Maharaja Agrasen Trust Kantapala Vs ITO (ITAT Cuttack)
The Income Tax Appellate Tribunal (ITAT), Cuttack Bench, has set aside a summary assessment notice issued by the Centralised Processing Centre (CPC) under Section 143(1) of the Income Tax Act, 1961, against Maharaja Agrasen Trust Kantapala, a charitable institution registered under Section 12A. The dispute for Assessment Year 2023-2024 centered on the CPC’s action of entirely disallowing the Rs. 7,93,988$ claimed by the Trust as an application of funds. The CPC’s adjustment effectively treated the Trust’s entire gross receipts Rs. 8,08,100 as taxable income.
The Trust contended that the CPC’s action was legally invalid because Section 143(1) permits only limited, apparent adjustments (such as arithmetic errors or disallowance of expenditure reported in the audit report), but does not empower the CPC to make a substantive disallowance of the application of funds claimed by a charitable entity. Such a disallowance goes to the root of the exemption claim and requires detailed verification and scrutiny proceedings initiated under Section 143(2). The ITAT concurred with the assessee, holding that the act of bringing the entire gross receipts of a registered charitable trust to tax through a summary intimation under Section 143(1) is erroneous and unsustainable. The Tribunal thus quashed the intimation, reinforcing the established principle that the scope of adjustments permissible under Section 143(1) is narrowly defined and does not extend to complex verification matters, particularly for charitable entities.
