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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: SHRI WASEEM AHMED & SHRI SIDDHARTHA NAUTIYAL
आदेश/O R D E R
PER BENCH:
The captioned appeal hasbeen filed at the instance of the assesseeagainst the order of the Ld.Commissioner of Income Tax-Appeals (in short the Ld. CIT(A)), National Faceless Appeal Centre (in short ‘NFAC’), Delhidated 18/03/2022arising in the matter of intimation processed under Section 143(1)of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2011-12.
The assessee has raised the following grounds of appeal: “1. That the Ld. CIT(A)-NFAC, Delhi has grievously erred in confirming the adjustment made by the Ld. A.O. u/s. 143(1) of the Act.
2. That the Ld. CIT9A)-NFAC, Delhi has grievously erred in failing to adjudicate on Ground no. 2 raised by the appellant being, assessing the appellant at gross income without allowing the claim of the expenses.
That the Ld. CIT(A)-NFAC, Delhi has grievously erred in failing to appreciate the true import of the submissions made by the appellant. 4. That the appellant craves for leave to add, amend and modify the grounds of appeal.”
3. The only issue raised by the assessee is that the Ld. CIT(A) erred in confirming the intimation issued under Section 143(1) of the Act wherein the expenditure of Rs. 14,90,482/- was disallowed.
The assessee in the present case is a Trust and filed its return of income declaring an income of Rs. NIL after claiming exemption under Section 11(1)(a) of the Act. However, the CPC while processing the return under Section 143(1) of the Act did not allow the benefit of deduction of the expenditure claimed by the assessee. As such, the amount of gross income was assessed to tax in the intimation issued under Section 143(1) of the Act dated 05.03.2013.
Aggrieved assessee preferred an appeal before the Ld. CIT(A) who confirmed the intimation issued under Section 143(1) of the Act by observing as under: “5.1 In the grounds of appeal the appellant contested that the A.O erred in not allowing the expenditure of Rs.14,90,482/- and deduction u/s 11(1) of Rs.2,63,026/-as claimed which was applied towards the objects of the appellant trust
5.2 In the written submission the A.R of the appellant stated that the appellant was registered u/s 12A.
5.3.1 As per section 12A(b) one of the condition for applicability of sections 11 and 12 is - where the total income of the trust or institution as computed underthis Act without giving effect to the provisions of section 11 andsection 12 exceeds the maximum amount which is not chargeable to income-tax in any previous year, the accounts of the trust or institution for that year have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the person in receipt of the income furnishes along with the return of income for the relevant assessment year the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed.
5.3.2 As per section 139(4A) – Every person in receipt of income derived from property held under trust or other legal obligation wholly for charitable or religious purposes or in part only for such purposes, or of income being voluntary contributions referred to in sub-clause (iia) of clause (24) of section 2, shall, if the total income in respect of which he is assessable as a representative assessee (the total income for this purpose being computed under this Act without giving effect to the provisions of sections 11 and 12) exceeds the maximum amount which is not chargeable to income-tax, furnish a return of such income of the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and all the provisions of this Act shall, so far as may be, apply as if it were a return required to be furnished under sub-section (1) 5.4 Hence the exemption u/s 11 and 12 cannot be allowed if the trust does not file the return of income along with the audit report within the due date u/s 139(1). In the present case the appellant trust did not file the return of income within the due date u/s 139(1) [Due date of return was 31/7/2011 and the return filing date was 2/3/2012] and appellant did furnish any details regarding the filing audit report. Hence disallowing the exemption claimed u/s 11 is upheld.”
Being aggrieved by the order of the Ld. CIT(A) the assessee is in appeal before us. The Ld. AR before us filed a Paper Book and contended that the adjustment made under the provisions of Section 143(1) of the Act by disallowing the expenses does not fall under the purview of the provisions of Section 143(1) of the Act. The Ld. A.R. also contended that the intimation under Section 143(1) of the Act was served upon the assessee beyond the stipulated time and therefore, same cannot be considered as valid intimation. It was also contended that there is no provision for charging the income on gross basis without allowing the expenses in its entirety. Such disallowance can only be made in the assessment proceedings under Section 143(3) of the Act.
On the other hand, the Ld. DR vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. The first controversy arises before us for our adjudication whether the information was sent to the assessee under the provisions of Section 143(1) of the Act beyond the time stipulated therein i.e. after the expiry of one from the end of the financial in which the return is filed. Admittedly, the return was filed 02.03.2012 and therefore the intimation should have been sent on or before 31.03.2013. But it was contended by the Ld. A.R. that the intimation was served after 31.03.2013 i.e. 11.11.2017. Accordingly, it was pleaded that no adjustment is warranted in the intimation generated under Section 143(1) of the Act. We have perused the copy of the intimation placed on Page 11 of the Paper Book which is dated 05.03.2013. It is the contention of the Ld. AR that intimation was not received by the assessee within the stipulated time and therefore, the onus lies upon the assessee to justify its stand based on the documentary evidence. As such the Ld. AR before us has not brought anything on record in the form of some tangible materials suggesting that intimation was received by the assessee after the stipulated time. In the absence of sufficient documentary evidences, we are not convinced with the arguments of the Ld. AR for the assessee.
