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Facts
The assessee, an Association of Persons (AOP) and a charitable trust, filed a Nil income return for AY 2017-18. The gross receipts were Rs. 1,78,10,242, and Rs. 1,89,76,471 was claimed for charitable application. The CPC denied the charitable trust claim, denied fund application, and added back gross receipts, assessing income at Rs. 1,78,10,242.
Held
The Tribunal held that the assessee was required to file a return in ITR-7 under Section 139(4A) but filed it under Section 139(4B), applicable to political parties. The registration under Section 12AA was granted later, and the activities for the relevant period were not examined. Considering these facts and a similar past case, the Tribunal set aside the order and remanded the matter.
Key Issues
Whether the assessee's return was filed correctly under the appropriate section given the timing of its registration as a charitable trust, and whether its activities for the assessment year align with its charitable objects.
Sections Cited
143(1)(a), 139(4A), 139(4B), 12A, 11, 10, 12AA, 139
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI R. K. PANDA & SHRI VINAY BHAMORE
Assessment Year : 2017-18 Sarvoday Pratishthan, Vs. ITO, Exemption, Ward-1(1), 94A, Sangita Smruti, Nt. Pune. Wadi Shivaji Nagar, Pune- 411005. PAN : AAGTS4500B Appellant Respondent Assessee by : Shri Kishor B. Phadke Revenue by : Shri Akhilesh Srivastva Date of hearing 24.07.2025 : Date of pronouncement 12.08.2025 : आदेश / ORDER
PER VINAY BHAMORE, JM:
This appeal filed by the assessee is directed against the order dated 17.03.2025 passed by Ld. Addl./JCIT(A)-5, Kolkata [‘Ld. CIT(A)’] for the assessment year 2017-18.
The assessee has raised the following grounds of appeal :- “(All grounds are on an alternate and without prejudice basis to each other.
1. The learned CITIA), NFAC erred in law and on facts in confirming the total income of the appellant at Rs. 1,78,10,242 instead of retuned income of Rs.”NIL”.
2. Appellant contends that, registration of 12A, granted on 22-01-2018 has a bearing on the entire gamut of all pending assessment proceedings (in particular AY 2017-18) on the said date. As such, the issue of assessment proceedings for AY 2017-18 deserve to be revisited in it's entirety, since, key objects of the assessee are same since year 1995, till date.
The learned I-T authorities computed appellant's taxable "total income" at Rs. 1,78,10,242 without granting deduction for genuine and Bonafide expenses incurred for the object of the trust amounting to Rs. 1,89,76,471/-. Learned 1-T authorities failed to appreciate that taxing of gross receipts (instead of taxing the net income) of the assessee is not the mandate of the Income-Tax Act.
Appellant contends that the appellant's innocent error in filing ROI in Form ITR-7 has been carried to an illogical extent; leading to taxation of the entire receipts of the assessee. Learned I-T authorities ought to have considered the 'genuine activity’ of appellant per se, instead of 'erroneously filed ITR- 7’.
5. Appellant craves leave to add/alter/modify/amend/delete all or any of the grounds of appeal
.”
3. Facts of the case, in brief, are that the assessee is an Association of Person (AOP) and filed its return of income for A.Y. 2017-18 on 20.12.2017 declaring Nil income. During the year, gross receipts of the assessee are Rs.1,78,10,242/- and the amount claimed to be applied for charitable purposes is Rs.1,89,76,471/-. Return processed u/s 143(1)(a) of the IT Act by Centralized Processing Centre (CPC) on 28.03.2019 denying the assessee’s claim being charitable trust and the claim of application of funds was denied and the gross receipts during the year at Rs.1,78,10,242/- were added back. Income assessed at Rs.1,78,10,242/-.
4. Aggrieved assessee preferred appeal before Ld. CIT(A) and after considering the reply of the assessee, Ld. CIT(A) dismissed the appeal by observing as under :- “5.4 Ground of appeal no.2 is against CPC’s action of determining the taxable income at Rs.1,78,10,242/- without granting deduction for expenses incurred amounting to Rs. 1,09,24,944/-, The facts involved in the case is that the appellant is a charitable trust registered under the Bombay Public Trust Act and its main object is to carry on activities in the field of education and health to help needy people in society. Sub-section (4A) of section 139 of the I.T. Act states as under- "Every person in receipt of income derived from property held under trust or other legal obligation wholly for charitable or religious purposes or in part only for such purposes, or of income being voluntary contributions referred to in sub-clause (iia) of clause (24) of section 2, shall, if the total income in respect of which he is assessable as a representative assessee (the total income for this purpose being computed under this Act without giving effect to the provisions of sections 11 and 12) exceeds the maximum amount which is not chargeable to income-tax, furnish a return of such income of the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and all the provisions of this Act shall, so far as may be, apply as if it were a return required to be furnished under sub-section (1)." It is therefore clear from the above that the appellant was required to file return of income in ITR-7 as per the provisions of section 139(4A) of the Act. It is however noted that the return filed by the appellant on 20.12.2017, although filed in ITR-7 but has been filed as per the provisions of sec. 139(4B) of the Act (as apparent from Filing status- Part-A-GEN of the ITR). The provisions mentioned in section 139(4B) is related to filing of return of income by a political party. Moreover, there is no mention as to the whether the appellant falls under the category of claiming exemption under any of the provisions of section 10 or 11 of the Act. All the relevant clauses in the return are filled with '0' making it difficult to ascertain as to in which category the appellant will fall. The appellant neither mentioned whether it is registered u/s 12A of the Act nor filed any Form 10 or 10B. CPC was therefore completely justified in ignoring the expenses claimed in the return and taxing the entire gross receipts of Rs. 1,78,10,242/-. This ground of appeal is therefore dismissed.
