Loading judgment…
Facts
The assessee, a charitable trust, claimed exemption under sections 11 and 12 of the Income Tax Act. The AO disallowed the exemption, and subsequent appeals and rectification petitions did not resolve the issue. The assessee filed an appeal before the ITAT after the CIT(A) dismissed their appeal.
Held
The Tribunal noted that the assessee had filed a condonation petition before the CIT(Exemption) and had also pursued an appeal before the ITAT. The Tribunal directed the AO to treat the assessee as not in default of tax until the condonation petition is resolved and remitted the matter back to the AO.
Key Issues
Whether the CIT(A) erred in dismissing the appeal without adjudicating the grounds of appeal, and whether the assessee was denied natural justice during the assessment proceedings.
Sections Cited
11, 12, 80G, 2(15), 139(4A), 143(1), 154, 250, 246A, 119(2)(b), 12A(ba), 234B, 234C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
Before: SHRIAMARJIT SINGH & SHRI ANIKESH BANERJEE
Instant appeal of the assessee was filed against the order of theLearned Commissioner of Income-tax (Appeal) Addl / JCIT(A)-5, Chennai [for brevity, ‘Ld.CIT(A)’] passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’), for Assessment Year 2016-17, date of order22.10.2024.The impugned order New Bombay Merchants Educational Foundation was emanated from the order of the CPC, Bengaluru, (in short, ‘the A.O.’) passed under section 143(1)of the Act, date of order21/02/2018.
The assesseehas taken the following grounds of appeal:-
“GROUND NO. 1: FAILURE OF CIT(A) TO ALLOW EXEMPTION U/S. 11 OF ADDL/JCIT(A)-5 CHENNAI DT, 22.10.2024. GROUND NO.1 : FAILURE OF CIT(A) TO ALLOW EXEMPTON U/S 11 OF RS.86,80,000 The Id. CIT(A) erred in laws and facts in dismissing the ground for grant of exemption u/s 11 of Rs. 86,80,000 without adjudicating the same on merits by allowing the claim for exemption u/s 11 on appreciation that the required Audit report in form 10-B was on record and the appellant has also applied for condonation if any of delay in filling the said report. Your appellant pleads that the exemption u/s 11 be allowed and not denied for technical reasons. GROUND NO 2: UNAUTHORIZED ADJUSTMENT U/S. 143(1)-NON-ISSUE OF NOTICE U/S. 143(1)(a) The Id. CIT(A) erred in laws and facts in ignoring the action of AOCPC of making unauthorized and impermissible adjustments to the returned income while determining total income u/s, 143(1) of the Act dt 21.02.2018 where there was no arithmetical error nor was any 'incorrect claim in the Return of Income and denying an opportunity of being heard as required us. 143(1)(a) by issue of notice proposing adjustment to returned income and inviting objection before making adjustments. which are not authorized u/s 143(1). Your appellant prays for deduction of the said amount of Rs. 88,10,900 being amount spent and applied on the objects of the trust and further prays for grant of exemption u/s. 11 of the Act. GROUND NO. 3: FAILURE TO DEDUCT EXPENDITURE OF RS. 2,27,88,731 OF INCOME The Ld. CIT(A) erred in law and on facts in ignoring the action of the Id. AO- CPC erred in law and on facts in making an addition of the Total Receipts of tuition fees, etc. of Rs. 2,28,08,685 to its total income without deducting the expenditure of Rs. 2,27,88,731 incurred wholly and exclusively for the purpose of earning such New Bombay Merchants Educational Foundation income. Your appellant prays for allowance of expenditure incurred for earning the income as per the general principles of taxation of income under the Income Tax Act. GROUND NO. 4: DISMISSAL OF APPEAL BY CIT(A) WITHOUT ADJUDICATING GROUND NO. 2 ΤΟ 4 The Id. CIT (A) erred in laws and facts in passing the order u/s. 250 dt. 22.10.2024 and dismissing the appeal without adjudicating ground no. 2 to 4 contested before him in an appeal filled u/s. 246A before him which ground were duly raised, contested and the fact relating to which were recorded in the statement of facts. Your appellant prays that the said Ground of Appeal
, 2 to 4, to be adjudicated and allowed after hearing your appellant. GROUND NO.
