D.P. TRUST,COIMBATORE vs. ACIT, EXEMPTIONS,, COIMBATORE

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ITA 1270/CHNY/2026Status: DisposedITAT Chennai15 June 2026AY 2021-224 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the CPC's action of reclassifying corpus donation as taxable income under section 143(1) goes beyond its limited jurisdiction. Such a determination requires factual examination and application of law, which cannot be done during prima facie adjustments.

What were the facts?

The assessee, a charitable trust, filed a return of income. The CPC processed the return under section 143(1) and treated a corpus donation of Rs. 20 lakhs as income, disallowing certain expenses. The CIT(A) dismissed the assessee's appeal, upholding the CPC's decision.

What were the issues?

Whether the CPC can re-characterize corpus donation as income while processing the return under section 143(1)? Whether the denial of exemption was justified due to non-filing of audit report when the income was below the threshold?

Which sections of the Income-tax Act were involved?

Section 143(1),Section 11,Section 12A,Section 119(2)(b)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI

Before: MS. PADMAVATHY.S & SHRI MANU KUMAR GIRI

For Respondent: Mr. E. Elango, JCIT

आयकर अपीलीय अिधकरण, ‘बी’ �ायपीठ, चे�ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH: CHENNAI सु�ी पदमावती यस, लेखा सद� एवं �ी मनु कुमार िग"र, �ाियक सद� के सम# BEFORE MS. PADMAVATHY.S, ACCOUNTANT MEMBER AND SHRI MANU KUMAR GIRI, JUDICIAL MEMBER ITA No.1270/CHNY/2026 िनधा$रण वष$/Assmt. Year: 2021-22 D.P. TRUST ACIT, EXEMPTIONS, 195, RACE COURSE, COIMBATORE, COIMBATORE-641018, Vs. TAMIL NADU TAMIL NADU (अपीलाथ' Appellant) (()थ' Respondent) Permanent Account Number of Assessee: AAATD6302L िनधा�रती �ारा/Assessee represented by: Mr. N. Arjun Raj, Advocate राज� व �ारा/Revenue represented by: Mr. E. Elango, JCIT

सुनवाई की तारीख / Date of conclusion of hearing: 11-06-2026 घोषणा की तारीख / Date of pronouncement: 15-06-2026 आदेश / O R D E R PER PADMAVATHY.S, A.M: This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals), Addl./JCIT(A)-1, Nasik (in short "FAA") passed u/s. 250 of the Income Tax Act, 1961 (in short "the Act") dated 19.01.2026 for Assessment Year (AY) 2021-22. 2. The assessee is a charitable trust registered u/s. 12A of the Act. The assessee filed a return of income for AY 2021-22 on 14.02.2022 declaring total income of Rs.52,130/-. The return was processed u/s. 143(1) by CPC where the income of the assessee is assessed at Rs. 20,66,485/-. The CPC while passing the order u/s. 143(1) of the Act has disallowed certain expenses to the tune of Rs. 14,355/- and has treated the contribution received towards

ITA No.1270/Chny/2026 DP Trust :- 2 -: corpus find amounting to Rs. 20 lakhs as the income of the assessee. Aggrieved, the assessee filed further appeal before the CIT(A). The assessee in the meantime has filed the audit report in Form-10B on 02.05.2023 and has also made a petition for condoning the delay in filing the audit report u/s. 119(2)(b) of the Act. The said condonation petition came to be rejected by the appropriate authority stating that the receipts of the assessee was only Rs. 66,485/- for the year under consideration which is below the threshold for filing Form-10B and therefore, the requirement to file Form-10B is not applicable to assessee's case. The CIT(A) dismissed the appeal stating that the assessee has not filed the audit report within the due date for filing the return and therefore the denial of exemption by the CPC is to be upheld. The assessee is in appeal before the Tribunal against the order of the CIT(A).

3.

Though the assessee has raised several grounds, during the course of hearing, the Ld. AR primary made submissions with regard to whether the CPC is correct in treating the corpus donation as the income of the assessee while processing the return under section 143(1). The ld AR drew our attention to the intimation to submit that the variance as stated in the intimation is only with respect to disallowance of expenses and that the assessee has not been put to notice with regard to treatment of corpus donation. The Ld. AR further argued that reclassification of corpus donation as the income of the assessee is outside the scope of section 143(1) of the Act. The ld AR also argued that but for the addition made towards corpus donation, the requirement to get the accounts audited does not apply to the assessee as has been confirmed by the appropriate authority while dismissing the petition filed under section 119 of the Act and the lower authorities have incorrectly denied the benefit of exemption on that ground.

ITA No.1270/Chny/2026 DP Trust :- 3 -: 4. The Ld. DR on the other hand relied on the order of the lower authorities. 5. We heard the parties and perused the material on record. The assessee filed the return of income declaring excess of income over expenditure amounting to Rs.52,130/-. From the perusal of the income and expenditure account for the year ended 31.03.2021, we notice that the assessee is have income to the tune of Rs.66,485/-. We further notice that the CPC while processing the return has considered the corpus donation of Rs.20 lakhs reflected in the Balance Sheet of the assessee (page 42 of paper book) as the income of the assessee and it is mentioned in the intimation under section 143(1) that since the assessee has not filed the audit report the expenses to the tune of Rs.14,355 is disallowed. The charitable institution registered under section 12A is required to get its accounts when the income of the trust exceeds the maximum amount chargeable to tax for the relevant AY. In assessee's case therefore the requirement to get the accounts audited would arise only when the income exceeds Rs.2,50,000. As already mentioned the income as per the financials is less than the said amount and hence the assessee has not filed the audit report and only when the corpus donation as added by CPC as the income has resulted in the requirement to file audit report. Therefore our decision here is restricted to the issue the whether the treatment of corpus donations of Rs.20 lakhs as the income of the assessee is permissible under section 143(1) of the Act. In our considered view, such an exercise by CPC travels beyond the limited jurisdiction conferred under section 143(1) of the Act. The power under section 143(1) is restricted to making prima facie adjustments apparent from the return of income and does not extend to re-characterization of a receipt disclosed by the assessee as corpus donation. Accordingly, the determination of whether a particular receipt constitutes corpus donation eligible and eligible for exemption under

ITA No.1270/Chny/2026 DP Trust :- 4 -: section 11 of the Act or not requires examination of facts and application of law and cannot be undertaken in the course of processing under section 143(1). In the present case, the assessee had specifically disclosed the impugned receipt as corpus donation and therefore, the action of the CPC in reclassifying the same as taxable income amounts to deciding a debatable issue which falls outside the ambit of section 143(1)(a). Accordingly, we hold that the adjustment made in the intimation issued under section 143(1) towards corpus donation cannot be sustained and is directed to be deleted.

6.

In the result, the appeal of the assessee is allowed. Order pronounced on 15th day of June, 2026 at Chennai.

Sd/- Sd/- (मनु कुमार िग"र) (पदमावती यस) (Manu Kumar Giri) (Padmavathy.S) लेखा सद�य लेखा सद�य सद�य /Accountant Member सद�य �याियक �याियक सद�य �याियक �याियक सद�य सद�य / Judicial Member सद�य लेखा लेखा चे�नई/Chennai, �दनांक/Dated: 15th June, 2026. EDN, Sr. P.S आदेश क� �ितिल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकर आयु!/CIT, Chennai/Madurai/Coimbatore/Salem 4. िवभागीय �ितिनिध/DR 5. गाड� फाईल/GF

Digitally signed by EJTADA DURGA EJTADA DURGA NARESH NARESH Date: 2026.06.19 10:33:00 +05'30'

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