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Facts
The assessee, a charitable trust providing education, filed an updated return for AY 2020-21 claiming exemption. The CPC issued a notice seeking clarification and then passed an intimation u/s 143(1) within two days, adding the gross receipts as income without providing adequate opportunity to respond.
Held
The Tribunal held that the intimation passed by the CPC was in violation of the principles of natural justice as the assessee was not provided with the mandatory 30-day period to respond to the notice. Therefore, the intimation was quashed.
Key Issues
Whether the intimation passed u/s 143(1) of the Income Tax Act, 1961, was valid when the assessee was not given the mandatory 30-day period to respond to a notice, violating principles of natural justice.
Sections Cited
10(23C)(iiiad), 10(23C)(iiiac), 143(1), 12A(1)(b), 234A, 234B, 234C, 57, 139(8A)
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Income Tax Appellate Tribunal, “B’’BENCH: BANGALORE
Before: SHRI WASEEM AHMED & SHRI KESHAV DUBEY
Assessment Year : 2016-17 The Rotary Charitable Trust Malavalli Thyagaraj Road Kotemalvalli Malavalli ITO Vs. Mandya 571 430 Exemption Ward Karnataka Bengaluru PAN NO : AACTT2807N APPELLANT RESPONDENT Appellant by : Sri Tharun Kothari, A.R. Respondent by : Sri Subramanian, D.R. Date of Hearing : 15.05.2025 Date of Pronouncement : 28.07.2025 O R D E R
PER KESHAV DUBEY, JUDICIAL MEMBER:
This appeal at the instance of the assessee is directed against the order of the ld. Addl/JCIT(A) Kochi dated 20.01.2025 vide DIN & Order No. ITBA/APL/S/250/2024-25/1072336484(1) passed u/s 250 of the Income Tax Act, 1961 (in short “the Act”) for the assessment year 2020-21.
The assessee has raised the following grounds of appeal:
The Assessee has also raised following additional grounds of appeal vide letter dated 30.04.2025 requesting for admission of these additional grounds, which are reproduced below:
1. The Centralized Processing Centre has erred in not following the mandatory conditions for making adjustment u/s 143(1) of the Act, on the facts and circumstances of the case.
2. The Centralized Processing centre ought to have provided the mandatory time period specified in law before making the impugned adjustment, on the facts and circumstances of the case.
3. The appellant craves to add, alter, amend, substitute, change and delete any of the grounds of appeal.
We have heard both the parties on admission of additional grounds. In our opinion, all the facts are already on record and there is no necessity of investigation of any fresh facts otherwise on record for the purpose of adjudication of above grounds & the additional grounds raised are also pure question of law. Accordingly, by placing reliance on the judgment of Hon’ble Supreme Court in the case of NTPC Vs. CIT 229 ITR 383 (SC), we inclined to admit the additional grounds for the purpose of adjudication as the action of the assessee is bonafide.
Now brief facts of the case are that the assessee is a Charitable Trust providing education to public at large. The assessee filed its updated return of income for the impugned assessment year 2020-21 on 23.2.2023 vide acknowledgement no.964945290230223 u/s 139(8A) of the Act in which the assessee claimed that Original return of Income for the assessment year 2020-21 was filed on 24/03/2021 vide receipt no. 302326910240321 which is to be revised/corrected /modified/rectified. The assessee in the updated return of The Rotary Charitable Trust, Malavalli Page 4 of 11 income claimed exemption u/s 10(23C)(iiiac) of the Act and arrived at the same taxable income of Rs.2,29,680/- as claimed in the original return after claiming expenditure of Rs.1,58,85,006/- against the gross receipts of Rs.1,61,14,686/-.
5.1 The ld. Deputy Director of Income Tax, CPC, Bengaluru before passing an intimation u/s 143(1) of the Act issued a notice dated 26/12/2023 seeking information/clarification on the data in the updated return filed on 23/02/2023 by mentioning the error description as reproduced below- 5.2 On going through the above, we take a note of the fact that the error description as mentioned by the CPC, Bengaluru is that the assessee has claimed exemption u/s 10(23C)(iiiab) in Part B- TI (Part B2), however the Government grants received by the institution does not does not exceed 50% of the total receipts. Hence, the exemption claimed at Sl. No. 2a of Part B-TI(Part B2) is not allowable in accordance with the above said provisions r/w Rule 2BBB.
The Rotary Charitable Trust, Malavalli Page 5 of 11 5.3 Thereafter, on 29/12/2023 i.e. after a gap of just 2 days of issuing notice seeking information/clarification, the same ld. Deputy Director of Income Tax, CPC, Bengaluru passed an intimation u/s 143(1) of the Act by treating the entire Gross Receipts of Rs. 1,61,14,686/- declared by the assessee as Income of the assessee and added the same with the taxable Income as declared by the assessee amounting to Rs.2,29680/- in arriving at the Total Taxable Income of Rs.1,63,44,366/- computed u/s 143(1) of the Act and raised the total demand of Rs.1,74,61,091/- as detailed below-
Being aggrieved by the aforesaid intimation u/s 143(1) of the Act dated 29/12/2023 passed by the CPC, Bengaluru, the assessee preferred an appeal before the ld. CIT(A)/ ld. Addl/JCIT(A).