5.5 In its submission, the appellant has prayed for personal hearing through video conferencing. However since the issue was simple without involving any complex factual or legal aspect, the requirement of allowing personal hearing was felt to be not necessary. In result, the appeal is dismissed.”
It is this order against which the assessee is in appeal before this Tribunal.
Ld. Counsel for the assessee apart from contending that the expenditure incurred by the assessee trust are more than the gross receipts / voluntary contribution also stated that the assessee has been granted registration u/s 12AA(1)(b)(i) of the Act vide order dated 22.01.2018 from financial year 2017-18 onward. However, when the return of income was furnished the above details of registration were not available with the assessee and therefore the same could not be incorporated in the return of income. Apart from this, it was also submitted that the assessee rightly submitted income tax return in ITR-7, however due to inadvertent error it was filed as per the provisions of section 139(4B) of the IT Act which is applicable to political party instead of as per the provisions of section 139(4A) which is applicable to person in receipt of income derived from property held under trust created wholly for charitable or religious purposes. Ld. AR further submitted that apart from above inadvertent error Form 10B Audit Report was CPC treated whole of the receipts as income of the assessee. In this regard, it was further submitted that the assessee has applied for condonation of delay in filing the Form 10B Audit Report. Alternatively, in ground no.3, it was contended that the CPC computed appellant’s taxable total income at Rs.1,78,10,242/- without granting deduction for genuine and bona-fide expenses incurred for the object of the trust amounting to Rs.1,89,76,471/-, which actually resulted in a deficit of Rs.11,66,229/-. Accordingly, it was requested to allow the genuine expenses incurred by the assessee and to allow the appeal filed by the assessee. Ld. AR fairly conceded that in the case of assessee itself for A.Y. 2016-17 similar addition was made and a coordinate bench of this Tribunal in order dated 17.06.2025 has already set-aside the order passed by Ld. CIT(A) and remanded the matter to the file of JAO for verification of expenses incurred by the assessee. Therefore, Ld. AR requested before us to set-aside the order passed by Ld. CIT(A) and remand the matter to the file of JAO for verification of expenses incurred by the assessee in this case also.
7. On the other hand, ld. Departmental Representative supported the orders of the lower authorities and raised no objection if the matter is restored to the file of JAO for necessary verification of expenses incurred by the assessee.
We have heard the rival contentions and perused the record placed before us. We observe that the assessee is a charitable trust working under the Trust Deed made on 25.01.1993. Assessee has been granted registration u/s 12AA(1)(b)(i) of the Act vide order dated 22.01.2018 which is applicable from F.Y. 2017-18 and onwards. In the return of income, assessee claimed application of income incurred towards genuine and bona-fide charitable objects of the trust amounting to Rs.1,89,24,944/-. Though the assessee has raised one of the ground that the expenditure incurred is higher than the gross receipts, therefore even if the assessee is not considered as registered trust u/s.12AA of the Act even then also, no addition is called for in view of the settled judicial precedents. At this juncture, it was asked that since registration u/s.12AA of the Act has been granted for F.Y. 2017-18 onwards, there has been no examination of the activities of the assessee trust for F.Y. 2016- 17 relevant to A.Y. 2017-18 as to whether similar activities as per objects of the trust deed have been carried out and as have been examined by ld.CIT (Exemption) while granting registration to the assessee u/s.12AA of the Act on 22.01.2018. We find that under identical facts, the case of the assessee for assessment year 2016- 17, has already been remanded to the JAO by a coordinate bench of this Tribunal by observing as under :- “7. Quoting the above proviso, Ld. Counsel for the assessee is claiming that since A.Y. 2016-17 was pending before CPC at that point of time and even when the registration was available during the course of First Appellate proceedings, assessee deserves to get the benefit of exemption u/s.11 as it is registered u/s.12AA of the Act. At this juncture, it was asked that since registration u/s.12AA of the Act has been granted for F.Y. 2017-18 onwards, there has been no examination of the activities of the assessee trust for F.Y. 2015-16 relevant to A.Y. 2016-17 as to whether similar activities as per objects of the trust deed have been carried out and as have been examined by ld.CIT (Exemption) while granting registration to the assessee u/s.12AA of the Act on 22.01.2018. I find substantial merit in the contention of ld. Counsel for the assessee and therefore find it proper to remit back this issue to the file of Jurisdictional Assessing Officer. Ld. JAO shall examine all the issues raised on merits in the instant appeal along with settled judicial precedents and also examine the activities of the assessee trust for the year under appeal and also verify as to whether they are in consonance with the objects for which registration u/s.12AA of the Act is granted to the assessee trust on 22.01.2018. Needless to mention ld. JAO shall grant reasonable opportunity of hearing to the assessee. Impugned order is set aside and all the effective grounds of appeal
raised by the assessee are allowed for statistical purposes.
8. In the result, appeal of the assessee is allowed for statistical purposes.”
9. Respectfully following the decision of the Tribunal in assessee own case for A.Y. 2016-17, we set-aside the order passed by Ld. CIT(A) and remand the matter to the file of JAO. Ld. JAO shall examine all the issues raised on merits in the instant appeal