DISALLOWANCE OF ELIGIBLE DEDUCTIONS ON MERE TECHNICALITIES

[Mr. M. GOVINDARAJAN]

In ‘Asha Modern Educational Society v. Income Tax Officer (Exemption), Ghaziabad’ - 2024 (2) TMI 1171 - ITAT, New Delhi - the assessee, Asha Modern Educational Society is an Educational Trust registered under Section 12AA of the Income Tax Act, 1961 (‘Act’ for short). The Assessee filed its Income Tax Return claiming charitable status. The assessee claimed application of income for charitable purposes under section 11 and 12 of the Act. The return has been verified without considering the aspect of its registration under Section 12AA of the Act and therefore all the income is added in the income.

On receiving the intimation of the above said order the assessee filed rectification application under section 154 of the Act for reprocessing the return after considering the deductions for application of income for charitable purposes under relevant under section 11 and 12 of the Act. Order was passed by Authority rejecting the claim of application of income for charitable purposes and demanded the tax considering the gross receipt of the trust as income.

Being aggrieved against the rectification order the assessee filed an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) dismissed the appeal on 13.05.2022. The assessee, being not satisfied with the dismissal order of Commissioner of Income Tax (Appeals) filed the present appeal before the Income Tax Appellate Tribunal (‘Tribunal’ for short).

The assessee (‘appellant’ for reference) submitted the following as the grounds of appeal-

• The Commissioner of Income Tax (Appeals) has grossly erred in confirming the addition of Rs. 3,34,32,351/- to the total income of the appellant Trust by the CPC without considering the factum of non adherence to the conditions of section 143(1).
• The Commissioner of Income Tax ( Appeals) has grossly erred in not considering that the appellant Trust had already complied with the filing of audit report in form I0B in terms of the Circular No. 10/2019 (F. No.197/55/2018-ITA-I), dated 22-5-2019 modified with the Circular No. 7/2021 (F.No. 197/49/2021 -ITA-1), dated 26-3-2021 and the time limit for passing the order of condonation in filing of audit report by the Principal Commissioner of Income Tax (Exemption) had already expired.
• The Commissioner of Income Tax (Appeals) has grossly erred in his failure to consider the ‘Shrimati Gitadevi Kondoi Seva Nidhi v. Income Tax Officer (Exemption)’, - 2020 (1) TMI 1675 - ITAT KOLKATA by the coordinate Bench of the Tribunal while framing the appellate order.

Before the Tribunal the appellant submitted that the order of the Commissioner of Income Tax (Appeals) is liable to be set aside by the Tribunal on the above said grounds.

The Revenue contended that the order of the Commissioner of Income Tax (Appeals) requires no interference as the delay in filing Form 10B has not been condoned by the competent authority, therefore by relying on the order of the Commissioner of Income Tax (Appeals), sought for dismissal of the Appeal filed by the Assessee.

The Tribunal has considered the submissions of both the parties. The Tribunal also analyzed the entire case in detail. The Tribunal relied on a judgment in ‘Pawan Kuamr Agarwal V. Commissioner of Income Tax’ - 2014 (5) TMI 449 - DELHI HIGH COURT. In this case the Tribunal analyzed the provisions of Section 154 of the Act. Section 154(1) of the Act provides that with a view to rectifying any mistake apparent from the record an income-tax authority referred to in section 116 may,-

• amend any order passed by it under the provisions of this Act ;
• amend any intimation or deemed intimation under sub-section (1) of section 143 (1A).

Section 154 (1A) of the Act provides that where any matter has been considered and decided in any proceeding by way of appeal or revision relating to an order the authority passing such order may, notwithstanding anything contained in any law for the time being in force, amend the order under that sub-section in relation to any matter other than the matter which has been so considered and decided.

Section 154 (2) provides that subject to the other provisions of this section, the authority concerned–

• may make an amendment under sub-section (1) of its own motion, and
• shall make such amendment for rectifying any such mistake which has been brought to its notice by the assessee, and where the authority concerned is the Commissioner (Appeals), by the Assessing Officer also.

From the reading of the above said Section the Tribunal observed that the power of rectification extends to amendment of intimation or deemed intimation under Section 143. This power extends even at the stage of the appeal and the further appeal to the Tribunal. Even after such decision, it is open to the AO to amend the intimation under Section 143 (1) if the circumstances so warrant. The Tribunal further observed that the justice demands, in the peculiar facts of the case, that there is no impediment to relief. The same has been overlooked in entirety by the lower authorities. The Tribunal also had failed to notice that the controlling expression in Section 154 is not ‘an error’ which is somewhat colored by the exercise of power by the authorities. Instead, the controlling expression is ‘any mistake’ which has wider connotation and includes mistakes committed by the parties also.

Considering the above judgment, the Tribunal held that the Revenue Authorities have to tax the right person in right manner and shall not disallow the eligible deductions on mere technicalities. In this case the Revenue has not followed the Pawan Kuamr Agarwal (supra) case. The Tribunal held that the Revenue Authorities should have allowed the benefit of exemption to the Assessee. The Tribunal deleted the additions made in the income of the assessee.