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Facts
The assessee filed its return under section 139(4A) beyond the due date. The Assessing Officer (AO) made adjustments under section 143(1) for expenses claimed and accumulated amounts without providing an opportunity for hearing, violating the second proviso of section 143(1) of the Act. Subsequently, the assessment was framed under section 143(3) and the expenses were accepted.
Held
The Tribunal held that the AO violated the second proviso of section 143(1) of the Act by making adjustments without giving the assessee a reasonable opportunity to be heard. The subsequent order under section 143(3) accepted the assessee's claims, indicating a divergence in views that was not permissible.
Key Issues
Whether adjustments made under section 143(1) without affording a reasonable opportunity to the assessee are valid, especially when a subsequent assessment under section 143(3) accepts the same claims.
Sections Cited
11(1), 143(1), 143(1)(a), 143(3), 139(1), 139(4A), 119(2)(b), 234B, 234C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: SHRI PRASHANT MAHARISHI & SHRI ANIKESH BANERJEE
Instant appeal of the assessee is preferred against the order of theLearned Commissioner of Income-tax Addl / JCIT(A)-1, Coimbatore [for brevity, ‘Ld.CIT(A)’] passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’), for Assessment Year 2020-21, passed on dated06.11.2023.The impugned orderwasemanated from the order of theCPC, Bengaluru (in short, ‘the A.O.’), passed undersection 143(1) of the Act, date of order11/10/2021.
“1. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) erred in confirming rejection / disallowance of claim of revenue expenditure incurred during the year amounting to Rs. 18412704/- u/s 11 (1) of the Act. Provisions of the Act ought to have been properly construed and regard being had to facts of the case claim of revenue expenditure of Rs.18412704/- u/s 11(1) of the Act should not have been rejected / disallowed.
On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) erred in confirming disallowance of Rs.3754222/- being amount accumulated and set apart for application to object of the appellant trust. Provisions of the Act ought to have been properly construed and regard being had to facts of the case claim of Rs.3754222/- u/s 11(1) of the Act should not have been disallowed.
3. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) erred in confirming action of the Assessing Officer making adjustment in intimation under section 143(1) of the Act without providing opportunity to the appellant as provided under section 143(1)(a) of the Act which makes adjustments illegal and contrary to the provisions of the Act.
4. The learned Commissioner of Income Tax (Appeals) erred in confirming order made under section 143(1) of the Act which is illegal, bad-in-law, ultra virus and without allowing reasonable opportunity of the hearing, and without appreciating facts and evidences in their proper perspective is liable to be annulled.
5. The learned Assessing Officer erred in 234B and 234C of the Act.
6. The appellant crave leave to add, amend, alter and / or vary any of the grounds of appeal before or at the time of hearing”
3 /Mum/2024 Ana Charitable Trust 2. The brief facts of the case are that the assessee has filed the return under section 139(4A) beyond the due date of filing the return as per Proviso to section 139(1) of the Act. Accordingly, the expenses claimed under section 11(1() as a charitable trust which was duly rejected during the processing of return U/s 143(1) of the Act amount to Rs.1,84,12,704/- and also the disallowance made amount of Rs.37,54,222/- being accumulated and set apart for application to object of the assessee trust. Without giving the reasonable opportunity and without issuance of any intimation, the entire adjustment was done under section 143(1) of the Act. Later on, the assessment was framed under section 143(3) by an order dated 20/09/2022 where the entire expenses U/s 11(1) and the adjustment of accumulated and set apart profit for application to the object of the trust was duly accepted and the order is passed with any demand of tax. The aggrieved assessee filed an appeal before the ld. CIT(A) by challenging the order under section 143(1) of the Act. The Ld.CIT(A) accepted the submission of the assessee and rejected the claim of the assessee on the ground that the return was filed under section 139(4A) of the Act beyond the due date as per the provisions of section 139(1) of the Act. Accordingly, the Ld.CIT(A), the appellate authority has no power to condone the delay for delay filing of the return. Accordingly, the addition was upheldU/s 143(1) of the Act. Being aggrieved on the appeal order, the assessee filed an appeal before us.
