THE NAB WORKSHOP FOR THE BLIND, MUMBAI V. DCIT(CPC), BANGLORE, BANGALORE

ITA 1646/MUM/2020

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 8898 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2016-2017
• Appeal Filed On: 29-06-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: GAUTAM NA YAK
• Keywords: Charitable institution; Deemed to accrue or arise in india
• Section: 143(1); 250; 274; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI BEFORE SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER & SHRI GAGAN GOYAL, ACCOUNTANT MEMBER ITA No. 1646/Mum/2020 (A.Y: 2016-17) The NAB Workshop for the Blind, Dr. Annie Besant Road, Worli, Mumbai – 400 030. Vs. DCIT (CPC) 4 th Floor, Piramal Chambers, Parel, Mumbai-400012. ./ज आइआर ./PAN/GIR No. : AAATT3397F Appellant .. Respondent Appellant by : Shri. Gautam Nayak.AR Respondent by : Shri. Pramod Nikalje.DR Date of Hearing 14.06.2022 Date of Pronouncement 20.06.2022 आद श / O R D E R PER PAVAN KUMAR GADALE JM: The assessee has filed the appeal against the order of the Commissioner of Income Tax (Appeal)-1,Mumbai passed u/s 143(1) and 250 of the Act. The assessee has raised the following grounds of appeal: 1. The learned Commissioner of Income tax (Appeals) was not justified in upholding the assessing officer's action of disallowing set off of deficit of Rs.43,52, 320 of the current year on account of excess application of income, against the deemed income taxable under section 11(3) of Rs.54,38,485, while making the intimation under section 143(1). ITA No. 1646/Mum/2020 The NAB Workshop for the Blind, Mumbai - 2 - 2. The learned Commissioner (Appeals) failed to appreciate that not permitting such set off was at best debatable, and hence could not have been done under section 143(1). 3. The learned Commissioner of Income tax (Appeals) failed to appreciate that there is no provision denying such set off of deficit against the deemed income taxable under section 11(3). 2. The brief facts of the case are that the assessee is a charitable institution registered with the Director of Income Tax (Exemption), Mumbai vide registration dated 15.03.2000 and also registered with the charity commissioner of Mumbai. The assessee is a trust engaged in vocational training centre for the blind aided by Government of Maharashtra. The assessee imparts vocational training to adult visually handicapped as under in various trades to facilitate their rehabilitation and conduct training courses for educated blind. The assessee has filed the return of income for the A.Y 2016-17 on 30.09.2017 disclosing a total income of Rs.10,86,170/- whereas the assessee in the financial year has earned the income of Rs. 2,14,63,808/- and applied income for charitable purpose of Rs. 2,58,16,128/-. As the application of money for charitable purpose exceeded the income of the trust, the excess application of ITA No. 1646/Mum/2020 The NAB Workshop for the Blind, Mumbai - 3 - money of Rs.43,52,320/- was adjusted against the accumulated income being the unutilized accumulation u/s 11(2) of the Act for A.Y 2010-11 of Rs.54,38,485/- and the balance of income is computed as taxable of Rs. 10,86,165/-. The assessee has received the intimation u/s 143(1) of the Act dated 30.08.2017 where the CPC has not granted the adjustment of income /deficit and assessed the total income of the assessee of Rs. 54,38,485/-. 3. Aggrieved by the order, the assessee has filed an appeal before the CIT(A). Whereas the CIT(A) has considered the grounds of appeal, submissions of the assessee vide letter dated 19.12.2019 referred at Para 4.1 of the order However, the CIT(A) is of the opinion that the assessee is not entitled for any relief and dismissed the assessee appeal. Aggrieved by the order of the CIT(A), the assessee has filed an appeal before the Honble Tribunal. 4. At the time of hearing, the Ld. AR submitted that the CIT(A) has erred in not considering the facts and the objects of the trust imparting education to the blind. The assessee has made the detailed ITA No. 1646/Mum/2020 The NAB Workshop for the Blind, Mumbai - 4 - submissions before the CIT(A) and were overlooked. Further the CIT(A) failed to appreciate the facts and that the assessee is entitled for set off of the accumulated income u/sec11(2) of the Act against the current year deficit. The Ld. AR substantiate the submissions with the paper book and judicial decisions and prayed for allowing the appeal. Contra, the Ld. DR supported the order of the CIT(A). 