I got a ticket for permit parking, however, I had the permit tab covered by another tag; can I plea not guilty?

Yes, explain these circumstances to your lawyer and plead "not guilty." The bottom line is that you did indeed possess the correct permit tag even though it was unintentionally covered. You need  to have your lawyer do some negotiating with the municipal prosecutor. Although no lawyer can "guarantee" a result, this is the type of charge that should either be reduced or perhaps even be dismissed. Please call me at either (732)932-7226 (office) or (732)710-0004 (cell). 

There is probably a requirement that the permit be displayed in a certain way so as to make it conspicuous for the police or other law enforcement people to see.  I do not believe that they have an obligation to go searching for the tag.  So although you can plead not guilty I doubt that they will indeed waive the fee.  They may, though, reduce the fee somewhat.  It is worth a try.  Good luck.