2022 (8) TMI 201 - AT - Income Tax

Rectification application u/s 154 - exemption u/s 10(23)(C)(iiiad) - claim for the first time by filing rectification application u/s 154 - CIT(A) observed that the assessee has incurred expenses towards Tree Plantation Programme and Women Welfare Programme which are not for educational purposes and society is not existing solely for educational purposes as is required u/s 10(23C)(iiiad) - HELD THAT - As observed that the recognition granted Dr Ram Manohar Lohia Avadh University , Faizabad is effective from 01.07.2012 for next three years to Dayashankar Jagdish Bahadur Mahila University , Lohangi, Pratapgarh, U.P. , and presently we are concerned with ay 2011-12(previous year 2010-11), thus for the year under consideration , the assessee was not holding any recognition from Dr Ram Manohar Lohia Avadh University , Faizabad and wrong contentions were raised by assessee. As pertinent to mention that the assessee never claimed exemption u/s 10(23C)(iiiad) in its return of income filed with the Department, rather it claimed exemption 11 and 12 of the 1961 Act, despite the fact that it never held registration u/s 12A at the relevant point of time. The assessee did not file revised return of income to claim exemption u/s 10(23C)(iiiad) , rather originally the assessee filed belated return of income which infact could not have been revised u/s 139(5). The assessee set up claim for the first time for grant of exemption u/s 10(23C)(iiiad) by filing rectification application u/s 154 of the 1961 Act. As held in Pr. CIT v. Wipro 2022 (7) TMI 560 - SUPREME COURT that scope in filing revised return is to only correct omissions and errors , rather than bringing an altogether new claim in revised return of income. In the instant case before us, the assessee has not even filed revised return of income claiming exemption u/s 10(23C)(iiiad) which infact the assessee could not have filed as originally the assessee filed belated return of income, rather this new claim of exemption u/s 10(23C)(iiiad) was set up for the first time by assessee through rectification application u/s 154. The scope of Section 154 is very narrow and restricted to only correcting mistakes apparent from record, and in case if the claim of the assessee requires long drawn deliberations and reasoning , it cannot be covered u/s 154. Thus, in our considered view , setting up of a new claim of exemption u/s 10(23C)(iiiad) for the first time through a rectification application u/s 154 of the 1961 Act is itself not permissible keeping in view the limited and narrow mandate of Section 154. Also that now withdrawing the exemption claim u/s 11 and 12 by filing rectification application u/s 154 , will falsify the accountants report u/s 12A(b) filed along with the return of income. Thus an altogether new claim cannot be set up even by filing revised return of income, as the scope in filing revised return of income is to correct omissions and errors, rather than bringing altogether new claim in revised return of income. - Decided against assessee.

Summary

Issues Involved:
1. Validity of order passed under Section 154 of the Income-tax Act, 1961.
2. Eligibility for exemption under Section 10(23C)(iiiad) of the Income-tax Act, 1961.
3. Consideration of genuine activities and expenditure claims of the society.
4. Impact of registration under Section 12A of the Income-tax Act, 1961.

Detailed Analysis:

1. Validity of Order Passed Under Section 154:
The assessee challenged the order passed under Section 154 of the Income-tax Act, 1961, dated 22.09.2017, asserting it was erroneous both in fact and law. The Tribunal noted that Section 154 has a narrow scope, limited to correcting mistakes apparent from the record. The assessee's attempt to introduce a new claim for exemption under Section 10(23C)(iiiad) through a rectification application was deemed impermissible. The Tribunal cited the Supreme Court judgment in Pr. CIT v. Wipro, emphasizing that a revised return cannot introduce an entirely new claim, and such claims cannot be entertained under Section 154.

2. Eligibility for Exemption Under Section 10(23C)(iiiad):
The assessee claimed exemption under Section 10(23C)(iiiad) for the first time in the rectification application, arguing it was engaged in educational activities. However, the Tribunal observed that the assessee did not claim this exemption in the original return of income and instead claimed exemption under Sections 11 and 12, despite not holding the necessary registration under Section 12A at that time. The Tribunal found that the assessee's income and expenditure account did not reflect any educational fees, only donations and membership fees, and noted that the recognition from Dr. Ram Manohar Lohia Avadh University was effective from a later period, not relevant to the assessment year in question. Consequently, the Tribunal upheld the denial of exemption under Section 10(23C)(iiiad).

3. Consideration of Genuine Activities and Expenditure Claims:
The assessee argued that its activities, including educational programs, were genuine and aligned with its by-laws, and thus, its expenditure claims should not be doubted. The Tribunal, however, found that the expenses listed (e.g., Children Development Program, Education Awareness Program, Tree Plantation Program, and Women Welfare Program) did not substantiate the claim that the society existed solely for educational purposes. The Tribunal agreed with the lower authorities that the society did not meet the criteria for exemption under Section 10(23C)(iiiad).

4. Impact of Registration Under Section 12A:
The assessee highlighted its registration under Section 12A, granted effective from 01.04.2015, to support its claim for exemption. However, the Tribunal noted that for the assessment year 2011-12, the assessee did not hold this registration and had claimed exemption under Sections 11 and 12 without the necessary documentation. The Tribunal emphasized that the registration under Section 12A was not applicable for the assessment years in question and upheld the denial of exemption.

Conclusion:
The Tribunal dismissed the appeals for both assessment years 2011-12 and 2013-14, finding no merit in the assessee's claims. The orders passed by the lower authorities were upheld, denying the exemption under Section 10(23C)(iiiad) and rejecting the rectification applications filed under Section 154 of the Income-tax Act, 1961.

Order Pronounced:
The judgment was pronounced in Open Court on 02/08/2022 at Allahabad, dismissing both appeals filed by the assessee.