ORDER
Per: Bench:
Both the appeals are filed by the assessee as per order of the ld. Commissioner of Income Tax (Appeal)-Bathinda [in brevity the ld. CIT(A)] bearing appeal nos. 89 & 90-IT/17-18, A.Y.s 2014-15 & 2015-16 respectively, date of order 20.02.2019, both the orders were passed u/s 250(6) of the Income Tax Act. 1961 [in brevity the Act].
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2. The grounds of both the appeals are as follows:
ITA No. 228/Asr/2019
| 1. |
That the Ld. CIT(A) has erred in upholding the validity of jurisdiction of Ld. AO without appreciating the facts that Ld. AO was not holding the valid jurisdiction over the assessee appellant. As such, assessment framed without jurisdiction is illegal. The same be cancelled. |
Rs.5,06,68,190/- |
| 2 |
That the Ld. CIT(A) has erred in dismissing the ground no. 3 of appeal in summary manner without appreciating the facts that provisions of 10(37) of the Act are applicable to the facts and circumstances of the case. Hence, amount received on acquisition of land is not subject to tax. |
Rs.5,06,68,190/- |
| 3 |
That the Ld. CIT(A) has erred in dismissing the ground no. 5 of appeal in summary manner without appreciating the facts that the capital gain is exempt u/s 11(1A) of the Act as the application filed u/s 12AA of the Act is pending for registration before the Worthy Commissioner of Income-Tax (Exemptions). Hence, amount received from government on acquisition of land is not subject to tax. |
Rs.5,06,68,190/- |
| 4 |
That the Ld. CIT(A) has erred in dismissing the ground no. 6 of appeal in summary manner without appreciating the facts that provisions of section 96 of the RFCTLARR Act are applicable on the assessee’s case. Hence, not liable to tax. |
Rs.5,06,68,190/- |
| 5 |
That the Ld. CIT(A) has erred in dismissing the ground no. 7 of appeal in summary manner without appreciating the facts that value adopted by the assessee appellant is based on the report of registered approved govt. valuer after considering site and position of land. As such, value taken by the Ld. AO is unjustified. Hence, need to be set aside. |
Rs.5,06,68,190/- |
| 6 |
That the Ld. Assessing Officer as well as the learned CIT(A) has erred in law and on facts in taking the status of the assessee appellant as AOP against status as claimed in the return of AOP (Trust). |
Rs.5,06,68,190/- |
| 7 |
That the appellant craves to add or amend the ground of appeal. |
|
|
Total Tax Effect |
Rs.5,06,68,190/- |
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ITA No. 229/Asr/2019
3. The assessee has submitted an additional ground which reproduced as under:
ADDITIONAL GROUND OF APPEAL
1. "That as per facts and circumstances of the case the assessee is entitled for benefit of registration under section 12A of the Income Tax Act for the assessment years 2015-16 as per provisions of section 12A(2) of the Income Tax Act as the application for registration has been filed on 21-12-2016 and / registration has been granted w.e.f. from the assessment year
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2016-17 and whereas assessment has been completed on 22-09- 2017."
4. The brief facts of the cases are that the assessee is a trust and doing the charitable activities without considering any caste or creeds. The assessee was allotted Permanent Account Number (PAN) under the Act, on 23.09.2013 in the status of trust and filed return accordingly. The notice u/s 148 was issued by the ld. Assessing Officer,Ward-1(4)/Mansa (in brevity the AO) dated 06.12.2016. In response to the said notices, the assessee filed return declaring nil income in Form 7 on 21.02.2017 u/s 139 (4A). Accordingly the assessee claimed exemption u/s 11 on the strength of application filed by the assessee u/s 12AA of the Act on 21.12.2016. The application of registration was filed before the ld. Commissioner of Income Tax (Exemption), Chandigarh, [in brevity the ld. CIT(E)]. The application was filed earlier before filing of the return u/s 148 of the Act. But the ld. AO did not consider assessee's claim in return and assessed the return as Association of Person (Trust) and added back the income with the total income of the assessee. In other issue, for the assessment year 2014-15, the agricultural land of assessee was acquired by Punjab Govt on dated 29.08.2013. The assessee computed capital gain tax by ascertaining the cost of acquisition on basis of the valuation of property on dated 1.4.1981 through registered valuer which was valued amount to Rs.59,15,000/-. But the valuation on dated 01/04/81 of said land
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was rejected by the revenue & took the instrument value as on before 01/04.1981 & computed capital gain accordingly. Also, the ld AO did not allow the deduction U/s 11(1A) of the Act related to the assessee-trust. The aggrieved assessee filed an appeal before the ld. CIT(A) and ld. CIT(A) did not consider the assessee's grievance and uphold the order of the ld.AO. The assessee filed two appeals before us against the orders of the ld. CIT(A) for further adjudication. Moot points of the grievances of assessee for two appeals are as follows:-
i. Both the assessment orders were passed by violating the jurisdiction by assessing officer as per direction of the Board circular.
