2024 (12) TMI 816 - AT - Income Tax

Rectification u/s 154 - denial of exemption u/s. 11 - HELD THAT - It is settled proposition of law that debatable issues cannot be done in the rectification proceedings. More particularly, when the CPC Centre vide its Intimation allowed the claim of exemption u/s. 11 of the Act in the rectification petition without assigning any reason or debating from the view taken earlier while passing the intimation u/s. 143(1), CPC ought not to have denied the exemption to the assessee. Thus the finding arrived by CIT(A) is well within the provisions of law which does not require any interference. Thus the appeal filed by the Revenue is devoid of merits and the same is liable to be dismissed. Appeal filed by the Revenue is dismissed.

Issues:
Delay in filing appeal; Rectification order under section 154 of the Income Tax Act, 1961; Exemption claimed under section 11 of the Act; Disallowance of exemption by CPC; Appeal by Revenue against granting of exemption under section 11; Debatability of issues in rectification proceedings.

Delay in filing appeal:
The appeal was filed by the Revenue against the appellate order dated 04.11.2022 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, relating to the Assessment Year 2015-16. The Registry noted a delay of three days in filing the appeal, which was explained by the Department due to the Assessing Officer holding multiple charges during that period, stock shortage, resulting in the delay. The delay of three days was condoned.

Rectification order under section 154 of the Income Tax Act, 1961:
The case involved an educational institution registered under section 12AA enjoying exemption under section 11 of the Act for the Assessment Year 2015-16. The assessee filed an original Return of Income claiming exemption under section 11 and declaring Nil Income. Subsequently, a Revised Return was filed for claiming credit of acquisition of securities. The CPC allowed exemption under section 11 but denied credit for the acquisition of securities. A rectification application was filed claiming credit for the securities, which was allowed, but exemption under section 11 was denied in a subsequent rectification order.

Exemption claimed under section 11 of the Act:
The Ld. CIT(A) granted exemption under section 11 after considering the submissions and facts of the case. The Ld. CIT(A) observed that the assessee, being a charitable trust, was eligible for deduction under section 11. The disallowance made by the CPC did not fall within the mandate of section 143(1). The Ld. CIT(A) concluded that the assessee was eligible for claiming exemption under section 11 on the expenditure incurred.

Disallowance of exemption by CPC:
The Revenue appealed against the granting of exemption under section 11 by the Ld. CIT(A). The Revenue argued that the CPC was not correct in granting the exemption. However, the assessee contended that the CPC, while allowing credit for securities in the rectification order, wrongly denied exemption under section 11 without providing any reasons for the disallowance.

Appeal by Revenue against granting of exemption under section 11:
The Revenue's appeal was based on the contention that debatable issues cannot be decided in rectification proceedings. The CPC, having allowed exemption under section 11 in an earlier intimation, should not have denied the exemption in the rectification order. The Tribunal upheld the Ld. CIT(A)'s decision to grant exemption under section 11, stating that the appeal filed by the Revenue lacked merit and was dismissed.

Debatability of issues in rectification proceedings:
The Tribunal reiterated that debatable issues cannot be decided in rectification proceedings. The CPC, having allowed exemption under section 11 in an earlier intimation without providing reasons, should not have denied the exemption in the rectification order. The Tribunal affirmed the Ld. CIT(A)'s decision to grant exemption under section 11, dismissing the Revenue's appeal.

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