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Income Tax Appellate Tribunal, AHMEDABAD “SMC” BENCH
Before: Shri Waseem Ahmed & Shri Siddhartha Nautiyal
Date of hearing : 10-06-2022 Date of pronouncement : 15-06-2022 आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:-
This is an appeal filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals)-9, Ahmedabad in Appeal no. CIT(A)-9/10036/DCIT CPC)/2019-20 vide order dated 13/08/2020 passed for the assessment year 2017-18.
Page No. 2 City Manager Association vs. DCIT
2. The assessee has raised the following grounds of appeal:-
“1. The Learned Commissioner of Income Tax (Appeals) has erred in law as well as on the facts of the case of the Appellant by confirming the adjustments made u/s. 143(l)(a) of the I.T. Act, 1961, holding that the law authorizes the Assessing Officer to make such adjustment while processing return u/s. 143(1), even though such adjustment is beyond the scope of provisions of section 143(l)(a) of the I.T. Act, 1961.
2. The Learned Commissioner of Income Tax (Appeals) has erred in law as well as on the facts of the case by confirming the reduction of claim for deduction by allowing deduction of only Rs.2,66,987/- instead of deduction claimed of Rs.3.93,662/-, which is rightly and validly allowable u/s. 11(1)(A) of the I.T. Act 1961 as claimed in the return of income filed by the Appellant.
3. The Ld. Commissioner of Income Tax (Appeals) has erred in law as well as on the facts of the case by upholding the reduction in the claim for deduction u/s. 11 by allowing deduction of only Rs. 17,79,912/- instead of deductions claimed of Rs. 24,95,038/- which is rightly and validly allowable u/s. 11 of the I.T. Act, 1961 as claimed in the return of income filed by the Appellant.
The Ld. Commissioner of Income Tax (Appeals) has also erred in law as well as on the facts of the case by confirming the determination of the assessed income at Rs. 8,44,501/- by further holding that the income shown u/s. 11(3)(c) by the appellant in the return of income filed is assessable separately and distinctly from other income of the Appellant.
5. The Appellant prays for the following :
(i) to allow deduction of Rs. 3,93,662/- fully as claimed in the return of income, for amount set part u/s. 111(1)(a) of the I.T. Act, 1961 Page No. 3 City Manager Association vs. DCIT
(ii) to allow deduction of claimed u/s. 11 of the I.T. Act, 1961 (iii) to hold that income of Rs. 8,44,501/- shown u/s. 11(3)(c) is not assessable separately and distinctly from other income. 6. Your Appellant prays to reserve the right to add, alter, amend and /or withdraw any of the above grounds of appeal. Total Tax Effect: 99,717/-“
3. At the outset, we note that the appeal is time-barred by 161 days. The counsel for the assessee submitted that the appeal was filed during the corona outbreak and hence is covered by the decision of the Hon'ble Supreme Court in Suo Moto Writ petition (C) No. 3 of 2020 In RE: “cognizance for extension of limitation”, extending the timelines during which the appeal could be filed. The Ld. Departmental Representative has not objected to assessee’s application for condonation of delay in filing the appeal. In view of the above facts, we are hereby allowing assessee’s application for condonation of delay.
4. On merits, the brief facts of the case are that the assessee is a Charitable Trust, duly registered under the Bombay Public Trust Act, 1950 and has also been granted registration u/s 12AA of the Act. For the year under consideration, the assessee filed return of income declaring income at � 1,29,375/- and also e-filed the audit report in form 10B for claiming deduction u/s 11(2) of the Act. The assessee received intimation under section 143(1) of the Act from CPC Bengaluru and in the said intimation, certain adjustments were made as regards deduction claimed under section 11(2) of the Act, which according to the assessee have been incorrectly Page No. 4 City Manager Association vs. DCIT disallowed since assessee’s case is directly supported by the decision of the Calcutta High Court in the case of Natwarlal Chaudhry Charitable Trust 189 ITR 656 (Cal). As per the assessee, the adjustments made under section 143(1) of the Act disallowing the legitimate claims of the deductions have been wrongly made without proper appreciation of facts and circumstances of the case as well as the records available. Moreover, disallowance made in the intimation under section 143(1) of the Act cannot be considered as adjustments stipulated under section 143(1)(a) of the Act, and hence the same cannot be disallowed by way of adjustment u/s 143(1)(a) of the Act. The assessee filed appeal before Ld. CIT(A) dismissed the assessee’s appeal by holding that since the position of law is unambiguous and not debatable, the action of AO, CPC is upheld and the additions made by way of intimation under section 143(1) of the Act are sustained.
Before us, the Ld. Counsel for the assessee at the outset submitted that the case is directly covered by the order passed by Ahmedabad ITAT in assessee’s own case for the immediately preceding assessment year AY 2016-17, a copy of which has been placed before us. The Ld. Departmental Representative has also not objected to the position taken by the assessee. We have perused the order and we note that since the issues before us are covered directly by the assessee’s own Tribunal order for AY 2016-17, respectfully following the same we are hereby allowing the assessee’s appeal. The relevant extracts of the ITAT ruling are reproduced below for reference:
Page No. 5 City Manager Association vs. DCIT
“4. While dictating this order, we noticed the ld. CIT(A) has made a pertinent observation, which reads as follows:
"4.8 It has also been brought to the notice of the undersigned that the same issue arose for consideration by the predecessor I the office for the Assessment Year 2015-16 and the appeal of the appellant was dismissed vide appellate order dated 15.08.2017. The appeal before the Hon'ble ITAT (registered as is reported to be pending as on the date of passing the appellate order. Therefore, to maintain the consistency of the stand taken by the predecessor in the office for A.Y.2015-16 on the identical issue, the appeal is required to be dismissed."