5. We heard the rival submissions and perused the material on record. The sole disputed issue envisaged by the Ld. AR that the CIT(A) has erred in not granting the set off of current year deficit on account of application money against the deemed income/accumulated income u/s 11(2) in the intimation u/s 143(1) of the Act. The Ld AR submitted that the assessee has been complying with the guidelines on accumulation of income from the earlier years. The Ld. AR referred to the page 1 of the paper book, where the computation of income disclosing the total income of the trust and application and also set off of application against the unutilized balance for A.Y 2010-11 u/s 11(2) of the Act is placed. Further, the Ld. AR referred to the ITA No. 1646/Mum/2020 The NAB Workshop for the Blind, Mumbai - 5 - return of income filed at page 2 to 19 of the paper book in particular, the assessee has disclosed this fact of accumulation of income and the set off at Part- B, T-1 of the return of income- ITR 7 filed. The assessee has disclosed the facts in the part-B, T-1 and as per the net calculation, the taxable income is worked out to Rs.10,86,165/-. 6. The Ld.AR mentioned that the assessee has claimed set off at the time of filling the return of income and referred to the correspondence and the submissions made before the CIT(A) placed at page 22 to 27 in the paper book . The contention of the Ld. AR that the provisions of Sec. 143(1) of the Act are only a restrictive provisions and they have to be incorporate only for certain arithmetic error in the return of income for incorrect claim apparent in the return of income filed. The Ld. AR emphasized that there is no incorrect claim in the return of income filed by the assessee. The question before us is regarding the set off of current year deficit against the income under 11(2) of the Act in the intimation u/sec143(1) of the Act. The Ld. AR has relied on the following judicial decisions: ITA No. 1646/Mum/2020 The NAB Workshop for the Blind, Mumbai - 6 - 1. Commissioner of Income Tax v. Natwarlal Chowdhury Charity Trust [1991] (189 IT 656 (Calcutta) 2. The Trustees, The B.N. Gamadia Parsi Hunnarshala v. Assistant Director of Income-Tax (Exemption) [2002] 77 TTJ 274 (Mumbai) 3. Abheraj Baldota Commissioner of 948/Bang/2017) Foundation Income-tax V. ITA The 947 & 948/Bang/2017. 4. Maker Tower 'E' Premises Co-operative Society Ltd. v. The Asst. Commissioner of Income-tax PC (ITA 4093/Mum/2017) 5. Dr Prasaad Narayan Honap v. Income-tax Officer [I.T.A. No. 78/PN/10 6. Ms. Sushiela Natarajan v. Income-tax Officer [2013] 28 IT(T) 237 (Chennai-Trib) 7. We found that the provisions of Sec. 143(1) of the Act are restrictive. The Ld.AR submitted that there is no power under the Act to make the addition unless there is a incorrect claim in the return of income filed. We find the Coordinate Bench of the Honble Tribunal in the case of Maker Tower E Premises Co- operative Society Vs ACIT CPC in ITA No. 4093/Mum/2017 dated 04.07.2018 has dealt on the provisions of 143(1) of the Act at page 6 Para 9 to 13 of the order read as under: ITA No. 1646/Mum/2020 The NAB Workshop for the Blind, Mumbai - 7 - 9. Before us, the learned Counsel for the assessee reiterated all the arguments made before CIT(A) and also filed all the details in its paper books consisting the pages 1 to 80. The learned Counsel for the assessee first of all raised the issue of validity of making adjustment under section 143(1) of the Act, he argued that the disallowance of deduction under section 80P2(d) claimed by the assessee on interest earned on deposits given to co-operative banks amounting to Rs. 76,11,781/- is clearly allowable deduction. As per the provisions there is no scope for any disallowance. Moreover, in any case, it is to be held to be debatable issue under debatable issue cannot be disallowed while processing the return under section 143(1) of the Act. The learned Counsel for the assessee took us through the provisions of section 143(1) and the relevant provisions reads as under: - “143. (1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such return shall be processed in the following manner, namely:— (a) the total income or loss shall be computed after making the following adjustments, namely:— (i) any arithmetical error in the return; 92[***] (ii) an incorrect claim, if such incorrect claim is apparent from any information in the return; 93 [(iii) disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under subsection (1) of section 139; ITA No. 1646/Mum/2020 The NAB Workshop for the Blind, Mumbai - 8 - (iv) disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return; (v) disallowance of deduction claimed under sections 10AA, 80-IA, 80-IAB, 80-IB, 80- IC, 80-ID or section 80-IE, if the return is furnished beyond the due date specified under sub-section (1) of section 139; or (vi) addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return:” 10. From the above provision of section 143(1), as operative from 01.04.2008, which was introduced with an object to reduce Revenue loss, the provisions of section 143(1) of the Act has been amended to provide that the total income of the assessee shall be computed as this provision is for making adjustment to the total income in the return