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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI PAWAN SINGH & DR. ARJUN LAL SAINI
O R D E R
PER PAWAN SINGH, JUDICIAL MEMBER:
This appeal filed by the assessee is directed against the order of National Faceless Appeal Centre (NFAC), Delhi “CIT(A)” dated 12.10.2021, for the Assessment Year (AY) 2017-18. The assessee has raised following grounds of appeal: “1. On the facts and circumstances of the case, the learned Commissioner of Income tax (Appeals) has erred in confirming addition made by the Assessing Officer passed u/s 143(1) on 27.03.2019.
2. On the facts and circumstances of the case, the learned Commissioner of Income tax (Appeals) has erred in not appreciating that the trust is eligible for exemption u/s 10(23)(vi) and further failed to appreciate that it received notification from CIT for such exemption.
3. On the facts and circumstances of the case, the learned Commissioner of Income tax (Appeals) has erred in not calling for remand report from the Assessing Officer and failed to take decision with regard to natural justice.
/AY.2017-18 Lions Umra Piplod Education Society 4. On the facts and circumstances of the case, the learned Commissioner of Income tax (Appeals) has erred in not allowing deduction of Rs.74139481 on revenue account and Rs.16862363/- towards capital account and also not allowing accumulation of Rs.14968317/-. 6. The appellant reserves right to add, alter, vary any or all grounds of appeal
.”
2. Brief facts of the case are that the assessee is an educational institution, engaged in imparting education. The assessee is having exemption certificate under section 10(23C) issued by Chief Commissioner of Income tax (CCIT) Surat. The assessee filed its return of income for assessment year (A.Y.) 2017-18 declaring ‘Nil’ income on 06.10.2017. In the computation of income, the assessee claimed deduction of Rs.7.41 crores on revenue account and Rs. 1.68 Crore toward aggregation of capital. The assessee while filing return of income, in the computation part of return, mentioned section 11 instead of section 10(23C).The return of income was processed by Central Processing Centre (in short ‘CPC’), Bangalore and intimation under section 143(1) was sent to assessee on 27.03.2019 assessing total income of Rs.9,97,89,955/- after disallowing entire deduction and thereby raised a demand of Rs.4,39,67,724/-.
3. Aggrieved by the action of the addition by Assessing Officer, CPC the assessee filed appeal before ld. CIT(A). Before the ld. CIT(A), the assessee submitted that assessee is educational institution and its /AY.2017-18 Lions Umra Piplod Education Society income is exempted under section 10(23C). From year to year the assessee is claiming exemption under section 10(23C) and the same is being allowed under section 143(1) or 143(3) without disturbing the books result for more than twenty years. The CCIT, Surat has issued certificate in favour of assessee to exempt the income of the assessee under section 10(23C). The only condition for claiming such exemption is to file certificate in Form 10BB applicable for educational institution. During the year under consideration, the AO/CPC rejected the application of income of Rs.7.41 crore towards revenue account and Rs.1.68 crore towards capital account and the reason for rejection/ disallowance is mentioning section 11 in place of section 10(23C) in computation part and for not filling certificate in Form 10BB. The AO/CPC out rightly rejected the assessee’s plea in response to proposed adjustment under section 10(23C), the assessee filed objection to be proposed adjustment but unfortunately contention of assessee was not accepted. The Assessing Officer rejected the objection of assessee for the adjustment and created huge demand. The assessee also stated that the AO/CPC not allowed accumulation of Rs.1.68 crore. On the submission of assessee that claim of exemption under section 10(23C) was properly made in the return of income, the NFAC asked the assessee to furnish the copy of return uploaded on the e-portal vide notice dated 01.09.2021.
