Goswami Bhagwan Lal Education Society Vs ITO (ITAT Delhi)
10(23C) / 11 Exemption Cannot Be Denied in 143(1)- CPC Cannot Tax Gross Receipts of a School -Failure to File Form 10B is Curable; 139(9) Opportunity Mandatory
Assessee, an educational society, filed ITR on 19.09.2015 declaring NIL income after claiming exemption u/s 10(23C)(via). Audit report was uploaded in Form 10BB (meant for institutions claiming exemption under clauses of s.10(23C)), whereas the ITR reflected claim u/s 11. CPC processed the return u/s 143(1), held the claim u/s 10(23C)(via) ineligible, also denied alternate claim u/s 11 for want of Form 10B, & taxed the entire gross receipts of Rs.1,18,22,502 instead of surplus of Rs.23,47,095.
CIT(A) upheld CPC’s action, holding that inconsistency between Form 10BB & ITR justified 143(1)(a)(ii) adjustment & that if exemption under 10(23C) or 11 fails, entire receipts, not income, become taxable.
Before Tribunal, Assessee argued:
- At most CPC could have treated the return as defective u/s 139(9) & given opportunity to upload Form 10B.
- Filing of Form 10B is directory & a curable defect, supported by CBDT Circular 10/2019 (22.05.2019) & judgments (Rai Bahadur Bissesswarlal Trust, Sankulp Welfare Society, National Horticulture Board, Sahja Nand Charity Trust).
- Even if exemption fails, CPC cannot tax gross receipts; only income embedded can be taxed.
- Disallowance of all expenditure under 143(1) is not a prima facie adjustment & is legally impermissible.
Tribunal accepted the arguments & held:
- Non-filing of Form 10B is a curable defect, reinforced by CBDT Circular 10/2019 & cited case law.
- Denial of exemption u/s 11 without giving 139(9) opportunity is a debatable issue, hence not permissible u/s.143(1).
- Disallowance of entire expenses in 143(1) is contrary to law; if exemption fails, income has to be computed under “Income from Other Sources” allowing deductions u/s 57.
- Only income embedded in receipts can be taxed, not the entire gross receipts.
Accordingly, ITAT set aside the CIT(A)’s order & restored the matter to AO to:
(i) give opportunity u/s 139(9);
(ii) allow assessee to file Form 10B & seek condonation;
(iii) re-examine eligibility u/s 11/10(23C);
(iv) compute only income, not receipts, if exemption is denied.
FULL TEXT OF THE ORDER OF ITAT DELHI
