Case Law Details
City Manager Association Ahmedabad Municipal Corporation Vs DCIT (ITAT Ahmedabad)
Let us consider the scope of section 154 for making prima facie adjustment while processing return under section 143(1)(a) of the Act i.e. process of dealing with the return is an ex parte process. It is pertinent to observe that whenever any debatable issue is involved an explanation of the assessee is required, then on such issue, no prima facie adjustment in an ex parte proceedings can be made. If facts are looked into, then it would reveal that both the issues were debatable one, where more than one opinion was possible. Adjustment under section 143(1)(a) is not permissible on both these aspects.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal is filed by the assessee against order dated 18.6.2019 in appeal no. CIT(A)-9/10060/DCIT passed by the Ld.Commissioner of Income-tax (Appeals)-9, Ahmedabad [for short “Ld.CIT(A)] relating to the assessment year 2016-17.
2. Brief facts of the case is that the assessee is a charitable trust registered under the Income tax Act, 1961 and enjoying benefits of section 11 and 80G of the Act. For the Asstt.Year 2016-17, the assessee has filed its return of income on 28.10.2016 declaring Rs.2,31,725/-. The return of income was processed under section 143(1) of the Act by intimation order dated 30.3.2018, wherein income of the assessee has been determined at Rs.26,95,625/- and demanded tax of Rs.7,02,246/- BY THE Dy.Commissioner of Income-tax, CPC Centre, Bangalore. It is seen from the intimation that deduction of Rs.5,40,082/- claimed by the assessee has been reduced to Rs.2,51,182/-. Similarly deduction of Rs.21,75,000/-claimed under section 11(2) has also not allowed, resulting in increased total income of Rs.26,95,695/- as against the returned income of Rs.2,31,730/-.
3. Aggrieved against the same, the assessee filed an appeal before the CIT(A). The ld.CIT(A)dismissed the appeal filed by the assessee by following various case laws mentioned at page no.7 to 11 of the CIT(A)’s order. Aggrieved against the appellate order, the assessee is before us by raising the following grounds of appeal:
“1. The Learned Commissioner of Income Tax (Appeals) has erred in law as well as on the facts of the case of the Appellant by confirming the reduction of claim for deduction by allowing deduction of only Rs.2,51,182/- instead of deduction claimed of Rs.540,082/-, which is rightly and validly allowable u/s.11(1) of the I.T. Act, 1961 as per return of income filed by the Appellant.
2. The Learned Commissioner of Income Tax (Appeals) has erred in law as well as on the facts of the case by confirming disallowance of deduction of Rs.21,75,000/- claimed for amount accumulated u/s.11(2) of the I.T. Act, 1961.”
The ld. counsel for the assessee, in support of the grounds argued the case and pleaded to cancel the disallowances made by CPC, Bangalore.
Per contra, the ld.DR supported the orders passed by the lower authorities.
4. While dictating this order, we noticed the ld.CIT(A) has made a pertinent observation, which reads as follows:
“4.8 It has also been brought to the notice of the undersigned that the same issue arose for consideration by the predecessor I the office for the Assessment Year 2015-16 and the appeal of the appellant was dismissed vide appellate order dated 15.08.2017. The appeal before the Hon’ble ITAT (registered as ITA No.2337/Ahd/2017) is reported to be pending as on the date of passing the appellate order. Therefore, to maintain the consistency of the stand taken by the predecessor in the office for A.Y.2015-16 on the identical issue, the appeal is required to be dismissed.”
5. As per the above observation of the ld.CIT(A), the appeal of the assessee in ITA No.2337/Ahd/2017 for the A.Y 2015-16 was pending before the Tribunal when the CIT(A) assed the impugned order on 18.6.19. However, both the parties before us have not brought to our knowledge about the status of that case before the Tribunal. On verification about the status of the same, we found that the above appeal of the assessee was disposed of in favour of the assessee vide order dated 21.8.019 just two months after the passing of the impugned order by the ld.CIT(A). The relevant portion of Co-ordinate Bench’s order reads as under:
“5. Before us, the assessee raised two fold submissions. Firstly, on the strength of Hon’ble Kolkatta High Court in the case of CIT Vs. Natwarlal Chowdhury Charity Trust, 52 taxmann 330 (Kol) it is entitled for deduction at 15% of the alleged deemed income offered for taxation in this assessment year. In the second contentions, she contended that both the issues are debatable that cannot be adjudicated under section 143(1) of the Act.