The ld. Addl/JCIT(A) Kochi dismissed the appeal of the assessee on the ground that the assessee had failed to furnish a validly e-filed audit report in Form 10B within the specified date as required u/s 12A(1)(b) of the Act and also filed the return of income belatedly for the assessment year 2020-21 and on merits of the case also, as the twin condition of claiming the deduction in the return of income as well as filing of Form 10B within the prescribed due date for filing Form 10B, has not been adhered to by the assessee, and mistaken claim is made by the assessee in the updated ITR as pointed out by CPC, the ld. Addl/JCIT(A) Kochi held that the CPC has rightly disallowed the claim of exemption in the 143(1) intimation and thereafter the rectification petition was also rejected by the ITO, Exemption Ward, Mysore and accordingly, the grounds of appeal of assessee were dismissed by the ld. Addl/JCIT(A) Kochi.
8. Again being aggrieved by the order of ld. Addl/JCIT(A) Kochi dated 20/01/2025 passed u/s 250 of the Act, the assessee has filed the present appeal before us. The assessee has also filed a Paper book comprising 34 pages containing therein the copy of Acknowledgement of filing updated return, Hard Copy of ITR-7 along with copy of notice/letter dated 26/12/2023 seeking information / clarification.
The Rotary Charitable Trust, Malavalli Page 7 of 11 9. Before us, the ld. A.R. of the assessee vehemently submitted that the intimation passed u/s 143(1) of the Act is illegal & bad in law especially when 2nd Proviso to Section 143(1)(a) mandates 30 days time whereas in the present case the Intimation has been passed by providing just 2 days time which is gross violation of Principles of Natural Justice. Further on merits the ld. AR of the assessee submitted that the assessee inadvertently claimed exemption u/s u/s 10(23C)(iiiac) of the Act instead of u/s 10(23C)(iiiad) of the Act. Lastly AR of the assessee submitted that the Order of the ld. Addl/JCIT(A) Kochi is completely non- application of mind as the furnishing of Audit Report in Form No.10B within the specified date as required u/s 12A(1)(b) & the provision of the section 11 & 12 does not apply the present case of the Assessee.
The ld. D.R. on the other hand relied on the order of the ld. Addl/JCIT(A) Kochi and submitted that as the assessee had filed its return of Income belatedly & the Audit Report in Form 10B had also not been furnished by the assessee, the CPC has rightly added the entire Gross receipts as Income of the assessee.
We have heard the rival submissions and perused the materials available on record. The assessee in the present case is a charitable Trust providing education to the public at large by running a School and declared Gross Receipts from School Fee amounting to Rs.1,57,59,742/- and RTE grants from Government amounting to Rs.3,54,944/- & thus declared total Gross receipts of Rs. 1,61,14,688/- in its updated Return filed on 23.02.2023 for the Asst. year 2020-21. Further, the assessee in the said Return had also claimed Expenses/deductions u/s 57 of the Act amounting to Rs.1,58,85,006/- & thus the balance Net Profit amounting to Rs. 2,29,680/- was declared under the head The Rotary Charitable Trust, Malavalli Page 8 of 11 “Income from Other Sources” and accordingly paid the gross tax, Interest & Fee liability amounting to Rs.1,15,734/- by way of TCS amounting to Rs. 16,000/- & by way of Self Assessment Tax of Rs. 99,630/- & the balance tax Payable as declared in the Return was Rs.100/-. It is also an undisputed fact that in the said updated Return filed on 11.1 The assessee by way of additional ground has raised the legal issue that the ld. DDIT, CPC, Bengaluru has not followed the mandatory condition for making adjustment u/s 143(1) of the Act. Further, before us the AR of the assessee also vehemently submitted that the mandatory time period specified in law before making the impugned adjustment was not provided to the assessee which is a gross violation of the principles of natural justice. It has been mandated under the 1st Proviso to section 143(1)(a) of the Act that no such adjustments shall be made unless an intimation is given to the assessee of such adjustments either in writing or in electronic mode. This has been followed by the ld. DDIT, CPC, Bengaluru by issuing the letter/intimation/notice dated 26/12/2023 to the assessee. Further as per the 2nd Proviso to section 143(1)(a) of the Act the response received from the assessee, if any shall be considered before making the adjustment and in a case where no response is received within 30 days of the issue of such intimation, such adjustments shall be made. Undisputedly, the ld. DDIT, CPC, Bengaluru issued a letter/notice on 26/12/2023 seeking information/Clarification from the assessee on the data in the updated return. Further, in the said letter/intimation it was also clearly mentioned in the Box that the assessee’s response should be provided within 30 days of receipt of this intimation.
11.2 However, the ld. DDIT, CPC, Bengaluru without waiting for the mandatory time period as provided in the 2nd proviso to The Rotary Charitable Trust, Malavalli Page 10 of 11 Section 143(1)(a) of the Act and also mentioned in the above letter/notice dated 26/12/2023 passed an Intimation u/s 143(1) of the Act on 29/12/2023 i.e. just after a gap of 2 days of issuing letter/intimation by adding the entire School Fee & RTE grants amounting to Rs.1,61,14,686/- as income of the assessee without providing adequate opportunity to the assessee to clarify. We are of the considered opinion that there is a clear violation of the principles of natural justice by providing inadequate opportunity of being heard to the assessee. We are also of the opinion that minimum statutory requirement of 30 days to submit the response to the letter/intimation is not merely a procedural formality but an essential aspect of due process. It ensures the legal process remains fair & just. In view of the above, as the 30 days requirement are mandatory requirement and failure to comply with would render the intimation passed u/s 143(1) of the Act invalid. Therefore, on this ground alone, the intimation u/s 143(1) of the Act would be vitiated & invalid in law. Thus, the intimation passed by the ld. DDIT, CPC, Bengaluru is hereby quashed. Thus we are not adjudicating the other grounds raised on the merits of the case.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 28th July, 2025