/AY.2017-18 Lions Umra Piplod Education Society 4. In the notice, the ld. CIT(A)/NFAC stated that during the appellate proceeding you are making a claim that educational institution is exempt under section 10. On the other hand, the communication issued by CPC dated 22.08.2018 and 09.10.2018 that incorrect claim under section 143(1) was made. It is apparent that in the return of income uploaded by assessee, relevant assessment exemption is claimed under section 11 instead of section 10. Since the exemption is claimed under section 11 without furnishing relevant Audit Report in Form 10B and no clarification has been made to the aforesaid communication from CPC and exemption appears to not have been considered. The claim made at appellate proceeding is at variance with the claim made with the return of income. Therefore, in order to decide the grounds of appeal, the assessee was required to substantiate with documentary evidence that a proper claim made in the return of income from which were not considered by PC. Thus, the assessee was asked to furnishing copy of return of income and uploaded on e-portal to determine either a proper claim of exemption was made in the return of income.
In response to the aforesaid notice, the assessee filed its reply dated 20.09.2021. The assessee stated that assessee’s educational institution is running for educational institution consisting of /AY.2017-18 Lions Umra Piplod Education Society primary school, pre-primary school, C. J. Patel College account and Lions Umra Piplod Education Society and a Secondary school. Educational institution is granted exemption under section 10(23C) of the Act. Exemption is not claimed under section 11, though it is mentioned in the computation in ITR inadvertently. Certificate in Form 10BB in the return of income, assessee has mentioned eligible exemption under section 10(23C)(vi). The return of income was also filed under section 139(4C). However in the computation part of return, it was clerical mistake by mentioning section 11 instead of section 10(23C). In the Audit Certificate, it was uploaded correctly in Form 10BB. The assessee also enclosed ITR-7 as uploaded at the time of filling return of income, copy of recasted ITR wherein mistake was correctly in revised ITR-7, wherein exemption/deduction claimed under section 10(23C) instead of section 11. The assesse is explained that there is no change in return of income. There is no escape of net income. Simply because mentioning different row cannot be reason for withdrawal of exemption. The assessee also furnished a copy of exemption granted under section 10(23C)(iii)(ad).
The NFAC/CIT(A) after considering the submission of the assessee held that the assessee claimed exemption under section 10(23C)(vi) and the assessee filled up vacant portion in the return of income
/AY.2017-18 Lions Umra Piplod Education Society meant for claiming under section, and not uploaded Audit Report in Form 10B as required under section 12A(1)(b) but the claim of benefit under section 11 claimed by assessee in the return was incorrect within the meaning of section 143(1)(a)(ii). The CPC afforded an opportunity to the assessee to rectify the mistake apparent from its return, the assessee did not choose to do so and instead of decided it to the mistake pointed out. The assessee has filled up in the appropriate section in the return of income which are in incongruous with the claim of exemption under section 10(23C) and when discrepancies were pointed out by CPC, the assessee instead of correcting the mistake in the return by filling revised return, choose to assert that claim made in the return is invalid and appropriate Audit Report has been submitted. The ld. CIT(A)/ NFAC on its aforesaid observations dismissed the appeal of the assessee. Aggrieved by the order of ld. CIT(A)/ NFAC the assessee has filed present appeal before this Tribunal.
We have heard the submissions of Learned Authorized Representative (ld. AR) for the assessee and Learned Departmental Representative (ld. CIT-DR) for the Revenue and have gone through the order of lower authorities. The ld. AR for the assessee submits that at the time of filling return of income, the row of point no. B inadvertently selected instead of Point no. C. This was an error
/AY.2017-18 Lions Umra Piplod Education Society occurred unintentionally. The information in selection of section applicable to trust was rightly made as well as certificate in Form 10B was rightly uploaded. Similarly, exemption granted under section 10(23C) was rightly uploaded, it was just skip of row by selecting B instead of C. During the appellate proceeding, the assessee filed recasted ITR along with computation to correct a simple error in the return of income. The assessee furnished clarification before ld. CIT(A) from time to time and furnished submission not only one but at seven times.