ii. The application for exemption U/s 12AA was applied so the jurisdiction for assessment is shifted from territorial jurisdiction to concurrent jurisdiction. So the ld AO made the assessment beyond jurisdiction and the assessment orders are nonest.
iii. The valuation of the cost of acquisition on dated 01/04/1981 was not accepted by the ld AO related computation of capital gain tax for F.Y. 2013-14.
iv) The ld AO refused to allow exemption U/S 11, 12 & 11(1A) of the Act.
v) On benefit of registration u/s 12A of the Act should be extended to coverup Section 12A(2) of the Act in both the years.
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5. Here, we are adjudicating the grievances of the assessee as per both ground of appeal together. But for brevity the ITA no-228/Asr/2019 has been taken as lead case.
6. Both the appeals have are same issues related to ground no. 1 to 3 which are decided as follows:-
6.1 In both the assessment years the notices u/s 148 was issued by the ld. AO, Ward 1(4), Mansa, dated 06.12.2016 and which were received by the assessee. In response to the notices the return in Form 7 on dated 21.02.2017 was filed by assessee declaring nil income. At the time of filing the return of income, for the year under consideration, copy of which has been placed in page 38 to 52 of the paper book. The return was filed in Form -7. The exemption was claimed u/s 11 on strength of the application filed by the assessee u/s 12AA of the Act, 1961 on dated 21.12.2016. Here, the exemption application was filed earlier before filing of return of income U/s 148 of the Act.
6.2 On basis of claimed of exemption u/s 11 the counsel of the assessee Mr. Sudhir Sehgal, Advocate, placed that the territorial jurisdiction of the assessee was shifted to concurrent jurisdiction under the ld. Commissioner of Income Tax (E), Chandigarh. Mr. Sehgal also placed that the territorial jurisdictional Assessing Officer, Ward 1(4), Mansa had no authority for completion of assessment as per
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the CBDT Circular No. 52/2014 dated 22.10.2014. The relevant part is extracted hereunder:
"Commissioner of Income Tax (Exemption) Chandigarh States of Jauum and Kashmir Himachal Pradesh, Punjab Haryana and Union territory of Chandigarh All cases of persons in the territorial, area specified in column (4) claiming exemption under clauses (21), (22),(22A),(22B),(23),(23A),(23AAA), and (23B), (23C), (23F), (23FA), (24), (46) and (47) of section 10, section 11, section 12, section 13A and section 13B of the Income tax Act, 1961 and assessed or assessable by an income tax authority at serial numbers 50 to 68 specified in the notification of Government of India bearing number S.O. 2752 dated the 22nd October, 2014."
6.3 Mr. Sehgal, also pointed out the relevant section for ascertaining in the jurisdiction of the assessee.
"Jurisdiction of Income-tax authorities. Section 120 (3) In issuing the directions or orders referred to in sub-sections (1) and (2), the Board or other income tax authority authorised by it may have regard to any one or more of the following criteria, namely:-
(a) Territorial area;
(b) Persons or classes of persons;
(c) Incomes or classes of income; and
(d) Cases or classes of cases."
