TaxTMI 
TaxTMI 
2021 (1) TMI 157
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....oticed that the assessee had not obtained registration u/s. 12AA of the Act and had also not filed returns of income for several years. These findings were communicated by the DDIT(Inv.) who conducted the survey to the AO. 4. On legal advice, the assessee made an application for grant of registration u/s. 12A of the Act. The assessee accordingly filed Form 10A on 28.9.2017 seeking registration u/s. 12AA of the Act. The assessee also filed returns of income for AYs 2016-17 and 2017-18. In the return of income so filed, in anticipation of grant of registration u/s. 12AA of the Act, the assessee had also claimed exemption u/s. 11 in respect of surplus of income over expenditure for the aforesaid assessment years. 5. By an order dated 27.3.2019 the CIT(E) rejected the application for grant of registration. Against such order, the assessee filed appeal before the ITAT in ITA No.1253/Bang/2018 challenging the refusal of registration. The Tribunal set aside the order of CIT(E) and remanded the plea of grant of registration to the CIT(E) for consideration afresh. The relevant observations of the Tribunal are as follows:- "We have heard both parties and perused the material available on....
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....essee pointed out the following:- (a) It was stated in the survey report that the assessee has not registered u/s 12A of the Act, but the assessee has wrongly claimed exemption of income u/s 11 of the Act. On this observation in the Survey report, it was submitted by the assessee that application for grant of registration was made which was pending. The Assessee pointed out that the relevant provisions of Sec.12A of the Act stipulates that even in respect of assessments for which return of income filed are pending as on date of filing of application for registration, even in respect of those AYs, the Assessee can claim exemption u/s 11. The assessee submitted that the assessee was constituted by a deed dated 13.11.2012 with charitable objects. The assessee thus claimed that the above remarks in the survey report have nothing to do with or in any way a hindrance to grant of registration u/s. 12A of the Act. (b) With regard to the Survey finding that the applicant trust has not maintained proper books of accounts, the assessee submitted that all books of a/c are maintained and have also been filed. In fact final statement of account have also been filed as noted in the order of ....
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....excess of income over expenditure in those years also needs to taxed, the assessee submitted that as per the provisions of law if the trust is granted registration u/s 12A even the pending assessments of earlier years also enjoy the exemption. Hence the incomes of the earlier years also are exempt. This is also an irrelevant consideration at the stage of grant of registration. (i) With regard to the allegation in the survey report that had there been no Survey the trust may not even file the return of income, the assessee pointed out that the assessee has maintained all books and the reason for non filing of R.I was due to the fact that the assessee was under the bonafide impression that trust being a educational institute is not liable to tax and not liable to file Return of Income. The non filling of R /I is not on account of any intention that the R/I and other legal compliances to be carried out after survey. This is also an irrelevant ground for in regard to grant of registration u/s 12A. (j) With regard to the allegation in the survey report that there can be no such refundable contributions under the provisions of the IT Act and the conclusion that the said action indica....
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....cause sub-section (4) has been inserted to section 12AA of the Act by the Finance Act, 2014 w.e.f. 1.10.2014 and in terms of the aforesaid provision, the CIT(E) has powers to examine whether the activities of the trust are not being carried out in a manner that the provisions of Sec.11 and 12 do not apply or there is violation of provisions of Sec.13(1) of the Act. The relevant provisions of section 12AA(4) reads as follows:- "(4) Without prejudice to the provisions of sub-section (3), where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996)] and subsequently it is noticed that the activities of the trust or the institution are being carried out in a manner that the provisions of sections 11 and 12 do not apply to exclude either whole or any part of the income of such trust or institution due to operation of sub- section (1) of section 13, then, the Principal Commissioner or the Commissioner may by an order in writing cancel the registration of such trust or institution: Provided that the registrati....
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....use the provisions so inserted also talks about the application of section 13(1) of the Act. He pointed out that in the impugned order no instance of violation of section 13(1) of the Act has been pointed out. 11. His next submission was that the provisions of section 12AA(4) are not applicable to a case of grant of registration and are applicable only to cases where the registration already granted is sought to be cancelled. It was submitted that the CIT(E)'s reliance on section 12AA(4) of the Act is completely misplaced. 12. He next pointed out that in reply to the show cause notice with regard to the findings of survey, the assessee has given clear explanation and the observations of the CIT(E) with regard to the lack of proper reply on the findings of the survey are ill-founded. The ld. counsel for the assessee also brought to our notice that the findings in para 8 of the impugned order are again incorrect. The addition made by the AO in AY 2016-17 is also in appeal before the CIT(Appeals). It was also submitted that the addition made u/s. 69 of the Act will not be a ground not to grant registration to an assessee. 13. The ld. DR relied on the order of CIT(E). 14. We ha....