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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: Shri George George K, JM & Shri Laxmi Prasad Sahu, AM
O R D E R
Per George George K, JM :
This appeal at the instance of the assessee is directed against CIT(A)’s order dated 23.11.2021. The order of the CIT(A) arises out of the intimation passed u/s 143(1) of the I.T.Act. The relevant assessment year is 2016-2017.
The grounds raised read as follows:
“1. The Order of the NFAC is against facts and law.
2. The NFAC is not justified in upholding the order Deputy commissioner of Income tax, CPC in not allowing the excess application during the year to carry over on the basis of amendment to section 11 by introduction of explanation 5 by Finance Act 2021 which is effective only from 1.4.2022. Your appellant has filed the return of income based on the law that was in force at the time of filing of return of income. The claim of your appellant was covered by the decision of the various high courts /tribunals including the jurisdictional ITAT Cochin bench decision. These decisions were later upheld by the . Chinmaya International Foundation. supreme court in CIT vs Subros Educational Society (96 taxman.com 652) 3. The NFAC is not correct in upholding that adjustments are made u/s 143(1)(a)(ii) of the Act as correct and that the appellant had made an incorrect claim in the return of income The assessee is entitled to apply for charitable purpose in excess of its receipts during the year and such excess application is allowed to carry over and set off in future years as held by supreme court, which fact is accepted by NFAC in its order. Hence the action of the Assessing officer is beyond the powers granted u/s 143(1) of the Act. we rely on the decision of ITAT Delhi Bench in the case of Maksat Technologies Private Ltd vs DCIT (191 ITD 175).”
The brief facts of the case are as follows: The assessee is a Sanskrit research institution having registration u/s 12A of the I.T.Act. For the assessment year 2016-2017, the return of income was filed on 20.09.2016 showing a receipt of Rs.5,37,52,713 and application of income of Rs.7,67,73,856. Consequently, the excess application over income amounting to Rs.2,30,21,143 was sought to be carried forward and set off against income of later years. The return of income was processed by the Central Processing Centre (CPC) and intimation u/s 143(1) of the I.T.Act was issued on 17.05.2017. In the said intimation, the application of income was restricted for the year to the gross receipts.
Aggrieved by the intimation passed u/s 143(1) of the I.T.Act, the assessee has filed appeal before the first appellate authority. The CIT(A) dismissed the appeal of the assessee. The CIT(A) upheld the intimation u/s 143(1) of the I.T.Act on account of insertion of Explanation 5 to section 11 of the . Chinmaya International Foundation. I.T.Act by the Finance Act, 2021 by stating that the same is clarifactory in nature and would apply respectively.
Aggrieved by the order of the CIT(A), the assessee has filed the present appeal before the ITAT. The learned AR has filed a paper book comprising of 48 pages enclosing therein the argument note, statement of total income for the relevant assessment year 2016-2017, audited accounts for the year ending 31.03.2016, the case laws relied on. The brief submission of the learned AR reads as follows:-
“Your appellant filed the return of income on 20.09.2016and the law permitted excess application to be carried forward. This view is confirmed by the decision of the jurisdictional ITAT Bench and later by the Supreme Court. The explanation 5 to section 11 is relating to determine mandatory application of income i.e. 85% of gross income not after deducting carry over applications. NFAC failed to note that explanation 5 to section 11 is not applicable since the appellant had applied 85% of its gross receipts for its objects during the year without any set off or deduction or allowance of any excess application of any of the year preceding the previous year. Without prejudice to the above, NFAC is not correct in its observation that the explanation 5 to section 11 inserted by Finance Act 2021 applies retrospectively. The memorandum explaining the provisions clearly mentions that “These amendments will take effect from 01.04.2022 and will accordingly apply to the assessment year 2022-23 and subsequent years.” Also the NFAC erred in upholding the order of the Assistant Commissioner of Income Tax of not allowing the carryover of excess application of AY 2001-02to 2015-16 while completing the assessment for AY 2016-17. The said issue is covered in the appellant’s own case for the assessment year 2011-12 (copy enclosed) where CIT(A) has held that the said claim is to be considered only in the year in which set off is claimed.
. Chinmaya International Foundation. Moreover, we are also attaching herewith order of ITAT, Cochin Bench in the case of the appellant for AY 2015-16 and AY 2017-18 where on appeal against an intimation u/s 143(1) on identical issue the appeal was allowed in favour of the appellant vide its order dated 16.03.2022.”
The learned Departmental Representative supported the orders of the Income Tax Authorities.
We have heard rival submissions and perused the material on record. On identical facts, the Cochin Bench of the Tribunal in assessee’s own case for assessment years 2015- 2016 and 2017-2018, had decided the issue in favour of the assessee in & 244/Coch/2021 (order dated 16.03.2022). The relevant finding of the Tribunal reads as follows:-
“5. We have considered the rival contentions. As rightly pointed out by the learned A.R. admittedly in assessee’s case the issue has been held against the assessee while in assessee’s sister concern’s case identical issue has been held in favour. This itself clearly shows that the issue is debatable. Admittedly a debatable issue cannot be considered in an item for adjustment under Section 143(1) of the Act. In any case even on merits the issue is liable to be held in favour of the assessee in view of the decision of the Hon'ble Supreme Court in the case of CIT vs. Subros Educational Society reported (2018) 96 taxmann.com 652 (SC). In these circumstances we are of the view that order of the learned CIT(A), NFAC in the case of the assessee is unsustainable and the same stands set aside. Further the adjustment made under Section 143(1)(a) of the Act being unsustainable in so far as it is a debatable issue, the same stands set aside.
In view of the order of the Tribunal in assessee’s own case (supra), we allow the appeal of the assessee and quash the intimation passed u/s 143(1) of the I.T.Act.
. Chinmaya International Foundation. 9. In the result, the appeal filed by the assessee is allowed.
Order pronounced on this 30th day of June, 2022.