6.4. This particular section is r.w.s. 124(1)(b) which is as follows:
"Jurisdiction of Assessing Officers. 124 (3)(b) where he has made no such return, after the expiry of the time allowed by the notice under [sub-section (2) of section 115WD or sub-section (1) of section
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142 or under sub-section (1) of section 115WH or under section 148 for the making of the return or by the notice under the first proviso to section 115WF or under the first proviso to section 144] to show cause why the assessment should not be completed to the best of the judgment of the AO, whichever is earlier;"
7. The jurisdiction was also challenged before the ld. AO by the counsel of the assessee the relevant part of the assessment order related to objection of the ld AO is extracted as follows:-
"2.2 Later on on change of incumbent, notice u/s 142(1) was issued to the assessee on 10.07.2017 fixing the case for 14.07.2017. On 14.07.2017, Shri Shiv Jindal, CA counsel for the assessee attended and sought adjourned which was granted for 25.07.2017. On 25.07.2017 none attended nor any reply received. Lastly the case was again fixed for hearing for 18.08.2017 by issue of notice u/s 142(1) dated 09.08.2017. On 22.08.2017 again Shri Shiv Jindal, CA attended and sought adjournment on the plea that reply is yet to be prepared. The case was adjourned for 05.09.2017. On 05.09.2017, Shri Shiv Jindal, CA counsel for the assessee attended and challenged the jurisdiction on the following grounds:
"It is submitted that in this case return has been filed claiming the status as charitable trust. Further for application for registration u/s 12AA has also been filed with the Commissioner of Income-tax (Exemptions) on 21.12.2016. Though the same has been rejected vide order dated 30.06.2016 but against the rejection order, the appeal has been filed before Hon'ble Income Tax Appellate Tribunal, Amritsar Bench, Amritsar on 18.08.2017 which is still pending. As such the
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jurisdiction in this case is only with the Income Tax Officer (Exemptions), Amritsar not in your ward.
In view of the aforesaid facts, it is, therefore, requested that the proceedings started under section 148 of the Income Tax Act started may kindly be dropped as notice has been issued without jurisdiction."
3. The objections of the assessee were rejected vide this office order dated 12.09.2017 as these were not acceptable for the following reasons:-
(i) As regards filing of return of income claiming the status as charitable trust is not acceptable because the assessee is not having registration u/ s 12AA of I. T. Act, 1961.
(ii) In this case no exemption u/s 12A of I. T. Act, 1961 is available upto the assessment year 2016-17. The assessee has applied for registration u/s 12AA of I. T. Act, 1961 before the Commissioner of Income-tax (Exemption) on 21.12.2016 i.e. after receipt of notice u/s 148 of I. T. Act, 1961. The application has been rejected by the worthy CIT(Exemptions). The assessee is in appeal before the Hon'ble ITAT, Amritsar and in case the same is allowed by the Hon'ble, ITAT the exemption would not be available for the year under consideration i.e. for the Asstt. Year 2014-15, the exemption would only be available to the assessee after the date of application i.e. 21.12.2016 for the Asstt. Year 2017-18 as per amended clause (a) of Section 12A by the Finance Act, 2007 w.e.f. 01.06.2007. The jurisdiction of the ITO (Exemption), Amritsar is over the cases where exemption u/s 10(23C) and exemption u/s 12A of I. T. Act, 1961 is available to the assessee.
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In the instant case neither exemption u/s 10(23C) nor exemption u/s 12A of I. T. Act, 1961 is available as evident from the facts stated above. Therefore, the plea of the assessee on this ground cannot be accepted.
(iii) As stated above notice u/s 148 of I. T. Act, 1961 was issued on 06.12.2016. This notice was complied with by the assessee by filing return of income. Lateron, notice u/s 143(2) of I. T. Act,, 1961 was also issued on 22.02.17 which was also complied with. The assessee is responding the notices issued from time to time and getting adjournment on the plea that information is yet to be prepared. The assessee is challenging the jurisdiction after a gap of 9 months from the receipt of notice u/s 148 and after a gap of 7 months from the receipt of notice u/s 143(2) of I. T. Act, 1961. As per Hon'ble Delhi High Court in the case of Mega Corporation Ltd., passed in ITA No. 128 of 2016 dated 23.02.2017 wherein it has been held in unambiguous terms that in the light of Section 124(3)(a) of the Income Tax Act, 1961 as the assessee is not entitled to question the jurisdiction of an Assessing Officer after expiry of one month from the date on which he is served a notice u/s 142(1) or 143(2) or 115(WE)(2) or after the completion of assessment, whichever is earlier:
After meeting out the objections raised by the assessee, a show cause notice alongwith notice u/s 142(1) issued to the assessee on 15.09.2017 and the case was finally fixed for hearing on 22.09.2017. Vide this notice, the assessee was required to show cause as to why
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the capital gain of Rs. 12,91,03,570/-arose on sale of immovable property and interest earned on FDRs amounting to Rs.2,37,702/- should not be added to the income of the assessee and assessed accordingly. In response, the assessee filed written reply which is reproduced as under:-
"The office of the assessee trust is situated in District Mansa and at the time of applying for Permanent Account Number, the jurisdiction in the case of the assessee trust was with the Assessing Officer, Mansa working under the Pr. Commissioner of Income-tax, Bathinda but thereafter, as per Notification No.52/2014 dated 22.10.2014, the Hon'ble CBDT has changed the jurisdiction of the persons claiming exemptions under section (21), (22), (22A), (22B)k, (23), (23A), (23AAA), (23B), (23C), (23F), (23FA), (24), (46) and (47) of Section 10, Section 11, Section 12, Section 13A and section 13B of the Income Tax Act, 1961 to the Assessing Officer working under the Commissioner of Income-tax (Exemptions), Chandigarh earlier being assessable by the Assessing Officer working under Pr. Commissioner of Income Tax referred at Sr. No. 50 to 68 of the notification of the Government of India bearing number S.O. 2752(E) dated the 22nd October, 2014. Admittedly, in this case the assessee trust is claiming exemption under section 11 and 12 of the Income-tax Act. Therefore, the basic jurisdiction iw the case of the assessee trust is with the Assessing Officer (Exemptions), Amritsar as per provisions of Section 124 read with Section 120 of the Income Tax Act. Accordingly, the assessee trust has challenged your jurisdiction vide application dated 05.09.2017 as in this case, notice u/s 148 of the Income Tax Act has
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been issued on 06.12.2016. Return in response to the said notice has been filed online declaring Nil income after claiming exemption u/s 11 of the Income Tax Act. As per Board Notification issued under section 120 of the Income Tax Act, the jurisdiction in such type of cases is only with the Assessing Officer (Exemptions). Therefore, this return should have been immediately transferred to the Assessing Officer (Exemptions) alongwith Permanent Account Number. The assessee trust has duly claimed exemption u/s 11 of the Income Tax Act and further disclosed the facts in the return that the application u/s 12AA of the Income Tax Act is pending with the Commissioner of Income- tax (Exemptions), Chandigarh. Similarly return for the assessment year 2016-17 and 2017-18 has been filed claiming exemption under section 11 of the Income Tax Act only. In the online return filed the jurisdiction of the case shows the jurisdiction with the Income Tax Officer, Ward-1 (2), Bathinda. However, vide order dated 12.09.2017, the claim of the assessee trust on account of validity of jurisdiction has been rejected after taking shelter under section 124(3) of the Income Tax Act without considering the Circular dated 22.10.2014 mentioned above which is binding u/s 119 of the Income Tax Act on all the subordinate authorities working under Hon'ble CBDT. In view of the above facts, the information as required is being filed under protest with the right to contest the issue of jurisdiction further before the appellate authorities."
7.1 In this respect the observation of the ld. CIT(A) is as follows:
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"4.2 I have given careful consideration to the contentions of the appellant and find that the same are not acceptable if the entire proceedings are examined in chronological manner. The appellant received compensation for land acquisition on 29/08/2013 and no return of income was filed for the year under consideration disclosing this compensation. This information came into possession of the Assessing Officer exercising jurisdiction based on territorial location of the appellant. The Assessing Officer exercising territorial jurisdiction mounted reassessment proceedings by issue of notice under section 148 of the Act on 06/12/2016 which was served upon the appellant through registered post on 09/12/2016 and through notice server on 15/12/2016. These are the relevant dates because at that point of time undisputedly there was no circumstance in existence which could show that the present Assessing Officer could not exercise jurisdiction over the appellant.
Subsequent to a valid issue of notice under section 148 and assumption of valid jurisdiction the present proceedings were initiated. The entire logic presumption of jurisdiction was explained in the case of Abhishek Jain v. ITO: [2018] 94 taxmann.com 355 (Delhi)/[2018] 405 ITR 1 (Delhi): holding that in terms of section 124(3)(b) jurisdiction of an Assessing Officer cannot be called in question by an assessee after expiry of one-month from date on which he was served with a notice for reopening assessment under section 148 of Income Tax Act.
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Hon'ble jurisdictional High Court in the case of Rajni Gugnani vs. CIT: [2014] 44 taxmann.com 98 (Punjab & Haryana) clarified the conflict of territorial and transactional AO vis-a- vis the AO where the assessee claims to have the jurisdiction. It was clarified that where assessee was not only maintaining residence in Delhi but also had bank account in Delhi where dubious transaction had taken place, Income-tax authority of Delhi had jurisdiction over assessee. In the present case, at the time of issue of notice for reassessment the territorial Assessing Officer assumed the jurisdiction based on the site as of the appellant as well as the site of the land which had been acquired resulting into compensation.
