LOKHANDWALA FOUNDATION ,MUMBAI vs. ITO (EXEMPTION) CIRCLE-1, MUMBAI

The CIT(A)-1 erred in dismissing the appeal filed by the appellant against intimation passed u/s 143(1) dated 21.02.2018 even though the AO has passed the order u/s 143(3) dated 01.12.2018 as well as order u/s 154 dated 16.05.2018 amending the intimation passed u/s 143(1) and deleting all the disallowances made under intimation u/s 143(1). The appellant submits that intimation u/s 143(1) merges with order u/s 143(3) and hence the appeal against intimation u/s 143(1) becomes infructuous. The appeal against intimation u/s 143(1) was filed only as a precautionary measure.

The said CIT(A) erred in assuming that the deduction not allowed in the intimation u/s 143(1) is because of not filing Form 10 was filed on 20.08.2016 i.e. within the due date and copy of the same was also filed before the CIT(A).

The brief facts of the case were that assessee is a charitable trust registered under section 12A of the Act. It filed its return of income for assessment year 2016-17 on 10/09/2016 at Rs. Nil. Subsequently, intimation under section 143(1) of the Income-tax Act, 1961 was passed on 21/02/2018 wherein certain adjustments were made to the total income of the assessee and it was assessed at Rs.15,93,96,959/-.

Subsequently, notice under section 143(2) issued to the assessee on 31/07/2017. Consequently, the total income of the assessee was assessed at Rs.92,83,180/- vide order dated 01/12/2018. 05. The assessee submitted rectification application under section 154 of the Act against the earlier intimation under section 143(1) of the Act. On 16/05/2018, the rectification application of the assessee was allowed. 06. Therefore, the chronology of the events show that for the impugned assessment year only disallowance was with respect to the depreciation of Rs.99,73,647/- which remained consequent to the assessment under section 143(3) of the Act dated 01/12/2018, Meanwhile, against the order passed under section 143(1) by the Central Processing Unit where the assessee was denied the exemption under section 11 of the Act for not filing form No.l0 within the prescribed date, assessee filed appeal before the learned C1T (A). 07. During the course of appellate proceedings before the learned C1T (A), assessee submitted its response on 17th March, 2020 stating that the learned assessing officer has already passed an order under section 154 of the Act wherein the grievance of the assessee has been redressed and further, an assessment order under section 143(3) has already been passed, therefore, the appeal of the assessee has become infructuous. 08. Learned C1T (A) noted the contention of the assessee but he did not agree with the same. He held that the benefit of section 11 had been denied to the assessee under section 143(1) of the Act, as the necessary form 10 had not been uploaded. He further noted that now the assessee seeks to rely on the assessment order passed under section 143(3) dated 01/12/2018 where benefit of section 11 has been allowed to the assessee. The learned CIT(A) further noted that the order of the assessing officer is silent on the issue of uploading or filing of form 10 & 10B and do not discuss the adjustment made under section 143(1) of the Act. Therefore, he rejected reliance on letter dated 21/02/2020 filed by the assessee and directed the assessing officer to verify whether form 10 & 10B be filed within the time prescribed. He further directed the assessing officer that if those are not filed within the time prescribed, the learned assessing officer should ascertain whether any condonation order has been passed by learned CIT (Exemption) or not in terms of circulars issued by CBDT. He, therefore, held that for technical purpose, the appeal of the assessee is treated as dismissed.

Assessee is aggrieved with that order and more precisely, with the direction of the learned CIT (A) with respect to the timely filing of form 10 & 10B for the impugned years.

