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Facts
The assessee, a charitable educational institution, filed its return of income for AY 2018-19 showing total receipts and expenditure. The Assessing Officer/CPC rejected the benefit claimed under section 11 for not filing Form 108 and computed total income, demanding a tax. The CIT(A) upheld this decision.
Held
The Tribunal noted that no steps were taken by the authorities below to verify the expenditure at the time of passing the intimation. While failure to submit a revised return is fatal and the use of the wrong return form lacks plausible explanation, only real income should be taxed. Expenses incurred are subject to verification.
Key Issues
Whether the assessee's claim for expenses is allowable as deduction, and whether the income can be taxed without verification of expenses.
Sections Cited
Section 11, Section 143(1)(a)
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Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR
Before: SHRI V. DURGA RAO & SHRI K.M. ROY, ACCOUNTANT, MEMBER
Date of Hearing – 10/02/2025 Date of Order – 17/02/2025
O R D E R PER K.M. ROY, A.M.
This appeal by the assessee is emanating from the impugned order dated 24/06/2024, passed by the learned Commissioner of Income Tax (Appeals)–4, Kolkata, [“learned CIT(A)”], for the assessment year 2018–19.
During the course of hearing, the Registry has pointed out that there is a delay of 17 days in filing the present appeal by the assessee. While going through the record available before us, we find that the assessee has filed application for condonation of delay of 17 days which is supported by Affidavit, the contents of the affidavit are reproduced below.
“The assessee is before your Honor against the order of CIT Appeal. The date of appeal order was 24.06.2024. There is a delay of around 6 days in filing of this appeal.
2 Uday Mahila Seva Sanstha ITA no.466/Nag./2024
Reason for delay theta the appeal before CIT was filed on pursued by another council. The assessee has pointed new Council for this matter now. The regular consultant of the assessee & the council were busy in filing of income tax return & GST returns. Due to the delay of 6 days in filing the appeal. Based on the above submissions the assessee most humbly request your honor to kindly condone the delay of around 6 days in filing appeal and kindly allow her to file the appeal with around 6 days of delay. The assessee will be pleased to furnish such other details as may be required in this regard. Prayer: Delay in filing of appeal may kindly be condoned and the assessee may kindly be permitted to file the appeal.”
In view of the above, delay is hereby condoned.
In its appeal, the assessee has raised following grounds:– “1. The Additional/Joint Commissioner of Income Tax Appeal erred in law as well as facts by not considering the ground of the appeal of the assessee regarding allowability of expenses incurred for the purpose of running the trust.
2. The Additional/Joint Commissioner of Income Tax Appeal erred in law as well as facts in not considering the submission of the assessee regarding power of A.O. CPC regarding disallowance of expenses.
The appellant may be permitted to raise, add, amend, alter all or any other grounds of appeal at the time of hearing.”
Facts in Brief:– The assessee is a Charitable Educational Institution and was registered under Bombay Public Trust Act, 1950. The assessee was also registered under The Society Registration Act, 1860. The society is running educational institutions. The assessee, for the year under consideration, filed its returned of income on 25/03/2019, and also filed return of income in Form no.ITR-7. In the return total receipt of ` 1,12,11,272, and expenditure of ` 1,08,58,949, was shown. The balance amount being loss than 15% of receipt was also claimed exempt. The 3 Uday Mahila Seva Sanstha ITA no.466/Nag./2024 Assessing Officer/CPC passed order computing total income of the ` 1,12,11,272. However, the Assessing Officer/CPC rejected the benefit under section 11 claimed by the assessee on the ground that the assessee has not filed Form no.108. A demand of ` 48,94,449. Aggrieved by the order passed by the learned CIT(A), the assessee filed appeal before the learned CIT(A) by raising following grounds:–
1) The assessee has inadvertently filed ITR-7. 2) The assessee may be allowed education expenses of Rs. 1,08,58,959/-. 3) The assessee also requested for stay of the demand.
In the written submission filed by the assessee wherein the assessee submitted details of revenue expenses incurred for earning income and hence claimed that the same be allowed as deduction from the receipt to arrive to arrive at net income. The assessee, by way of another written submissions, challenged the disallowance of expenses made by the Assessing Officer/CPC while passing order under section 143(1)(a) of the Act. The Assessing Officer/CPC while considering the submissions of the assessee, rejected the claim of allowability of expenditure. The learned CIT(A) held that in the absence of audit or audit report, the claim of the assessee could not be verified and hence the said claim was rejected. The learned CIT(A) further held that the income of the assessee was rightly charged at maximum marginal rate. The assessee being aggrieved is in further appeal before us.
We have heard the learned Counsel for the parties and perused the material available on record. This appeal emanates out of intimation under 4 Uday Mahila Seva Sanstha ITA no.466/Nag./2024 section 143(1) of the Act. No steps have been taken by the authorities below to verify the expenditure while passing the intimation. Failure to submit revised return of income is fatal. Moreover, there is no plausible explanation about why wrong return form is used. We find no merits in the submission made by the assessee that it was an inadvertent error, because the return forms are unequivocal and specific. However, it is also true that only real income can be brought to tax. The entire gross receipts cannot be brought to tax without abatement of expenses incurred. However, the expenses are subject to verification and the Assessing Officer is directed to examine the application of income and to tax only the embedded real profit after thorough examination and analysis of expenditure incurred. We order accordingly.
In the result, assessee’s appeal stands allowed for statistical purposes. Order pronounced in the open Court on 17/02/2025