2017 (8) TMI 485 - AT - Income Tax

Validity of intimation / adjustment u/s 143(1) - Exemption u/s 11A denied - Registration no. u/s 12AA was not mentioned in the ITR - Held that - In this case, there was an evidence having filed application for registration but there was no evidence with the income tax department to show whether the revenue has rejected the assessee s application for registration or not but allowed the exemption claimed by the assessee. Therefore, it is evident that the society has been granted the registration or deemed to have been granted the registration and the department has not cancelled the registration subsequently. The return of income was processed u/s 143(1) of the Act and the adjustment made by the income tax department withdrawing the exemption claimed u/s 11 of the Act unilaterally without putting the assessee on notice. The Act permits the adjustments u/s 143(1) of the Act, which are apparent from record. Since the adjustment made by the AO is debatable, which requires verification from the assessment records and there was no evidence to show that the registration applied for was rejected or cancelled, we hold that the adjustment made by the revenue in the intimation u/s 143(1) is beyond the scope of section 143(1) of the Act and accordingly, we set aside the orders of the lower authorities and delete the addition made by the A.O. - Decided in favour of assessee.

Summary

Issues:
1. Whether the assessee is entitled to exemption u/s 11 of the Income Tax Act, 1961?
2. Whether the adjustment made by the revenue in the intimation u/s 143(1) is valid?

Analysis:
Issue 1:
The assessee, a registered society under the Societies Act, claimed exemption u/s 11 of the Act. The assessee argued that since it was registered u/s 12AA of the Act and had consistently claimed exemption from 1990 onwards, the revenue cannot unilaterally withdraw the exemption. The assessee provided evidence of filing returns and exemption being allowed in previous years. The department contended that the assessee failed to mention the registration certificate number, justifying the withdrawal of exemption. The Tribunal noted that the society had applied for registration u/s 12AA, with evidence from a scrutiny assessment order for 1996-97 showing exemption granted. The Tribunal held that the revenue should have verified the registration status before making adjustments u/s 143(1) and concluded that the adjustment was beyond the Act's scope. Consequently, the Tribunal set aside the lower authorities' orders and deleted the addition made by the Assessing Officer.

Issue 2:
The Tribunal examined the validity of the adjustment made by the revenue in the intimation u/s 143(1) of the Act. The revenue argued that the assessee's failure to mention the registration certificate number warranted withdrawal of exemption u/s 11. However, the Tribunal found that there was no evidence of rejection or cancellation of the registration applied for. As the adjustment made by the revenue was debatable and lacked supporting evidence, the Tribunal held it to be beyond the scope of section 143(1) of the Act. Consequently, the Tribunal allowed the appeal filed by the assessee, setting aside the lower authorities' orders and deleting the addition made by the Assessing Officer.

In conclusion, the Tribunal ruled in favor of the assessee, emphasizing the importance of verifying registration status before withdrawing exemptions and holding that adjustments made without proper evidence are beyond the scope of the Income Tax Act.