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2020 (4) TMI 424 - AT - Income TaxRectification u/s 154 - CPC disallowed the entire claim of the application of income on the ground that the assessee trust was not registered u/s 12A therefore, entire gross receipts were added back to the returned income of the assessee in the proceedings carried out u/s 143(1) - assessee moved a rectification application u/s 154 pleading that even if the assessee is assessed as an AOP, the assessee may be grated the claim of revenue expenditure which has been claimed as application of income in the return of income. However, the said application was also rejected by the CPC - HELD THAT - Under similar circumstances, the claim of the expenditure has been allowed by the CPC for the assessment year 2016-17 copy of the assessment order has been placed on record. We find force in the contention of the Ld. Counsel for the assessee that if the assessee has not been treated as a charitable trust, still the income of the assessee is to be assessed as per the normal provisions of the Act and the admissible revenue expenditure is to be allowed against the income of the assessee. In view of this, the impugned order of the CIT(A) is set aside, the matter is restored to the file of the Assessing Officer for deciding it afresh, treating the assessee s income as an AOP and considering the claim of the assessee of allowability of expenditure which was inadvertently claimed as application of income in the return of income. Appeal of the assessee is treated as allowed for statistical purposes.
Issues:
Appeal against rejection of rectification application u/s 154 of the Income Tax Act, 1961. Disallowance of claim of application of income due to non-registration u/s 12A. Appeal against dismissal of appeal by Ld. CIT(A). Allowability of expenditure claimed as application of income. Issue 1: Appeal against rejection of rectification application u/s 154: The appeal was filed by the assessee against the rejection of the rectification application u/s 154 of the Income Tax Act, 1961. The Commissioner of Income Tax-2, Chandigarh upheld the action of the Assessing Officer / CPC in rejecting the rectification application. The assessee trust, being an irrevocable Pension Fund trust, created for the provision of pension benefits, moved the rectification application which was disallowed due to non-registration u/s 12A of the Act. Issue 2: Disallowance of claim of application of income due to non-registration u/s 12A: The Assessing Officer / CPC disallowed the claim of application of income by the assessee trust on the grounds of not being registered u/s 12A of the Income Tax Act. The entire gross receipts were added back to the returned income of the assessee in the proceedings carried out u/s 143(1) of the Act. The assessee pleaded for the claim of revenue expenditure even if assessed as an AOP, but the rectification application u/s 154 was also rejected by the CPC. Issue 3: Appeal against dismissal of appeal by Ld. CIT(A): The assessee, being aggrieved by the order of the CPC, filed an appeal before the Ld. CIT(A), which was dismissed. The Ld. CIT(A) upheld the decision against the assessee, leading to the assessee filing an appeal before the ITAT Chandigarh. Issue 4: Allowability of expenditure claimed as application of income: The Ld. Counsel for the assessee argued that similar expenditure claims were allowed by the CPC for a different assessment year. The contention was that even if the assessee is not treated as a charitable trust, the income should be assessed as per the normal provisions of the Act, allowing admissible revenue expenditure against the income. The ITAT Chandigarh set aside the CIT(A) order, restoring the matter to the Assessing Officer for reevaluation, treating the assessee's income as an AOP and considering the claim of expenditure inadvertently claimed as application of income. This judgment highlights the importance of proper registration under the Income Tax Act for trust entities, the need for correct assessment of income and expenditure, and the recourse available through appeals and rectification applications in case of adverse decisions by tax authorities.
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