2023 (3) TMI 1151 - AT - Income Tax

Denial of benefit of carry forward setting off of loss and exemption u/s 11 r.w.s. 12 - Belated filing of ITR - excess of expenditure over income as per the financials for the year under appeal - CIT A upholding the disallowance of the exemption claimed u/s.11 on the ground that the return was not filed in accordance with the Provisions contained in Sec. 12A 1 ba i.e. within the Due date u/s 139 4A of the Act under the facts and in the circumstances of the appellant s case - HELD THAT - CPC has charged the income tax on the entire gross receipts without giving effect of the expenditures incurred by the assessee towards earning of the income. The income has been defined in section 2(24) of the Act., the income should be construed in its general meaning but not to the entire receipts, if the assessee has incurred any expenditure towards earning the income, in such case, the assessee is entitled for deduction of expenditure incurred as prescribed in the Income Tax Act. There may be disallowances of the expenditures, which are not in conformity within the provisions of the Income Tax Act. Assessee filed return of income belatedly as per section 139(4) of the Act. The section 139(4A) of the Act prescribes that all other provisions of the Act shall apply as if it were a return required to be furnished under sub-section (1) of section 139 of the Act. The income is arrived after deducting the allowable expenditures as per the I.T. Act. 1961. In the impugned case on hand, the total receipts declared by the assessee , we observe that there is excess expenditure over income which is loss suffered by the assessee during the year. Therefore, in this case, the claim of deduction from income under section 11 and 12(1) (ba) does not arise. No doubt that the assessee has filed his return of income belatedly but he was required to compute his income and the income is below the threshold limit and in this case no tax shall be charged on the entire receipts. We also make it clear that the assessee will not get the benefit of carry forward setting off of loss for the subsequent year as prescribed u/s 139(3) - we set aside the order of the CIT(A). Accordingly, appeal of the assessee is partly allowed.

Summary

Issues involved:
The appeal filed by the assessee against the order passed by the National Faceless Appeal Centre (NFAC) for the assessment year 2018-19.

Grounds of Appeal:
1. Challenge against orders of authorities as being opposed to law, equity, weight of evidence, and facts.
2. Disagreement with determination of income and disallowance of exemption claimed.
3. Dispute over disallowance of exemption due to late filing of return and non-compliance with provisions.
4. Dispute regarding disallowance of exemption claimed and filing of Form No. 10B.
5. Dispute over taxation of gross receipts without allowing expenses.
6. Denial of liability to be charged interest under specific sections of the Act.
7. General prayer for appeal to be allowed, justice to be rendered, and costs to be awarded.

Details of the Judgment:
The assessee, a Trust registered under section 12A of the Income Tax Act, filed a return of income claiming exemption under section 12AA. The Central Processing Centre (CPC) processed the return without granting the claimed exemption, leading to an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) upheld the disallowance of exemption due to late filing of the return, as per the provisions of section 139(4A) and section 12A(1)(ba) of the Act.

The Income Tax Appellate Tribunal (ITAT) considered the appeal challenging the tax charged on the entire receipts of the assessee. The Tribunal noted that the return was filed late, and the assessee did not comply with the conditions under section 12A(1)(ba) for claiming exemption under sections 11 and 12. The gross receipts of the Trust were analyzed, revealing a loss for the year. The ITAT emphasized that income tax should be levied on the income earned after deducting allowable expenditures, as per the Act. Despite the late filing of the return, the Tribunal acknowledged the excess of expenditure over income, resulting in a loss for the assessee. Therefore, the claim of deduction under sections 11 and 12(1)(ba) did not apply. The Tribunal partially allowed the appeal, setting aside the CIT(A)'s order and clarifying that no tax shall be charged on the entire receipts.

In conclusion, the ITAT partially allowed the appeal, recognizing the loss suffered by the assessee and emphasizing the deduction of allowable expenditures in determining taxable income.

Separate Judgment:
No separate judgment was delivered by the judges in this case.