income of the assessee i.e. (a) any arithmetic error in the return or (b) in incorrect claim, if such incorrect claim is apparent from any information in the return of income. Here in the very section, the meaning of term “incorrect claim apparent from any information in the return” has been defined by inserting an explanation in the said section. The term shall mean such claim on the basis of an entry, in the return for filing (a) an item, which is inconsistent with another entry of the same or some other item in such return; (b) in respect of which, information required to be furnished under this act to substantiate such entry has not been so furnished; or (c) in respect of a deduction, where such deduction exceeds ITA No. 1646/Mum/2020 The NAB Workshop for the Blind, Mumbai - 9 - specified statutory limit which may have been expressed as monetary amount or percentage or ratio or fraction. 11. We have gone through the facts in the present case and noticed that the complete details of the deduction claim under section 80P2(d) on the interest income derived from co-operative banks were filed in the return of income with the CPC. We find no specific reason for not granting of deduction under section 80P2(d) of the Act and how it is incorrect in any manner. Accordingly, the return processed by CPC Bangalore under section 143(1) of the Act disallowing the claim of deduction under section 80P2(d) of the Act, is without any basis and being a highly debatable issue, it cannot be considered while acting under section 143(1) of the Act. Accordingly, we delete the disallowance of deduction and allow this issue of assessee’s appeal on validity of processing by CPC under section 143(1) of the Act. 12. Since, we have adjudicated the issue on validity of processing of return under section 143(1) of the Act and allowed the claim of the assessee on the very jurisdiction. Hence, we need not to adjudicate the issue on merits. The appeal of assessee is allowed. 13. In the result, the appeal assessee is allowed 8. We find the CIT(A) has made observations referred at page 13 Para 7&8 of the order read as under: 7. As regards the argument of the assessee that the IT Form 7 does not have a separate schedule for deemed income, the same is without merit. The IT forms do not laid down law. In the instant case the IT Form had a provision for declaring income chargeable under section ITA No. 1646/Mum/2020 The NAB Workshop for the Blind, Mumbai - 10 - 11(3) of the Act and the assessee had also filled in the relevant figure in its Return. The ITR Form does not have any column for application of this amount as it is not the income derived from the property of the Trust. This argument of the assessee is rejected. 8. The assessee is also argued that the matter was debatable and it cannot be adjusted in the intimation. This contention of the assessee is baseless. The law is very clear and it has been consistently been so since past decades. Under section 143(1), the AO is permitted to make an adjustment of an incorrect claim if the same is apparent from any information the return. In the case of the assessee it had itself declared the additional income chargeable to tax under section 11(3) of the Act but had not taken it as taxable. This discrepancy was adjusted under section 143(1) of the Act, which is as per the law. Therefore, the ground of appeal of the assessee and all the arguments taken by it are dismissed. 9. We considering the facts, provisions of the Act, judicial decisions are of the opinion that the adjustment under 143(1) of the Act can be made only on the basis on arithmetic error or incorrect claim where as in the present case the assessee has claimed the set off as discussed in the above paragraphs in the computation of income and also in the return of income was filed which cannot be disputed. For the various reasons the CPC has not considered the assessee’s submissions/claim and there was no ITA No. 1646/Mum/2020 The NAB Workshop for the Blind, Mumbai - 11 - opportunity was provided to the assessee to make submissions before the adjustment by the CPC. We are of the opinion that the order of the CIT(A) cannot be sustained and to meet the ends of justice, we set aside the order of the CIT(A) and direct the Assessing officer to delete the addition and allow the grounds of appeal of the assessee in favour of the assessee. 10. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 20.06.2022. Sd/- Sd/- ( GAGAN GOYAL) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated 20.06.2022 KRK, PS /Copy of the Order forwarded to : 1. / The Appellant 2. / The Respondent. 3. आ र आ / The CIT(A) 4. आ र आ ( ) / Concerned CIT 5. "#$ % & &' , आ र ) र*, Mumbai / DR, ITAT, Mumbai 6. % +, - . / Guard file. ान ु सार/ BY ORDER, ITA No. 1646/Mum/2020 The NAB Workshop for the Blind, Mumbai - 12 - " & //True Copy// 1. ( Asst. Registrar) ITAT, Mumbai