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Facts
The assessee, a society running educational colleges, filed its return of income for AY 2020-21 after the due date, along with a delayed Form 10B. The CPC processed the return under section 143(1) and disallowed exemption claimed under section 11 due to the delayed Form 10B. The assessment order under section 143(3) retained this adjustment. The CIT(A) dismissed the assessee's appeal.
Held
The Tribunal held that the CIT(A) erred in dismissing the appeal without adjudicating on merits, as the assessment order under section 143(3) supersedes the intimation order under section 143(1). The delay in filing Form 10B is a procedural defect and should not disentitle the assessee from claiming exemption.
Key Issues
Whether the delay in filing Form 10B, a procedural defect, can lead to denial of exemption under section 11, and whether an order under section 143(3) supersedes an order under section 143(1).
Sections Cited
143(3), 143(1), 11, 12A(1)(b), 119(2)(b), 143(2), 142(1), 11, 12
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Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI MANISH BORAD & MS. ASTHA CHANDRA
BEFORE SHRI MANISH BORAD, ACCOUNTANT MEMBER AND MS. ASTHA CHANDRA, JUDICIAL MEMBER आयकर अपील सं. / & 2459/PUN/2024 धििाारण वर्ा / Assessment Year : 2020-21 Dattakala Shikshan Sanstha, Dy. CIT (Exemptions), Gat No. 551/524, Swami Chincholi, Pune Pune Solapur Highway, Pune-413130 Vs. PAN : AAATD9774C अपीलार्थी / Appellant प्रत्यर्थी / Respondent Assessee by : Shri Pramod S. Shingte Department by : Shri Amol Khairnar Date of hearing : 15-05-2025 Date of 22-07-2025 Pronouncement : आदेश / ORDER
PER ASTHA CHANDRA, JM :
The two appeals filed by the assessee are directed against the two separate orders dated 03.10.2024 and 29.10.2024 of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi [“CIT(A)”] arising out of the order passed by the Assessment Unit, Income Tax Department (“AO”) u/s 143(3) and intimation order passed by the Centralized Processing Center (“CPC”) u/s 143(1) of the Income Tax Act, 1961 (the “Act”) on 19.09.2022 and 24.12.2021 respectively pertaining to Assessment Year (“AY”) 2020-21. Since the issues are involved are identical, both these appeals were heard together and are being disposed of by this common order.
We will first take up the appeal in ITA No. 2567/PUN/2024 arising out of section 143(3) order of the Ld. AO. 2.1 The assessee has raised the following grounds of appeal:- “1. On the facts and in the circumstances of the case and in law the learned Commissioner of Appeals erred in dismissing the Appeal on the ground that Appeal against the Intimation order u/s-143(1) is filed and pending before appellate authority and grounds of Appeal raised in the Appeal cannot be adjudicated as same are subject matter of another Appeal contrary to the law that an Order passed and u/s 143(3) supersedes the Intimation order u/s-143(1).
2. On the facts and in the circumstances of the case and in law the learned. Commissioner of Appeals erred in confirming the addition of 2 ITA Nos. 2567 & 2459/PUN/2024, AY 2020-21 Rs.26,70,63,238/ by the Assessing officer in the order passed u/s 143(3) disregarding the fact that no real addition was made by the Assessing officer in terms of show cause notice issued to appellant in the assessment order passed but assessing officer retained the addition made under Intimation order passed u/s 143(1) which is legally not permissible and thus bad in law and deserves to be deleted.
3. On the facts and in the circumstances of the case and in law the learned Commissioner of Appeals erred in dismissing Appeal & retaining the Order of the assessing officer which retained the addition of Rs. 26,70,63,238/- made in the Intimation order u/s- 143(1) on account of delayed filing of Form 10B disregarding the fact that the said form was filed on 18/02/2021 along with the return of Income and was also submitted before assessing officer during assessment proceedings. Hence the non-allowance of exemption u/s- 11 of the Income Tax Act is contrary to the decisions of various Income Tax Appellate tribunals (ITAT) including ITAT Pune allowing exemption u/s-11 for such delayed Form 10B.
4. On the facts and in the circumstances of the case and in law the learned Commissioner of Appeals erred in disregarding the legal provisions of the section 11 & 12 of the Income Tax Act, which mandates Computation of total Income of the Trust or institution in the status as an ordinary AOP without giving effect to provisions of section 11 & 12 and then only apply the eligibility for exemption which is not followed in the Assessment order passed u/s-143(3) by the Assessing officer rendering the assessment order bad in law and deserves to be set aside.