3. The Ld.AR argued and filed a written submission which is kept in record. The Ld.AR first argued that the deduction of expenses under section 11(1) and other adjustment was made under section 143(1) without giving the reasonable opportunity to assessee, which violates the 2ndProviso of section 143(1) of the Act. The Ld.AR further invited our attention in the order passed under section 4 /Mum/2024 Ana Charitable Trust 143(3) of the Act dated 20/09/2022 in same impugned assessment year where the entire deduction of expenses and claim of the assessee is accepted.
4. The Ld.DR vehemently argued and invited our attention in appeal order page 10, para 5.9 which is reproduced as below: - “5.9 CBDT has issued circular No.06/2020 dated 19.02.2020 to overcome this difficulty and to Condone of delay under section 119(2)(b) of the Income-tax Act, 1961 in filing ofReturn of Income for A.Y 2016-17,2017-18, and 2018- 19 and Form No.9A and FormNo.
The CBDT has authorised the Commissioners of Income-tax (Exemptions) to condone the delay and is as under "Accordingly, in continuation of earlier Circulars issued in this regard, with the view to prevent hardship to the assesseeand inexerciseof powers conferred under section 119(2)(b) of the Act, the CBDT has decided that where the application for condonation of delay in filing Form 9A and Form 10 has been filed,and the Return of Income has been filed on or before 31st March of the respective assessment years i.e. Assessment Years 2016-17, 2017-18 and 2018-19, the Commissioners of Income-tax (Exemptions) are authorised u/s 1 19(2)(b) of the Act, to admit such belated applications for condonation of delay in filing Return of Income and decide on merit."
5.10 In the appeal before it the The ITAT Delhi has directed the appellant to file condonation petition before the Commissioners of Income-tax (Exemptions) and has dismissed the appeal.
5.11 CBDT has issued circular No.17/2022 dated 17-07-2022 which is as under "Sub: Condonation of delay under Section 119(2)(b) of the Income-tax Act, 1961 in filing of Form No. 9A and Form No. 10 for Assessment Year 2018-19 and subsequent yearsReg.
5 /Mum/2024 Ana Charitable Trust In exercise of the powers conferred under section 119(2) of the Income-tax Act, 1961 (hereinafter referred to as 'Act'), the Central Board of Direct Taxes (CBDT) by Circular No.3/2020[F.No.197/55/2018-ITA-l] dated 03.01.2020 authorized the Commissioners of Income-tax to admit applications of condonation of delay in filing Form No. 9A and Form No. 10 for A Y 2018- 19 or for any subsequent Assessment Years where there is delay of up to 365 days and decide on merits 2. Further to the powers delegated to Commissioners of Income-tax as discussed above, the CBDT hereby directs that where there is delay of beyond 365 days upto three years in filing Form No. 9A and Form No. 10 for Assessment Year 20 18-19 or for any subsequent Assessment Years, the Pr. Chief Commissioners of Income-tax 1 Chief Commissioners of Income-tax are authorized to admit such applications of condonation of delay under section 119(2) of the Act and decide on merit.
The Pr. Chief Commissioner/Chief Commissioner of Income-tax, as the case may be, while entertaining such applications for condonation of delay in filing form No. 9A and Form No. 10, shall satisfy themselves that the applicant was prevented by reasonable cause from filing such Form within the stipulated time. In respect of Form No. 10, the Pr. Chief Commissioner/Chief Commissioner of Income-tax, as the case may be, shall also satisfy themselves that the amount accumulated or set apart has been invested or deposited in anyone or more of the forms or modes specified in sub-section (5) of section 11 of the Act.