I have also considered the contention of the appellant that subsequently, it had filed application under section 12AA for grant of registration on 21/12/2016, filed the return of income in Form no. 7 on 22/01/2017 and the application was rejected on 30/06/2017 would alter the jurisdiction because it has converted the appellant in to an entity "claiming exemption" over which jurisdiction could be exercised only by ITO (exemption). The appellant also referred to section 12AA(2) to argue that if and when registration is allowed it relates back to the pending assessments also. All these arguments at fallacious for the reason that the jurisdictional order mentioning that the entities claiming exemption are assessable by ITO (exemption) cannot be interpreted to mean that one who has applied for registration or filled up income tax return in particular form
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would qualify to be validly claiming exemption. The term claiming exemption means one who is authorised to claim the exemption. Secondly, the contention that if and when registration is granted it relates back to the pending assessment cannot be construed to mean that during the period when the registration has not been granted territorial Assessing Officer is precluded from exercising jurisdiction. On the contrary, if without grant of registration any attempt by ITO (exemption) to exercise jurisdiction would be un-authorized because the appellant has not been granted valid exemption registration. The ground of appeal is dismissed."
8. Here, the two issues are adjudicating which will be ascertaining the legal jurisdiction of assessing office;
(a) The application of the notification No. 52/2014 dated 22.10.2014 whether applicable of the assessee for considering concurrent jurisdiction of the assessee. The two judgments are mentioned by the ld CIT-DR in relation to rejection of the jurisdictional issue of assessee by the ld. AO. The judgments are as follows, Hon'ble Delhi High Court in the case of Abhishek Jain, and in case of Rajni Gugnani, Hon'ble Punjab & Haryana High Court, 44 taxmann.com 98. Mr. Sehgal Mention that the revenue authorities rely on the two judgments but in the case of Sh. Abhishek Jain there is no applicability in this case, since the facts are entirely different with the present case. By way of specific notification dated 22.10.2014
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that the jurisdiction all over India is through transfer of assessee who claimed exemption u/s 11 and 12. He further mentioned that in case of Rajni Gugnani at page 5 of the order is also different fact, because here also there is no conflict between two AOs. In the assessee's case as per the notification the jurisdiction stands transfer. Thus submission of the assessee by way of ground no. 1 may please be accepted.
9. The ld. Counsel of the assessee Mr. Sehgal submitted chart of the events which is extracted as follows:
SEQUENCE OF EVENTS
| Date of Incorporation |
23.09.2013 |
| Issue of Notice u/s 148 |
06.12.2016 |
| Application for registration u/s 12AA |
21.12.2016 |
| Filing of Return of Income in response to Notice u/s 148 for AY 2014-15 AY 2015-16 |
21.02.2017 22.02.2017 |
| Order of Rejection of registration application by CIT(Ex.) |
30.06.2017 |
| Passing of Assessment Order u/s 147 |
22.09.2017 |
| Passing of Appellate Order by CIT(A) |
20.09.2019 |
| Order by Hon’ble ITAT against the order of rejection of application of registration |
22.09.2019 |
| Order of approval of registration u/s 12AA by CIT (Ex.) |
31.05.2019 |
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9.1. The Ld CIT-DR vehemently argued. The main focus of pleading was that the assessee should not be benefited on basis of claim of U/s 11 & 12 of the Act by strength of application U/s 12AA of the Act. The benefit will be applicable only those assessees who got the registration U/s 12A of the Act. The ld AO acted as per his jurisdiction.
10. We are perusing the records and considering the facts of the case. The assessee was incorporated on dated 23.09.2013. Accordingly, the PAN was allotted by mentioning the incorporated year 2013. The status of the assessee is trust. The trust has claimed the exemption under section 11 & 12 in the return after filing the application of registration U/s 12AA of the Act. The jurisdiction was vested on the ld. CIT(E) and not with the Territorial Commissioner. Because the said notification is mentioning the word "claiming exemption u/s 11 and 12". No other restriction was imposed in the clause for claiming deduction.
10.1 The ld CIT-DR took the view that the said exemption will be allowed after getting registration U/s 12A of the Act. But the notification has not made such restriction in between allowed or deemed to be allowed of registration. In other hand, the application in Form 10A related to application of registration u/s 12AA was filed on 21.12.2016. The returns were filed u/s 139(4A) of the Act for A.Y. 2014-15 on dated 21.02.2017 and for 2015-16 on dated 22.02.2017. The ld. CIT(E) had rejected the registration application on dated 30.06.2017. The said
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order was restored back and by the ITAT, Amritsar Bench on dated 22.09.2019. The final approval was received by the assessee for registration u/s 12AA on dated
31.05.2019.
