Shri Panchmurti Education Society v. ITO

Case snapshot

Sections / provisions: 11; 12A; 139(4); 143(1)(a)

Questions before the Court / Tribunal

• See the source-driven case record below.

Material facts and background

The relevant facts of the case are that the assessee education society is

a public charitable trust registered with the Charity Commissioner, Nagpur vide Registration No. F-742(N) dated 11/05/1965. The said Registration is placed on record. The assessee is also registered under the Societies Registration Act vide registration dated 11/05/1965 and a copy of which is placed on record. The assessee approached the Charity Commissioner of Nagpur for framing of Scheme under section 50A of the Maharashtra Public Trust Act, as in the old bye-laws there was no provision regarding the mode of succession of trustees, tenure of trustees, etc. The Assistant Charity Commissioner, Nagpur, by an order dated 30/09/2014 approved the said

Scheme, a copy of which is placed on record. The said Scheme contains the object of the trust which are all educational in nature. The assessee was running the following educational institution under its aegis which is affiliated to SSC Board of Education:i) Mount Everest Primary School ii) Pandit Nehru High School The said schools receive grant from Government of Maharashtra and is fully aided school. The school is regularly inspected by the Department of Education, Government of Maharashtra, and it continuing to receive grant till date. The said Schools are engaged in imparting secular education. The financial

31/03/2017 and 31/03/2018 are placed on record. The premises of the assessee was subject to search and seizure operation and after thorough scrutiny of books of accounts and its working, the assessee was granted exemption under erstwhile provision under section 10(22) of the Income Tax Act 1961 (“the Act”) and the same is placed on record. The assessee applied for the registration under section 12AA of the Act by furnishing application dated 30/03/2017 which was rejected on 29/09/2017 on the grounds that the byelaws did not contain dissolution clause, however, the Commissioner of Income Tax (Exemption) was satisfied that the object of the trust appeared prima facie charitable. The copy of the order of Rejection dated 29/09/2017 is placed on record.

Being aggrieved, the assessee trust preferred appeal before the Tribunal, Nagpur Bench. Meanwhile, the assessee filed its return of income electronically for the assessment year 2017-18 on 30/03/2018. Subsequently, intimation under section 143(1) of the Act was received by the assessee on 24/03/2019 raising the demand against the assessee amounting to ` 5,02,23,100, by the Central Processing Centre, Bengaluru, a copy of which is placed on record. Against the said demand, the assessee filed appeal challenging the order dated 24/03/2019 passed under section 143(1)(a) before the Commissioner of Income Tax (Appeals) which was dismissed. On appeal before the Tribunal, the Co–ordinate Bench allowed the appeal of the assessee vide its order dated 09/06/2022 directing the Commissioner of Income Tax (Exempt.) to grant exemption under section 12A to the assessee w.e.f. the assessment year 2017–18, a copy of which is placed on record. Thereafter, the assessee received registration certificate under section 122A issued by the learned CIT(E), a copy of which is placed on record. The assessee trust after obtaining registration certificate approached the statutory auditor for the Audit Report in...

not eligible to avail exemption under section 11 & 12 of the Act, a copy of which is also placed on record. Being aggrieved, the assessee is in further appeal before the Tribunal. 5.

Appellant / assessee submissions

The judgment copy does not separately set out this component in a distinct section; refer to the full order and the reasoning section below.

Revenue / respondent submissions

Per–contra, the learned Departmental Representative (“the learned

Court / Tribunal analysis and reasoning

section 12AA of the Act dated 23/11/2022, issued by the learned CIT(E), the same is reproduced below for better conceptual clarity:– “Order for approval on Set Aside Application under section 12AA of the Income Tax Act, 1961 ORDER U/S.12AA OF THE INCOME-TAX ACT, 1961 READ WITH RULE 17A OF THE INCOME TAX RULES, 1962 (Order giving effect to the order dated 09-06-2022 of the ITAT, 'NAGPUR' BENCH, NAGPUR In appeal ITA No.383/NAG/2017) The applicant had filed an application for registration u/s 12AA of the Income Tax Act, 1961 оп 30-03-2017. The said application was rejected by the CIT(Exemptions), Pune vide order dated 29-09-2017. The applicant filed an appeal against the said order. The Hon'ble ITAT, 'Nagpur Bench, Nagpur, vide order dated 09-06-2022 in appeal ITA No.383/NAG/2017 has allowed the appeal of the applicant and directed the undersigned to grant registration to the applicant. 2 Therefore, in compliance to the above directions of the Hon'ble ITAT, the applicant trust/ society/non-profit company is hereby granted registration u/s 12AA of the Income Tax Act, 1961, with salient activities as Education under the category of Charitable Trust/Institution and the provisions of...