Learned authorized representative stated that when the learned CIT (A) has dismissed the appeal of the assessee on technical ground, i.e. the appeal of the assessee has become infructuous; he does not have authority to go into the other merits of the case. He referred to the chronology of the events relating to the assessment proceedings. His first contention was that the learned CIT(A) should have either allowed the appeal of the assessee or treated it as infructuous as the issue under section 143(1) against which the appeal was preferred before the learned CIT(A) was already redressed by the learned assessing officer under section 154 of the Act. He further stated that even otherwise, when the assessment order under section 143(3) of the Act is passed, the intimation under section 143(1) merges with that order and, therefore, the appeal itself becomes infructuous before the learned CIT(A). He stated that even otherwise, the intimation under section 143(1) does not stay that the disallowance is made because of the late filing of form 10 & 10B. He otherwise submitted that form 10 was filed on 20th August, 2016 and form 10 B was filed on 24/08/2016 whereas the due date of filing of return of income was 17/10/2016, Accordingly, he submitted that the direction given by the learned CIT (A) as such not sustainable in law.

The learned departmental representative vehemently supported the order of the learned CIT (A).

We have carefully considered the rival contention and perused the orders of the lower authorities. Assessee filed its return of income on 10/09/2016. Intimation under section 143(1) of the Act was passed on 21/02/2018 wherein the total income of the assessee was determined at Rs.15,93,96,959/-. The above sum is the total income comprising of school receipt, interest received on fixed deposits and other contributions. The intimation under section 143(1) did not grant any deduction as per serial Nos.16 to 22 of the intimation. Meanwhile assessee filed form 10-dated 20lh August 2016, which was submitted online on 24/08/2016, and further, form No. 10. which was also filed on 20/08/2016. The assessee also submitted the details of submission of these forms online to the assessing officer vide letter dated 19lh March 2018. Consequently, the assessment order under section 143(3) of the Act was passed on 01/12/2018 determining the total income of the assessee at Rs.92,83,180/- which has arisen on account of the disallowance of depreciation, as according to the assessing officer, it amounted to double deduction. Therefore, on the basis of rectification application made by the assessee on 16/05/2018, the Centralized Processing Centre passed an order under section 154 of the Act wherein the assessee was granted deduction of Rs.2,32,11,633/- to the extent of 15% of the total contribution and further deduction of Rs,4,50,00.000/- as amount accumulated for specific purposes. Thus, on 16/05/2018, by the above order, the grievance of the assessee was settled. The learned : CIT (A), despite noting the above fact, held that for technical purpose, the appeal of the assessee is treated as dismissed. That means, he has held that the appeal of the assessee has become infructuous. The moment it is held so that the appeal of the assessee has become infructuous, he is not capable of passing any direction to the assessing officer. Had he decided the issue on the merits of the case, he would have been entitled to pass any order in terms of section 251(1) (a) of the Act. However, when the appeal itself has become infructous, he should not have passed any direction to the assessing officer. There is one more angle to this issue. section 250(2) provides that the assessee has a right to be heard if the CIT (A) is deciding the appeal on the merits. Therefore if any direction is passed by the learned CIT - A, he should have given an opportunity to the assessee to meet out such observation. Therefore, the order was passed by the learned CIT – A in violation of the principles of natural justice, and is not sustainable.

Further, in the present case the assessing officer has already passed an order u/s 143 (3) of The act and has granted assessee the benefit of Section 11 and Section 12 of the income tax act including accumulation of income. Appeal before CIT (A) was against an intimation passed u/s 143 (1) of the act. Subsequently the assessment order u/s 143 (3) of the act has also been passed. In assessment order u/s 143 (3) of the act the assessee has been granted benefit of accumulation of total income. Therefore, the directions now issued by the learned CIT -A , after passing of the order by the learned assessing officer u/s 143 (3) of the act, (which was not subject matter of appeal before CIT (A)), will tantamount to giving direction to the assessing officer in the order passed u/s 143 (3) of the Act. Ld CIT (A) does not have any authority to give direction in orders which were not before him. Even otherwise the assessee has already filed such forms before the due date of filing of the return of income and is in conformity with the provisions of Section 11 (2) (C) of the act. Therefore, we do not find any reason for the learned CIT - A to give any such direction to the learned assessing officer. Accordingly, ground number 1 - 3 of the appeal of the assessee is allowed and the directions given by the learned CIT - A with respect to the verification of filing of form number 10 and 10 B within time prescribed is unwarranted and hence are deleted.

Accordingly, appeal filed by the assessee is allowed.