Further, the Pr. Chief Commissioner/Chief Commissioner of Income-tax, as the case may be, shall preferably dispose the application within three months of receipt of the application" 5.12 In this case the return is filed after the due date u/s 139(1).The appellate authority has no discretionary power to relax provisions of the Statute
6 /Mum/2024 Ana Charitable Trust andalternate remedy is available to the appellant as per statute. In the 143(3) assessment completed on 20-09-2022 the disallowance u/s 143(1) is retained as the assessing officer also has no power to condone the delay in filing of the return and audit report. The appellant can file a condonation petition before the appropriate authority to condone the delay in filing of return and audit report.”
We heard the rival submissions and considered the documents available on record. First, the observation of the Ld.Assessing Officer in the order under section 143(3) dated 20/09/2022 is reproduced as below: - “3. The school is running for standard I to X and the teachers are assigned the classes as per time table. There are no specific teachers for specific classes or specific subjects. The were employees on full time basis and on monthly salary basis. There was no administrative staff other than one security staff name Ramesh Mourya. The trustees were responsible to act as principal of the school and for HR and public relation activities. The documentary evidence of their day to day involvement was clear in annexure D1 of the Activity report for 19-20 submitted in our reply dated 14.1.2022."
In addition to above reply furnished by the assessee, the assessee also demanded video conference for further submission, which was duly provided to the assessee on 09/09/2022.
The reply of the assessee was duly considered and verified from the Form 10B for the F.Y. 2016-17 relevant to the A.Y. 2017-18 and found satisfactory. Accordingly, the assessment is completed u/s 143(3) r.w.s. 144B of the Income Tax Act, 1961 and income of the assessee is assessed at Rs. 28,61,220/-. Here, it is pertinent to mention that this is a limited scrutiny case. Hence, the demand u/s 143(1)(a) of the Income Tax Act, 1961 will exist till the disposal of appeal.
Hence, the assessment order is passed u/s 143(3) r.w.s. 144B of the I at Rs. 28,61,220/-. Charge interest as per income tax act and , computation sheet and demand notice accordingly.”
As per this order, the entire issue is duly accepted in the proceedings under section 143(3) of the Act. Same return of income is accepted in assessment proceeding U//s 143(3) of the Act and is rejected U/s 143(1) of the Act. The impugned appeal order is itself unjustified.The grievances of the assessee is that thereturn under section 143(1) was duly processed and addition was made without giving an opportunity to the assessee which clearly violated the 2ndProviso of section 143(1) of the Act. Here, a quick look on section 143(1) of the Act and 2nd Provision as below: - “143. 18[(1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such return shall be processed in the following manner, namely:-
(a) the total income or loss shall be computed after making the following adjustments, namely: -
(i) any arithmetical error in the return; 23[***]
(ii) an incorrect claim, if such incorrect claim is apparent from any information in the return;
[(iii) disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under sub-section (1) of section 139;
8 /Mum/2024 Ana Charitable Trust (iv) [disallowance of expenditure or increase in income indicated] in the audit report but not taken into account in computing the total income in the return;
(v) disallowance of deduction claimed under [section 10AA or under any of the provisions of Chapter VI-A under the heading “C.-Deductions in respect of certain incomes”, if] the return is furnished beyond the due date specified under sub- section (1) of section 139; or (vi) addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return:
Provided that no such adjustments shall be made unless an intimation is given to the assessee of such adjustments either in writing or in electronic mode:
Provided further that the response received from the assessee, if any, shall be considered before making any adjustment, and in a case where no response is received within thirty days of the issue of such intimation, such adjustments shall be made;]
(Emphasis Supplied)
In our considered view, the fact is duly accepted by the revenue in order framed U/s 143(3) of the Act. The same authority on same ROI cannot take divergent view as per their whims. Further, the ld. AO has violated the 2nd Provision of the Sec. 143(1) of the Act without giving reasonable opportunity to assesssee the adjustment done. Accordingly, the addition amount of Rs.1,84,12,704/- andRs.37,54,222/- are deleted. The impugned appeal order is set aside and the appeal of the assessee is allowed.