Case Law Details
Arya Samaj Vs ITO (ITAT Delhi)
Before ITAT, it was pleaded that the assessee has wrongly filled the column A(i) pertaining to “Other details” the ITR7 and since CPC is a automated process, the adjustment has also been wrongly made. It was argued that had there been a notice issued before making an adjustment, the same would have been brought to the notice of the revenue authorities. On the other hand, the ld. DR argued that the order u/s 143(1) is based on the return filed by the assessee.
Having gone through the entire factum of the case, we hold that a right tax has to be collected from the right person and though the CPC has processed the return based on the information given by the assessee, and when the information given by the assessee itself is incorrect in filling of the relevant column, the same needs to be allowed to be rectified in the interest of justice. Hence, the matter is remanded back to the file of the JAO to consider the earlier return and subsequent return filed by the assessee and the mistake in filling the column no. A(i) be rectified.
FULL TEXT OF THE ORDER OF ITAT DELHI
The present appeal has been filed by the assessee against the order of the ld. CIT(A)-40, New Delhi dated 03.01.2019.
2. The assessee has raised the following grounds of appeal:
“1.1 That on the facts and in the circumstances of the assessee trust’s case the learned Commissioner of Income tax (Appeals) was wrong in sustaining disallowances made vide intimation / order passed under section 143(1) of the Act, of various deductions, exemptions, relief claimed in the return of income aggregating to Rs. 77,23,693.
1.2 That on the facts and in the circumstances of the assessee trust’s case the learned Commissioner of Income tax (Appeals) was wrong in assuming the reasons for making of adjustments made vide intimation / order passed under section 143(1) and thus sustaining disallowances / adjustment of Rs. 77,23,693 even while the said intimation was not a speaking order in as much as the reasons for making disallowances / adjustment have not been mentioned in the said intimation / order dated 11.03.2 017.”
3. As taken from the record of the CIT(A).
4. The facts of the case are that the return of income was filed on 21.09.2015 declaring income at nil after claiming exemption under section 11. In the return, income from business or profession was shown at Rs. 64,33,801/-, amount applied for charitable purpose on capital account was shown at Rs. 4,57,822/-, Rs. 53,77,479/- was claimed as amount deemed to have been applied to charitable or religious purposes in India as per clause (2) of the Explanation to section 11(1) and an amount of Rs.13,96,850/- was claimed as amount accumulated or set apart for application to charitable or religious purposes to the extent of 15% of income.
5. In addition, an amount of Rs. 12,89,892/- was claimed as exempt under section 11(1A). The return was processed under section 143(1) by the CPC, Bangalore. As per the intimation under section 143(1)(a), the benefit of exemption under section 11 was not given to the assessee and income chargeable under section 11(4) was computed at Rs. 77,23,693/-. A tax liability of Rs. 28,49,284/- was computed by the CPC as against refund of Rs.30,021/- claimed by the assessee.
6. Heard the arguments of both the parties and perused the material available on record.
7. In the case of the appellant it is seen that in the return of income in Form ITR 7, that in Column A(i) pertaining to “Other Details”, following information has been given:
|
A |
i | Where, in airy of the projects/institutions run by you, one of the charitable purposes is advancement of any other object of general public utility- | Yes | |
| a | whether there is any activity’ in the nature of trade, commerce or business referred to in proviso to section 2(15)? | Yes | ||
| b | whether there is any activity of rendering any services in relation to any trade, commerce or business for any consideration as referred to in proviso to section 2(15)? | No | ||
| ii | If ‘a’ or ‘b’ is YES, the aggregate annual receipts from the such activities | |||
| SI. No. |
Name of the project/Institution’s | Amount of aggregate annual receipts from such activities | ||
| 1 | GURU VIRJANAND DHARMARTHA AU SH AD H A LAYA | 18648845 | ||
8. The ld. CIT(A) held that it is apparent that any claim which is inconsistent with any other entry made in the return of income will constitute “an incorrect claim apparent from any information in the return” as defined in the Explanation to section 143(1) and is liable to be disallowed.
9. The ld. CIT(A) held that the assessee made a claim for exemption under section 11 where charitable purpose was shown under the category of “advancement of any other object of general public utility” and the entire receipts were shown from such activity. The ld. CIT(A) relied on the relevant portion of section 2(15) which reads as under:
“(15) “charitable purpose” includes relief of the poor, education, yoga, medical relief preservation of environment (including watersheds, forests and wildlife.) and preservation of monuments or places or objects of artistic of historic, interest, and the advancement of any other object of general public utility: Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce, of business, or any activity of rendering any service in relation to any trade, commerce, or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity:
Provided further that the first proviso shall not apply if the aggregate value if the receipts from the activities referred to therein is twenty-five lakh rupees or less in the previous year.”
10. Owing to the above, the ld. CIT(A) held that a plain reading of section 2(15) it is clear that if the charitable purpose falls under the category of advancement of any other object of general public utility and. the receipts from business are more than Rs. 25 lakhs, then, as per the first proviso to section 2(15), advancement of any other object of general public utility shall not be charitable purpose. To that extent, there is no inconsistency in the processing by the CPC since the receipts from activities in the nature of trade, commerce or business were shown to be more than Rs. 25 lakhs.
11. The ld. CIT(A) also relied on the decision of the Hon’ble Supreme Court in the case of Kvaverner John Brown Engg. (India) (P) Ltd. vs. ACIT [(2008) 305 ITR 103], wherein has been held as under:
“One of the main conditions stipulated by way of the first proviso to section 143(1)(a), as it stood during the relevant time, referred to prima facie, adjustments. The first proviso permitted the department, to make adjustments in the income or loss declared in the return in cases of arithmetical errors or in cases where any loss carried forward or deduction or disallowance which on the basis of information available in such return was, prima facie admissible, but which was not claimed in the return or in cases where any loss carried forward, or deduction or allowance claimed in the return which on the basis of information available in such return was, prima fade inadmissible.”
12. The ld. CIT(A) held that in the instant case under consideration it was claimed in the return that exemption was being claimed under section 11 and an amount of Rs. 1,86,48,845/- was shown from the activities in the nature of trade, commerce or business referred to in the proviso to section 2(15) and in terms of the second proviso to section 2(15), such activities will not be charitable purpose if the receipts exceed Rs. 25 lakhs. As noted above, processing under section 143(1)(a) is done on the basis of information available in the return of income and adjustments have to be made in the said processing on account of incorrect claim, if such incorrect claim is apparent from any information in the return. Since as per the first and second provisos to section 2(15), the activity cannot be considered to be a charitable purpose, the receipts be more than Rs. 25 lakhs, it was considered as an incorrect claim and exemption was denied at the time of processing.
13. Before us, it was pleaded that the assessee has wrongly filled the column A(i) pertaining to “Other details” the ITR7 and since CPC is a automated process, the adjustment has also been wrongly made. It was argued that had there been a notice issued before making an adjustment, the same would have been brought to the notice of the revenue authorities. On the other hand, the ld. DR argued that the order u/s 143(1) is based on the return filed by the assessee.
14. Having gone through the entire factum of the case, we hold that a right tax has to be collected from the right person and though the CPC has processed the return based on the information given by the assessee, and when the information given by the assessee itself is incorrect in filling of the relevant column, the same needs to be allowed to be rectified in the interest of justice. Hence, the matter is remanded back to the file of the JAO to consider the earlier return and subsequent return filed by the assessee and the mistake in filling the column no. A(i) be rectified.
15. In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 28/12/2022.