5. ASSESSMENT OF TOTAL INCOME The Id. CIT(A) erred in laws and facts in ignoring the action of AO - CPC of assessing the total income at Rs. 88,10,900 against the returned income of Rs. 1,30,900 and in process making an addition/disallowance of Rs. 86.80,000 to the returned income Your appellant pleads for the deletion of the addition of Rs. 86,80,000 made by the Ld. A.O. and further prays for grant of exemption us. 11 of the Act. GROUND NO. 6: SERIOUS VIOLATION OF NATURAL JUSTICE The Id. CIT(A) erred in laws and facts in ignoring the action of AO - CPC of passing an order u/s 143(1) in gross violation of the provisions of natural justice in as much as no opportunity of being heard was given to the appellant. Your appellants pray that an order passed by the Ld. A.O. u/s 143(1), passed in gross violations of natural justice be quashed. GROUND NO. 7: LEVY OF INTEREST U/S, 234B OF RS. 5,84,729 AND 234C OF RS. 94,065. The Id. CIT(A) erred in laws and facts in ignoring the action of AO-CPC of levying interest u/s. 234B of Rs. 5,84,729 and us. 2340 of Rs. 94,065. Your appellants deny any liability to payment of interest and further submit that the tax was paid as per the provisions of the law and that the interest was charged in violation of the provisions of the natural justice in as much as no opportunity for hearing was given. Your appellants pray that the interest u/s. 234B and s. 2340 should be deleted.”
New Bombay Merchants Educational Foundation 3. The brief facts of the case are that the assessee is a trust registered under charitable organization under section 12A of the Act and under section 80G of the Act. The assessee trust is running school and education which are activities listed in section 2(15) of the Act and has applied the income for such charitable purpose. During the impugned assessment year, the assessee claimed exemption under sections 11 and 12 of the Act and section 12A is constituted validly. But during the impugned assessment year, the assessee filed the return under section 139(4A) but delay in Form 10B which is obtained on 30/09/2016 under sub sections (2)of the section 33 and 34 of Bombay Public Trust, 1950. On the basis of this audit report the expenses are duly claimed by the assessee trust. During processing of return under section 143(1), the Ld.AO disallowed the exemption under section 11 and the tax was determined amount to Rs.88,10,900/-. The assessee filed a rectification petition under section 154, but without giving an opportunity to assessee, the CPC passed the order under section 154 and instead of granting relief, enhanced the total income to Rs.2,28,08,685/-. The assessee filed the condonation petition before the Ld. CIT(Exemption) U/s 119(2)(b) of the Act on 12/12/2019 for not complying with the timelines expressed in section 12A(ba) for claiming exemption under section 11 of the Act. But without receiving any order from the Ld.CIT(E), alternatively, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) considered the merit of the case and condoned the delay, and the appeal was adjudicated. The Ld.CIT(A) dismissed the appeal of the assessee. Being aggrieved, the assessee filed an appeal before the ITAT.
When the appeal was called for hearing, none was present on behalf of the assesssee. No adjournment petition was filed. Considering the merit of the case,
After considering the learned DR’s submissions and reviewing the documents on record, we note that the assessee filed a condonation petition under Section 119(2)(b) before the Ld. CIT(Exemption) for failing to meet the timeline specified in Section 12A(ba) of the Act. The assessee also pursued an alternative remedy by filing an appeal before the ITAT.In its appeal order, the Ld. CIT(A) held that the issue should be remitted back to the jurisdictional AO, instructing him to treat the assessee as not being in default of tax until the petition for condonation under Section 119(2)(b) is resolved by the Ld. CIT(Exemption). Additionally, the assessee contended that no reasonable opportunity was provided under Section 143(1) of the Act during the processing of the intimation.We find that the assessee has indeed taken an alternative remedy. Therefore, we direct the Ld.AO to consider the assessee as not being in default of tax until the petition for condonation under Section 119(2)(b) is disposed of by the Ld.CIT(E). Accordingly, the matter is remitted back to the file of the Ld.AO with the above instruction.
In the result, the appeal of the assessee bearing is allowed for statistical purpose.
Order pronounced in the open court on 24th day of February, 2025.