SHREE SREE BALANANDA TRUST,DEOGHAR vs. ITO, EXEMPTION WARD,, DHANBAD

Assessee represented by None Department represented by Shri Shadab Ahmed, CIT-DR Date of hearing 09/01/2025 Date of pronouncement 04/02/2025 O R D E R PER: PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER: 1. This appeal preferred by the assessee emanates from the order of National Faceless Appeal Centre, Delhi (NFAC)/learned Commissioner of Income Tax (Appeals) [in short, the ld. CIT(A)] dated 14/12/2022 for the Assessment Year (AY) 2016-17 as per the grounds of appeal on record.

2. In this case, the return of income was filed by the assessee within due date under Section 139(1) of the Income Tax Act, 1961 (in short, the Act). However, the assessee failed to furnish Form-10 and accordingly failed to satisfy one of the twin conditions specified under Section 13(9) of the Act. Even during the appellate proceedings, the assessee had not furnished any evidence for filing of Form-10 for the impugned assessment year. The claim of assessee regarding deduction under Section 11 of the Act was not considered by the Assessing Shree Sree Balananda Trust Vs ITO (E) Officer under Section 143(1) of the Act, since Form-10 was not filed by the assessee.

3. The assessee has raised a legal ground wherein it has been contended that whether through an intimation under Section 143(1) of the Act, the department can deny exemption of a Trust under Section 11 of the Act. It has been the contention of assessee that whether the assessee is eligible for the claim of exemption under Section 11 of the Act or not requires factual verification and is a debatable issue. Such adjustment cannot be made by processing return under Section 143(1)(a) of the Act. The assessee had relied on the decision of Hon'ble Punjab & Haryana High Court in the case of CIT Vs Khalsa Dewan (2008) 300 ITR 357 (P&H) wherein it has been held as under: "The material question which, in our view, requires to be decided is whether the Assessing Officer was justified in changing the status of the assessee from a trust to an AOP while processing the return under Section 143(1)(a) of the Act. The scope and ambit of powers vested with the Assessing Officer for making prima facie adjustments at the relevant time was provided under the proviso to Section 143(1)(a) of the Act and the same was confined only to such adjustments specifically enumerated in the proviso (i), (ii) and (iii) of the Act. In the case of S.R.F. Charitable Trust v. Union of India [1992] 193 ITR 95, the Hon'ble Delhi High Court held that as per the provisions of Section 143(1)(a) of the Act the Assessing Officer could allow or disallow only such claims which were admissible/inadmissible on the basis of the returns and documents accompanying the return. It was also held that the Assessing Officer had no power to disallow the claim merely on the ground that no proof was furnished by the assessee. While interpreting Clause (iii) of the first proviso to Section 143(1)(a) of the Income- tax Act, 1961, it was held as under (page 98): The said clause clearly provides that the Income-tax Officer can make an adjustment to the income or loss declared in the return if, on the basis of the information available in such return, accounts or documents, the deduction, allowance or relief claimed is prima facie inadmissible. The conclusion that the claim of the assessee is inadmissible must, in other words, flow from the return as filed. No power is given to the Income-tax Officer to disallow a claim for the reason that there is no proof in support of the claim made by the assessee. In a way, the said Clause (iii) of the proviso is analogous to Section 154 of the Act. Where it is evident from the return as filed, along with the documents in support thereof, that a claim of the assessee is inadmissible, only then an adjustment under the said proviso can be made. If proof in 2 support of the claim is not furnished by an assessee, then for the lack of proof, no disallowance or an adjustment can be made. The only option which is open to the Income-tax Officer, in such a case, is that he can require the assessee to furnish proof in which case he will presumably have to issue notice under Section 143(2). This is also evident from the fact that, except for the documents specified, the assessee is not required to file the entire books of account or other documents along with the return. The proof in support of the claim may be evidenced from correspondence, from the books of account or other documents and it is not the law, as we understand it, that, in support of a claim made in the return for deduction or non-taxability of a receipt, all the proofs available and original documents must be filed along with the return. It is apparent on a reading of the said provision that adjustment can be made only if there is information available in such return that prima facie a claim or allowance is inadmissible." The same view has been taken by the Hon'ble Delhi High Court in the case of Samtel Color Ltd. Vs. Union of India (2002) 258 ITR 1 wherein it has been held as under: "A bare reading of section 143(1)(a) of the Income-tax Act, 1961, makes it clear that if, on the basis of the return filed by the assessee, any tax or interest is found due after adjustments, as set out in the section, an intimation has to be sent to the assessee specifying the sum so payable. Similarly, if any refund is found due to the assessee on the basis of the said return, it shall be granted. However, the first proviso to the section authorises the Assessing Officer to make certain adjustments while calculating the tax or interest payable or while granting refund. The adjustments permitted to be made are also specified under the proviso. Clause (iii) of the first proviso lays down that unless the return or the accompanying documents or accounts show that the deduction, allowance or relief claimed therein is prima facie inadmissible on the basis of information available in the said documents, such deduction or allowance claimed cannot be disallowed. The phrase "prima facie" is not defined in the Act. In common parlance the phrase "prima facie" means 'on the face of it'. Going by the literal and dictionary meaning of the phrase "prima facie", for the purposes of adjustments under clause (iii) to the proviso, a deduction claimed must be inadmissible on the face of the return, documents and accounts accompanying it. If the deduction or allowance or relief so claimed is capable of a debate or requires further proof and cannot be made under clause (iii) of proviso to section 143(1)(a) of the Act. It is not open to the Assessing Officer to make any adjustment in the returned income by disallowing any claim for deduction, allowance or relief, unless he is satisfied on the basis of information available in the return, documents, and the accounts accompanying it, that such a claim is inadmissible on the face of it and there is no possibility of any debate thereon. If anything more is read into the power of the Assessing Officer to make unilateral adjustments, it would render the provision wholly arbitrary and unreasonable because : (a) a disallowance is made without giving an opportunity to the assessee to explain his view point in support of the deduction or allowance, and Shree Sree Balananda Trust Vs ITO (E) (b) additional tax on the increased amount is charged from him arbitrarily. This would not only be in total violation of the principles of natural justice, it will also be not in consonance with the spirit of the provision to cause minimum inconvenience to the assessee and at the same time put the assessee on guard against claiming inadmissible deductions and allowances. No prejudice will be caused to the Revenue. In a given case where the Assessing Officer has any doubt about the allowability of deduction or claim made by the assessee, it is open to him to issue a notice under sub-section (2) of section 143 and have the evidence in support thereof." The Hon'ble Kerala High Court in the case of CIT Vs K.V. Mankaram and Co. (2000) 245 ITR 353 has held that the Assessing Officer cannot under Section 143(1)(a) change the status of a firm to 'association of persons' which needs physical verification and it cannot be mechanically done vide intimation and processing under Section 143(1)(a) of the Act. The same view had been upheld by the coordinate Kolkata Bench in & 1188/Kol/2018 for A.Y. 2014-15 and 2015-16 order dated 12/09/2018 wherein it was held as under: "4. Be as it may, disallowance in question cannot be made as a prima facie adjustment, while processing the return u/s 143(1) of the Act. The issue whether the assessee is entitled for exemption u/s 11(2) of the Act and the issue whether the activities of the assessee confirm the provisions u/s 2(15) of the Act and the provision of Section 11(1)(e) of Act cannot be adjudicated while processing the return u/s 143(1), that too by a machine. Hence we delete the disallowance made and direct the AO to allow the claim of the assessee."