2022 (3) TMI 143 - AT - Income Tax

Rectification of mistake u/s 154 - CIT(A) not allowing of deduction u/s 11 of the Act which are claimed to have been incurred for charitable purpose - HELD THAT - We find that the assessee is a charitable Trust registered u/s 12AA of the Act since 06.07.1979 and the same is in force. There is no iota of evidence on record to dispute the fact that the assessee Trust is regularly carrying out charitable activities as per its objects for which it has been granted registration u/s 12AA of the Act. Against the gross income earned during the year at ₹ 11,60,122/-, the said Trust incurred an expenditure of ₹ 6,02,569/- for charitable purpose, it also set apart an amount of ₹ 1,71,463/- u/s 11(1)(a) of the Act for application to charitable or religious purposes in subsequent year and for doing the same, Form No. 10B has been filed. The deduction has also been claimed for ₹ 3,86,090/- u/s 11(1)(2) of the Act, for which Form No. 9A has been filed. The reason for denial of this deduction by the Revenue authorities was only on account of a mistake made by the assessee in filing the income tax return in ITR Form No. 7 by not filling the deduction amount in the prescribed column which resulted in denying the deduction by the Central Processing Centre (CPC). The said mistake has already been rectified by the assessee by filing the rectification on the income tax portal and submitting the corrected XML file on the income tax portal. The hard copy of the revised return/rectified return is placed on record in paper book at page 35-65 and after perusal of the same we find that the assessee has shown the respective amount of deduction claimed in the correct prescribed column. But even after filling the correct details, Central Processing Centre (CPC) has again rejected the claim without assigning any reason. In our view, the ld. CIT(A) erred in not deciding the issue on merit and exceeded its jurisdiction by directing the AO to examine the issue afresh. Thus we are of the considered view that the assessee being a charitable Trust registered u/s 12AA of the Act deserves to be allowed the deduction claimed u/s 11 - Decided in favour of assessee.

Summary

Issues:
Appeal against order of ld. Commissioner of Income-tax (Appeals) regarding deduction u/s 11 of the Income Tax Act, 1961.

Analysis:
1. The appeals filed by the assessee were against the orders of the ld. Commissioner of Income-tax (Appeals) related to the Assessment Year 2018-19, arising from assessment orders framed under sections 154 and 143(1) of the Income Tax Act, 1961 by DCIT, Ward-CPC, Bengaluru.

2. The assessee raised identical grounds challenging the actions of the ld. CIT(A), NFAC, including not adjudicating the raised grounds on merits, directing the AO to pass a fresh order, and not allowing deductions claimed for charitable purposes.

3. The grievance of the assessee primarily revolved around the non-allowance of a deduction of ?11,60,122/- under section 11 of the Act, claimed to have been incurred for charitable purposes.

4. The assessee, a charitable Trust registered under section 12AA of the Act, was engaged in providing medical relief to the poor. The initial return for AY 2018-19 did not claim the deduction in the prescribed format, leading to rejection of the claim in subsequent orders.

5. The ld. CIT(A) partly allowed the appeal against the order under section 154, directing the AO to pass a fresh order due to lack of discussion on reasons for denial of exemptions. The appeal against the order under section 143(1) was held as infructuous.

6. The assessee contended that the deduction was rightly claimed and should be allowed, while the ld. D/R supported the order of the ld. CIT(A).

7. After hearing the contentions and examining the records, the Tribunal noted the assessee's grievance against the denial of the deduction under section 11 and the setting aside of the issue for fresh examination.

8. The Tribunal found merit in the assessee's claim for the deduction of ?11,60,122/-, as the denial was due to a mistake in filing the return, which was rectified by the assessee. The ld. CIT(A) erred in not deciding the issue on merit and directing a fresh examination.

9. Consequently, the Tribunal allowed the appeal, directing the deletion of the addition made and setting aside the ld. CIT(A)'s finding. Another appeal related to denial of deduction became infructuous due to the decision in the first appeal.

10. As a result, the appeal in ITA No. 323/Kol/2021 was allowed, while ITA No. 471/Kol/2021 was dismissed as infructuous.