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Facts
The Revenue appealed the CIT(A)'s order partly allowing the assessee's appeal. The assessee claimed exemption under Section 10(23C) for AY 2018-19, but this was denied by the AO. The CIT(A) directed the AO to verify expenditures and compute income.
Held
The Tribunal held that the CIT(A) erred by remanding the matter back to the AO, as the CIT(A) did not have the power to set aside the assessment. The Tribunal directed the CIT(A) to decide the issue of verifying expenditure and computing income at his own level. The assessee's claim for exemption under Section 10(23C) was denied as there was no material to prove its applicability for AY 2018-19.
Key Issues
Whether the CIT(A) had the power to set aside the assessment and refer it back to the AO? Whether the assessee is eligible for exemption under Section 10(23C) for AY 2018-19 based on subsequent year approval?
Sections Cited
10(23C), 12A, 143(3), 251(1), 270A, 11, 12, 144, 245HA, 12AA
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, LUCKNOW BENCH “A”, LUCKNOW
Before: SHRI KUL BHARAT & SHRI ANADEE NATH MISSHRA
(A) This is an appeal preferred by Revenue against impugned order of Ld. Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi; dated 17.08.2023. The grounds of appeal of Revenue are as under: -
“1. The Ld. CIT(A) has erred in law and facts in partly allowing the appeal of the assessee by restoring the case with AO with direction to verify the expenditure claimed by the assessee and thereafter compute the income; as it is beyond the powers of CIT(A).
“1. Because, the Ld. Commissioner of Income Tax (Appeals) has erred on facts and law while not allowing benefit of provisions of section10(23C) in A.Y. 2018-19 wherein subsequent year assessee was approved u/s 10(23C)(vi) of the Income Tax Act and eligible for deduction in parity of provisions of section 12A of the Income Tax Act.
Because, the Ld. Commissioner of Income Tax (Appeals) has erred on facts and law while restricting the application of fund to the extent of Rs. 3,77,87,472.07/- against gross receipt of Rs. 3,83,03,348.60/- and computing the surplus at Rs. 5,15,876.53/- without considering institution is existing solely for education purpose not for the propose of profit and eligible for exemption u/s 10(23C) of the Income Tax Act.” (B) In this case, the assessee filed a return of income declaring total income at Nil. Vide assessment order dated 08.03.2021 [DIN No. ITBA/AST/S/143(3)/2020-21/1031317779(1)]. The ssessee’s income was assessed at Rs.3,83,03,349/-. The relevant portion of the aforesaid assessment order is reproduced as under: - “5. The assessee society has claimed exemption u/s 10(23C)(iiiad) of the Income Tax Act, 1961 in its return of income. Since the aggregate annual receipt of the society is above Rs.One Crore, the assessee society is not exempt u/s 10(23C)(iiad) of the I.T. Act, 1961. The society is neither registered u/s12A nor approved u/s 10(23C)(vi) of the Income Tax Act, 1961 for the A.Y. 2018-19. Since the assessment in this case has been made u/s 143(3) at an income of Rs.3,83,03,349/- as processed u/s 143(1) by the Deputy Commissioner of Income Tax (CPC), Bangalore, penalty proceeding u/s 270A of the I.T. Act, are being initiated separately for misreporting of income.
The assessment of income is done as per computation sheet at an income of Rs.3,83,03,349/- and the sum payable is determined as per the demand notice.” (B.1) The assessee’s appeal filed in the office of the Ld. CIT(A) was partly allowed. The relevant portion of the impugned order of the Ld. CIT(A) is reproduced as under: -
“8.1 During assessment proceedings, the AO noticed that the appellant has claimed exemption u/s. 10(23C) (iiiad), however, the appellant society is neither registered u/s 12A nor approved u/s 10(23C)(vi) of the Act. Therefore, AO had taker the gross receipts of Rs.3,83,03,349/- as income and completed the assessment The appellant in his submission has stated CO. No.01/LKW/2024 Page 3 of 9 that he had filed application for exemption Certificate u/s 10(23C)(vi) on 23.03.2019, got the approval from CIT exemption vide approval no, CIT EXEMPTION, LUCKNOW/EXM11/2019-20/A/10023 dated 07.03.2020. The order for approval u/s 10(23C)(vi) furnished by appellant expressly mentions that it is effective from A.Y 2019-20 onwards. There is no mention of it being applied or applicable retrospectively. The claim of the appellant therefore is devoid of any merit and cannot be accepted, in view of the aforementioned Hence. the contentions of the appellant to grant the exemption u/s 10(23C)(vi) in AY 2018-19 is rejected. 