Mr. Sehgal also pointed out that the date of effect is very financial year 2016-17 related to A.Y. 2017-18. So the effective date of registration is effective from financial year 2016-17 in which year the application was made for registration u/s 12AA. Accordingly, the jurisdiction was generated in the financial year 2016-17 before the ld CIT(E), Chandigarh. During the assessment this particular jurisdiction was deemed jurisdiction so this particular jurisdiction is not with the assessing authority, ITO Ward 1(4), Mansa but with the CIT(E) Chandigarh.
10.2 In this respect the reliance was placed on the judgment of M. I. Builders P. Ltd. Vs. ITO in ITA No.111/Luck/2006 date of order 07.09.2007, 115 ITD 0419 (2008). As per the order:
"29. The argument of learned Departmental Representative that since the assessee has not objected to the assessment framed for the asst. yr. 2001-02 and, therefore, Asstt. CIT, Range-IV, Lucknow can validly issue notice under s. 148(1) is not sustainable in law. As discussed above, protection of the proceedings and assessment thereafter on account of failure of the assessee to object within the time allowed under s. 124(3) is
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available to specific proceeding and not to every proceeding. Erroneous assumption of jurisdiction cannot, in general, be validated. Such validation is specific in s. 124(3). Secondly, principles of estoppel are not applicable to income-tax proceedings. What may be acceptable or held in one year or in one proceeding cannot be in general held to be applicable to other proceedings. It is held by Hon'ble Gujarat High Court in Anant Mills Ltd. vs. CIT (supra) that estoppel is not applicable to successive assessments. In any case, estoppel cannot be made applicable to assumption of jurisdiction. It has to be specifically provided in the statute. We, therefore, do not find any force in the arguments in this regard submitted by the learned Departmental Representative. The same are, therefore, rejected. So far as the merit of the case is concerned in our considered view, they are merely academic as reassessment is cancelled as having been initiated without jurisdiction.
30. As a result we hold that the issuance of notice under s. 148(1) by Asstt. CIT, Range-IV, Lucknow was without jurisdiction and, therefore, invalid. The assessment framed on that basis by Addl. CIT, Range-I, Lucknow will also be invalid and, therefore, is cancelled. The appeal of the assessee is therefore, allowed."
11. The ld. CIT-DR relied on the order of the revenue authorities and mentioned that the assessee did not inform the revenue within one month after receiving notice u/s 148 about the change of jurisdiction. So, there is violation of section
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124 of the Act. The issue was already discussed in the above part that the judgment of Shri Abhishek Jain and the Rajni Gugnani are not applicable factually different with the assessee's case.
12. In brief, the jurisdiction point is explained in this way that the territorial jurisdiction is overruled by the concurrent jurisdiction which is covered by the said notification of the CBDT. Furthermore, the registration U/s 12AA is in action from the year of application. So, the year of application is considered as deemed registration and the claim of deduction u/s 11 and 12 should be applicable accordingly. Accordingly, the assessing authority had acted beyond jurisdiction. The grounds of related to the jurisdictional issue are in favour of the assessee.
13. In result, the grounds of the assessee related jurisdictional issue is allowed.
14. Ground Nos. 4 to 6:- during the assessment year 2014-15, the agricultural land of the assessee was acquired in the value of Rs.15,40,67,304/- by the Government of Punjab on dated 29.08.2013. The assessee invested another agricultural land amount of Rs.10,76,33,375/-. The exemption was claimed in applicability of section 11(1A) of the Act and exemption of capital gain arising out of compulsory acquisition of assessee's land. In view of the said section, the assessee has also invested the net consideration to the extent of Rs.10,76,33,375/-
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in another agricultural land. The assessee is debitable this particular land was acquired by the assessee on date which was prior to 01.04.1981. For the valuation of the cost of acquisition, the assessee was made valuation of the land by Mr. Mani Kant Garg, the Government approved valuer of Income Tax. The valuation certificate is enclosed in paper book from page 153 to 157 dated 20.02.2017. According to the valuation report the cost of land on 01.04.1981 is Rs.59,15,000/-. The valuation report was placed by the assessee before the AO. The observation of the ld. AO in this is as follows:-
"d) In para 2 of the reply the assessee also contended that as per order of worthy Commissioner of Income-tax (Exemptions), Chandigarh the assessee was not owner of the land which was acquired by the Punjab Govt. This contention of the assessee is also not acceptable in view of the fact that as per acquisition letter the land was shown in the name of assessee. Further, as per Schedule CG (Capital Gains), the assessee itself has calculated the capital gain on sale of land in question. Moreover, as per Annexure A of Balance Sheet for the year ended 31.3.2014, the assessee has increased capital fund by Rs. 15,40,67,304/- on account of acquisition of land.
