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TMI Blog2022 (4) TMI 1603X X X X Extracts X X X X X X X X Extracts X X X X ..... d limit, therefore, the calculation of the tax rate at maximum marginal rate is correct. However, the AO did not elaborate regarding the disallowance of entire expenditure claimed by the assessee i.e. 143(1) by the CPC, Bangalore. A perusal of the same shows that the adjustment made by the CPC, Bangalore, does not fall under any of the limb prescribed u/s 143(1) of the Act. Further, the submission the ld. Counsel that no such adjustment was made in earlier Assessment Years and there is no change in the facts during the year under consideration, also could not be controverted by the ld. DR. Even otherwise also, as find in the case of DDIT (E) vs Petroleum Sports Promotion Board [ 2014 (3) TMI 298 - DELHI HIGH COURT] has held that in case of a charitable society even if benefit u/s 11 12 of the Income Tax Act, 1961 is denied and its income was brought to tax as income from other sources, all relevant expenditures were also to be allowed. Thus adjustment made by the CPC, Bangalore, and confirmed by the ld. CIT(A) is not warranted being contrary to provisions of section 143(1) - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... owance of the entire expenditure of ₹ 4,85,564/- is beyond the scope of provisions of section 143(1) of the Act. Further, the CPC, Bangalore was not correct in denying benefit of threshold limit and charging income tax at maximum marginal rate on gross profit. 4.1. However, the Ld. CIT(A) was not fully satisfied with the arguments advance by the assessee. She held that the rate applicable in case of the assessee will be same as that of an individual, hence the slab of ₹ 2,50,000/- will be applicable. However, she rejected the other grounds i.e. confirming the disallowance of entire expenditure incurred by the assessee at ₹ 4,85,564/- by observing as under:- 5.1. I have carefully considered the submissions of the appellant and the facts of the case. 5.2 Brief facts of the case: The appellant is a registered society that runs a temple at Ambica Vihar. However, it is seen from the memorandum of association called for and submitted by the AR of the appellant that the society has been registered with the following objects: 1. To manage and administer any library, reading room, school and any other institution irrespective of caste creed and social status. 2. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred for the purpose of earning donation or interest. Therefore, the action of the ACIT CPC with regard to disallowance of expenses is upheld and he gross total income computed at 7,03,620/- is considered to be the correct taxable income. 5.4 Now, coming to the taxability of the income, it is seen that the appellants' return was filed reflecting the status as AOP. Therefore, it is necessary to see the applicability of rates of tax, at which the unregistered AOP will be taxed. As the appellant is a charitable trust which is registered under the Societies Registration Act, 1890, therefore, section 167B of the I.T. Act will not be applicable, therefore, the rate at which an unregistered charitable or religious trust or institution is taxed will be the rate that is applicable to individual assessee except for those that are covered u/s 13(1) of the I.T. Act. 5.4.1 In view of the above, the rate applicable in case of the appellant will be same as that of an individual hence the slab of 2,50,000/- will be applicable. 5.4.2 Considering the above facts, the threshold limit should be allowed while computing the tax of the appellant on total income of ₹ 7,03,624/-. 6. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ranted being contrary to Provisions of section 143(1) of the Act. 7. In his another plank of argument, the ld. Counsel for the assessee, relying on various decisions, submitted that debatable issue cannot be subject matter of adjustment u/s 143(1) of the Act. He submitted that the adjustment made by disallowing entire expenditure requires verification of all expenditure by providing due opportunity to the assessee to substantiate its claim, which is a debatable issue which can be permitted by issuing scrutiny notice u/s 143(2) of the Act only and not permitted by way of adjustment. For the above proposition, he relied on the decision of the Hon'ble Delhi High Court in the case of Abhishek Cement Ltd. vs Union of India, reported in [2012] 349 ITR 1(Del.) and the decision of the Hon'ble Bombay High Court in the case of Bajaj Auto Finance Ltd. vs Commissioner of Income Tax, reported in [2018] 404 ITR 564 (Bom.). 8. The ld. DR, on the other hand, heavily relied on the order of the ld. CIT(A). 