2024 (6) TMI 1344 - AT - Income Tax

Denial of Exemption u/s.11 - assessee was not holding any registration u/s.12A/12AA - Denial of deduction of expenditure incurred towards educational purposes - as claimed that since the turnover of the assessee is less than Rs.1 Crore and the assessee is engaged in the educational activities by running Educational Institution, the assessee is eligible for deduction u/s.10(23C)(iiiad) - CIT(A) observed that the assessee has claimed expenses for which no proper evidences are available and claim of deduction of the expenses have been made merely on the basis of self-made vouchers , as was adversely reported by the auditors in their audit report by way of adverse comment/remarks about the claim of deduction of expenditure based on self made vouchers instead of evidence in support of expenses, and based on that Ld.CIT(A) disallowed the claim of deduction of expenses as the genuineness of these expenses could not be proved by the assesse HELD THAT - Assesse had submitted before us that one more opportunity be provided to the assessee , and the assessee will produce all the relevant documents/evidences to prove that the assessee is genuinely engaged in the educational activities of running of the educational institution and holding the necessary evidences to support the expenses being incurred for the purposes of the educational activities of the assessee. It was submitted by ld. Counsel for the assessee that the auditors had given a general remarks about non availability of evidences in support of the expenses incurred. The ld. Counsel for the assessee had submitted that the assessee has filed paper book containing 15 pages in which audited accounts with auditors report is placed. Also assessee submitted that the expenses incurred included salaries to the tune of Rs. 26,53,200/- which is paid to staff who is engaged by the educational institution run by the assessee for educational activities such as faculty members, administrative staff etc, and there are other expenses such as seminar expenses, uniform expenses , communication expenses , vehicle expenses, postage expenses etc. which were also incurred for educational activities of the assesse in running the educational institution, for which it is submitted by ld. Counsel that the assessee will submit all the evidences to substantiate the genuineness of expenses being incurred for the educational activities of the assessee. Department has no objection if the matter is restored back to the file of Ld.CIT(A) for fresh adjudication. Therefore we set aside the appellate order passed by ld. CIT(A) and restore the matter back to the file of ld. CIT(A) for deciding afresh appeal filed by the assessee with ld. CIT(A) on merits in accordance with law - The assessee is directed to co-operate with Ld.CIT(A) , and submit all the explanations and information sought for by ld. CIT(A) in order to adjudicate appeal filed by the assesse on merits - Appeal of the assessee is treated as allowed for statistical purposes.

Issues Involved:
1. Legality of the intimation passed by the Assessing Officer (AO) under section 143(1) of the Income Tax Act, 1961.
2. Denial of deduction of expenditure incurred towards educational purposes amounting to Rs. 67,97,457/-.
3. Eligibility for exemption under section 10(23C)(iiiad) of the Income Tax Act, 1961.

Detailed Analysis:

1. Legality of the Intimation Passed by AO under Section 143(1):
The assessee challenged the intimation passed by the AO under section 143(1) of the Income Tax Act, 1961, arguing that it was "bad in law and deserves to be uncalled for." The AO had processed the return of income for AY 2019-20 and denied the exemption under section 11 on the grounds that the assessee was not holding registration under section 12A/12AA of the Act. The AO stated, "As per the details furnished in the return, Assessee is not registered u/s 12A/12AA or approved u/s 10(23C)(iv) or 10(23C)(v) or 10(23C)(vi) or 10(23C)(via). Hence exemption is not allowable."

2. Denial of Deduction of Expenditure Incurred Towards Educational Purposes:
The assessee declared income of Rs. NIL after claiming exemption under section 11 of the Act and reported gross receipts of Rs. 67,97,457/- with expenditure of Rs. 65,93,431/- for the objects of the Trust. The AO disallowed the entire claim for expenditure made by the assessee under section 11, resulting in a taxable income of Rs. 67,97,457/-. The Ld. Commissioner of Income-tax (Appeals) [CIT(A)] upheld the AO's decision, noting that the Tax Auditor had adversely remarked that "in respect of the expenses claimed by the assessee there are no third-party supporting evidences and the only evidence available are in the form of self-made vouchers." Consequently, the CIT(A) found no infirmity in the AO's action of disallowing the entire expenditure claimed by the assessee.

3. Eligibility for Exemption under Section 10(23C)(iiiad):
The assessee contended that it was eligible for exemption under section 10(23C)(iiiad) of the Act, as its turnover was less than Rs. 1 crore and it was engaged in educational activities. The CIT(A) rejected this claim, stating that the assessee had claimed expenses based on self-made vouchers without proper evidence, as reported by the auditors. The Tribunal noted that the assessee had inadvertently claimed exemption under section 11 instead of section 10(23C)(iiiad) and had submitted that it would provide all relevant documents to substantiate the genuineness of the expenses incurred for educational activities.

Tribunal's Decision:
The Tribunal observed that the assessee had filed its return of income claiming exemption under section 11, which was disallowed by the AO due to the lack of registration under section 12A/12AA. The assessee argued that it was eligible for exemption under section 10(23C)(iiiad) and that the expenses were genuinely incurred for educational activities. The Tribunal decided to restore the matter back to the file of the CIT(A) for fresh adjudication, allowing the assessee to produce all relevant documents and evidence to support its claim. The Tribunal emphasized that it had not commented on the merits of the issues involved and that all contentions were kept open.

Conclusion:
The appeal filed by the assessee was allowed for statistical purposes, with the matter being remanded to the CIT(A) for a fresh decision on the merits in accordance with the law. The assessee was directed to cooperate with the CIT(A) and provide all necessary documents and explanations to substantiate its claims.

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