8.2 The Appellant vide bis submission has also contended that the leamed AO has considered the gross receipts of Rs. 3,83,03,349/- as income of the society and has not considered the expenditure incurred for the said assessment year in support of his contention appellant has also submitted the assessment year in hrs own case for AY 2016-17. For the year under consideration the appellant has shown gross receipts of Rs.3,83,03,348.60/-, expenditure of Rs 3,77,87,472.07/- and excess of income over Expenditure at Rs.5,15,876.53/- in its income and expenditure account. This contentions of the appellant has force in it. Once the exemption is denied what can be taxed is the excess of receipt over eligible expenditure related to the business of the appellant. As mentioned by the appellant, even in earlier AY 2016-17, in the similar facts and circumstances, in appellants own case, the then AO has taxed the excess receipt over expenditure, as against the total receipt: Therefore. respectfully following the consistent approach of the department and in the facts of the case, only surplus receipt over expenditure is held taxable. 8.3 The AO shall therefore verify the expenditure claimed by the appellant and thereafter compute the income of the appellant as discussed above. Accordingly, Ground No.1 of appeal is partly allowed.” (B.2) During the course of appellate proceedings in Income Tax Appellate Tribunal (“ITAT”, for short), the assessee filed a paper book containing the following particulars: - 1 (2013) 38 Taxmann.com 100 (SC) para 28, 29, 30 & 31 CIT vs Excel Industries Ltd 2 (2017) 88 Taxmann.com 133 (Amritsar ITAT) para 25 to 28 Punjab Education Society vs ITO Moga 3 (2021) 132 Taxmann.com 269 (Raipur ITAT) para 7 to 13 Prem Prakash Mandal Sewa Trust vs ITO Exemption Raipur (B.3) At the time of hearing, the Ld. Departmental Representative for the Revenue submitted that the Ld. CIT(A) erred in partly allowing the appeal of the assessee by restoring the case to the Assessing Officer, with the direction to verify the expenditure claimed by the assessee and thereafter compute the income. He also submitted that the addition should have been confirmed entirely by the Ld. CIT(A). The Ld. Counsel for the assessee CO. No.01/LKW/2024 Page 4 of 9 supported the order of the Ld. CIT(A) in respect of the direction of the Ld. CIT(A) to verify the expenditure claimed by the assessee and thereafter compute the income.
(B.4) Powers of Ld. CIT(A) have been mentioned in section 251(1) of the Act, the relevant provisions of which are reproduced below:-
Powers of the [Joint Commissioner (Appeals) or the] Commissioner (Appeals). 251. (1) In disposing of an appeal, the Commissioner (Appeals) shall have the following powers— (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment: [Provided that where such appeal is against an order of assessment made under section 144, he may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment;] (aa) in an appeal against the order of assessment in respect of which the proceeding before the Settlement Commission abates under section 245HA, he may, after taking into consideration all the material and other information produced by the assessee before, or the results of the inquiry held or evidence recorded by, the Settlement Commission, in the course of the proceeding before it and such other material as may be brought on his record, confirm, reduce, enhance or annul the assessment.” (B.5) The aforesaid proviso to Section 251(1)(a) of the Act was inserted by Finance Act (No.2) Act, w.e.f. 01.10.2024. Thus, the Ld. CIT(A) had powers to set aside the assessment and refer the case back to the Assessing Officer for making afresh assessment w.e.f 01.10.2024. but prior to 01.10.2024, the Ld. CIT(A) did not have the power to set aside the assessment back to the Assessing Officer. He had powers (only) to confirm, reduce, enhance or annul the assessment. The present appeal before us pertains to assessment year 2018-19 and the impugned appellate order of the Ld. CIT(A) has been passed on 17.08.2023. Therefore, it is CO. No.01/LKW/2024 Page 5 of 9 obvious that in the present case, the aforesaid proviso to Section 251(1)(a) of Act (inserted with effect from 01.10.2024 has no applications); and the Ld. CIT(A) could have only confirmed, reduced, enhanced, annulled the assessment but could not have set aside the assessment back to the Assessing Officer. In the present case before us, the direction of the Ld. CIT(A) to the Assessing Officer to verify the expenditure claimed by the assessee and thereafter compute the income of the assessee amounts to setting aside the assessment back to the Assessing Officer for fresh computation of the assessee’s income. As discussed earlier, the Ld. CIT(A) did not have power to set aside the assessment back to the Assessing Officer. Therefore, the Ld. CIT(A) is directed to decide this issue at his own level exercising his powers to confirm, reduce, enhance or annul the assessment without referring the matter back to the Assessing Officer for computation of the assessee’s income afresh. Accordingly, ground no. 1 of appeal is allowed.
