LAXMIBEN VIJAYLAL SANGHAVI CHARITABLE TRUST,MUMBAI vs. EXEM.WARD 1(2), INCOME TAX APPELLATE TRIBUNAL

The assessee has raised the following grounds of appeal:

Brief facts of the case are that the assessee is a charitable trust. For the year under consideration, it filed its return of income in Form ITR- 7 on 18.09.2018 declaring nil income. In the return, the assessee disclosed income of Rs.1,90,098 and an amount of Rs.5,88,040 applied during the previous year towards its charitable objects under the revenue account in Schedule ER. While processing the return under section 143(1), the CPC reduced the amount of application from Rs.5,88,040 to nil and computed the total income at Rs.1,90,098. The assessee filed applications seeking rectification of the said adjustment. By order dated

The assessee carried the matter in appeal. The learned CIT(A) observed that the assessee had not furnished a valid registration certificate and treated the dispute as one concerning eligibility for exemption under section 11 without fulfilment of the conditions prescribed in sections 12A and 12AA. The learned CIT(A) further held that the issue was debatable and therefore could not be rectified under section 154. Consequently, the appeal was dismissed.

Before us, the learned Authorised Representative submitted that the expenditure/application of Rs.5,88,040 was specifically disclosed in the return of income and was supported by the income and expenditure account. It was contended that the claim could not be regarded as an incorrect claim apparent from the return and, therefore, its disallowance was beyond the limited scope of section 143(1)(a. The learned Authorised Representative accordingly prayed that the adjustment be deleted and the application of income be allowed.

Per contra, the learned Departmental Representative relied upon the orders of the lower authorities and submitted that the assessee had failed to establish fulfilment of the statutory conditions for claiming exemption under section 11 of the Act.

We have heard the rival submissions and perused the material available on record. The return itself records income of Rs.1,90,098 and application of Rs.5,88,040 under the revenue account. The rectification order also reproduces these figures in the comparative computation: the amount shown by the assessee at serial no. 4(i), namely, "amount applied during the previous year - revenue account (24 of Schedule ER)", is

The scope of processing under section 143(1)(a) is confined to the adjustments specifically enumerated therein. An adjustment for an incorrect claim can be made only where the incorrectness of the claim is apparent from information contained in the return. A claim which requires examination of supporting material, verification of statutory conditions or formation of an opinion cannot be disallowed by treating it as a prima facie incorrect claim during processing under section 143(1). In the present case, there is no inconsistency between the claim of application and the information furnished in the return. The CPC has simply substituted the disclosed figure of Rs.5,88,040 by nil without identifying any information in the return from which the claim could be regarded as incorrect. Such an adjustment travels beyond the permissible scope of section 143(1)(a).

We further find that the learned CIT(A) sustained the adjustment on the ground that the assessee had not produced a valid registration certificate and had not fulfilled the requirements for exemption under section 11. This was not the reason stated in the intimation or the rectification order for reducing the application to nil. In any event, the learned AR submitted the copy of valid registration before us.

Once the adjustment made in the intimation was beyond the authority conferred by section 143(1)(a), the resulting error was apparent from the record and ought to have been corrected while disposing of the assessee's application under section 154. We accordingly set aside the 4

In the result, the appeal filed by the assessee is allowed.