e) In para 3 of the reply, the assessee contended that as per valuation report dated 20.02.2017, the market value of the acquired property as on 01.04.1981 is Rs.59,15,000/-. On the
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basis of valuation report the maximum capital gain should worked out is amounting to Rs.9,85,25,454/- instead of Rs. 12,91,03,570/-. This contention of the assessee is also not acceptable. As per registration deed registered by the Tehsildar Mansa, the rate of land in Mansa Kalan was Rs.5970/- per kanal i.e. Rs.47,760/- per acre as against Rs. 1,05,600/- per acre calculated by the Valuer. The copy of registration deed for that period is placed on record. In view of these facts, the value of land as on 01.01.1981 taken at Rs.26,58,507/- is correct. Hence, the reply of the assessee is not accepted.
5. In view of the facts stated above the reply of the assessee is not accepted. As stated above, during the year financial year 2013-14 relevant to the assessment year 2014-15, the Punjab Govt, had acquired land of the assessee measuring 445 kanals 3 marls for Rs. 15,40,67,304/- on 29.08.2013 which is a capital asset within the meaning of section 2(14) of I. T. Act, 1961 as per acquisition records. The assessee is not eligible for exemption u/s 10(37) of I. T. Act, 1961. Therefore, the capital arose on the transfer of the said land which works out to Rs. 12,91,03,570/- is assessed in the hands of the assessee."
15. The ld. CIT-DR vehemently argued and relied on the order of the ld. CIT(A) which is extracted as follows:
"d) Applicability of RECTLAR : there is no dispute that the award/compensation was given to the appellant on 29/08/2013
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where as by virtue of circular number 36/2016 dated 25/10/2016 issued by Central Board of Direct Taxes the beneficial provisions would be effective from 01/01/2014. The benefit of RECTLAR has been correctly denied by the Assessing Officer to the appellant.
e) Valuation of cost of acquisition: the appellant has challenged cost of acquisition adopted by the Assessing Officer by applying the rate of Rs. 5970 per kanal (Rs.47,760/- per acre) relying upon valuation report dated 20/02/2017 where the fair market value as on 01/04/1981 has been calculated at Rs. 59,15,000/- per acre. The calculation of the Assessing Officer was based upon actual transaction having been transacted at the relevant time as per the record of revenue authorities. The valuation report is submitted by the appellant was not based on actual transaction but merely on assumptions. The appellant has not pointed out any defect in the comparative case adopted by the Assessing Officer which is a real and not imaginary. The calculation of the Assessing Officer is based on credible information, therefore in absence of any objection by the appellant cannot be disbelieved. The ground of appeal is dismissed.
In consideration of totality of circumstances as mentioned above, the grounds of appeal from 3 to 7 are devoid of any merits and hence dismissed."
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16. Other than the agricultural land in both the years, assessee claimed deduction of interest for the year 2014-15 amount to Rs.2,37,702/- and for A.Y. 2015-16 amount to Rs. 44,73,197/- and also Golak donation Rs.2,54,505/- and Rs.3,56,836/- for A.Y. 2014-15 and 2015-16 respectively which were added back with the total income of assessee. But the assessee's grievance is that all are covered under deduction section 11 & 12 of the Act.
16. First we adjudicate the issue related to calculation of capital gain in relation to valuation of cost of acquisition by registered valuer and applicability of section 11(1A) of the Act. Considering above, we have already discussed that the assessee got registration u/s 12AA for F.Y. 2016-17. The registration was approved by the ld. CIT(E) on 31.05.2019.
For adjudicating the above mentioned issues we have to ascertain that applicability of Section 12A(2) of the Act for both the assessment years under appeal. These two years are guided by the provision of section 12A(2) of the Act. The provision of section 12A Clause (2) is reproduced hereunder:
2) Where an application has been made on or after the 1st day of June, 2007, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution from the assessment year immediately following the financial year in which such application is made:]
Conditions for applicability of sections 11 and 12.
