2022 (1) TMI 834 - AT - Income Tax

Adjustment made in the intimation u/s. 143(1) - denying the benefit of deduction/exemption u/s 11 - CIT(A) upheld the adjustments made in the intimation stating that the assessee had not furnished the details of its registration u/s. 12A/12AA in the return of income and had in fact mentioned that it had not been registered under the said section and had in fact stated no against column in the return of income asking whether registered u/s. 12A/12AA of the Act - HELD THAT - We find that the necessary details of registration u/s. 12A had been filed before the ld. CIT(A) and the assessee had also pointed out that in any case even if it is treated as not registered and assessed in status of AOP since its taxable income was below the limit prescribed for AOPs no tax liability arose in the case of the assessee. We have gone through the provisions of section 143(1) and we find that the said section provides, by way of proviso, that no adjustments to the income shall be made till the same is intimated to the assessee and 30 days time is given to the assessee to respond to the same. In the present case, the facts on record do not reveal any such opportunity being granted to respond. Therefore, when the assessee had responded before the ld. CIT(A), i.e., the first available opportunity, pointing out with evidence that it was a registered charitable entity and thus entitled to the deductions/exemptions claimed he was duty-bound to consider the same and accordingly adjudicate the issue. Assessee, we have noted, had also pleaded that even prima facie no tax was due as payable by it even after making the adjustments as its income was below the taxable limit. The Ld. CIT(A), we find, has not taken any cognizance of this contention of the assessee. CIT(A)'s order, justifying the adjustments on the basis of disclosure made by the assessee that it was not registered as a charitable entity, is we find taking a hyper technical view on the issue, particularly when the adjustment was made without affording any opportunity to the assessee as provided in law, coupled with the fact that the assessee had evidenced its registration u/s. 12A of the Act to the Ld. CIT(A) by producing the certificate. Also the Ld. CIT(A) has not addressed the alternative argument of the assessee that even after the adjustments its income was below the taxable limit. We consider it fit to restore the issue to the ld. CIT(A) with the direction to decide the appeal - Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
Adjustment made to the income of the assessee in the intimation u/s. 143(1) of the Income Tax Act, 1961, denying the benefit of deduction/exemption of income claimed by the assessee as a charitable trust under section 11 of the Act.

Analysis:

1. The appeal was filed against the order passed by the Commissioner of Income Tax (Appeals)-1, Vadodara, pertaining to Assessment Year 2013-14. The grounds raised by the assessee included issues related to the denial of deductions, taxation of income at maximum marginal rate, disallowance of deduction for charitable purposes, and levying of interest under various sections of the Act.

2. The main issue in the appeal was the adjustment made to the income of the assessee in the intimation u/s. 143(1) of the Act, resulting in the denial of deduction claimed as a charitable trust under section 11. The assessee had shown income from other sources and claimed deductions for applying income to charitable purposes. However, the deductions were denied in the intimation, leading to tax liability being raised on the assessee.

3. The assessee contended that it was registered as a public charitable trust under section 12A of the Act and, even after the denial of deductions, its gross income was below the taxable limit for AOPs. The CIT(A) upheld the adjustments, stating that the assessee had not provided registration details in the return of income.

4. The ITAT observed that the necessary details of registration under section 12A were submitted before the CIT(A), and the assessee had argued that even if not registered, its income was below the taxable limit. The provisions of section 143(1) were analyzed, emphasizing that adjustments should only be made after giving the assessee an opportunity to respond.

5. The ITAT found that the assessee was not given an opportunity to respond before the adjustments were made. The CIT(A) did not consider the evidence of registration provided by the assessee and did not address the argument that the income was below the taxable limit even after adjustments.

6. Consequently, the ITAT decided to restore the issue to the CIT(A) for reconsideration, directing a proper hearing and consideration of the submissions made by the assessee. The appeal of the assessee was allowed for statistical purposes, emphasizing the need for due process and fair consideration of the assessee's contentions.

This detailed analysis highlights the key legal issues, arguments presented, and the decision rendered by the ITAT, ensuring a comprehensive understanding of the judgment.