (as discussed): The Court examined section 12A, particularly sub-section (2) and its proviso, governing eligibility to exemption under sections 11 and 12. It noted that section 12A continues to apply post-amendment and that the proviso to section 12A(2) provides that once registration is obtained, exemption shall be available for any assessment year for which an application for registration was made, provided the objects and activities remain the same, and that exemption cannot be denied merely because registration was granted after the due date.

Interpretation and reasoning: The Court found as undisputed that the assessee held valid registration under section 12A since 2011, which had neither been withdrawn, suspended nor cancelled. It noted that due to the statutory transition to section 12AB, all existing charitable institutions were required to seek re-registration, and that CBDT, by successive circulars under section 119, extended the time for filing Form 10A. The assessee applied for re-registration in Form 10A on 06.01.2022 within the extended period and was granted registration in Form 10AC on 13.01.2022. The Court held that this statutory and administrative scheme was intended to be non-disruptive and that the earlier registration under section 12A validly continued for the relevant previous year. It reasoned that the subsequent registration under section 12AB did not extinguish the earlier registration for prior years; rather, it affirmed continuity of charitable status. The Court further held that, in light of the proviso to section 12A(2), exemption cannot be denied for an assessment year merely because the re-registration was granted later, so long as the trust's objects and activities remained unchanged. The Court concluded that the absence of the new 12AB registration number in the ITR resulted from timing-since the return had been filed before the grant of Form 10AC-and was a mere technical mismatch, not a substantive defect affecting eligibility.

Conclusions: The Court concluded that the assessee had a subsisting and valid registration under section 12A throughout the previous year relevant to the assessment year in question, had applied for re-registration within the extended time, and had obtained registration under section 12AB thereafter. The assessee therefore fulfilled the foundational requirement for exemption under sections 11 and 12. The technical non-mention of the new registration number in the return could not be a valid ground to deny exemption. The reasoning of the lower authorities that the exemption was not allowable because Form 10AC mentioned validity from a later assessment year and because new registration details were not filled in the ITR was held to be unsustainable.

Issue 3: Legality of denial of exemption under sections 11 and 12 in processing under section 143(1)(a) and in rectification under section 154

Interpretation and reasoning: The Court observed that the CPC and the appellate authority had denied exemption solely on the basis that the assessee had not furnished registration/approval details under the new section 12AB regime in the return, and on the view that Form 10AC was effective only from a subsequent assessment year. It held that, given the continuing validity of the original registration under section 12A and the protective effect of the proviso to section 12A(2), such denial ignored the substantive statutory position. Since registration under section 12A was undisputedly in force for the relevant year and re-registration had been duly sought and granted, there was no legal basis to treat the assessee as unregistered for that year. Consequently, the denial of exemption in the intimation under section 143(1)(a), as well as its reiteration in the rectification order under section 154, was contrary to the statutory scheme and could not be sustained.

Conclusions: The Court held that the CPC was not justified in denying exemption under sections 11 and 12 while processing the return under section 143(1)(a) or in reiterating that denial in the order under section 154. The disallowance of application of income and accumulation under section 11 was directed to be deleted, and the Assessing Officer was directed to allow exemption under sections 11 and 12 as claimed in the return.

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