5. Without prejudice to grounds 1, 2 ,3 & 4 above the learned Commissioner of Income Tax (Appeals) erred in confirming the one sided addition of entire gross receipts of Rs.26,70,63,238/ without allowing for Revenue expenditure of Rs.26,52,43,398/ shown in the Schedule-ER of the Return of Income and accepted at page 19 of the Intimation order u/s-143(1) passed by assessing officer ADIT-CPC, thus the addition of entire gross receipts of Rs.26,70,63,238/- made in the assessment order u/s 143(3) is bad in law and the addition amount if any cannot exceed the difference amount between the two. Appellant craves leave to add, amend, delete or alter all or any of the grounds of appeal at any time during the appellate proceedings.”
3. Briefly stated, the facts of the case are that the assessee is a society registered under the Societies Registration Act, 1860 as well as Bombay Public Trust Act, 1950. It is also registered u/s 12A and 80G of the Act. The assessee is engaged in running various educational colleges imparting diploma and degree courses in the field engineering, management, pharmacy etc. For AY 2020-21, the assessee filed its return of income on 18.02.2021 declaring income at Rs. Nil. The return was filed after the expiry of the due date which was 15.02.2021 for the relevant AY. The audit report in Form 10B as required under the provisions of section 12A(1)(b) of the Act was also filed on 18.02.2021 along with the return of income. Initially, the return was processed u/s 143(1) of the Act vide intimation order dated 24.12.2021 by CPC at total income of Rs.26,70,63,238/- wherein the CPC disallowed the exemption claimed by the assessee u/s 11 of the Act which resulted in a tax demand of Rs.14,45,18,890/-. Against the said intimation order, the assessee filed appeal before the Ld. CIT(A)/NFAC on 12.01.2022. Thereafter, the case was selected for limited scrutiny under E-Assessment Scheme, 2019 on the issues of :(i) Receipts of Trust and (ii) Depreciation claimed by the Trust. Statutory notice(s) u/s 143(2) and 142(1) of the Act along with questionnaire were accordingly issued and served upon the assessee. In response thereto, the assessee filed its reply from time to time. The Ld. AO also issued a show cause notice proposing to treat the assessee as an AOP and to make addition of Rs.4,00,59,485/- as estimated income being 15% of gross receipts of Rs.26,70,63,238/-. The reply filed by the assessee in response to the said show cause notice was accepted by the Ld. AO and no addition was made in the assessment. The Ld. AO however retained the adjustment made under the intimation order passed u/s 143(1) of the Act.
Aggrieved, the assessee filed an appeal before the Ld. CIT(A)/NFAC who dismissed the appeal of the assessee and confirmed the action of the Ld. AO by observing as under : “6. As noticed from the Form 35, the appellant has filed this appeal against the order u/s. 143(3) of the IT Act dated 19.09.2022. on perusal of the assessment order, it is noticed that no addition was made by the AO and the assessment proceeding were concluded assessing the Income as per the computation of the Income u/s. 143(1) of the IT Act. Further, the appellant had also claimed that the appeal against the intimation u/s. 143(1) of the IT Act was also preferred and pending as of now. 6.2 The main contention of the appellant in the present appeal is regarding the denial of the delayed form 10B and invoking the provision of section 12A(1)(b) of the IT Act made in the intimation u/s. 143(1) of the IT Act. However, none of the issues were discussed during the assessment proceeding. Therefore, the issues raised by the Appellant in this appeal aren't covered in the Assessment Order passed by the AO (against which the current appeal has been preferred). 6.3 In view of the above discussion and also considering the appellant's claim that appeal against the order u/s. 143(1) of the IT Act is still pending, grounds of appeal cannot be adjudicated as the same are subject matter to another appeal. Accordingly, the appellant's contentions are hereby not admitted and this appeal is dismissed. The Jurisdictional Assessing Officer is also directed to follow the directions of the CIT(A) in order against the appeal u/s. 143(1) of the IT Act (wherever passed) and accordingly compute the Income.”
Dissatisfied, the assessee is in appeal before the Tribunal and all the grounds of appeal relate thereto.