The ld AR for the assessee submits that the assessee also raised additional grounds of appeal before ld. CIT(A) for not granting deduction under section 10(23C), in spite of fact that Audit Report from 10BB of correctly uploaded along with approval of ld. CIT(A) dated 26.02.2009, and bringing to his notice in ITR-7 for furnishing return under section 10(23C)(vi) and 139(4C) as applicable to educational institution. The ld. AR submits that assessee-trust is an existence in 1984. The assessee is always granted exemption after scrutiny assessment under section 143(3). The assessee was granted full exemption in assessment order passed for AY.2016-17 under section 143(3), copy of which is placed on record at page no. 62 to 72 of the assessment order. The financial statement of assessee-trust is also placed record at page
/AY.2017-18 Lions Umra Piplod Education Society no.73 to 112. In the intimation under section 143(1), the Assessing Officer disallowed whole of the revenue and capital expenditure. The ld. AR submits that assessee filed detailed written submission before the ld. CIT(A)/NFAC. The ld. CIT(A) /NFAC failed to appreciate the fact of assessee’s case and even not care to seek the remand report of Assessing Officer. The assessee urged before the ld. CIT(A)/ NFAC to invoke their power for seeking Remand Report and to consider the material placed before him and to admit additional claim or claim which was not made before the Assessing Officer, as the NFAC/CIT(A) has co-terminus power as of Assessing Officer. The ld. CIT(A)/NFAC disregarded the claim of the assessee on the ground that in the computerized environment, adequate facility has been provided to tax-payer to response to CPC communication. Thus, there will be limitation of utilizing co- terminus jurisdiction by the appellate authority. The ld AR for the assessee submits that the NFAC failed to appreciate the facts of the present case and in granting relief to the assessee despite having co-terminus power as well as inherent power of appellate authority. To support his submission, the ld. AR for the assessee relied upon the following decisions: PCIT vs. Karnataka State Co-operative Federation Ltd. (2021) Tax Pub(DT) 1509 (Kar-HC) DCIT vs Adani Power Ltd. & Vice-Versa 2018 TaxPub(DT) 3879 (Ahd – Trib)
/AY.2017-18 Lions Umra Piplod Education Society CIT vs Abhinitha Foundation (P.) Ltd. 2017 TaxPub(DT) 19452 (Mad- HC) CIT vs Premkumar Arjundas Luthra (HUF) 2016 TaxPub(DT) 3496 (Bom-HC) Jute Corporation of India Ltd. vs CIT & Anr. (SC) 187 ITR 688 (SC) Siva Equipment Pvt. Ltd. vs ACIT (2020) 423 ITR 20 (Bom.)(HC) CIT vs Kanpur Coal Syndicate 1965 AIR 325 SC: 1964 SCR (6) 85: 1964 TaxPub(DT) 0339(SC) Bata India Ltd. vs DCIT 2019 Tax Pub(DT) 6365 (Kol-Trib) Ratnamani Metals & Tubes Ltd. vs DCIT 2018 TaxPub(DT) 7623 (Ahd-Trib).
On the other hand, Ld. CIT-DR for the Revenue supported the order of Assessing Officer and ld. CIT(A).
We have considered the rival submission of the parties and have gone through the order of lower authorities. There is no dispute that assessee is educational institution. Further, the assessee has obtained a certificate from the ld. CCIT under section 10(23C)(iii)(ad) on 09.09.2008. The certificate issued by ld. CCIT has not been withdrawn and is still in existence. The educational activities carried out the assessee is also not in dispute. A very short dispute is that at the time of filling return of income, the assessee while filling of return of income mentioned applicable section 11 in place of section 10(23C) and certificate required under Form 10BB was not uploaded. Resultantly, the CPC/AO while processing the return of income of assessee disallowed the entire exemption claimed by assessee.
