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Income Tax Appellate Tribunal, DIVISION BENCH, ‘A’ CHANDIGARH
Before: SHRI RAJPAL YADAV & SHRI KRINWANT SAHAY
The assessee is in appeal before the Tribunal against the order of the ld. Commissioner of Income Tax (Appeals) [in short ‘the CIT (A)’] dated 23.09.2024 passed for assessment year 2018-19.
2. The assessee has taken five grounds of appeal, however, in brief, its grievance revolves around a single issue, namely, A.Y.2018-19 2 the ld. CIT (Appeals) has erred in confirming the addition of Rs.11,39,77,899/- which was made by the CPC, Bangalore while processing the income of the assessee u/s 143(1) of the Income Tax Act and denied the benefit of Section 11 and 12 of the Income Tax Act.
The brief facts of the case are that assessee has filed its Income Tax Return on 30.09.2018. Its computation of income ought to be as under :
Aggregate Receipts as shown in the ITR Rs. 77,39,77,899/- Rs. 11,28,04,091/- Revenue expenses as claimed in the ITR Rs.12,40,731/- Depreciation as per books of accounts of the assessee (Mandatory) -66,923/- TOTAL INCOME
The CPC, Bangalore has processed the return but made addition of Rs.11,39,77,899/- by denying the benefit of Section 11 and 12 of the Act. It is pertinent to observe that if benefit of Section 11 and 12 is to be denied to the assessee, then also net income ought to have been determined but that aspect was not examined by the CPC, Bangalore and addition of above amount was made. The assessee made detailed
ITA No.1132/CHD/2024 A.Y.2018-19 3 written submissions which has been considered by the ld.CIT (Appeals) but ld. CIT (Appeals) has held that though assessee is entitled for the benefit of Section 11 and 12 because registration u/s 12A was conferred to it when assessment proceeding for assessment year 2018-19 was pending, but according to the understanding of the CIT (Appeals), processment of the income by the CPC is not equivalent to an assessment u/s 143(3). In other words, according to the CIT (Appeals), the processment of the return u/s 143(1) cannot be termed as assessment, therefore, this benefit is not available. The relevant discussion made by the CIT (Appeals) reads as under : “From the plain readings of the provisions of section 143(1) and 143(3) it is evident that there is clear distinction vis-a-vis the powers of the assessing officer as well as the nature, procedure and conclusion drawn in framing the orders u/s 143(1) and 143(3). In 143(1), the jurisdiction / power of the assessing authority is restricted to the extent of making adjustments to returned income on the basis of facts and figures which are apparent, clear having no ambiguity or doubt, factually incorrect arc difference in facts and figures reported in tax audit report and that in ITR. On the other hand in 143(3), the jurisdiction / power of the assessing officer is much wider in the sense that he can call for any document or books of account, clarification and explanation from the assessee, carry out independent enquiries against the assessee as well as third parties. After doing so he is required to pass a written and speaking order either accepting the returned income or making additions / disallowances to returned income. 5.4 It may therefore be stated that the power of the appellate authority in respect of appeals against Intimation u/s 143(1) is limited to examine and A.Y.2018-19 4 verify whether the assessing officer has followed the provisions as mentioned in various sub clauses of clause (a) and clauses (b) to (e) of section 143(1) while making adjustments to returned income. The appellate authority does not have the jurisdiction to go into or examine the merit of the respective adjustments as to whether such adjustments are correct or not as per the various provisions of the Act. This is more so because, in 143(1), the details and evidences in respect of the relevant facts and figures are neither before the assessing officer nor before the appellate authority to go into and examine. 5.5 In the light of the limitations as discussed above as regard the adjudication of adjustments made to returned income u/s 143(1), I now give my opinion as under:- There are basically two grounds of appeal raised by the appellant. 1st 5.6 is that assessing officer (CPC in this case) did not allow the benefit of exemption u/s 11 and 12 of the Act inspite of the Trust having being registered u/s 12AA, the certificate towards which was granted by the concerned Commissioner dated 24.09.2019. The 2nd one is that the assessing officer, while rejecting claim of exemption u/s 11, did not allow the deduction of admissible expenses incurred and instead taxed the entire receipts in the hands of the appellant. As regard the 1st issue, i.e. denial of benefit u/s 11, it is to be stated 5.7 that as per section 12A(2), benefit of exemption u/s 11 and 12 are to be allowed from the assessment year immediately following the financial year in which application for registration u/s 12AA is made. In this case, the appellant applied for registration on 30.03.2019 i.e. financial year 2018-19. Hence, it is eligible for benefit u/s 11 and 12 from AY-2019-20 onwards and not for the assessment year in this case which is AY 2018-19. However, 1st proviso below section 12A(2) [as per IT. Act applicable that year] states that where registration has been granted to the trust or institution under section 12AA, benefit u/s 11 and 12 shall apply of any assessment preceding the aforesaid assessment year, for which assessment proceedings are pending before the Assessing Officer as on the date of such registration and the objects and the activities of such trust or institution remain the same for such preceding assessment year. 5.8 If the contents of this proviso are analysed, it becomes clear that after registration is granted, benefit of section 11 and 12 shall be allowed even for any earlier year (i.e. prior to the year in which application for registration was made) of which assessment is pending before the assessing officer. In this case, the dates of events are as under:-
