A charitable institution must file income tax returns to claim exemptions under sections 11 and 12 prior to 2018, as registration alone is insufficient for eligibility.

JUDGMENT :

BECHU KURIAN THOMAS, J.

The question that arises for consideration is whether a charitable institution registered under section 12A of the INCOME TAX ACT , 1961 (for short ‘the Act’) was required to file a return of income for the purposes of claiming the benefit of exemption under sections 11 and 12 of the Act, prior to 2018.

2. Petitioner is a charitable trust rendering educational services and is an assessee under the Act. According to the petitioner, for the assessment years 2015-16 and 2016-17, its entire receipts were applied for charitable purposes and hence it was not necessary to file a return of income. Since petitioner had not filed the return for the aforementioned assessment years, the Income Tax Officer issued a notice under section 148 of the Act proposing to assess the petitioner under section 147 of the Act by alleging that there were reasons to believe that the net income over expenditure had escaped assessment. Petitioner further alleges that, since it had not received any notice, a response could not be filed and later, when a show cause notice was issued, a detailed reply was furnished and all documents were made available. Thereafter, despite accepting the Income and Expenditure Account and the Balance Sheet, the excess income over expenditure was assessed in the hands of the petitioner, treating it as an ‘association of persons’ for the sole reason of not having filed a return of income.

3. Petitioner pleads that the assessment order, without giving the benefit of the exemption under section 11 of the Act, for the sole reason of not filing a return of income, is erroneous. Challenging the assessment orders, a revision petition was preferred before the second respondent. During the pendency of the aforesaid revision petition, the third respondent imposed a penalty under section 272A(2)(e) of the Act for non-filing of returns, which was also challenged in a revision petition filed under section 264 of the Act. Subsequently, by orders dated 21.03.2024, the second respondent rejected the revision petitions filed by the petitioner against the assessment orders and by orders dated 30.03.2024 and 24.03.2024, the second respondent rejected the revision petitions filed by the petitioner against the penalty. The said orders are under challenge in this writ petition. Petitioner has also sought for a declaration that, as a charitable institution, it is eligible for exemption under sections 11 and 12 of the Act, notwithstanding the non-filing of returns for the years 2015-16 and 2016-17.

4. A statement has been filed on behalf of the respondents pleading that, the registration under section 12A of the Act by itself, does not confer any right for exemption to the petitioner under sections 11 and 12 of the Act. It is averred that the exemption from taxation will arise only when the assessee complies with the conditions laid down in sections 11, 12, 12A and 13 of the Act, apart from other provisions of the statute. Respondents also pleaded that filing of return of income is a condition precedent for the applicability of sections 11 and 12 of the Act for the assessment years 2015- 16 and 2016-17 as per section 12A(1)(b) of the Act. It is further stated that, despite granting ample opportunities, petitioner had failed to furnish any justification for not filing the income tax returns, thereby rendering itself ineligible for grant of exemption under sections 11 and 12 of the Act. According to the respondents, petitioner falls in the category of a representative assessee as defined under section 160 of the Act and whatever income the trust receive