"[Provided that the provisions of sections 11 and 12 shall apply to a trust or institution, where the application is made under—
(a) sub-clause (i) of clause (ac) of sub-section (1), from the assessment year from which such trust or institution was earlier granted registration;
(b) sub-clause (iii) of clause (ac) of sub-section (1), from the first of the assessment year for which it was provisionally registered:
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Provided further that where registration has been granted to the trust or institution under section 12AA or section 12AB], then, the provisions of sections 11 and 12 shall apply in respect of any income derived from property held under trust of any assessment year preceding the aforesaid
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assessment year, for which assessment proceedings are pending before the Assessing Officer as on the date of such registration and the objects and activities of such trust or institution remain the same for such preceding assessment year:"
16.1. In this respect Mr. Sehgal submitted the judgments which are hereunder:
i. Prem Prakash Mandal Sewa Trust vs. ITO (Exemption), Raipur (CG) [2021] 132 taxmann.com 269 (Raipur-Trib.).
ii. SNDP Yogam vs. ADIT (Exemption) [2016] 68 taxmann.com 152 (Cochin- Trib.)
iii. Punjab Educational Society vs. ITO-IT, Moga [2017] 88 taxmann.com 113 (Amritsar-Trib.).
iv. St. Jude's Convent School vs. ACIT, Circle-III, Jalandhar [2017] 77 taxmann.com 173 (Amritsar-Trib.).
17. The ld. CIT(A) had rejected the claim of the assessee as applicability of section 11(1A) for the A.Y. 2014-15 only due to the want of registration u/s 12AA and it has been approved beyond any doubt that assessee is deemed to be registered u/s 12AA for the year under consideration on the basis of second proviso to clause 2 of section 12A as per binding judgments. The assessment for both the years was pending during the time of approval/deemed approval. So the assessment proceedings were pending during approval. So the applicability of section 12A is
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also casted in the A.Y. 2014-15 and 2015-16. The expenses related to Golak donation and interest should be calculated in taking consideration of section 11 r.w.s. 12A of the Act.
19. In adjudication of valuation of cost of acquisition it is very clear that a land was purchased before 01.04.1981. The base rate of index is started from 01.04.1981 as per the Act. The valuation of the property should not be the same on the date of acquisition beyond 01.04.1981 & on the date 01/04/1981. We relied in the judgment Govindaraju vs. ITO Ward 8-(2) Bangalore 377 ITR 243 (Kar), Where assessee determined fair market value of property according to valuation report of a registered valuer, Assessing Officer could not have arrived at 'fair market value' of property ignoring valuation report on record. So, the report drawn by the Government Valuer is very much accepted. Mr. Sehgal also mentioned that both the revenue authorities did not take contingence of any other valuation report from any of the authority. So, this particular report is accepted. As the benefit of section 12A is applicable in both the years. Mr. Sehgal specially mentioned the judgment in the case of Prem Prakash Mandal vs. ITO (Exemption) with following observation: Where assessee-trust, engaged in social and religious activities, was denied exemption under section 11 on ground of non-registration under section 12A, however, during pendency of appeal filed by assessee before CIT (A) against same, assessee obtained registration under section 12A, assessee's
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case would be covered under deemed registration and, thus, assessee would be entitled to claim exemption under section 11.
20. Ground no-7 is general in nature.
21. In view of the finding given by us herein above with regard to the status of the assessee society and its eligibility to claim exemption u/s 11 of the Act. The assessee is eligible of benefit of Section 12A(2) of the Act for the AY 2014-15 & 2015-16. The copy of order U/s 12AA(1)(b) of the Act is annexed in page no-37 to 38 of Paper Book. Therefore we direct the Assessing Officer to grant the benefit of Section 11 & 12 for AY 2014-15 & 2015-16. The valuation report of assessee should be accepted for value of cost of acquisition of aforesaid land on dated 01/04/1981.
22. In the result, the grounds & additional ground of the appeals bearing no ITA 228 & 229/Asr/2019 are allowed.
Order pronounced in the open court on 22.06.2022 Sd/- Sd/-
(Dr. M. L. Meena) (ANIKESH BANERJEE) Accountant Member Judicial Member
AKV
Copy of the order forwarded to:
(1)The Appellant
(2) The Respondent
(3) The CIT
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(4) The CIT (Appeals)
(5) The DR, I.T.A.T. True Copy
By Order
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