The Income Tax Appellate Tribunal ( ITAT ), Jaipur Bench, has recently, in an appeal filed before it, held that registration to trust cannot be cancelled for mere non-compliance of notice during the covid-19 period.
The aforesaid observation was made by the Jaipur ITAT, when an appeal was filed before it by the assessee, as against the order of the Commissioner of Income Tax (Exemption), Jaipur [CIT(E)], for the assessment year 2021-22, dated 04.03.2021, as per provision of under Section 12AA of the Income Tax Act.
The ground of the assessee’s appeal being that the order under section 12AA(1)(b)(ii) of Income Tax Act, 1961, is bad in law and therefore deserves to be quashed, the facts as culled out from the records, pertaining to the issue, were that the assessee trust had made an application in Form no. 10A seeking registration u/s. 12AA of the Income Tax Act.
Thereafter, a letter/notice dated 23.10.2020 was issued at the email/address provided in the application, requiring the applicant to furnish by Email Certain documents/ explanations by 04.11.2020, along with the original/certified Trust deed / AOA for verification. And, one more opportunity was provided vide letter/notice dated 19.12.2020 as final opportunity.
However, since it was a limitation matter, the application was disposed by the CIT(E) holding that since the applicant failed to submit the required details, the application seeking registration u/s. 12AA was rejected, thereby treating the same as filed. And it is being aggrieved by the same, that the assessee has preferred the instant appeal before the Jaipur ITAT.
With Sh.Sunil Porwal (C.A.), the AR of the assessee, having submitted that the period in which the notices were issued were in a situation where the apex court had extended all the limitation, whether specifically extended or not, he added that therefore, the assessee has reasonable cause for not responding to the notices.
He further submitted that in past, the trust was already registered u/s.12A of the Income Tax Act and that subsequently for A. Y. 2022-23 to 2026-27 the CIT(E) had already granted the registration (APB-27to29), while also adding that the registration granted to the assessee in terms of TOLA, was effective till 01.04.2021 and further that later on, the CIT(E) vide order dated 24.09.2021 had granted registration too.
Thereby contenting that thus, effectively, the cancellation order in appeal in effect, is in terms of the above legal proposition, not legal, the AR of the assessee thus, argued that the assessee trust is already having valid registration under the old provisions of Section 12A and 80G of the Income Tax Act, which was effective till 01.04.2021, and that it was on account of the change made in the Finance Act, 2020, that the assessee had to apply afresh, but that on account of TOLA, the assessee was under the bona fide belief that on account of the extension, the application need to be persuaded.
Relying upon various extension granted by the apex court on account of Covid-19, the AR for the assessee contended that the CIT(E) has, without referring to TOLA and by not considering the fact of non -expiration of the registration, on account of TOLA, rejected the application filed by the assessee without deciding the case on merit based on the information already available on record.
He attracted the attention of the ITAT to the fact that the assessee, upon subsequent application, was granted the registration under the amended provisions of Section 12AA of the Income Tax Act, and therefore that the grievance of the assessee is, for the intervening period for which without any adverse observation and merely on account of non-compliance of application of the notice issued in the Covid 19 period, the application of the assessee was not considered.
Thus, based on these facts, the AR of the assessee prayed before the ITAT Tribunal that it may grant the restoration of the registration based on the ground that the registration should continued, in the light of the facts stated, and that in absence of any adverse observation, the claim of the assessee be admitted.
However, per contra, Sh. Ajey Malik (CIT), the DR appearing on behalf of the Revenue objected to the prayer of the assessee and submitted that the action of non-appearance on the part of the assessee, as well the non-submission of the details, called for the registration to be expelled, and that the same is done by the Revenue on its merits.
He further that it is a fit case to be remanded back to the file of the CIT(E), to require the assessee to comply with the directions of the CIT(E), in support of the application filed and to require the assessee to furnish the details as was called by the CIT(E), while in the rejoinder of arguments of the DR, the AR of the assessee , relying upon the TOLA, submitted that it was under the bonafide belief that the application was required to be filed after the registration expired, that the limitation had already been extended by TOLA, and further that even on the subsequent application, the trust had been given the approval without observing any adverse remark, either on the activity part or on the compliance of information filed by the assessee.
Hearing the opposing contentions of either side and perusing the materials available on record, the ITAT Panel comprising of Dr S. Seethalakshmi, the Judicial Member, along with Rathod Kamlesh Jayantbhai, the Accountant Member observed:
“We have heard the rival contentions, perused the material on record. The Bench noted that it is not in dispute that the assessee is holding the valid registration and the approval under Section 12A and 12AA of the Act was in effect but it was only for the intervening period as the registration is already available to the assessee effective from A. Y. 2022-23. Considering the facts and rival contentions discussed herein above, the bench is of the considered view that in absence of any adverse remark on the activity of the trust merely on technical ground for this intervening period the registration cannot be cancelled for this period and a benefit of having a registered trust cannot be denied to the assessee when there is specific time extension limit given by the Hon’ble Apex Court and TOLA for this period.”
Thus, allowing the assessee’s appeal, the Jaipur ITAT held:
“The assessee is having sufficient cause for not replying to the notices issued by the Revenue. As regards the contention of the ld. DR we are not considering his prayer to restore to this issue to the file by the ld. CIT(E) as the subsequently the ld. CIT(E) has already granted the registration to the assessee trust and there is no adverse observation by the ld. CIT(E). In light of these facts and circumstances of the case, we see no reason to sustain the order under appeal and in the absence of any controverting finding on record we vacate the order passed by the ld. CIT(E) dated 04.03.2021.”
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