Case Law Details
ITO (Exemption) Vs Shree Umiya Education Trust (ITAT Ahmedabad)
ITAT Ahmedabad held that denial of exemption u/s. 11 by CPC in the rectification petition not justified since the same was allowed in earlier proceeding and it is settled position of law that debatable issues cannot be done in rectification proceedings.
Facts- The assessee is an educational institution registered u/s. 12AA enjoying exemption u/s. 11 of the Act. For the Asst. Year 2015-16, assessee filed its original Return of Income on 29-09-2015 along with Audit Report in Form 10B claiming exemption u/s. 11 of the Act and declaring Nil Income. Thereafter the assessee filed a Revised Return of Income along with the Audit report in Form 10B on 11-03-2016 for claiming credit of cost of acquisition of securities. Intimation u/s. 143(1) was passed on 11-10-2016 by CPC allowing exemption u/s. 11 of the Act but denying credit for cost of acquisition on securities. Therefore Assessee filed rectification application u/s. 154 on 16-01-2018 claiming credit for cost of acquisition on securities. CPC allowed the rectification but denied exemption u/s. 11 of the Act vide rectification order dated 01-09-2019.
CIT(A) allowed the appeal. Being aggrieved, revenue has preferred the present appeal.
Conclusion- Held that it is settled proposition of law that debatable issues cannot be done in the rectification proceedings. More particularly, when the CPC Centre vide its Intimation dated 11-10-2016 allowed the claim of exemption u/s. 11 of the Act in the rectification petition without assigning any reason or debating from the view taken earlier while passing the intimation u/s. 143(1), CPC ought not to have denied the exemption to the assessee. Thus the finding arrived by Ld. CIT(A) is well within the provisions of law which does not require any interference. Thus the appeal filed by the Revenue is devoid of merits and the same is liable to be dismissed.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal is filed by the Revenue as against the appellate order dated 04.11.2022 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “CIT(A)”), arising out of the rectification order passed under section 154 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2015-16.
2. The Registry has noted that there is a delay of three days in filing the above appeal. It is explained by the Department, the A.O. holding multiple charges during the said period, shortage of stock, the delay of 3 days in filing the appeal. Thus the delay of three days in filing the appeal is hereby condoned.
3. Brief facts of the case is that the assessee is an educational institution registered u/s. 12AA enjoying exemption u/s. 11 of the Act. For the Asst. Year 2015-16, assessee filed its original Return of Income on 29-09-2015 along with Audit Report in Form 10B claiming exemption u/s. 11 of the Act and declaring Nil Income. Thereafter the assessee filed a Revised Return of Income along with the Audit report in Form 10B on 11-03-2016 for claiming credit of cost of acquisition of securities. Intimation u/s. 143(1) was passed on 11-10-2016 by CPC allowing exemption u/s. 11 of the Act but denying credit for cost of acquisition on securities. Therefore Assessee filed rectification application u/s. 154 on 16-01-2018 claiming credit for cost of acquisition on securities. CPC allowed the rectification but denied exemption u/s. 11 of the Act vide rectification order dated 01-09-2019.
4. Aggrieved against the Rectification order, assessee filed an appeal before Ld. CIT(A) who granted exemption u/s. 11 of the Act by observing as follows:
“6. .. The only ground of appeal A relates to the disallowance of exemption claimed u/s 11 of Rs. 3,97,01,626/-, The assessee had filed his ITR on 29.09.2015 u/s 139(4) of the Act alongwith Form 10B. Later, CPC sent communication to assessee. Assessee again filed return of income on 11.03.2016 alongwith Form 108. This revised return was processed by CPC u/s 143(1) on 11.10.2016. Vide intimation order u/s 143(1), CPC disallowed the cost of acquisition of securities of Rs. 80,00,000/-. But no demand was raised since assessee has negative income. Aggrieved with this order, assessee filed rectification request to CPC on 16.01.2018. An order u/s 154 was passed by the CPC on 01.09.2019 giving credit of cost of acquisition of securities but disallowing the exemption claimed by the assessee u/s 11 which was already given by the CPC vide order passed u/s 143(1). Aggrieved with this order, assessee filed this appeal. After considering all the submissions made by the assessee and facts of the case, it is crystal clear that the assessee is a charitable trust and eligible for deduction u/s 11 of the Act. The assessee has also submitted certificate u/s 12AA of the Income Tax Act, 1961 and also filed Form 10B alongwith both ITRs i.e. original ITR filed on 29.09.2015 and revised ITR on 11.03.2016 within the time allowable. There is no reason why the entire expenditure claimed by the assessee has been disallowed. The said disallowance doesn’t fall within the mandate of section 143(1). It is a fact particularly evident from the proceedings that the same expenditure was earlier allowed by CPC and only when a rectification application was filed that the same was disallowed. There is no reasoning ascribed to this change of stance. In view of the above facts, the assessee is eligible for claiming exemption u/s 11 on the expenditure incurred which is denied by the CPC vide order u/s 154 dated 01.09.2019 consequent to a preceding order u/s 143(1)(a) that had allowed the same expenditure.
7. In light of the above facts, the appeal of the assessee is allowed.
5. Aggrieved against the same, Revenue is in appeal before us raising the following Grounds of Appeal:
6. Sr. D.R. appearing for the Revenue in support of the grounds claimed that ld. CIT(A) is not correct in granting exemption u/s. 11 of the Act.
7. Per contra Ld. Sr. Counsel Shri Tushar Hemani appearing for the assessee submitted that assessee had filed rectification application merely for getting credit of ‘cost of acquisition’ of securities pursuant to which such credit was allowed by CPC while passing rectification order. However, while doing so, CPC denied exemption u/s. 11 of the Act without assigning any reasons whatsoever either making such disallowance or for deviating from the view taken earlier while passing intimation u/s. 143(1) dated 11-10-2016 allowing exemption u/s. 11 of the Act. Thus ‘CPC’ became ‘functus officio’ after passing intimation u/s. 143(1) of the Act in so far as the issue as to exemption u/s. 11 of the Act is concerned. Thus in the rectification proceedings, CPC ought to have restricted itself to the claim made by the assessee and not denying registration u/s. 11 of the Act. More particularly, debatable issue does not fall within the purview of “error apparent from record” as envisaged under section 154 of the Act. Thus Ld. CIT(A) has rightly allowed the exemption u/s. 11 of the Act which does not require any interference. Department appeal is liable to be dismissed.
8. We have perused the materials available on record. It is settled proposition of law that debatable issues cannot be done in the rectification proceedings. More particularly, when the CPC Centre vide its Intimation dated 11-10-2016 allowed the claim of exemption u/s. 11 of the Act in the rectification petition without assigning any reason or debating from the view taken earlier while passing the intimation u/s. 143(1), CPC ought not to have denied the exemption to the assessee. Thus the finding arrived by Ld. CIT(A) is well within the provisions of law which does not require any interference. Thus the appeal filed by the Revenue is devoid of merits and the same is liable to be dismissed.
9. In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open court on 12 -12-2024
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