GUJARAT INDUSTRIAL INVESTMENT CORPORATION LIMITED EMPLOYEES PROVIDENT FUND,GANDHINAGAR vs. THE ITO, WARD-1(EXEMPTIONS), AHMEDABAD

The assessee filed appeal before CIT(Appeals) against the intimation order passed CPC. The assessee contended during appellate proceedings before CIT(Appeals) that its income was actually exempt under alternative provisions as well, namely Sections 10(25) or 10(38) read with Section 2(38) of the Act, even if exemption under Section 10(23AAA) was not allowable. The CIT(Appeals), however, found that the CPC had duly issued an intimation under Section 143(1)(a) of the Act proposing the adjustment, and that the limited scope of adjustments permissible under Section 143(1) of the Act had been adhered to. The claim of alternate exemptions could not be entertained at the appellate stage, as the adjustment related specifically to the disallowance of a particular exemption initially claimed under Section 10(23AAA) of the Act, by the assessee. Therefore, the CIT(Appeals) rejected Gujarat Industrial Investment Corporation Ltd. Employees Provident Fund vs. ITO Asst. Year –2022-23 - 3– all grounds of appeal, holding that the adjustment made by the CPC was in accordance with law and procedure, and consequently, the appeal of the assessee was dismissed.

The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee. Before us, the Counsel for the assessee submitted that the alternate plea of the assessee should have been considered by CIT(Appeals), being an appellate authority duly empowered to do so and also in light of several judicial precedents which have held that appellate authorities are empowered and should look into the alternate plea raised by the assessee at appellate stage, even if inadvertently there was an omission on part of the assessee to make a claim in the return of income. In response, the Ld. DR placed reliance on the observations made by the CPC and Ld. CIT(Appeals) in their respective orders.

We have heard the rival contentions and perused the material on record. Having considered the rival submissions and in light of the legal position that appellate authorities are vested with the power to adjudicate on alternative legal pleas raised by the assessee even if such claims were not made in the return of income, we are of the considered view that the CIT(Appeals) erred in not examining the alternate claim of exemption under Sections 10(25) or 10(38) read with Section 2(38) of the Act. The CIT(Appeals), while upholding the procedural legality of the adjustment made under Section 143(1) of the Act, in our view ought to have examined whether the income which was brought to tax by way of disallowance of Section 10(23AAA) exemption, could nonetheless be excluded from the total Gujarat Industrial Investment Corporation Ltd. Employees Provident Fund vs. ITO Asst. Year –2022-23 - 4– income under any other applicable provision of the Act, as claimed by the assessee during appellate proceedings. In view of the above, and in the interest of justice, we deem it appropriate to set aside the order passed by the CIT(Appeals) and restore the matter to the file of the Jurisdictional Assessing Officer (JAO). The JAO shall examine the alternate claim of exemption under Sections 10(25) or 10(38) read with Section 2(38) of the Act, after giving the assessee an adequate opportunity of being heard and to furnish the necessary evidence in support of such claim. We clarify that we have not expressed any opinion on the merits of the claim, and the JAO shall decide the issue in accordance with law.

In the result, the appeal of the assessee is allowed for statistical purposes. This Order pronounced in Open Court on 06/08/2025