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Facts
The assessee, United Church, filed its Income Tax Return for A.Y. 2020-21 after the due date, admitting NIL income. The return was processed under Section 143(1), disallowing the claim for exemption under Section 11 as the assessee was not registered under Section 12AA of the Income Tax Act. This resulted in the gross receipts being taxed without allowing corresponding expenditure, leading to a determined total income of Rs. 77,99,420/-.
Held
The Tribunal acknowledged that the assessee was not registered under Section 12AA, thus not entitled to Section 11 exemption. However, it ruled that the assessee's technical mistake of not claiming expenditure or AOP status in the original return should not deny the benefit of allowing expenditure. The Ld. AO was directed to examine the expenditure from gross receipts and allow it in accordance with law.
Key Issues
Whether disallowance of Section 11 exemption under Section 143(1) for lack of Section 12AA registration mandates taxing gross receipts without allowing expenditure, and if a technical error in filing can deny the allowance of expenditure.
Sections Cited
143(1), 11, 12AA, 250, 143(3), 143(1)(a)(ii)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, VISAKHAPATNAM “DIVISION” BENCH, VISAKHAPATNAM
Before: SHRI LALIET KUMAR, HON’BLE & SHRI S BALAKRISHNAN, HON’BLE
सुिवधई समधप्त होिे की नतनि/ Date of Conclusion of Hearing : 16.01.2025 घोषणा की तारीख/Date of Pronouncement : 13.02.2025 आदेश /O R D E R PER SHRI S BALAKRISHNAN, ACCOUNTANT MEMBER: 1. These appeals are filed by the assessee against different orders Learned Commissioner of Income Tax/ADDL/JCIT(A)-10, Mumbai [hereinafter in short “Ld.CIT(A)” vide respective DIN &OrderNo. as stated below: -
I.T.A.Nos.69 & 70/VIZ/2024 United Church ITA No. & A.Y. DIN &OrderNo. Dated ITBA/APL/S/250/2023-24/1059337145(1) 03.01.2024 ITBA/APL/S/250/2023-24/1059329289(1) 03.01.2024 2. Since the issue raised by the assessee for both the appeals are identical in nature, these appeals are clubbed and a consolidated order being passed. We now take up the appeal in as a lead appeal.
This appeal is filed by the assessee against the order of Ld. CIT(A) vide DIN & Order No. ITBA/APL/S/250/2023-24/1059337145(1) dated 03.01.2024 for the A.Y. 2020-21 arising out of the intimation passed under section 143(1) of Income Tax Act, 1961 (in short ‘Act’) dated 01.06.2022.
Brief facts of the case are that, assessee filed its return of income on 25.03.2021 admitting NIL income for the A.Y. 2020-21. The due date of filing of return of income was 15.02.2021 whereas assessee filed return of income after the due date. The return was summarily processed under section 143(1) of the Act on 01.06.2022 determining total income at Rs. 77,99,420/- after disallowance of the claim of exemption under section 11 of the Act since assessee was not registered under section 12AA of the Act.
Being aggrieved by the intimation, assessee filed an appeal before Ld.CIT(A). Assessee made written submissions on the various grounds by it
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I.T.A.Nos.69 & 70/VIZ/2024 United Church before First AppellateAuthority. Ld. CIT(A) considering the written submissions and by relying on the Memorandum to Finance Bill, 2008 & 2016 upheld the intimation issued under section 143(1) of the Act by Centralized Processing Centre (in short “CPC”), thereby dismissed the appeal of the assessee.
6. On being aggrieved by the order of the Ld. CIT(A), assessee is in appeal before us by raising following grounds of appeal: -
“1. That under the facts and circumstances of the case the processing of the return u/s 143(1) of the IT Act dt: 01/06/2022 that was upheld by Ld. CIT(A) vide order u/s 250 of the IT act dt: 03/01/2024 is contrary to the facts of the case and provisions of law.
The Ld. CIT(A) ought to have held that even when the assessee trust not registered u/s 12AA and not entitled for the benefit u/s 11 of the IT Act even in such situation also the entire receipts of the assessee society should not suffer to tax. Instead, Ld. CIT(A) ought to have given a finding that the normal provisions of the computation of tax should be applied to tax the excess of income or expenditure if any.
