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Facts
The CPC made an addition of Rs. 14,59,152/- under Section 11(3) for an amount applied for specific objects in A.Y. 2023-24, which was the 6th year of utilization of funds accumulated under Section 11(2) for A.Y. 2017-18. The appellant challenged this addition, arguing it was a debatable issue and thus not permissible under Section 143(1)(a), and that precedents supported their position.
Held
The Tribunal held that the issue regarding the utilization of accumulated funds in the 6th year was debatable, and therefore, an adjustment under Section 143(1)(a) could not be made. Relying on Bombay High Court and ITAT decisions, it found that the denial of benefit/exemption for 6th-year utilization was not permissible, and the amendment to the accumulation period could not be applied retrospectively. Consequently, the addition made by CPC was deleted.
Key Issues
Whether an addition related to the utilization of accumulated funds in the 6th year, being a debatable issue, can be made through an intimation under Section 143(1)(a) of the Income Tax Act, and whether the amendment reducing the accumulation period for Section 11(2) funds to 5 years can be applied retrospectively.
Sections Cited
143(1)(a), 11(3), 11(2), 143(1)
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Income Tax Appellate Tribunal, Mumbai “E” Bench, Mumbai.
Before: Smt.Beena Pillai (JM) & Shri Omkareshwar Chidara (AM)
In the above cited appeal, the appellant has stated that the Ld. CPC has made an adjournment under section 143(1)(a) of the Income Tax Act by making an addition of Rs. 14,59,152/- under section 11(3) of the Act being the amount applied for specific objects in A.Y. 2023-24. This A.Y. 2023-24 is the 6th year out of accumulation made under section 11(2) for A.Y. 2017-18 under the relevant provisions of the Act for that assessment year.
Against the said addition, the appellant filed an appeal and confirmed the disallowance made by CPC, Bangalore.
Aggrieved by the order of CPC under section 143(1) of the I.T. Act and appeal order of Ld. CIT(A), the appellant filed an appeal. The appellant raised mainly two objections :- a) The addition/disallowance under section 11(3) cannot be made under section 143(1)(a) of the Act by issuing an intimation under 2 Holy Cross Church section 143(1) of the Act as the same is highly debatable and not mistake an apparent from record. b) The appellant argued that matter on merits too was already covered in favour of the appellant by at least 3 decisions of ITAT Mumbai.
The Ld. DR relied on the order of Ld. CPC and the order of Ld. CIT(A) where it was held that the provisions of law should be strictly interpreted and when the legislature has reduced the period of accumulation to be spent to 5 years, then the appellant has to spend the surplus within five years and cannot be extended to 6th year. When the law is unambiguous and clear, addition under section 143(1)(a) of the Act can be done by CPC and no arguments are required to read the simple meaning of legislative amendment.
Heard both sides. The Bench is of the opinion that the issue is debatable and adjustment cannot be made under section 143(1)(a) of the Act. Hon'ble Bombay High Court in the case of Khatau Junkar Ltd. (196 ITR 157) (Bom) held that the meaning of words, “prima facie inadmissible” in clause (iii) of section 143(1)(a) is “on the fact of it, the claim is not admissible”. When there are three decisions of ITAT are in favour of the appellant, the issue cannot come under the purview of “on the face of it, the claim is not admissible”. Coming to the merits, the issue is covered by the following jurisdictional ITAT, Mumbai Benches in the following cases where it was held that denial of benefit/exemption for utilization in 6th year permissible and the amendment cannot be applied retrospectively as the accumulation of surplus funds took place five years back. a) ITO Vs. Basilica of Our Lady of the Mount (ITA No. 2927/Mum/2005) b) Sri Dadar Digambar Jain Vs. ITO (ITA No. 2446/Mum/2025) c) Dr. Shamli Khasbardar Vs. (ITA No. 3811/Mum/2024)
In view of the above, the addition made by CPC is deleted.
3 Holy Cross Church 7. The appeal of appellant is allowed.
Order pronounced in the open Court on 25/09/2025.