The second controversy arises whether such correction made in the intimation issued under Section 143(1) of the Act comes under the purview of theadjustment as envisaged under the provisions of the Act. In this regard, we note that under the provisions of Section 143(1) of the Act, the total income or loss shall be computed after making the following adjustments:-
Any arithmetic error in the return 2. Any incorrect claim apparent from any information in the return shall mean a claim on the basis of an entry, in the return of an item:- o which is inconsistent with another entry of the same or some other item in the income tax return. o in respect of which, information required to be furnished to substantiate such entry, has not been furnished under this Act. o in respect of which a deduction, where such deduction exceeds specified statutory limit which may have been expressed as monetary amount or percentage or ratio or fraction.
In the present case, the assessee to claim the benefit of exemption under Section 11/12 of the Act was to file the return of income along with the Audit Report in pursuance to the Clause (b) of sub-Section (1) to Section 12A of the Act within the time permitted under the provisions of Section 139(1) r.w.s. 139(4A) of the Act. Admittedly, the due date for filing the return of income was 31.07.2011 whereas the assessee has furnished the return on 02.03.2012. Thus, the assessee was not eligible for the exemption under Section 11/12 of the Act but the assessee has made inaccurate claim in the return of income by doing so. Thus, we are of the view that the adjustments can be made under the provisions of Section 143(1) of the Act with respect to the exemption claim by the assessee under Section 11/12 of the Act. Before parting, it is equally significant to note that there is no denial for disallowing claim of the assessee with respect to the expenditures incurred by it against the income. In other words the gross total income cannot be brought to tax. The expenses which have been incurred in connection with the income should be allowed as deduction. The Hon’ble Delhi High Court in the case Deputy Director of Income-tax (E) Inv., Circle –II V. Petroleum Sports Promotion Board reported in 362 ITR 235 has held as under: “It is open to the income-tax authorities to deny the exemption under Section 11 of the Act in the absence of registration under Section 12A and if they do so, then the assessment has to be completed in accordance with the provisions of the Income Tax Act; if the income is assessed under the residual head full play must be allowed to Section 57(iii). Though prima facie it would appear that the phraseology employed in Section 57(iii) is different from Section 37(1), it has been held by the Supreme Court in CIT v. Rajendra Prasad Moody, [1978] 115 ITR 519 that Section 57(iii) must be construed broadly and the somewhat wider language of Section 37(i) should not affect the interpretation of Section 57(iii).”
However, from the preceding discussion, we note that the AO has made the disallowance of all the deduction/exemption/expenditures claimed by the assessee in the intimation issued under Section 143(1) of the Act. As regards disallowance of expenditure, it is a debatable issue, therefore the same cannot be made in the intimation under Section 143 (1) of the Act. The Bombay High Court in the case of Bajaj auto finance Ltd. vs.CIT, reported in ITR No. 25 of 2000 has also held as under: “Once, reliance is placed upon a decision of a Court and / or Tribunal to make a claim, then even if the Assessing Officer has a different view and does not accept the view, yet the claim itself becomes debatable. This is so laid down in Instruction No.1814 dated 4 th April, 1989 issued by the CBDT in respect of the scope of prima facie disallowance under Section 143(1)(a) of the Act. In fact, paragraph no.9 thereof provides that where a claim for deduction has been made
on the basis of a decision of a High Court / Tribunal, then, even if there is contrary view expressed by another High Court and / or Tribunal or an appellate Authority, the issue itself becomes debatable. In such cases, no adjustment under Section 143(1)(a) of the Act is permissible.”
The Hon’ble Gujarat High Court in the case of CIT vs. Rughuvir Synthetics Ltd in Tax Appeal No. 333 of 2004 has also held as under: “12. In view of the above submissions, in our considered view the order passed by the CIT (Appeals), the Income Tax Appellate Tribunal and also the order of the Gujarat High Court impugned herein cannot sustain and are set aside as they have wrongly held that the issue was debatable and could not be considered in the proceedings under section 143 (1) of the Act.”
From the above judgments, there remains no ambiguity to the fact that the issues which are of debatable nature cannot be made subject to adjustment in the intimation specified under Section 143(1) of the Act. From the reading of the above facts in aggregate, it appears that adjustments have been made by the AO under the provisions of Section 143(1) of the Act without appreciating the relevant provisions of law and due application of mind. Accordingly, we hold that all the adjustments i.e. disallowance of exemption under Section 11/12 and expenditures against the revenue, have been made by the AO in the intimation issued under Section 143(1) of the Act are not sustainable. Accordingly, we set aside the finding of the Ld. CIT-A and direct the AO to allow the claim of the assessee on the reasoning as discussed above.
In the result the appeal filed by the assessee is allowed.
Order pronounced in the Court on 14/09/2022 at Ahmedabad.