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Facts
The assessee, a public charitable trust, reported Nil income after receiving corpus donations of Rs.16 Crores. Due to an inadvertent reporting error in the return, the CPC processed the return under Section 143(1) and added the Rs.16 Crores to the income, raising a demand. The Assessing Officer later completed the assessment under Section 143(3) without any additions, accepting the assessee's explanations.
Held
The Tribunal held that once an assessment is completed under Section 143(3), any intimation issued under Section 143(1) ceases to exist and merges with the Section 143(3) order. The CIT(A) rightly deleted the addition made in the computation sheet as it was an error, leading to the dismissal of the Revenue's appeal.
Key Issues
Whether the addition made during the processing of return under Section 143(1) survives when a scrutiny assessment under Section 143(3) is completed without any addition, and whether the CIT(A) was right in deleting the addition made in the computation sheet.
Sections Cited
143(3), 143(1), 154, 142(1), 11(1)(d), 143(2)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “E” BENCH MUMBAI
Before: SHRI AMIT SHUKLA & SHRI GIRISH AGRAWAL
O R D E R
PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:
This appeal filed by the Revenue is against the order of Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi vide order no. ITBA/NFAC/S/250/2024-25/1068252005(1), dated 02.09.2024 passed against the assessment order by National e-Assessment Centre, Delhi, u/s. 143(3) of the Income-tax Act (hereinafter referred to as the “Act”), dated 25.02.2021 for Assessment Year 2018- 19.
2. Grounds taken by the Revenue are reproduced as under: "1. Whether on the facts and circumstance of the case and in law, the he Ld. CIT(A) was right in allowing relief to the assessee holding the since no adverse inference was drawn in order u/s 143(3), the rightful adjustment made during the processing u/s 143(1) on account of an error from assessee in the ROI?
2. Whether on the facts and circumstance of the case and in law, the Ld. CIT(A), has erred in giving relief on the basis of wrong facts the rightful adjustment made during the processing u/s 143(1) on account of an error from assessee in the ROI thereby resulting in perversity of justice in the instant Case? 3. Whether on the facts and circumstance of the case and in law, the Ld. CIT(A), has erred in giving relief and the rightful remedy would be to set aside the case back to the file of the AO?"
Brief facts of the case are that assessee is a public charitable trust registered u/s.12A. Assessee filed its return of income on 26.10.2018 reporting total income at Nil. In the year under consideration, assessee had received corpus donation amounting to Rs.16 Crores. In the return so filed, assessee had reported this corpus donation under the schedule voluntary contribution. However, inadvertently, it also reported the same corpus donation in the schedule of income from other sources while filing the return. According to the assessee, while computing the tax liability in the software utility for its return form in ITR Form No.7, the tax liability worked out as Nil, with a refund of Rs.8,82,626/-. Assessee uploaded its return on these set of facts which was processed by the Centralised Processing Centre, Bengaluru (CPC) u/s.143(1) vide intimation dated 20.03.2020. In the return so processed, corpus donation of Rs.16 Crores inadvertently also reported under the head income from other sources was added to the donation income and accordingly tax liability was determined raising a demand of Rs.7,77,24,148/-.
2.1. It is important to note, a vital fact that notice u/s.143(2), dated 22.09.2019 was issued and served on the assessee prior to the issue of intimation u/s 143(1), for selecting the case of assessee for scrutiny assessment on the two following issues: i) Expenditure for charitable for religious purposes ii) Receipt of voluntary donation.
2.2. Though the case of the assessee was selected for scrutiny assessment vide issuing the aforesaid notice u/s.143(2), yet the return of the assessee was processed u/s.143(1) by CPC for which the intimation was issued subsequently, i.e., on 20.03.2020. Assessee moved an application for rectification of mistake apparent from the records u/s.154 before the CPC on 12.05.2020, which was rejected vide order dated 18.06.2020. Assessee moved another application u/s.154 before the ld. JAO on 13.07.2020. Assessee also moved an appeal before the ld. CIT(A) against the rectification order passed u/s. 154 dated 18.06.2020 vide appeal no. CIT(A)-1/Mumbai/10043/2020-21 which was instituted on 13.07.2020.
2.3. In the meanwhile, assessment proceedings took off by the ld. Assessing Officer against the notice issued u/s.143(2). Assessee furnished its first reply before the ld. Assessing Officer vide submission dated 07.10.2019 giving all the explanations and corroborative documents on the two issues for which the scrutiny assessment was taken up. Assessee also furnished the details on corpus and non-corpus donations received by it during the year, details of which is tabulated below:
Ld. Assessing Officer issued notice u/s.142(1), dated 02.01.2020, seeking various details from the assessee. Reply was furnished vide letter dated 13.01.2020 along with corroborative documentary evidences. Assessee had given all the details in respect of corpus donation of Rs.16 Crores which was deductible u/s.11(1)(d). All these details furnished by the assessee was verified in the course of assessment proceedings.