1. Appellant applies for registration — 30.03.2019
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Registration granted by CIT on — 24.09.2019 3. ITR for AY 2018-19 filed on — 30.09.2018 4. ITR processed u/s 143(1) on — 21.03.2020 It may be therefore seen that although the appellant was eligible for benefit of Section 11 and 12 only w.e.f. AY-2019-20 as per section 12A(2), but as per 1st proviso, if its assessment for the present year in appeal i.e. AY-2018-19 was pending for assessment as on 24.09.2019 then it would be eligible for the said benefit even for AY-2018-19. It is fact that ITR for AY-2018-19 was filed and was yet to be processed u/s 143(1) before date of granting registration. Here comes the interpretation as to whether processing of return u/s 143(1) can be termed as assessment. There are various case laws as well as many provisions of the IT. Act itself, where it is mentioned that assessment means regular assessment framed u/s 143(3) or 144 or 147. An Intimation u/s 143(1) is not an order culminating from any assessment but only processing of the ITR filed by an assessee. And since appellant's case for A.Y. 2018-19 was not pending for assessment as on the date of granting of registration, its case will not fall within the scope of 1st proviso below section 12A(2). 5.9 It is therefore concluded that appellant is not eligible for benefit u/s 11 and 12 for the AY-2018-19 and CPC had sufficient material before it for making the a adjustment to returned income as per the provisions of section 143(1)(a) of This ground of appeal is therefore dismissed. 5.10 As regard the 2nd issue in grounds of appeal i.e. whether or not CPC was justified in disallowing admissible expenses while computing income to be taxed at maximum marginal rate, it is to be stated that the administrative expenses involved in running day to day affairs of the Trust are required to be deducted before arriving at the income of the Trust which would be taxed at maximum marginal rate. However, since this authority does not have access to the said expenses or the correctness of the said expenses, it is not possible for this authority to ascertain as to which and to what extent such administrative expenses are to be allowed as deduction. The jurisdictional assessing officer is therefore directed to examine and verify the same and allow the deduction of administrative expenses before arriving at the income of the Trust. This ground of appeal is therefore allowed subject to above verification. The appeal of the assessee is therefore partly allowed.”
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Before us, ld. counsel for the assessee submitted that issue in dispute is squarely covered by the order of the ITAT passed in ITA No. 464/ASR/2017. He placed on record copy of the Tribunal’s order dated 14.06.2019. Apart from this, he relied upon following other orders of the ITAT : Particulars Sr. No. 1. Copy of Judgment of Hon'ble ITAT, Amritsar in the case of Dussehra Committee, Amritsar Vs. ACIT (CPC), Bangalore, dated 14.06.2019 2. Copy of Judgment of Hon'ble ITAT, Pune in the case of Sirur Shikshan Prasarak Mandal Vs. ACIT, Exemption, [2024] 166 taxmann.com 525 (Pune - Trib.). 3. Copy of Judgment of Hon'ble ITAT, Chandigarh in the case of Shiva Education Society Vs. DCIT (Exemptions), dated 14.11.2024. 4. Copy of relevant extract of Circular No. 01/2015 dated 21.01.2015 5. Copy of Order for registration u/s 12AA of the Income Tax Act. dated 24.09.2019
6. We find that exactly identical issue arose before the ITAT, Amritsar which has been considered by the Bench. The discussion made by the Bench read as under :
“5. We have heard the contentions of the Id DR and perused the material available on record. The relevant provisions under consideration are contained in section 12A(2) of the Act which reads as under:-
"(2) Where an application has been made on or after the 1st day of June, 2007, the provisions of sections Hand 12 shall apply in relation to the income of such trust or institution from the assessment year immediately following the financial year in which such application is made:
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Provided that where registration has been granted to the trust or institution under section 12AA, then, the provisions of sections 11 and 12 shall apply in respect of any income derived from property held under trust of any assessment year preceding the aforesaid assessment year, for which assessment proceedings are pending before the Assessing Officer as on the date of such registration and the objects and activities of such trust or institution remain the same for such preceding assessment year: Provided further that no action under section 147 shall be taken by the Assessing Officer in case of such trust or institution for any assessment year preceding the aforesaid assessment year only for non-registration of such trust or institution for the said assessment year: Provided also that provisions contained in the first and seco proviso shall not apply in case of any trust or institution which was refused registration or the registration granted to it was cancelled at any time under section 12AA."
