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Facts
The assessee filed its return of income as 'Nil' but the AO, under Section 143(1) of the Income Tax Act, determined the total income as Rs. 6,75,000/- due to a discrepancy between the exemption claimed in the return and Form 9A. The Ld. CIT(A) confirmed the AO's action, stating that the assessee should have filed a revised return or sought relief under Section 119(2)(b) for condonation of delay, and dismissed the appeal.
Held
The Tribunal noted that the Section 143(1) process is machine-driven and that the First Appellate Authority (CIT(A)) should have taken a holistic view to avoid penalizing the assessee for inadvertent oversight. Consequently, the matter was remanded back to the Ld. CIT(A) for re-appraisal of the correct figures and to allow due relief to the assessee in accordance with law.
Key Issues
Whether an adjustment made under Section 143(1) based on a discrepancy between the ITR and Form 9A, due to an admitted oversight, should be upheld without a holistic review by the CIT(A).
Sections Cited
Section 250, Section 143(1), Section 119, Section 119(2)(b), Section 11(1), Section 11, Section 12A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “PATNA BENCH” PATNA
Appearances by: Assessee represented by : Puja Bajaj, AR Department represented by : Ashwani Kr. Singal, JCIT Date of concluding the hearing : 07.01.2025 Date of pronouncing the order : 09.01.2025
ORDER PER SANJAY AWASTHI, ACCOUNTANT MEMBER:
The present appeal emanates from order under Section 250 of the Income Tax Act, 1961 (hereafter ‘the Act’) dated 29.12.2023, passed by the Ld. Commissioner of Income-tax (Appeals), Addl/JCIT(A)-5, Mumbai (hereinafter referred to as the “Ld. CIT(A)”] for A.Y. 2022-23. 1.1 The impugned order itself is on the basis of certain adjustments made by the Ld. AO u/s 143(1) of the Act. The brief facts are that the assessee filed his return of income on 07.11.2022 at “Nil” income.
Jan Sikshan Sansthan However, the total income of Rs. 6,75,000/- was determined u/s 143(1) of the Act. This enhancement was affected because there was a discrepancy between the exemption claimed in the return and Form 9A filed by the assessee. The Ld. CIT(A) confirmed the action of the Ld. AO with the following findings: “It has been admitted by the appellant that incorrect information has been inadvertently has been furnished in the return of income. Therefore, the appellant was required to file a revised return of income to correct the mistake. In this case the appellant has not filed the revised return mentioning the correct figure of income and application u/s 11(1). Further if the time limit for filing the revised return has lapsed, the only remedy available lies in the machinery provisions of the Act rather seeking legal remedy. Such provisions are found in section 119(2)(b) which enables an assessee to approach the Board for seeking relief in such cases. The provisions of section 119(2)(b) are reproduced below: Section 119: "Instructions to subordinate authorities 1. The Board may from time to time.
Without prejudice to the generality of the foregoing power,- (b) the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class, by general or special order, authorize (any income tax authority, not being a JCIT (Appeals) or [*] Commissioner (Appeals) to admit an application or claim for any exemption, deduction, refund, or any other relief under this Act after expiry of the period specified by or under this Act for making such application or claim and deal with the some on merits in accordance with law." From the above, it is clear that the first appellate authorities have not been entrusted with powers of condoning delay in such cases. The intention of legislature with respect to such cases is very clear that the remedy in such situation lies in the section 119 of the Act. From the above it is clear that the appellant has not correctly reported the application u/s 11(1). As has already been stated earlier the only remedy to correct an error in filing of return is by revising the return. In view of the above, I am of the considered opinion that as the adjustment has been made on account of admitted discrepancy in the figures reported in return of income vis-à-vis Form 9A, therefore the relief claimed is not allowable. Therefore, this ground of appeal is dismissed. In the result, appeal is dismissed.”
1.2 Aggrieved with the action of Ld. CIT(A), the assessee has approached the ITAT through the following grounds: “1. That on the facts and in the circumstances of the case of the assessee the learned Additional/Joint Commissioner of Income Tax, A-5, Mumbai was not 2 Jan Sikshan Sansthan justified in considering the total receipt and application of income as Rs. 25,00,000.00 and Rs. 9,29,725.00 respectively as against actual receipt and application of Rs. 45,00,000.00 and Rs. 29,29,725.00/- respectively.
2. That on the facts and in the circumstances of the case of the assessee the learned Additional/Joint Commissioner of Income Tax A- 5, Mumbai was not justified in confirming the addition of Rs. 6,75,000.00.
