The Surat bench of the Income Tax Appellate Tribunal ( ITAT ), in the case of Shri Siddhanath Mahadev Temple, held that the temple trust is entitled to tax exemptions under Sections 11 and 12 of the Income Tax Act 1961. The assessee-appellant, Shri Siddhanath Mahadev Temple, filed an appeal against the order passed by the Commisiioner of Income Tax ( Exemptions ) [CIT(E)] dates 28.03.2024 under Section 263 of the Act.
In this case, the assessee initially had not filed its return of income for the assessment year (AY) 2017-18 as per the provisions mandated by Section 139(4A) of the Act. The case was reopened through a notice under Section 148, to which the assessee filed its return of income as a reply and declared its income as NIL, which the Assessing Officer initially accepted based on the explanations provided by the Trust.
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When the CIT(E) examined the records of the case, CIT(E) observed that as per provisions 139(4A) of the Act, in the case of trusts which derive income from voluntary contributions before claiming exemptions under Sections 11&12 of the Act, is supposed to furnish a return of the income that exceeds the maximum amount not chargeable to tax.
The CIT(E) further stated that the provisions of Section 12A(1)(b) state that if the total income exceeds the basic exemption limit, the books of such trusts must be audited, and the audit report must be filed with the relevant year’s income returns.
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The CIT(E) observed that the assessee filed the return only in response to notice u/s 148 of the Act and held that the assessment order passed by the AO was not accurate as the assessee did not file the return under section 139 within the due date was harmful to the interests of the revenue under Section 263 of the Act. The CIT(E) held that the assessee could not claim exemptions under Sections 11 and 12 of the Act. The CIT(E) also upheld that the new amendment of Section 12A(1)(ba) mandates the correct filing of income within the due date as per Section 139(4A) and sets aside the AO’s order.
In an appeal to the tribunal, the authorised representative ( AR ) of the assessee submitted that no return of income was filed by the assessee initially, and the AO had not made any additions to the income declared as a reply under Section 148 of the Act. The AR further submitted that the Finance Act, 2017, inserted clause (ba) of Section 12A, and it would be applicable only from the 2018-19 AY and not 2017-18 and hence the return that the CIT(E) held to be mandatory under Section 139 of the Act was not applicable as the AY under consideration here is 2017-18 and this thereby proves that the order passed by the AO is neither wrong nor prejudicial to the revenue’s interests. The Department Representative (DR) for the revenue argued in court in support of the CIT(E) order.
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After hearing both sides, the Tribunal held that there was no dispute that the assessee had not filed its return of income under Section 139 of the Act and that it was not mandatory as the law that mandates such accurate filing does not have a retrospective effect and will not apply to the 2017-18 AY. The tribunal agreed to the findings of the case of the United Educational Society, which the assessee relied upon to assert the non-filing of the income returns.
The tribunal, consisting of Pawan Singh ( Judicial Member ) and Bijayanada Pruseth ( Accountant Member ), further asserted that the AO was not justified in denying the assessee the benefit of exemption under Sections 11 and 12 of the Act and directed the AO to compute income in accordance with the said provisions. The tribunal set aside the CIT(E) order and, as a result, allowed the appeal put forth by the assessee.
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