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2022 (9) TMI 1393 - AT - Income TaxAdjustment done by CPC under the provisions of section 143(1) - Disallowing the claim of assessee as claimed in the return of income while processing return of income u/s 143(1) - Debatable issue - entire income as exempt u/s 10(23C)(iiiad) of the Act was disallowed - HELD THAT - The cumulative effect of section 143(1) and omission w.e.f. 1.6.1999 of section 143(1A) 143(1B) 143(5) of the Act is that neither prima facie adjustments can be made nor any levy of additional income tax can be made on or after 1st June 1999. Thus the power of AO under this section are very limited and restricted only to the returned income filed by the assessee. A.O. cannot visit beyond the return except to compute tax or interest after adjustment of pre-paid tax as mentioned above. Therefore according to the clear provisions of section 143(1) of the Act it would be beyond the jurisdiction of AO to compute income by denying exemption u/s 10(23C)(iiiad) of the Act on the reason that aggregate annual receipts shown in Schedule Part-A General (1) details of the projects/institutions run by the assessee is more than Rs.1 crore. In our opinion the issue of determining the exemption u/s 10(23C)(iiiad) of the Act or 10(23C)(iiiae) is very debatable. As relying on Children Education Society 2013 (7) TMI 519 - KARNATAKA HIGH COURT the issue which is very much debatable that which cannot be done while processing the return u/s 143(1) of the Act. Further the Ld. CIT(A) not addressed the issue properly. Hence the lower authorities committed error in disallowing the claim of assessee as claimed in the return of income while processing return of income u/s 143(1) of the Act. Accordingly we allow all the grounds taken by the assessee in this appeal from ground Nos.2 to 5.
Issues Involved:
1. Consideration of facts and grounds of appeal. 2. Entitlement for exemption under Section 10(23C)(iiiad). 3. Eligibility for exemption under Section 10(23C)(iiiad) and refraining from making additions. 4. Application of the limit of one crore on gross receipts. 5. Allowance of depreciation to arrive at taxable income. 6. Allowance of exemption under Section 11 read with the second proviso to Section 12A(2). 7. Applicability of provisions under Sections 234A, 234B, 234C, and 234F. Issue-wise Detailed Analysis: 1. Consideration of Facts and Grounds of Appeal: The appellant argued that the Commissioner of Income Tax (Appeals) did not consider all the facts and grounds submitted. The Tribunal reviewed the facts of the case and the grounds raised, noting that the assessee, a society formed under the Mysore Societies Registration Act, was engaged in promoting education and had filed its income tax return for the assessment year 2018-19. The return was processed under Section 143(1) by the CPC, Bengaluru, which disallowed the claim of exemption under Section 10(23C)(iiiad) and depreciation. 2. Entitlement for Exemption under Section 10(23C)(iiiad): The appellant contended that the CIT(A) should have given a specific finding on whether the appellant was entitled to exemption under Section 10(23C)(iiiad). The Tribunal noted that the CIT(A) justified the disallowance based on the provisions of Section 11(2)(c), stating that the assessee did not file the return within the due date specified under Section 139(1), thus losing the opportunity for exemption under Section 11. 3. Eligibility for Exemption under Section 10(23C)(iiiad) and Refraining from Making Additions: The Tribunal examined whether the assessee was eligible for exemption under Section 10(23C)(iiiad) and whether any additions should have been made. The Tribunal referred to the Karnataka High Court's decision in CIT Vs. Children Education Society, which clarified that the aggregate annual receipts of each educational institution should be considered separately for exemption purposes. The Tribunal concluded that the issue of determining the exemption was debatable and should not have been adjusted under Section 143(1). 4. Application of the Limit of One Crore on Gross Receipts: The appellant argued that the limit of one crore on gross receipts should apply to each institution individually, not in aggregate. The Tribunal agreed, citing the Karnataka High Court's interpretation that each educational institution is a separate entity, and the aggregate annual receipts should be considered individually for exemption under Section 10(23C)(iiiad). 5. Allowance of Depreciation to Arrive at Taxable Income: The appellant contended that depreciation should be allowed to arrive at the taxable income. The Tribunal noted that the CPC had disallowed the depreciation claim while processing the return. The Tribunal found this adjustment beyond the scope of Section 143(1), which limits the AO's power to only compute tax or interest based on the returned income without denying exemptions. 6. Allowance of Exemption under Section 11 Read with Second Proviso to Section 12A(2): The Tribunal did not specifically address this issue in detail as it was rendered academic due to the findings on the primary grounds. 7. Applicability of Provisions under Sections 234A, 234B, 234C, and 234F: The appellant argued that the provisions of Sections 234A, 234B, 234C, and 234F should not apply to the society. The Tribunal did not adjudicate this issue separately, considering it academic in light of the resolution of the primary grounds. Conclusion: The Tribunal concluded that the lower authorities erred in disallowing the claims of the assessee while processing the return under Section 143(1). The appeal filed by the assessee was allowed, and the grounds related to the exemption under Section 10(23C)(iiiad) and depreciation were upheld. The general and academic grounds did not require further adjudication. The order was pronounced in the open court on 6th September 2022.
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