The Ld. AR submitted that the CPC has disallowed the exemption claimed by the assessee for the reason that the audit report in Form 10B was filed along with the return of income with a delay of three days on 18.02.2021. He submitted that reason for the delay in filing Form 10B was the peak Covid period at the relevant time. He submitted that Form 10B was however available while processing of return u/s 143(1) by the CPC on 24.12.2021. He submitted that the delay in filing of Form 10B is a procedural defect and the assessee’s claim of exemption cannot be denied for this reason. The said contention of the assessee is supported by many decisions passed by the Co-ordinate Benches of the Tribunal in favour of the assessee. He also brought to our attention that the assessee filed an application dated 01.03.2024 for the delay condonation u/s 119(2)(b) of the Act for the AY 2020-21 for the delayed filing of Form 10B before the Ld. CIT (Exemptions), Pune but the same was not disposed off until the impugned order was passed by the Ld. CIT(A)/NFAC. The Ld. AR submitted that as the assessee’s appeal has been not decided on merits, the matter may be restored back to his file for adjudication on merits of the case.
The Ld. DR, on the other hand, supported the order of the Ld. CIT(A)/NFAC and Ld. AO.
We have heard the Ld. Representatives of the parties, perused the intimation order u/s 143(1) and the assessment order passed u/s 143(3) of the Act and also the order(s) of the Ld. CIT(A)/NFAC as well as other material available on record. We have also perused the paper book filed by the Ld. AR on behalf of the assessee. We find that the intimation order u/s 143(1) of the Act has been passed by the CPC disallowing the exemption claimed by the assessee u/s 11 of the Act due to the delayed filing of Form 10B. The adjustment made under the intimation order has been retained in the assessment order passed u/s 143(3) of the Act. Admittedly, the CPC had the access to Form 10B while processing the assessee’s return u/s 143(1) of the Act. We find some force in the argument of the Ld. AR that the impugned issue is covered in favour of the assessee by catena of decisions of the Co-ordinate Benches of the Tribunal including the Pune Bench wherein the Tribunal has taken a view that where the assessee filed Form 10B (audit report) after due date but before the processing of return u/s 143(1), such delay being merely a procedural defect would not 5 & 2459/PUN/2024, AY 2020-21 disentitle assessee from claiming the benefit of exemption u/s 11 of the Act.
The Ld. CIT(A)/NFAC has dismissed the appeal of the assessee and confirmed the action of the Ld. AO for the reasons provided in the preceding paragraph. We find that the Ld. CIT(A)/NFAC has dismissed the appeal on the ground that the assessee has also filed an appeal against the intimation order u/s 143(1) of the Act which is pending before the appellate authority and therefore the grounds of appeal placed by the assessee in the present appeal before him could not be adjudicated as the same are subject matter of another appeal. The grievance of the assessee is that the impugned order passed by the Ld. CIT(A)/NFAC is contrary to the law as the order passed u/s 143(3) supersedes the intimation order passed u/s 143(1) of the Act. The Ld. AO in his order u/s 143(3) has retained the addition made under intimation order passed u/s 143(1) of the Act which is not legally permissible and therefore it is bad in law. We find some force in the arguments of the Ld. AR. In our view, once the order u/s 143(3) is passed under the scrutiny assessment, the intimation order passed u/s 143(1) of the Act gets merged with the order passed u/s 143(3) of the Act. Since, during the pendency of the appeal before the Ld. CIT(A)/NFAC against the intimation order passed u/s 143(1) of the Act, the assessment order u/s 143(3) was passed by the Ld. AO on 19.09.2022, the same will have the effect of superseding the intimation order passed u/s 143(1) of the Act. Hence, in our view, the Ld. CIT(A)/NFAC ought to have decided the issues in the present appeal on merits of the case which he has failed to do.
Considering the totality of the facts and in the circumstances of the case and the legal position enumerated above, we deem it fit, to set aside the order of the Ld. CIT(A)/NFAC and restore the matter back to his file for de-novo adjudication on merits of the case as per fact and law after affording a reasonable opportunity of hearing to the assessee. Needless to say, the assessee shall provide the requisite support in terms of submitting the relevant documents/evidence as may be required/called upon on the appointed date without seeking adjournment under any pretext unless for sufficient cause, failing which the Ld. CIT(A)/NFAC shall be at liberty to pass appropriate order as per law. We direct and order accordingly. The grounds of appeal raised by the assessee are accordingly allowed for statistical purposes.
11. The appeal in 143(1) intimation order of the CPC. Vide our above order of even date in we have set aside the order of the Ld. CIT(A)/NFAC for denovo adjudication on merits of the case observing that the order passed u/s 143(3) of the Act has the effect of superseding the intimation order passed u/s 143(1) of the Act which is the subject matter of the present appeal. Accordingly, the present appeal become infructuos and requires no adjudication.
In the result, the appeal of the assessee in is allowed for statistical purposes and the appeal in is dismissed as infructuos.