The assessee craves leave to add, alter amend or withdraw any ground of appeal on or before the time of hearing.”
2. Before us, the Ld. AR averred that there were certain figures mentioned in Form 10 and 9A which were reflective of the current situation whereas due to an oversight a wrong figure got mentioned in certain column of the ITR. The Ld. AO utilised that discrepancy to adversely enhance the returned income. The Ld. AR pointed out from the written submission as under:
“The assessee had spent Rs 20,00,000/- on Capital expenses and Rs. 9,29,725/- on revenue expenditure. These figures are readily verifiable from the copy of audited financial statements enclosed herewith. These figures are also reported in Form 9A submitted with the department, a copy of which is enclosed herewith. The assessee had received grant of Rs. 45,00,000/- during the year, out of which Rs. 25,00,000/- was for meeting revenue expenditure and was shown in the Profit/loss statement and the balance of Rs. 20,00,000/- was a onetime grant received for the purpose of the setting up of the institute and the same was accordingly utilized in acquisition of fixed asset required for smooth functioning of the institute. As per the scheme of the ITR form 7, purchase of asset is required to be reported in the ITR net of the subsidy/financed amount, accordingly investment in fixed assets and its adjustment through grant received were not readily visible in the ITR form filed. Thus, actual grant received by the assessee was Rs. 45,00,000/- and the actual amount utilized by the assessee for the purpose of its object were Rs. 29,29,725/-. In addition, Rs. 8,95,275/- is deemed to have been applied on the objects of the society as the assessee had furnished form 9A in the specified manner and within the specified time Thus, the assessee has applied total Rs. 38,25,000/- out of the total funds received of Rs. 45,00,000/- which constitutes 85% of its receipts and have consequently complied with the requirements of section11/12A of the act………… The assessee has received Rs. 45,00,000/- from the Ministry of Skill Development & Entrepreneurship, Govt of India out of which Rs. 20,00,000/- were provided as one time grant for setting up the institute and the balance to meet out the expenses of the institute. As per the terms of sanction all the amounts received were to be spent in the manner and under the heads specified by the Government of India. The assessee was duty bound to spend the entire grant on the project in the specified manner and there was no savings for the assessee out of the grants received. Any unspent portion was a liability of the assessee. Thus, the unspent balance, which in the financial statements and the ITH was erroneously reported as excess of income over expenditure was a liability towards the government of India Thus, no part of the grant received could have Jan Sikshan Sansthan constituted as excess of income over expenditure and no tax could have been levied on such unspent balance………….. Requirement of submission of Utilization certificate in itself establishes that the assessee has to utilize the entire money in the project and in the manner prescribed. Any unspent balance is required to be returned to the sponsoring agency and cannot constitute any surplus in the hands of the assessee. Thus, the above details duly establishes that the assessee does not have any scope of earning any income and the unspent balance is a liability in its hand The assessee is also enclosing herewith the utilization certificate submitted in form GFR 12-A (rule 238(1) for the period ended on 31.03.2022 with the sponsoring agency of the Government of India. On perusal of the certificate it would be observed that the unspent balance is required to be reported as "Grant Position or the yearend, which is required to be taken as opening balance in Para 3 & 4 of the utilization certificate under the head "Grant Position at the beginning of the Financial Year This format of the certificate implies that the unspent grant is to be held as a liability in the hands of the assessee and is required to be spent on the sanctioned project in the next period only. As detailed above the assessee did not have any surplus, and consequently no tax liability can be imposed upon him.”
2.1. The Ld. DR relied on the orders of the AO and the Ld. CIT(A). 3.0. We have carefully perused the documents before us and heard the Ld. AR/DR. It is understood that the process u/s 143(1) of the Act is a totally machine-driven process as of now. Accordingly, it is not expected that a computer would apply its mind beyond a point. However, it is certainly expected that any First Appellate Authority will take a holistic view of the issue at hand and ensure that the assessee is not penalised for some inadvertent oversight. In this case, we find that this is exactly what has happened and therefore, we deem it fit to remand this matter back to the file of Ld. CIT(A) for appraising the correct figures and allowing relief to the assessee as would be due to him within the law.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the court on 09.01.2025
Sd/- Sd/- [Sonjoy Sarma] [Sanjay Awasthi] Judicial Member Accountant Member 4 Dated: 09.01.2025 AK, PS Copy of the order forwarded to: 1. Jan Sikshan Sansthan, Begusarai 2. Income Tax Officer (Exemption), Ward, Bhagalpur 3. CIT(A)- 4. CIT- 5. CIT(DR)