Undisputedly, the assessee society has been granted registration u/s 12AA by order of the Id CIT(E) dated 20.02.2015 and as on the said date of grant of registration u/s 12AA of the Act, the assessment proceedings in respect of return of income filed on 12.02.2015 for A.Y 2014-15 were pending. Therefore, the first limb of the second proviso is satisfied in the instant case.
7. As regards the second limb which requires the objects and activities to be the same for the impugned assessment year and the assessment year relevant to the year of grant of registration, the Id CIT(A) has stated that the powers of the AO u/s 143(1) are limited as compared to section 143(3) and the said facts cannot be examined. In this regard, we refer to section 143(1) which provides that where the return has been filed u/s 139, the return shall be processed and total income or loss after making adjustment towards any arithmetical error or any incorrect claim apparent from any information in the return. The term "incorrect claim" has been defined in the explanation which reads as under:- "Explanation- For the purposes of this sub-section- (a) "an incorrect claim apparent from any information in the return" shall mean a claim, on the basis of an entry, in the return,- (i) of an item, which is inconsistent with another entry of the same or some other item in such return; (ii) in respect of which the information required to be furnished under this Act to substantiate such entry has not been so furnished; or (iii) in respect of a deduction, where such deduction exceeds specified statutory limit which may have been expressed as monetary amount or percentage or ratio or fraction."
The incorrect claim thus includes a claim in respect of which the information required to be furnished under this Act to substantiate such entry has not been so furnished. In the instant case, the assessee has claimed exemption under section 11 and 12 while filing the return and at that time, the application seeking A.Y.2018-19 8 registration u/s 12AA was already filed and given that registration was pending, the details regarding such registration were apparently not filed. Therefore, such claim was made on the belief that the assessee society shall be granted registration and the said registration will be equally applicable for the impugned assessment year in terms of second proviso to section 12A(2). Therefore, the basis of such claim of exemption u/s 11 and 12 is grant of registration u/s 12AA with a retrospective effect. To our mind, such basis of claim is in consonance with the spirit and language of section 12A which provides that once registration has been granted u/s 12AA of the Act, the same will be equally applicable to pending assessment proceedings 9. Now, coming back to the contentions of the Revenue, if we were to agree with the findings of the Id CIT(A), the provisions of section 12A read with second proviso thereto will become otiose where there are no regular assessment proceedings under section 143(3) of the Act. The Courts have also held that the provisions should be read in a manner where the spirit and intent behind such provisions is not vitiated. Therefore, on conjoint reading of the provisions of section 143(1) and 12A(2), we are of the considered view that the AO is very much empowered to take into consideration the fact regarding grant of registration u/s 12AA subsequent to the filing of return of income. Given that CPC merely processes the return and cannot carry out further verification, the matter relating to examination of the objects and activities is set-aside to the file of Assessing Officer to examine the same after providing reasonable opportunity to the assessee society and where the same is found to be the same, grant the necessary exemption u/s 11 and 12 as so sought by the assessee society in its return of income. In the result, the appeal filed by the assessee is allowed for statistical purposes.”
A similar observation has been made by ITAT Pune Bench in the case of Sirur Shikshan Prasarak Mandal Vs ACIT, Exemptions reported in 166 txmann.com 525 (ITA No. 609 (Pune) of 2024. The ITAT has observed that benefit of Section 11 and 12 would be available even while processing the return u/s 143(1) of the Income Tax Act. The observation of the ITAT in paragraph No. 12 reads as under :
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“12. Now, we find that the assessee trust was granted registration u/s 12A of the IT Act during the pendency of assessment proceedings and Form 10B audit report was also available with the CPC while processing the return. Therefore, considering the totality of the facts and in the light of the decisions of Co-ordinate Bench of the Tribunal {supra) discussed above, we allow the additional ground of appeal raised by the assessee in the present appeal. We therefore direct CPC to amend the intimation issued u/s 143(1) of the IT Act in the light of Form 10B Audit Report and provisional registration certificate u/s 12A of the IT Act furnished before us.”
7.1 The other orders of the ITAT are on the similar line.
8. The assessee has not declared gross receipt as an income, rather it has shown the expenditure also. If Section 143(1) was not a Section vide which taxable liability of the assessee has been affected, then why the CPC Bangalore has made the addition. The assessee has not shown it as a gross income, therefore, ld. CIT (Appeals) has erred in inerprating the provision in the manner which has frustrated the very objective of proviso annexed with sub-section (2) of Section 12A. The Amritsar Bench of the Tribunal has construed it in right perspective and therefore, we are of the view that assessee is entitled for full benefit of the registration granted to it. The impugned order of the CIT (Appeals) is set aside. The issue is relegated to the file of AO for determining the true A.Y.2018-19 10 income of the assessee after granting benefit of Section 11 and 12 of the Income Tax Act.
In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced on 01.07.2025.