9. I have considered the rival arguments made by both the sides, perused the orders of the CPC, Bangalore and the Ld. CIT(A) and the paper book filed on behalf of the assessee. I have also cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed as monetary amount or percentage or ratio or fraction;" 10. A perusal of the same shows that the adjustment made by the CPC, Bangalore, does not fall under any of the limb prescribed u/s 143(1) of the Act. Further, the submission the ld. Counsel that no such adjustment was made in earlier Assessment Years and there is no change in the facts during the year under consideration, also could not be controverted by the ld. DR. 11. Even otherwise also, I find the Hon'ble Delhi High Court in the case of DDIT (E) vs Petroleum Sports Promotion Board (Supra) has held that in case of a charitable society even if benefit u/s 11 & 12 of the Income Tax Act, 1961 is denied and its income was brought to tax as income from other sources, all relevant expenditures were also to be allowed. The relevant observation of the Hon'ble High Court reads as under:- "7. The learned standing counsel for the revenue submitted that the order of the Tribunal is untenable since it indirectly confers the benefit of Section 11 upon the assessee. We are, however, not inclined to accept the contention. The CIT (Appeals) has actually not held so. He never examined the question whether the assessee was eligible f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 2002-03 the assessee was exempt from tax under Section 10(23C); from the assessment year 2006- 07 it has been granted registration or a charitable institution under Section 12A making it eligible for the exemption under Section 11." 12. In view of the above discussion, I am of the considered opinion that the adjustment made by the CPC, Bangalore, and confirmed by the ld. CIT(A) is not warranted being contrary to provisions of section 143(1) of the Act. Accordingly, the order of the Ld. CIT(A) is set-aside and the AO is directed to allow the claim of expenditure of ₹ 4,85,564/- from the gross receipt. ITA No.6761 to 6763/Del/2019 13. In the above cases, the assessee filed the return of income u/s 139(1) of the Act for the above three Assessment Years in ITR-7, declaring total income of ₹ 2,01,148/- for the AY 2014-15, ₹ 2,51,150/- for AY 2015-16 and ₹ 4,43,503/- for AY 2016-17. The CPC, Bangalore while processing the return u/s 143(1) accepted the returned income with no adjustment but worked out the tax at maximum marginal rate as against normal rate. The assessee filed appeal before the Ld. CIT(A), who made enhancement to the assessed income by exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in appeal. In the absence of any statutory provision, the general principle relating to the amplitude of appellate authority's power being co-terminus with that of the initial authority should normally be applicable. If the tax liability of the assessee is admitted and if the ITO is afforded opportunity of hearing by the appellate authority in allowing the assessee's claim for deduction on the settled view of law, there appears to be no good reason to curtail the powers of the appellate authority under section 251(1)(a) hearing appeal against the order of subordinate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. In the absence of any statutory provision the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. There appeared to be no good reason to justify curtailment of the power of the AAC in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the ITO. There may be several factors justifying raising of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... triction under the Act that the information, which could form the basis for enhancement of income, could not be sourced from the Assessing Officer. Enough safeguards for exercising of such powers in the form of principles of natural justice have been provided. [Para 6] Keeping in view the plain language of section 251, the power to enhance income could be exercised by the Commissioner (Appeals) even on an information furnished by the Assessing Officer. [Para 8] 5.4.8. In the light of the above, the objection raised by the appellant regarding the jurisdiction and powers of enhancement of CIT(A) deserves to be rejected. Further in light of the deliberations and discussions made in the preceding in the paragraph and respectfully relying on the judicial decisions of the Hon'ble Courts, as cited above, the taxable income of the appellant is being enhanced. It has already been discussed in para 5.3 supra that the AO (CPC) was not consistent in his approach as in the immediately preceding year, the processing was completed after taking the total receipts as taxable income instead of considering the net recipes as shown by the appellant. And it has already been discussed that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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