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Facts
The assessee, Gujarat Sales Tax Bar Members Benevolent Scheme, filed its return for AY 2017-18 declaring 'Nil' income after claiming exemption under Section 11. The CPC made an adjustment under Section 143(1), disallowing the exemption. The CIT(A) upheld this adjustment.
Held
The Tribunal held that the adjustment made under Section 143(1) was on the ground that the assessee had not filed Form 10B within the prescribed time. However, the delay in filing Form 10B was condoned by the CIT(Exemption). Therefore, the basis for the disallowance under Section 143(1) no longer survived.
Key Issues
Whether the adjustment made under Section 143(1) for disallowing exemption under Section 11 is valid when the delay in filing Form 10B was condoned.
Sections Cited
250, 143(1), 11, 119(2)(b)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
This appeal is preferred by the assessee against the order dated 22.10.2024 passed under section 250 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”], for the Assessment Year 2017–18, whereby the CIT(A) upheld the adjustment made in the intimation dated 09.03.2019 passed under section 143(1) of the Act by Centralised Processing Centre, Bengaluru [hereinafter referred to as “CPC”]
As per the Statement of Facts the assessee is a benevolent scheme constituted by The Gujarat Sales Tax Bar Association for the benefit of its members, registered as a public charitable trust under the Bombay Public Trust Act and also registered under section 12A(a) of the Act vide certificate dated 14.06.1991. The assessee filed its return of income for A.Y. 2017–18 on 12.03.2018, declaring total income at Rs.Nil, after claiming exemption under section 11 of the Act amounting to Rs.9,37,067/-. The CPC processed the return under section 143(1) of the Act and issued intimation dated 09.03.2019, whereby the claim of exemption under section 11 amounting to Rs.9,37,067/- was disallowed, and total income was assessed at Rs.9,37,067/-, resulting in a demand of Rs.69,292/-.
The assessee preferred an appeal before the CIT(A). However, the said appeal was dismissed vide order dated 22.10.2024, primarily on the ground that the assessee had not filed Form No. 10B within the time prescribed under the Act, and thus, the benefit of exemption under section 11 was rightly denied by CPC.
Aggrieved by the order of CIT(A), the assessee is in appeal before us raising following grounds of appeal:
“1.1 The order passed u/s.250 on 22.10.2024 by NFAC [CIT(A)), Delhi. (for short CIT(A)" upholding the intimation passed u/s 143(1) on 09-03-2019 for A.Y. 2017-18 by DCIT CPC, Bangaluru in determining income at Rs. 9,37,067/- as against retuned income at Rs. Nil after disallowing the claim 3 of deduction u/s.11 towards application of income of Rs.9,37,067/- and accumulation to the extent of 15% of income of Rs.7,76,034/- is wholly illegal, unlawful and against the principles of natural justice.
1.2 The Ld. CIT(A) has grievously erred in law and/or on facts in ignoring the written submissions and order of Tribunal and thereby upholding disallowance of the claim of deduction u/s.11 towards application of income of Rs.9,37,067/- and accumulation to the extent of 15% of income Rs.7,76,034/-. Thus there is gross violation of the principles of natural justice.
2.1 The Ld. CIT(A) has grievously erred in law and or on facts in upholding disallowance of the claim of deduction u/s.11 towards application of income of Rs. 9,37,067/- and accumulation to the extent of 15% of income Rs.7,76,034/-.
2.2 That in the facts and circumstances of the case and in law, the Ld. CIT(A) has grievously erred in law and or on facts in upholding disallowance of the claim of deduction u/s 11 towards application of income of Rs.9,37,067/- and accumulation to the extent of 15% of income Rs.7,76,034/-
2.3 The Ld. CIT(A) has failed to appreciate that the adjustment towards disallowance of the impugned claim u/s.11 was in excess of the powers provided under section 143(1) and the same cannot be treated as prima facie adjustment under this provision.
3.1 Without prejudice to above and in alternative, the Ld. CIT (A) has failed to appreciate that the appellant had uploaded Form 10B on 03.06.2019 and now the so called delay in filing Form NO 10B has been condoned by CIT(EXEM.) vide his order dt.17.04.2025 so that no adjustment by way of disallowance u/s 11 is called for.
It is therefore prayed that the adjustment u/s 143(1) in respect of application of income of Rs.9,37,067/- and accumulation to the extent of 15% of income Rs.7,76,034/- deserves to be deleted.
4 5. During the course of hearing before us, the learned Authorised Representative for the assessee submitted that the delay in filing Form No. 10B for A.Y. 2017–18 has since been condoned by the Jurisdictional Commissioner of Income Tax (Exemption), Ahmedabad. A copy of the condonation order dated 17.04.2025 passed under section 119(2)(b) of the Act was placed on record. As per the said order, the delay of 573 days in filing Form 10B was condoned, subject to conditions, after considering the merits of the assessee’s application. In light of the condonation granted, it was submitted that the disallowance made in the intimation issued under section 143(1) has lost its foundation and requires reconsideration in light of the valid and condoned audit report. The learned A.R. accordingly prayed that the impugned order be set aside and the matter restored to the file of the Jurisdictional Assessing Officer for proper computation of income, after granting due effect to the condonation order.
Considering the facts and circumstances, the Departmental Representative raised no objection in restoring the matter back to the file of Jurisdictional Assessing Officer.
We have carefully considered the rival contentions and perused the material on record. It is an undisputed fact that the disallowance of exemption under section 11 in the intimation passed under section 143(1) was made solely on the ground that the assessee had not filed Form No. 10B within the prescribed time. The CIT(A) also upheld the adjustment on this ground. However, as rightly pointed out by the learned A.R., the delay in 5 filing Form No. 10B has now been condoned by the CIT(Exemption), Ahmedabad, vide order dated 17.04.2025 passed under section 119(2)(b) of the Act. Once the delay has been condoned by the competent authority, the foundational basis for disallowance under section 143(1) no longer survives.
In view of the above development, we are of the considered opinion that the matter requires reconsideration at the level of the Jurisdictional Assessing Officer. The Jurisdictional Assessing Officer shall now verify the audit report filed, grant the exemption in accordance with law, and re-compute the total income after giving due opportunity of hearing to the assessee.
In the result, the impugned order passed by the CIT(A) is set aside, and the matter is restored to the file of the Jurisdictional Assessing Officer for fresh adjudication in accordance with law and after giving due effect to the condonation granted by the CIT(Exemption).
The appeal of the assessee is allowed for statistical purposes.
Order pronounced in the Court on 1st May, 2025 at Ahmedabad.