5. As per the above observation of the ld. CIT(A), the appeal of the assessee in for the A.Y 2015-16 was pending before the Tribunal when the CIT(A) assed the impugned order on 18.6.19. However, both the parties before us have not brought to our knowledge about the status of that case before the Tribunal. On verification about the status of the same, we found that the above appeal of the assessee was disposed of in favour of the assessee vide order dated 21.8.019 just two months after the passing of the impugned order by the ld. CIT(A). The relevant portion of Co- ordinate Bench's order reads as under:
"5. Before us, the assessee raised two fold submissions. Firstly, on the strength of Hon'ble Kolkatta High Court in the case of CIT Vs. Natwarlal Chowdhury Chanty Trust, 52 taxmann 330 (Kol) it is entitled for deduction at 15% of the alleged deemed income offered for taxation in this assessment year. In the second contentions, she contended that both the issues are debatable that cannot be adjudicated under section 143(1) of the Act.
On the other hand, the ld. DR relied upon the order of the Revenue authorities. He placed on record copy of ITAT's order in the case of the Trustees, The B.N. Gamadia Parsi Hunnarshala, 77 TTJ 274 (Mum-Trib.) We would like to reproduce brief order of the Hon'ble Kolkatta High Court in the case of CIT Vs. Natwarlal Chowdhury Charity Trust (supra), which reads as under:
Page No. 6 City Manager Association vs. DCIT
"Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the assessee's right to accumulate 25% of the total income of the previous year extended to the deemed income under Section 11 (3) of the Income-tax Act, 1961, added therein in the circumstances mentioned above ?"
The facts found by the Tribunal as stated in the statement of case are as follows : -
The assessee-trust accumulated Rs.46,184 during the accounting years relevant to the assessment years 1973-74 to 1976-77. During the previous year relevant to the present assessment year, accumulated income ceased to be invested in fixed deposit with the Indian Bank and it was, therefore, deemed to be the income of the trust in the previous year in which it ceased to remain invested or deposited in terms of clause (b) of sub-section (3) of section 11 of the Income-tax Act, 1961. The Income-tax Officer was of the opinion that the assesses was not entitled to accumulate 25% of this deemed income because permitting it to do so would amount to a double benefit to the assesses. He, therefore, assessed the entire deemed income.
The Tribunal in agreeing with the decision of the Appellate Assistant Commissioner observed:
The legal fiction contained in section 11(3) of the Income-tax Act, 1961, should be allowed to play to the fullest extent and there is no warrant to take a restricted view for denying the exemption which is specifically allowed by the statute. In fact, as per the law as stood from April 1, 1976, charitable trusts are permitted to accumulate up to 25% of their income without complying with any formalities or condition and such accumulation is not included in the total income. Therefore, we uphold the order of the Appellate Assistant Commissioner as it is quite justified in law and the assesses would be entitled to accumulate 25% of the total income of the previous year relevant to the assessment year 1978-79 inclusive of the deemed income under section 11 (3) of the Income-tax Act, 1961.
Page No. 7 City Manager Association vs. DCIT
4. Mr. Moitra, appearing on behalf of the Revenue, has failed to show any infirmity in the order of the Tribunal. In fact, he has prayed merely for remand of the case as was done by the Andhra Pradesh High Court in the case of CIT v. Hyderabad Secunderabad Foodgrains Association Ltd. [1989] 175 ITR 574. The facts in that case were quite different and it was felt by the Andhra Pradesh High Court that it was necessary to remand the case.
But, in the instant case, no argument at all has been advanced to show any infirmity in the order of the Tribunal"
Since Mr. Moitra has failed to show us any infirmity in the order passed by the Tribunal, the question is answered in the affirmative and in favour of the assessee."
7. In the light of the above, let us consider the scope of section 154 for making prima facie adjustment while processing return under section 143(l)(a) of the Act i.e. process of dealing with the return is an ex parte process. It is pertinent to observe that whenever any debatable issue is involved an explanation of the assessee is required, then on such issue, no prima facie adjustment in an ex parte proceedings can be made. Reading of judgment of Hon'ble Kolkatta High Court (supra), and if facts are looked into, then it would reveal that both the issues were debatable one, where more than one opinion was possible. Adjustment under section 143(l)(a) is not permissible on both these aspects. Therefore, we allow appeal of the assessee, and delete both the disallowances."
6. In the light of the above, respectfully following the Co-ordinate Bench decision in the assessee's own case for the Asst. Year 2015-16, wherein the disallowances were being made under section 143(1) of the Act, and similar disallowance is also made for the present year viz. Asst. Year 2016-17, we hold that debatable issue should not be done in an intimation under section 143(l)(a) of the Act. Therefore, we allow the appeal of the assessee and delete both the disallowances.
Page No. 8 City Manager Association vs. DCIT
In the result, the appeal filed by the assessee is allowed.”
5. In the result, assessee’s appeal is allowed.
Order pronounced in the open court on 15-06-2022 Sd/- Sd/- (WASEEM AHMED) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 15/06/2022 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद