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Facts
The assessee, a charitable institution, filed its return of income declaring Nil income after claiming exemption under section 11 of the Income-tax Act, 1961. The CPC processed the return under section 143(1) and made an adjustment of Rs. 1,48,54,837. Subsequently, a scrutiny assessment under section 143(3) was completed, where the AO held the assessee eligible for exemption but computed total income based on the 143(1) adjustment.
Held
The Tribunal held that the CPC's adjustment was erroneous as it did not consider the assessee's eligibility for exemption under section 11(2) in light of the extended due date for filing Form No. 10. The Assessing Officer, despite conducting a scrutiny assessment, failed to examine this aspect. The CIT(A) also did not adjudicate the issue.
Key Issues
Whether the CPC's adjustment of Rs. 1,48,54,837 was justified, considering the assessee's claim for exemption under section 11(2) and the extended due date for filing Form No. 10.
Sections Cited
11(2), 143(1), 143(3)
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Income Tax Appellate Tribunal, MUMBAI BENCH “F” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI SUNIL KUMAR SINGH
This appeal by the assessee is preferred against order dated 28.02.2024 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2021-22, raising following grounds :
Shri Vithalrao Joshi Charities Trust Shri Vithalrao Joshi Charities Trust
The learned Commissioner of Income Tax The learned Commissioner of Income Tax - Appeals erred in Appeals erred in not allowing the claim not allowing the claim under section 11(2) to the extent of Rs. under section 11(2) to the extent of Rs. 1,48,54,837/ 1,48,54,837/-.
The learned Commissioner of Income Tax 2. The learned Commissioner of Income Tax - Appeals erred in Appeals erred in not appreciating that the completion of assessment was to be not appreciating that the completion of assessment was to be not appreciating that the completion of assessment was to be made under section 143(3) on the basis of the return of income made under section 143(3) on the basis of the return of income made under section 143(3) on the basis of the return of income and not on the and not on the basis of the intimation under section 143(1). basis of the intimation under section 143(1). 3. The learned Commissioner of Income Tax The learned Commissioner of Income Tax - Appeals erred in Appeals erred in not considering the submissions made before him and dismissing not considering the submissions made before him and dismissing not considering the submissions made before him and dismissing the appeal merely stating that there was no independent the appeal merely stating that there was no independent the appeal merely stating that there was no independent discussion on the issue in the discussion on the issue in the assessment order and hence the assessment order and hence the same could not be adjudicated in the same could not be adjudicated in the present appeal. 4. The learned Commissioner of Income Tax The learned Commissioner of Income Tax - Appeals erred in Appeals erred in not providing relief stating that an appeal was not preferred not providing relief stating that an appeal was not preferred not providing relief stating that an appeal was not preferred against the intimation order, without appreciati against the intimation order, without appreciating that the ng that the appellant had complied with the mandate of section 11(2) in appellant had complied with the mandate of section 11(2) in appellant had complied with the mandate of section 11(2) in entirety and the intimation itself was grossly erroneous. entirety and the intimation itself was grossly erroneous. entirety and the intimation itself was grossly erroneous. 5. The learned Commissioner of Income Tax The learned Commissioner of Income Tax - Appeals erred in Appeals erred in not adjudicating on the third ground of appeal
raised before him, not adjudicating on the third ground of appeal raised before him, not adjudicating on the third ground of appeal raised before him, namely the erroneous computation of the demand of Rs. namely the erroneous computation of the demand of Rs. namely the erroneous computation of the demand of Rs. 52,26,75,098/ 52,26,75,098/- made by the learned AO wherein the figures made by the learned AO wherein the figures appearing in the computation sheet do not match with the appearing in the computation sheet do not match with the appearing in the computation sheet do not match with the assessment order. assessment order.
2. Briefly stated, facts of the case are that the assessee a facts of the case are that the assessee a charitable institution filed its return of income on 29.01.2022 ble institution filed its return of income on 29.01.2022 ble institution filed its return of income on 29.01.2022 declaring total income at Rs. Nil declaring total income at Rs. Nil, after claiming exemption u/s 11 of after claiming exemption u/s 11 of the Income-tax Act, 1961 (in short ‘the Act’). The return of income tax Act, 1961 (in short ‘the Act’). The return of income tax Act, 1961 (in short ‘the Act’). The return of income filed by the assessee was processed u/s 143(1) of the Act vide filed by the assessee was processed u/s 143(1) of the Act vid filed by the assessee was processed u/s 143(1) of the Act vid intimation order dated 19.10.2022 wherein, the Central Processing intimation order dated 19.10.2022 wherein, the Central Processing intimation order dated 19.10.2022 wherein, the Central Processing Centre (CPC), Bangalore made adjustment of Rs.1,48,54,837/-. Centre (CPC), Bangalore made adjustment of Rs.1,48,54,837/ Centre (CPC), Bangalore made adjustment of Rs.1,48,54,837/ Subsequently, the case was selected for scrutiny and statutory Subsequently, the case was selected for scrutiny and statutory Subsequently, the case was selected for scrutiny and statutory notices under the Act were issued and complied with. In the notices under the Act were issued and complied with. In the notices under the Act were issued and complied with. In the Shri Vithalrao Joshi Charities Trust Shri Vithalrao Joshi Charities Trust scrutiny assessment completed u/s 143(3) of the Act the Assessing tiny assessment completed u/s 143(3) of the Act the Assessing tiny assessment completed u/s 143(3) of the Act the Assessing Officer held that assessee is eligible for exemption u/s 11 of the Act held that assessee is eligible for exemption u/s 11 of the Act held that assessee is eligible for exemption u/s 11 of the Act and did not make any addition but while computing the total did not make any addition but while computing the total did not make any addition but while computing the total income, he started computation from the income computed u/s he started computation from the income computed u/s he started computation from the income computed u/s 143(1) of the Act i.e. Rs.1,48,54,837/ (1) of the Act i.e. Rs.1,48,54,837/- and accordingly determined and accordingly determined total income of the assessee at Rs.1,48,54,837/ total income of the assessee at Rs.1,48,54,837/-.
3. Aggrieved, the assessee filed appeal before the Ld. CIT(A) but Aggrieved, the assessee filed appeal before the Ld. CIT(A) but Aggrieved, the assessee filed appeal before the Ld. CIT(A) but according to the Ld. CIT(A) the Assessing Officer has not made any according to the Ld. CIT(A) the Assessing Officer has not made any according to the Ld. CIT(A) the Assessing Officer has not made any discussion in the assessment order on the issue of addition of the on in the assessment order on the issue of addition of the on in the assessment order on the issue of addition of the amount of Rs.1,48,54,837/ amount of Rs.1,48,54,837/- and therefore, according to him, the and therefore, according to him, the issue was not matter of appeal before him issue was not matter of appeal before him ,hence same could not be same could not be adjudicated by him. The Ld. CIT(A) further referred to the decisio . The Ld. CIT(A) further referred to the decisio . The Ld. CIT(A) further referred to the decision of the Co-ordinate Bench of the Tribunal in the case of Areca Trust ordinate Bench of the Tribunal in the case of Areca Trust ordinate Bench of the Tribunal in the case of Areca Trust v. CIT (Appeals) in dated 26.07.2023 and v. CIT (Appeals) in ITA No. 433/Bang/2023 dated 26.07.2023 and v. CIT (Appeals) in ITA No. 433/Bang/2023 dated 26.07.2023 and held that order u/s 143(3) of the Act and intimation order u/s held that order u/s 143(3) of the Act and intimation order u/s held that order u/s 143(3) of the Act and intimation order u/s 143(1) of the Act are t 143(1) of the Act are two distinct orders and can give rise and can give rise to separate causes of action. The Ld. CIT(A) advised of action. The Ld. CIT(A) advised the assessee to prefer appeal against the intimation u/s 143(1) of the Act for the prefer appeal against the intimation u/s 143(1) of the Act for the prefer appeal against the intimation u/s 143(1) of the Act for the disallowance made of Rs.1,48,54,837/ disallowance made of Rs.1,48,54,837/-.
4. Aggrieved, the assessee is in appeal before the Tribunal by way Aggrieved, the assessee is in appeal before the Tribunal by way Aggrieved, the assessee is in appeal before the Tribunal by way of raising grounds as reproduced above. ounds as reproduced above.
Shri Vithalrao Joshi Charities Trust Shri Vithalrao Joshi Charities Trust
We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the relevant material on record. The assessee in the case is registered a relevant material on record. The assessee in the case is registered a relevant material on record. The assessee in the case is registered a Charitable Trust under the provisions of the Charitable Trust under the provisions of the Income Income-tax and said registration is continued. registration is continued. There is no issue in dispute on this aspect There is no issue in dispute on this aspect and the Assessing Officer has also held that assessee is eligible for and the Assessing Officer has also held that assessee is eligible for and the Assessing Officer has also held that assessee is eligible for exemption u/s 11 of the Act in respect of application of the income. exemption u/s 11 of the Act in respect of application of the income. exemption u/s 11 of the Act in respect of application of the income. For the year under consideration, the assessee shown gross income For the year under consideration, the assessee shown gross income For the year under consideration, the assessee shown gross income amounting to Rs.95,06,66,434/ ng to Rs.95,06,66,434/-. As per the provisions of section . As per the provisions of section 11 of the Act, the assessee was required to apply 85 ssessee was required to apply 85 ssessee was required to apply 85% of the above income towards the object of the trust. The assessee computed the income towards the object of the trust. The assessee computed the income towards the object of the trust. The assessee computed the said amount of the 85% of the income said amount of the 85% of the income eligible amount u/s 11 of th eligible amount u/s 11 of the Act to Rs.80,80,66,469/ Act to Rs.80,80,66,469/-. Against the said amount, amount, the assessee incurred total expenditure of R incurred total expenditure of Rs.79,32,11,632/- which resulted which resulted in surplus amount of Rs.1,48,54,837/ surplus amount of Rs.1,48,54,837/-. Under the provisions of . Under the provisions of section 11(2) of the Act section 11(2) of the Act, where the assessee has not applied 85 the assessee has not applied 85% of the income to charitable purpose in India, b to charitable purpose in India, but said income is ut said income is accumulated or set apart for application to charitable purpose then apart for application to charitable purpose then apart for application to charitable purpose then income so accumulated income so accumulated or set apart shall not be included or set apart shall not be included in the total income of the previous year, s al income of the previous year, subject to furnishing o furnishing of statement in prescribed form i.e. Form No. 10 to the Assessing Officer stating in prescribed form i.e. Form No. 10 to the Assessing Officer stating in prescribed form i.e. Form No. 10 to the Assessing Officer stating that said income shall shall not accumulated for more than five years not accumulated for more than five years and the money so accumulated was required to be deposited in the and the money so accumulated was required to be deposited in the and the money so accumulated was required to be deposited in the specifies modes.
Shri Vithalrao Joshi Charities Trust Shri Vithalrao Joshi Charities Trust 5.1 Before us, the Ld. couns Before us, the Ld. counsel for the assessee submitted that in el for the assessee submitted that in the case of the assessee due date of the filing of the return was the case of the assessee due date of the filing of the return was the case of the assessee due date of the filing of the return was extended up to 15.03.2022 and therefore, the assessee had filed extended up to 15.03.2022 and therefore, the assessee had filed extended up to 15.03.2022 and therefore, the assessee had filed return of income on 29. return of income on 29.01.2022 along with Form No. 10 and 1.2022 along with Form No. 10 and therefore, assessee is eligibl therefore, assessee is eligible for exemption u/s 11(2) of the Act e for exemption u/s 11(2) of the Act provided the income so accumulated income so accumulated is invested in specified mode is invested in specified mode under the provisions of section 11(2) of the Act. T ons of section 11(2) of the Act. The Ld. counsel ons of section 11(2) of the Act. T submitted that CPC wrongly CPC wrongly noted the due date of the filing of the noted the due date of the filing of the return to be on 31.1 31.12.2021 and since, the Form No. 10 as well as 2.2021 and since, the Form No. 10 as well as the ITR were filed on 29.01.2022, the ITR were filed on 29.01.2022, the CPC presumed CPC presumed that the assessee had not filed not filed both the return and form within the due date within the due date allowed, hence treated treated expenditure of Rs.1,48,54,837/ expenditure of Rs.1,48,54,837/- as claimed wrongly u/s 11(2) of the Act. The Ld. counsel for the assessee of the Act. The Ld. counsel for the assessee of the Act. The Ld. counsel for the assessee further submitted that the Assessing Officer while completing full further submitted that the Assessing Officer while completing full further submitted that the Assessing Officer while completing full scrutiny though examined the other aspect of scrutiny though examined the other aspect of eligibility u/s 11 of eligibility u/s 11 of the Act, however, did not examine owever, did not examine the aspect of adjustment made the aspect of adjustment made by the CPC of Rs.1,48,53,837/ f Rs.1,48,53,837/-. He further submitted that the Ld. . He further submitted that the Ld. CIT(A) has also not adjudicated the issue. CIT(A) has also not adjudicated the issue.
5.2 In view of the above facts and circumstances of the case, we In view of the above facts and circumstances of the case, we In view of the above facts and circumstances of the case, we are of the opinion that, firstly, the Ld. CPC has not considered the are of the opinion that the Ld. CPC has not considered the submission of the assessee regarding claim of its eligibility u/s submission of the assessee regarding claim of its eligibility u/s submission of the assessee regarding claim of its eligibility u/s 11(2) of the Act in view of extended date of filing of Form No. 10 11(2) of the Act in view of extended date of filing of Form No. 10 11(2) of the Act in view of extended date of filing of Form No. 10 along with return of income which resulted under the adjustment of along with return of income which resulted under the adjustment of along with return of income which resulted under the adjustment of Shri Vithalrao Joshi Charities Trust Shri Vithalrao Joshi Charities Trust Rs.1,48,54,837/-. Se Secondly, the case was selected case was selected for complete scrutiny u/s 143(3) of the Act scrutiny u/s 143(3) of the Act, thus it was imperative on the it was imperative on the Assessing Officer to examine the submission of the assessee against Assessing Officer to examine the submission of the assessee against Assessing Officer to examine the submission of the assessee against the adjustment made by the CPC but t the adjustment made by the CPC but the Assessing Officer he Assessing Officer conveniently ignored cause conveniently ignored cause of such adjustment without looking into of such adjustment without looking into the eligibility of u/s 11(2) of the Act. Although, the assessee was the eligibility of u/s 11(2) of the Act. Although, the assessee was the eligibility of u/s 11(2) of the Act. Although, the assessee was having recourse or options to prefer rectification application against having recourse or options to prefer rectification application against having recourse or options to prefer rectification application against intimation order or intimation order or file appeal against said order appeal against said order, but did not exercised its options s options. Since, the Assessing Officer did not discuss . Since, the Assessing Officer did not discuss this issue in the impugned assessment orde this issue in the impugned assessment order passed u/s 143(3) of r passed u/s 143(3) of the Act, the Ld. CIT(A) he Ld. CIT(A) is justified in not adjudicating the issue in justified in not adjudicating the issue in dispute raised by the assessee. Before us, the Ld. counsel for the dispute raised by the assessee. Before us, the Ld. counsel for th dispute raised by the assessee. Before us, the Ld. counsel for th assessee has submitted that now the assessee has preferred appeal assessee has submitted that now the assessee has preferred appeal assessee has submitted that now the assessee has preferred appeal on 19.10.2022 before the Ld. CIT(A) against the intimation order before the Ld. CIT(A) against the intimation order before the Ld. CIT(A) against the intimation order passed and said appeal is pending passed and said appeal is pending before the Ld. CIT(A) for before the Ld. CIT(A) for admission and adjudication. admission and adjudication.
5.3 In the facts and circumstances In the facts and circumstances, we feel it appropriate to , we feel it appropriate to restore this issue in dispute back to the file of the Ld. Assessing restore this issue in dispute back to the file of the Ld. Assessing restore this issue in dispute back to the file of the Ld. Assessing Officer for considering the submission of the assessee against the Officer for considering the submission of the assessee against the Officer for considering the submission of the assessee against the eligibility of the claim u/s 11(2) of the Act which has remained to be eligibility of the claim u/s 11(2) of the Act which has remained to be eligibility of the claim u/s 11(2) of the Act which has remained to be examined u/s 143(3 examined u/s 143(3) of the Act. We however direct direct that if the assessee gets relief in appeal filed against order u/s 143(1)(a) of the in appeal filed against order u/s 143(1)(a) of the in appeal filed against order u/s 143(1)(a) of the Act, then no further action shall be required at the end of the then no further action shall be required at the end of the then no further action shall be required at the end of the Shri Vithalrao Joshi Charities Trust Shri Vithalrao Joshi Charities Trust Assessing Officer. With the above discussion, the grounds of appeal Assessing Officer. With the above discussion, the grounds of appeal Assessing Officer. With the above discussion, the grounds of appeal of the assessee are allowed for statistical purposes. see are allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for In the result, the appeal of the assessee is allowed for In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open Court on nounced in the open Court on 24/07/2024. /07/2024.