6. On the other hand, the ld.DR relied upon the order of the Revenue authorities. He placed on record copy of ITAT’s order in the case of the Trustees, The B.N. Gamadia Parsi Hunnarshala, 77 TTJ 274 (Mum-Trib.) We would like to reproduce brief order of the Hon’ble Kolkatta High Court in the case of CIT Vs. Natwarlal Chowdhury Charity Trust (supra), which reads as under:
“Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the assessee’s right to accumulate 25% of the total income of the previous year extended to the deemed income under Section 11(3) of the Income-tax Act, 1961, added therein in the circumstances mentioned above ?”
2. The facts found by the Tribunal as stated in the statement of case are as follows :
The assessee-trust accumulated Rs.46,184 during the accounting years relevant to the assessment years 1973-74 to 1976-77. During the previous year relevant to the present assessment year, accumulated income ceased to be invested in fixed deposit with the Indian Bank and it was, therefore, deemed to be the income of the trust in the previous year in which it ceased to remain invested or deposited in terms of clause (b) of sub-section (3) of section 11 of the Income-tax Act, 1961. The Income-tax Officer was of the opinion that the assessee was not entitled to accumulate 25% of this deemed income because permitting it to do so would amount to a double benefit to the assessee. He, therefore, assessed the entire deemed income.
3. The Tribunal in agreeing with the decision of the Appellate Assistant Commissioner observed:
The legal fiction contained in section 11(3) of the Income-tax Act, 1961, should be allowed to play to the fullest extent and there is no warrant to take a restricted view for denying the exemption which is specifically allowed by the statute. In fact, as per the law as stood from April 1, 1976, charitable trusts are permitted to accumulate up to 25% of their income without complying with any formalities or condition and such accumulation is not included in the total income. Therefore, we uphold the order of the Appellate Assistant Commissioner as it is quite justified in law and the assessee would be entitled to accumulate 25% of the total income of the previous year relevant to the assessment year 1978-79 inclusive of the deemed income under section 11 (3) of the Income-tax Act, 1961.
4. Moitra, appearing on behalf of the Revenue, has failed to show any infirmity in the order of the Tribunal. In fact, he has prayed merely for remand of the case as was done by the Andhra Pradesh High Court in the case of CIT v. Hyderabad Secunderabad Foodgrains Association Ltd. [1989] 175 ITR 574. The facts in that case were quite different and it was felt by the Andhra Pradesh High Court that it was necessary to remand the case.
But, in the instant case, no argument at all has been advanced to show any infirmity in the order of the Tribunal.”
Since Mr. Moitra has failed to show us any infirmity in the order passed by the Tribunal, the question is answered in the affirmative and in favour of the assessee.”
7. In the light of the above, let us consider the scope of section 154 for making prima facie adjustment while processing return under section 143(1)(a) of the Act i.e. process of dealing with the return is an ex parte process. It is pertinent to observe that whenever any debatable issue is involved an explanation of the assessee is required, then on such issue, no prima facie adjustment in an ex parte proceedings can be made. Reading of judgment of Hon’ble Kolkatta High Court (supra), and if facts are looked into, then it would reveal that both the issues were debatable one, where more than one opinion was possible. Adjustment under section 143(1)(a) is not permissible on both these aspects. Therefore, we allow appeal of the assessee, and delete both the disallowances.”
6. In the light of the above, respectfully following the Co-ordinate Bench decision in the assessee’s own case for the Asst.Year 201516, wherein the disallowances were being made under section 143(1) of the Act, and similar disallowance is also made for the present year viz. Asst.Year 2016-17, we hold that debatable issue should not be done in an intimation under section 143(1)(a) of the Act. Therefore, we allow the appeal of the assessee and delete both the disallowances.
7. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the Court on 3rd June, 2022 at Ahmedabad.
