ITO- 23(2)(1), MUMBAI, MUMBAI vs. J.M. FINANCIAL MUTUAL FUND, MUMBAI

J.M. Financial Mutual Fund आदेश / O R D E R PER AMIT SHUKLA (J.M): The present appeal by the Revenue and the cross- objection by the assessee are directed against the order dated 02/05/2025 passed by the learned Addl./JCIT(A), Panchkula, arising from processing of return under section 143(1) of the Income-tax Act, 1961, for the assessment year 2023–24.

J.M. Financial Mutual Fund 5.2 The initial adjustment under section 143(1)(a)(ii) leading to disallowance of exemption of 1,10,80,56,197 stands nullified through rectification under section 154 dated 11.11.2024. 5.3. The variance of 1,10,80,56,197 reflected in the rectification order is due to wrong return filed by the appellant. In the return of income Part B2 of Part B – TI appellant should have claimed exemption u/s 10(23D) of Rs 2,63,01,28,730. Therefore, the AO is hereby directed to remove the residual variance and ensure consistency in all related schedules. In view of these facts, these grounds of appeal are allowed.”

7. Learned senior counsel for the assessee has rightly contended before us that the Revenue’s grievance is entirely misplaced. The relief was not granted by way of entertaining any fresh or belated claim but by recognising the rectification order which itself nullified the CPC’s adjustment and restored the statutory exemption. In other words, the CIT(A) has merely endorsed the effect of the rectification, without traversing beyond his appellate remit.

8. We find considerable merit in this submission. Once the CPC, by passing an order under section 154, has itself accepted the assessee’s computation and granted exemption under section 10(23D), the very basis of the Revenue’s appeal does not survive. The allegation that a “fresh claim” was entertained is factually incorrect, since the exemption was already claimed in the original return and only a mismatch in schedules had led to the earlier adjustment. The rectification order merely corrected this error and brought the return in line with the statutory position that income of a SEBI- registered mutual fund is wholly exempt under section 10(23D). In these circumstances, the learned CIT(A) has J.M. Financial Mutual Fund rightly upheld the rectification and granted the consequential relief.

9. In these circumstances, the Revenue’s appeal is devoid of merit. The exemption under section 10(23D) is a statutory benefit which cannot be denied merely on account of a technical mismatch in the return, once the CPC itself has accepted the position through rectification. The learned CIT(A) has not ventured beyond his jurisdiction, but has simply endorsed what already stood corrected by the rectification order. We therefore find no error, much less any infirmity, in the order of the CIT(A) warranting interference. Accordingly, the appeal of the Revenue is dismissed.

10. Turning to the cross-objection filed by the assessee, we note that it merely supports the conclusions reached by the learned CIT(A). Since we have already upheld those findings in dismissing the Revenue’s appeal, the cross-objection also deserves to be, and is hereby, allowed.