3. The Ld. CIT(A) ought to have considered contention of the assessee that Assessing Officer was obligated to have considered its claim for deduction of expenses as per expenditure account while arriving taxable income.
4. The Ld. CIT(A) ought to have known that income received coexists with corresponding expenditure and when these two are correlated with each other there remains net gain or net loss and in the event of gain such Page No. 3
I.T.A.Nos.69 & 70/VIZ/2024 United Church amount would be subjected to tax. This fundamental aspect Ld. CIT(A) fails to recognize accordingly.
5. The Ld. Pr. CIT(A) should have held that disallowing the entire expenditure and recognizing gross income for tax purpose is not contemplated u/s 143(1) of the IT Act.
For these and other reasons that are to be urged at the time of hearing the case the Hon'ble ITAT may delete the addition in the interest of justice and fair play.”
Ground Nos. 1 & 6 are general in nature and needs no adjudication.
Ground Nos. 2, 3, 4 & 5 relate to taxing of the gross income at Rs.77,99,420/- without allowing the expenditure for the impugned assessment year. On this issue, Ld. Authorised Representative [hereinafter “Ld.AR”] submitted that assessee has been denied the benefit of allowance of the expenditure against the gross receipts for the impugned assessment year. He pleaded that alternatively assessee to be taxed as an AOP, only the net income shall be subjected to tax. Ld.AR further submitted that in the A.Y. 2020-2021 & 2021-2022 the ITR was filed in the status of AOP/BOI and therefore the expenditure claimed be allowed. He submitted the relevant ITR acknowledgment which is placed at page No. 14 of the Paper book. He pleaded that similar allowance of expenditure may also be granted for the impugned assessment year. He also submitted that income expenditure account for the year ending 31.03.2020 is placed at Page No. 12 & 13 of the Page No. 4
I.T.A.Nos.69 & 70/VIZ/2024 United Church paper book. On this issue, he relied on the decision of the Co-ordinate Bench of the Tribunal in dated 09.03.2022 in the case of Joharimal High School v. ITO (Exemptions) and further placed reliance on the decision of the Delhi “SMC” Bench in the case of Shri Sanatan Dharam Mandir Sabha v. ITO in order dated 13.04.2022.
Per contra, Ld. Departmental Representative [hereinafter in short “Ld.DR”] fully supported the orders of the Revenue Authorities.
We have heard both the sides and perused the material available on record. In the instant case, it is an undisputed fact that assessee is not Registered under section 12AA of the Act. However, the assessee claimed exemption under section 11 of the Act in-spite of not having a Registration under section 12AA of the Act. The intimation under section 143(1) of the Act is being processed based on the returns filed by the assessee and it does not constitute assessment proceedings as contemplated under section 143(3) of the Act. Accordingly, CPC has observed that the assessee does not have Registration under section 12AA of the Act based on the return of income filed by the assessee and thereby sought to add the gross receipts as total income of the assessee. Since claim of exemption was disallowed by processing return of income under section 143(1) of the Act by CPC, assessee took an alternative plea that the CPC ought to have treated the assessee as an Page No. 5
I.T.A.Nos.69 & 70/VIZ/2024 United Church AOP and recompute the income after allowing the entire expenditure. This process of examining of such alternate plea cannot be made under section 143(1) of the Act unless otherwise the claim is validly made in the return of income. Section 143(1)(a)(ii) of the Act disallows an incorrect claim which is apparent from any information in the return of income either from the audit report or some other information was provided by the assessee while filing the return of income. Accordingly,CPC has processed the return of income in accordance with the provision of section 143(1)(a) of the Act.
Coming to the alterative plea of the assessee that expenditure shall be allowed from the gross receipts and assessee be treated as an AOP. The assessee ought to have claimed as such while filing return of income. However, this technical mistake of the assessee cannot deny it the benefit of allowance of expenditure claimed by it. We are therefore of the considered view that the expenditure shall be allowed to the assessee from the gross receipts and we direct the Ld. AO to examine the expenditure and allow the same in accordance with law.
In the result, appeal of the assessee is allowed.
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I.T.A.Nos.69 & 70/VIZ/2024 United Church (A.Y. 2021-22)
Coming to appeal relating to the assessee has raised identical grounds. Therefore, the decision taken in . Accordingly, appeal filed by the assessee is allowed.
To sum-up, appeals filed by the assessee are allowed.
Order pronounced in the open court on 13th February, 2025.