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Facts
The assessee, a charitable trust, filed its return of income claiming exemption under Section 10(23C)(iiia) which was denied by the CPC. A rectification application and subsequent appeal to the CIT(A) were also dismissed.
Held
The Tribunal held that the issue raised was debatable and beyond the scope of rectification under Section 154. Therefore, the denial of exemption by CPC under Section 143(1) was incorrect.
Key Issues
Whether the denial of exemption under Section 10(23C)(iiiad) by the CPC under Section 143(1) was justified when the issue was debatable and beyond the scope of rectification.
Sections Cited
154, 10(23C)(iiiad), 143(1), 2BC, 11
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH : BANGALORE
Before: SHRI PRASHANT MAHARISHI
This appeal is filed by Shivaganga Yoga Centre (the assessee/appellant) for the assessment year 2019-20 against the appellate order passed by the Addl./JCIT(A), Madurai [ld. CIT(A)] dated 7.3.2025 wherein the appeal filed by the assessee against the rectification order passed u/s. 154 of the Income-tax Act, 1961 [the
Act] dated 31.3.2023 by the ITO, Exemptions Ward 1, Hubli was dismissed. Aggrieved the assessee is in appeal before me.
The brief facts of the case show that assessee is a charitable trust running the Yoga Centre filed its return of income for assessment year 2019 – 20 on 19 August 2029 where the due date of filing of the return was 30 September 2019. The return of income was showing that while filing the return of income the assessee as per return of income claimed that an amount of ₹ 882,500/– is eligible for exemption under section 10 (23C) (iiiad) which was denied by the central processing Centre and computed the total income of the assessee at ₹ 883,010/–. The assessee aggrieved with the intimation dated 11 May 2020 preferred an rectification application on 23 January 2023 which was rejected on 31st of March 2023 stating the reason that the issue raised in application under section 154 of the act are debatable one and are beyond the scope of rectification under section 154 of the act. Aggrieved with the rejection of above rectification application assessee preferred an appeal before the learned CIT – A who disposed of the appeal of the assessee by order dated 7 March 2025 dismissing the appeal of the assessee and therefore assessee is in appeal before us.
Fact shows that the assessee trust got its accounts audited and filed return of income on 19 August 2019 with income of ₹ 510/– after claiming exemption towards postgraduate diploma course fee collected from students under section 10 (23) (iiiad) of ₹ 882,500. Central Processing Centre issued intimation under section 143 (1) of the act on 11 May 2020 by declining exemption under section 10 (23)(iiiad) of the act stating reason that " as per details in the return, the assessee has claimed exemption under section 10 (23) (iiiad) in part B – TI, however, the assessee has not selected the drop-down of under " section under which exemption claimed "under filing status in schedule personal information. Therefore exemption claimed in serial No. 9C in schedule part B – TI is not allowed. It was further stated that filing of schedule IE4 is mandatory and exemption under section 10 may not exceed the total receipt as per that schedule. As per rule 2BC exemption is allowed only if the aggregate annual receipt including any voluntary contribution during the relevant year does not exceed rupees one crore.
Assessee explained that it is using Winman utility software to file income tax return and the software are generated income tax return even when mandatory schedule IE 4 were not filed. The CPC accepted the return of income even when mandatory field were not filed.
Assessee preferred an application for rectification on 23 January 2013 under section 154 of the income tax act for the rectification apparent on record. This application was rejected for the reason that issue raised in application under section 154 which are debatable one and are beyond the scope of rectification under section 154 of the income tax act and therefore same was rejected.
The learned CIT-A held that the central processing Centre has correctly disallowed the exemption. He directed the assessee to file working of exemption allowable under section 11 as per form No. 10 B filed and the AO is directed to allow correct exemption.
We have heard both the parties and find that the application under section 154 was rejected for the reason that that the issue raised by the assessee in application under section 154 of the act are debatable one and it is beyond the scope of rectification under section 154 of the act. The fact in the law clearly shows that if the issue is debatable it could not have been adjusted under section 143 (1) of the act. For the simple reason we allow the appeal of the assessee.
However, merely because the assessee could not file the due columns in the return of income wherein the adequate information is otherwise available that the assessee is entitled to deduction under that section, the CPC would have found incongruity or inconsistency in various columns filed by the assessee in the return of income, but that does not make it possible adjustment under section 143 (1) of the act. The exact reason by the CPC for making the adjustment is " as per the details in the return, the assessee has claimed exemption under section 10 (23C)(iiiad) in part B - TI , however the assessee has not selected the drop-down of 10 (23C)(iiiad) under " section under which exemption claimed "under filing status in schedule personal information. Hence exemption claimed in serial No. 9C in schedule part B -TI is not allowed. Further filing of schedule IE4 is mandatory. Exemption under section 10 May not exceed the total receipts as per schedule IE4 . As per rule 2BC exemption is allowed only if the aggregate annual receipts
including any voluntary contributions during the relevant previous year does not exceed rupees one crore." On complete reading of the above reason it is apparent that it is not the inconsistency in the return of income but the relevant to drop-down menu is not selected. The assessee has also explained the reason why it could not be done. The assessee explained that even the annexure stated to be in the intimation was not filed however the claim of the assessee does not exceed rupees one crore. In view of the above facts we allow the claim of the assessee direct the learned assessing officer to allow the claim of the assessee of deduction/exemption under the respective section after verifying the facts. The learned CIT – A has also directed the assessee to claim deduction under section 11 of the act. The AO may also examine and if he finds that in one of the sections the deduction is available to the assessee where it is entitled according to the provisions of the law, he is directed to grant the same.
In the result appeal of the assessee is allowed for statistical purposes.
Pronounced in the open court on this 22nd day of December, 2025.