3.1. From the perusal of the assessment order, it is noted that ld. Assessing Officer made a statement about the response filed by the assessee in reply to notices issued u/s. 142(1). He also stated that on the basis of material available on record, explanation of the assessee on the issues are accepted. He, thus completed the assessment by holding that income of the assessee is assessed u/s.143(3) without any addition Hemendra Kothari Foundation. AY 2018-19 to the order u/s.143(1) under the normal provisions of the Act. Thus, there was no addition made by the ld. Assessing Officer in the scrutiny assessment. However, in the computation sheet forming part of the assessment order, he took the corpus donation of Rs.16 Crores which were added at the time of processing of return u/s.143(1) for the purpose of determining the total assessed income at Rs.16 Crores and arriving at a tax liability of Rs.7,77,24,148/- including interest.
On the above narrated factual position, there lay two appeals by the assessee before the ld. CIT(A), one against the order passed u/s.154 r.w.s. 143(1), dated 18.06.2020, wherein adjustment of Rs.16 Crores has been made and second, against the assessment order passed u/s.143(3), dated 25.02.2021, wherein no addition was made by the ld. Assessing Officer but the total assessed income was arrived at by taking the total income as per the intimation issued u/s.143(1).
Assessee is in appeal before the Tribunal against the first appellate order passed against the assessment order u/s.143(3). There is no appeal by the assessee against the first appellate order passed against the order u/s. 154 r.w.s. 143(1). We have kept both the appellate order passed by ld. CIT(A) which are of the same date, i.e., 02.09.2024. From the digital signature annexed to the two orders, it is noted that the appellate order against assessment made u/s.143(3) was passed first and then, the appellate order against rectification u/s.154 r.w.s. 143(1).
5.1. In the impugned order relevant to the present appeal against assessment order u/s.143(3), ld. CIT(A) has taken note of the fact that once the assessment is completed u/s.143(3), any intimation issued u/s.143(1) ceases to exist as the same gets merged into the order passed Hemendra Kothari Foundation. AY 2018-19 u/s.143(3). He thus, observed that income assessed u/s.143(3) would prevail over income determined/processed u/s.143(1) wherein only certain prima facie adjustments can be made. According to him, provisions of section 143(1) as against the power of full scale scrutiny u/s.143(3) are superseded and a demand created while processing the return u/s.143(1) ceases to exist once the notice u/s.143(2) is issued and served on the assessee.
We note that a notice u/s.143(2) was issued prior to the intimation issued u/s.143(1), fact of which is already stated above. Further, case of the assessee was selected for scrutiny assessment to verify the donations received for which assessee made elaborate submissions with documentary evidences placed on record and has been accepted by the ld. Assessing Officer while completing the assessment u/s.143(3). Ld. Assessing Officer made an explicit statement in the assessment order about the acceptance of explanations furnished by the assessee based on material placed on record. He has also categorically stated that income is assessed u/s.143(3) without any addition to the order u/s.143(1). Had the ld. Assessing Officer intended to retain the addition of the corpus donation of Rs.16 Crores, such an intention would have been expressly stated while completing the assessment, which is not a case of the ld. Assessing Officer to hold against the assessee.
6.1. Ld. CIT(A), while disposing the appeal against assessment made u/s.143(3) has thus, held that addition of corpus donation of Rs.16 Crores in the computation sheet accompanying the assessment order appears to be an error. He thus, directed the ld. Assessing Officer to delete the same thereby allowing the appeal of the assessee. For the other appeal against the order u/s.154 r.w.s. 143(1), observation of ld. CIT(A) mentions that appeal filed by the assessee against order u/s. Hemendra Kothari Foundation. AY 2018-19 143(3) has been disposed of in favour of the assessee and therefore, the issue of addition of Rs.16 Crores no longer survives. Accordingly, this appeal has become redundant and is accordingly disposed in favour of the assessee. Against this disposal, Revenue is not in appeal before the Tribunal.
6.2. Keeping the two first appellate orders by ld. CIT(A) in juxtaposition and taking into account the detailed discussions made in the aforesaid paragraphs, coupled with factual matrix, we do not find any reason to interfere with the findings arrived at by ld. CIT(A) in the first appellate order against assessment made u/s. 143(3), deleting the addition of corpus donation of Rs.16 Crores which was made in the computation sheet accompanying the assessment order. Accordingly, grounds raised by the revenue are dismissed.