(C) As regards, ground no. 2 of appeal, this is being decided along with the grounds taken by the assessee in cross objection. In ground no. 2 of cross objection, the assessee has objected to the order of the Ld. CIT(A) restricting the application of funds to the extent of Rs.3,77,87,472.07/-. We have already given direction to the Ld. CIT(A), in foregoing paragraph no. B.4 of this order. The Ld. CIT(A) is further directed to verify the issue raised in ground no. 2 of cross objection and to decide the matter at his own level without setting aside the matter to the Assessing Officer. Accordingly, the issue in ground no. 2 of cross objection is restored back to the file of the Ld. CIT(A), with the direction to (D) In ground no. 1 of cross objection, the assessee has objected to order of the Ld. CIT(A) in not allowing the benefit of provisions of Section 10(23C) of the Act in A.Y. 2018-19 on the ground that in the subsequent year, the assessee’s application u/s 10(23C) of the Act was accepted. In this regard, a paper book containing the following particulars was also filed from the assessee’s side on this issue: -
1 (2013) 38 Taxmann.com 100 (SC) para 28, 29, 30 & 31 CIT vs Excel Industries Ltd 2 (2017) 88 Taxmann.com 133 (Amritsar ITAT) para 25 to 28 Punjab Education Society vs ITO Moga 3 (2021) 132 Taxmann.com 269 (Raipur ITAT) para 7 to 13 Prem Prakash Mandal Sewa Trust vs ITO Exemption Raipur (D.1) At the time of hearing, the Ld. Counsel for the assessee submitted that u/s 12A(2) of the Act, proviso was inserted by Finance Act (No.2) Act, 2014 w.e.f. 01.10.2014 to the effect 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 if the objects and activities of such trust or institution remain the same for such preceding assessment year. He further submitted that the aforesaid proviso to Section 12A(2) of the Act would apply to Section 10(23C) of the Act also and that the assessee was eligible benefit u/s 10(23C) of the Act in A.Y. 2018-19 also (to this present appeal pertains) on the strength of the approval granted to the assessee u/s 10(23C) of the Act in the subsequent CO. No.01/LKW/2024 Page 7 of 9 year. For this purpose, the Ld. Counsel for the assessee relied on the following case laws: - (i) CIT vs Excel Industries Ltd (supra), (ii) Punjab Education Society vs ITO (supra) (iii) Prem Prakash Mandal Sewa Trust vs ITO Exemption (supra). The Ld. Departmental Representative supported the order of the Ld. CIT(A) on this issue, stating that the approval granted to the assessee u/s 10(23C) of the Act for subsequent assessment year had no application for A.Y. 2018-19 to which the present case pertains.
(D.1.1) At the time of hearing, Ld. Counsel for the assessee was asked specifically by Bench whether there was any material on record to show that the objects and activities of the assessee were the same as was for the subsequent year in which assessee was granted approval u/s 10(23C) of the Act. The Ld. Counsel for the assesse responded in the negative and admitted that there was no such material. Therefore, even if the claim of parity of provisions of section 10(23C) of the Act with the provisions of Section 12A of the Act as claimed by the assessee in ground no. 1 of cross objection is accepted, even then, there is no material on record to show that the conditions for approval u/s 10(23C) of the Act were satisfied also in the present A.Y. 2018-19 (to which this appeal pertains).
(D.2) In our view, however, the assessee’s claim of parity of provisions of Section 12A of the Act with Section 10(23C) of the Act is mis-placed. If there was legislative intent to extend parity of provisions [as contained in proviso to Section 12A(2) of the Act] to Section 10(23C) of the Act; then legislature would have brought in similar amendment to Section 10(23C) of the Act also as was done by inserting proviso to Section 12A(2) of the Act. In CO. No.01/LKW/2024 Page 8 of 9 the absence of any such provision in Section 10(23C) of the Act, it is a logical inference that the legislature did not intend to provide similar benefit u/s 10(23C) of the Act (i.e. similar to the benefit granted under proviso to Section 12A(2) of the Act). It is well established principle of statutory interpretation that if the provision of law is specifically enacted for one purpose but is not enacted for another purpose, then no inference can be drawn that legislature intended to enact the law for the latter purpose also.
(D.2.1) In view of the aforesaid discussion, the case laws relied upon from the assessee’s side i.e., (i) CIT vs Excel Industries Ltd (supra), (ii) Punjab Education Society vs ITO (supra) (iii) Prem Prakash Mandal Sewa Trust vs ITO Exemption (supra) have no application in the facts and circumstances of the present appeal before us. The order of the Ld. CIT(A) in not allowing the benefit of Section 10(23C) of the Act for the A.Y. 2018-19, being in accordance with law, is upheld and ground no. 1 of cross objection filed by the assessee is dismissed.
In the result, the appeal of the Revenue and Cross Objection of the assessee, both are treated as partly allowed for statistical purposes.
Order pronounced in the open Court on 31/07/2025.