/AY.2017-18 Lions Umra Piplod Education Society 11. Before ld. CIT(A), the assessee stated that they are entitled for exemption under section 10(23C) as approved by ld. CCIT-Surat, vide his notification dated 26.09.2009. The assessee also uploaded Form 10BB along with approval under section 10(23C) and raised additional grounds of appeal to admit the claim of assessee. The ld. CIT(A) instead of accepting the inadvertent mistake and admitting the additional ground/claim raised before him, rejected the plea of assessee by taking that CBDT has provided through notification, the manner of verification validation, proceeding of return and rectification of the intimation emanating from CPC, without involvement of Assessing Officer. It was also recorded by NFAC that in the computerized environment, adequate facility has been provided to the taxpayer response to the CPC communication, therefore, there is limitation of utilizing co-terminus jurisdiction by the appellate authority. In our view the observation of NFAC is absolutely misplaced and illogic. The appellate authorities are having inherent jurisdiction/power to correct or rectify the mistake which were unintentionally occurred. In our view, the ld. CIT(A)/NFAC filed to exercise their jurisdiction inherently vested in it.
12. The power of appellate authority has been explained by Hon'ble Jurisdictional High Court in the case of CIT vs Mitesh Impex
/AY.2017-18 Lions Umra Piplod Education Society (2014) 270 CTR 66 (Guj.) wherein the Hon'ble High Court by referring various decisions of Hon'ble Apex Court including in the case of Goetze (India) Ltd. vs CIT 284 ITR 323 (SC), Jute Corporation of India 187 ITR 688 (SC), wherein it was held that the CIT(A) as well as Tribunal has jurisdiction to entertain and consider the additional claim and not mere additional legal submission. Such claim need not to be those which becomes available on account of change of circumstances of law but which were even available when return was filed.
The Hon'ble Karnataka High Court in PCIT vs Karnataka State Co- operative Federation Ltd. (supra) held that when the assessee asserted that there is certain typographical error in the original return of income, in fact wherein it has entered ‘Nil’ in Item No. 1, however it was eligible to claim an exemption under section 10(23C) or deduction under section 80P. The exemption was supposed to be filed in Item No.5 of the Schedule. The CPC has only considered the item in lieu of ‘Nil’ ad has not considered the exemption under section 10(23C) or deduction under section 80P for which assessee was eligible. On appeal, first appellate authority and Income Tax Appellate Tribunal (ITAT) both allowed assessee’s claim. On further appeal by Revenue before Hon'ble High Court it was held that the claim of assessee for eligibility with regard to /AY.2017-18 Lions Umra Piplod Education Society deduction under section 80P was entertained by ld. CIT(A) as the assessee did not have opportunity to raise the contention before AO/CPC. As the CPC passed the assessment order, the assesse had no opportunity to make a fresh claim by way of revised return before CPC as the process is automated. It was held by Hon'ble High Court that the assessee’s claim before appellate authority is entertainable, even the same is not claimed in the original return of income, nor assessee filed a revised return of income to make such claim. We find that the assessee’s claim is better claim then the facts in case of Karnataka State Co-operative Federation Ltd. (supra).
The Hon'ble Gujarat High Court in case of CIT vs Xavier Kalavani Mandal (P.) Ltd. reported in (2014) 41 taxmann.com 184 (2014) also held that in order to claim exemption under section 11, the assessee can filed Audit Report in Form 10B even in later stage either before the Assessing Officer or before appellate authority by showing a sufficient cause. Further, in Sarvodaya Charitable Trust vs ITO exemption reported in (2012) 125 taxmann.com 75 (Guj) held that wherein assessee is to be charitable trust, registration under section 12A of the Act was substantially satisfied condition for availing benefit of exemption as a charitable could not be /AY.2017-18 Lions Umra Piplod Education Society denied exemption, the assessee merely on a bar of limitation in filing Audit Report in Form 10B. (emphasis added by us)
Considering the aforesaid factual and legal discussion, we admit the additional ground of appeal and direct the Assessing Officer to verify the fact and consider the revised return of income, report under Form-10BB uploaded/ filed by the assessee on e-portal of department and allow appropriate relief to the assessee for exemption under section 10(23C) and pass order in accordance with law.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced on 21/03/2022, and result was also placed on notice board.