INCOME TAX ACT, 1961

Section 147 Section 143(3) Section 12A

Reassessment - Validity - Applicability of second proviso to section 12A(2) inserted with effect from 1-10-2014 whether retrospective in nature -

Assessee was a Trust which was constituted under a registered trust deed. The assessee-trust was managing and administering a temple. The assessee had many devotees and worshipers to the temple god, which the assessee-trust was maintaining. The assessee-trust was registered under the provisions of sections 12AA and 80G with effect from assessment year 2015-2016. The case of the assessee was reopened by issuance of a notice under section 148 for the assessment years 2008-2009 to 2013-2014. Subsequently, the AO concluded the assessments by passing order of assessment under section 143(3) read with section 147 for all the assessment years under consideration, by determining the total income of the assessee. CIT(A) disposed of the appeals by confirming the additions made by the AO. Assessee contended that due to retrospective application of second proviso to section 12A(2) reopening of assessment was not legally correct.Held: Section 12A was amended by the Finance (No. 2) Act, 2014 with effect from 1-10-2014 by way of insertion of second proviso to section 12A(2). The benefit of retrospective application alone could be the intention of the legislature and this point was further strengthened by the Explanatory Notes to Finance (No. 2) Act, 2014 issued by the Central Board of Direct Taxes vide its Circular No. 01/2015, dt. 21-1-2015. The statute also goes on to provide that no action under section 147 could be taken by the AO merely for non-registration of trust for earlier years. Sections 12A and 12AA are only procedural in nature. Hence, it is not the registration under section 12AA by itself that offers immunity from taxation. A receipt whether it is revenue or capital in nature is to be decided at the assessment stage. Being procedural in nature, liberal interpretation will give effect to the intention of the amendment, thereby removing the hardship in genuine cases like the present assessee under consideration. As per second proviso to section 12A(2), no action under section 147 shall be taken by the AO in case of a trust for any assessment year preceding the aforesaid assessment year only for non-registration of such trust for the said assessment year. In the present case, since assessee has been granted registration under section 12A on 5-8-2014 for the assessment year 2015-2016, it was not possible to reopen the assessment earlier to that on non-registration of such trust and bringing the corpus donation into tax, which was received for specific purposes. Since this Tribunal allowed the legal issue in favour of the assessee, Tribunal was refrained from going into any other grounds raised by the assessee in these appeals.

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