Held: Normally, a charitable or religious trust or institution is expected to file the auditor's report along with the return but, in cases where for reasons beyond the control of the assessee some delay has occurred in filing the said report, the assessing officer, for reasons to be recorded, has been authorised to condone the delay in furnishing the auditor's report and accept the same at a belated stage. It has been clarified that the exemption available to the trust under section 11 may not be denied merely on account of delay in furnishing the auditor's report. The word <169>shall<170> occurring in section 12A cannot, under the circumstances, be read as a <169>must<170> making it mandatory for the trust to furnish the auditor's report along with the filing of the rectum. If for certain unavoidable circumstances, the assessee is unable to furnish the auditor's report along with the return then the same can be furnished at a later date with the permission of the assessing officer who may permit the assessee to do so after recording his reasons for so doing. The Central Board of Direct Taxes by issuing the Circular dated 9-2-1978, (1/1148-CBDT F. No. 267/482/77-IT (Part), dated...

under:– “Thus it can be observed that the conditions prescribed under section 12A have not been fulfilled by the appellant. Therefore, it is quite clear that the benefit of the exemption u/s 11 and 12 of the act cannot be extended to the appellant as the conditions for the same are not fulfilled by the appellant as mentioned above. Thus, the addition of Rs. 11,26,85,825/- made to the total income of the appellant is Valid and stands confirmed. The appeal of the appellant is dismissed.”

15.3 Therefore, section 12A of the Income-tax Act has been amended to provide that where a trust or an institution has been granted registration under section 12AA or has obtained registration at any time under section 12A [as it stood before its Amendment by the Finance (No. 2) Act, 1996) and, subsequently, it has adopted or undertaken modifications of the objects which do not conform to the conditions of registration, it shall be required to obtain fresh registration by making an application within a period of thirty days from the date of such adoption or modifications of the objects in the prescribed form and manner. Consequential amendments to Section 12AA of the Incometax Act have also been made. 15.4 Further, as per the provisions of said section, the entities registered under section 12AA are required to file return of income under sub-section (4A) of section 139 of the Income-tax Act, if the total income without giving effect to the provisions of sections 11 and 12 exceeds the maximum amount which is not chargeable to income-tax. However, there was no clarity as to whether the said return of income was to be filed within time allowed under section 139 or otherwise. 15.5 In...

Operative decision and relief

income. Dur view is emboldened by the fact that section 12A(1)(b) of the Act has been amended w.e.f. 01/04/2023, by Finance Act, 2023, to encompass that return of income filed under section 139(1) or 139(4) of the Act will satisfy compliance of section 139(4A) of the Act. The amendment is a beneficial one and only clarifies the intention of the legislature. Further, There is no further reason to deepdive into the non–furnishing of audit report along with the return of income since the registration was granted belatedly with

retrospective effect at the behest of the directions from this forum. It is excruciating to note that a demand has been created on flimsy grounds as aginst the assessee which is in existence since 1965. For the sake of clarity it is clarified that the assessee trust is successful in assailing the order on twin grounds of submission of return of income as well as submissions of the audit report in tandem with the provisions for the impugned assessment year. It is surprising that the learned CIT(A) had traversed in an altogether different route to sustain the addition which is also perverse and has been noted cryptically by this forum. 19.

the disputes in question, we are in concurrence with the averments raised before us by the learned A.R. and hold that the entire addition of ` 11,26,85,825, merits full relief and hence the returned income be accepted. Consequently, grounds no.1, 2, 3 and 5 are decided in favour of the assessee appellant per detailed reasonings rendered supra. 20.

In the result, appeal filed by the assessee is allowed as above. Order pronounced in the open Court on 21/01/2025

Authorities and precedents appearing in the judgment

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Ratio and legal principle

The decision turns on the statutory and factual issues recorded above. The operative result is classified as Operative order controls. Read the rule only with the statutory version, factual findings and precedent chain recorded in the full judgment.

Why this judgment matters

The case is relevant to taxpayers, advisers and litigators dealing with Income Tax. Its practical value lies in the interaction between the statutory text, the evidentiary record and the procedural route followed in this case.

Practitioner action points

• Keep registration, audit-report, Form 10/10B/10BB and filing timestamps together; many exemption disputes are procedural and depend on when the form existed versus when it was uploaded.
• For litigation, attach the full judgment/order to the working paper and cite the paragraph/page supporting the proposition rather than relying on a headnote alone.

Full judgment and source trail

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