The South India Club, New Delhi V. ITO Ward Exemption 2(3), New Delhi

ITA 354/DEL/2024

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 2243 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-05-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 30-04-2024
• Assessment Year: 2018-2019
• Appeal Filed On: 29-01-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DHARAM VEER SING H
• Keywords: Charitable institution; Opportunity of being heard; Set aside
• Section: 147; 11; 139; 143(3); 142(1); 12A; 12AA; 10B; 143(1); 250; 201; 143(2); 139(4); 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘G’: NEW DELHI BEFORE, SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER AND SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER ITA No.354/Del/2024 (ASSESSMENT YEAR 2018-19) The South India Club Mandir Marg Near Hindu Maha Sabha New Delhi-110 001 PAN-AAAJT2351B Vs. Income Tax Officer Ward Exemption 2(3) New Delhi (Appellant) (Respondent) Assessee by Shri. R. Sivaraman, Adv. Respondent by Shri Dharam Veer Singh,CIT- DR Date of Hearing 01/05/2024 Date of Pronouncement 22/05/2024 ORDER PER S.RIFAUR RAHMAN, AM: 1. This appeal has been filed by the Assessee against the order of Learned Commissioner of Income Tax (Appeals)-1, Coimbatore [“Ld. CIT(A)”, for short], dated 07/12/2023 for Assessment Year 2018-19. 2 ITA No.354/Del/2024 The South India Club vs. ITO 2. The assessee is a registered society under the Societies Act, 1860, registered on 14/02/1941. The assessee filed application for registration u/s 12A with Commissioner of Income Tax (Exemption), Delhi on 27/03/2019. When the application was pending, the assessee filed return of income for the Asst. Year 2018-19 on 30/03/2019. In the return, the assessee had claimed application of income for charitable purpose for Rs.6,01,35,500/-. As per the information available on record, the assessee has utilized on Revenue account of Rs.72,224/- during the previous year and capital account repayment of loan of Rs.6,00,00,000/-. The AO observed that as per the provisions of the Act, an amount accumulated or set apart for application of charitable or religious purposes or for the stated objects of the trust or institution to the extent, which does not exceed 15 percent of income derived from property held in trust or institution u/s 11(a) or 11(b) are eligible for deduction. The return was processed u/s 143(1)(a) of the Act and in the above proceedings, it was observed that the total income of the trust without giving effect to the provisions of 3 ITA No.354/Del/2024 The South India Club vs. ITO section 11 and 12 exceeds the maximum amount which is not chargeable to tax, the audit report in Form 10B has to be E-filed along with the return of income. Since, the assessee has not E- filed the audit report in Form 10B along with or before filing the return of income, exemption u/s 11 is not allowed. As per the return of income declared and observed that the assessee has not filed the Form 10B along with the return of income, an amount of Rs.6,01,35,500/- added as income of the assessee and denied the exemption claimed u/s 11 of the Act. 3. Aggrieved with the above order, the assessee preferred an appeal before the Ld. CIT-1, Coimbatore. 4. The assessee has filed grounds of appeal and detailed submissions before the Ld. First Appellate Authority along with relevant documents in support of its claim. The same is reproduced by Ld. CIT(A) at pages 3 to 6 of the order. “1. The appellant, the South Club (formerly known as The South India Association) was formerly registered on 14.02.1941 as a society under the societies Registration Act, 1860. The South India Club is a non-profit society and its primary objectives are:- I) to pioneer, cultivate and encourage activities in educational, social, cultural and recreational fields, to cultivate literary and artistic talents, to 4 ITA No.354/Del/2024 The South India Club vs. ITO provide a common meeting place with a reading room and library and to promote fine arts. The appellant filed application for Registration under 12A with Commissioner of Income Tax (Exemptions), Delhi on 27.03.2019. When this application was pending. the appellant filed Return of Income for the Assessment Year 2018-19 on 30.03.2019. In this Return, the appellant had claimed application of income for charitable purposes of Rs.6,01,35,500/- which comprised of amount applied during the previous year Revenue Account Rs. 72,224/-, amount applied during the Previous Year Capital Account (Repayment of Loan) Rs.6,00,00,000/-. II. During the financial year 2017-18, we have received an amount of Rs. 6,00,00,000 as voluntary donation from Shriram Transport Finance Company Ltd. This amount was utilised for repayment of loan taken earlier from Shriram Investments of Rs.6,60,97,435/-. This loan amount taken from Shriram Investment has been utilised for construction of new building as we have been advised that the old building is unsafe for operation. III. The DOT, CPC, Bengaluru issued a proposal u/s on 16.08.2019.(Copy of the same is enclosed). IV. The DCIT, CPC issued intimation u/s.143(1) dated 10.11.2019, wherein he denied the exemption claimed u/s.11 and disallowed Rs.6,00,35,500/- as Form No. 10B has not been e-filed in time. The appeal is filed against the denial of exemption claimed u/s 11 and addition of Rs.6,00,35,500/- V. When the evidence of prior filing of intimation or registration, as the case may be, could not be traced in the appellant's case namely South India Club, we were advised to apply for registration u/s 12A of the Income Tax Act afresh. Thus, the registration application was made on 27.03.2019. While the application is pending the appellant filed ROI for AY 2018-19 on 30.3.2019. Our application was rejected by CIT(E) vide his order dated 30.9.2019. The order of the CIT(E) was appealed and we received favourable decision of Hon'ble ITAT in I.T.A. No: 8338 / Del / 2019 dated 13.08.2020 allowing our appeal and directing the CIT (Exemption) to grant registration u/s 12AA. (Copy of ITAT's order is enclosed). VI. Consequent to the ITAT's order, the CIT (Exemptions) granted registration by order dated 05.01.2021. (Copy of the order enclosed). 5 ITA No.354/Del/2024 The South India Club vs. ITO VII. When the CIT (Exemptions) granted registration on 05.01.2021 the income tax scrutiny assessment for the assessment year 2018-19 was pending which, was completed on 08.02.2021. Second Proviso to Sec. 12A(2) of Income Tax Act, which reads as under, is squarely applicable to our case. "Provided further that where registration has been granted to the trust or institution under section 12AA or section 12AB, then, the provisions of sections 11 and 12 shall apply in respect of any income derived from property held under trust of any assessment year preceding the aforesaid assessment year for which assessment proceedings are pending before the Assessing Officer as on the date of such registration and the objects and activities of such trust or institution remain the same for such preceding assessment year". VIII. When the CIT (Exemptions) granted registration to us, w.e.f. Assessment year 2019-20 in accordance with sub section 2 of section 12A on the basis of the application filed in March 2019 automatically the second proviso to that sub section guarantees the benefit of application of section 11 and 12 for pending assessments of earlier assessment years subject only to the condition that there has been no change in objects and activities in the intervening period. There was no change in the objects and activities of the appellant's society during the financial year. Therefore the benefit of registration granted to us is available for the assessment year 2018-19 also. This is a statutory benefit given to us to which the assessee society is entitled and which cannot be denied. IX. Without prejudice the above submissions, we submit that the Assessing Officer erred in overlooking the fact that the donation received of Rs.6,00,00,000/- from STFC, a patron member of the society cannot be brought to tax on the principle of mutuality which governs the society. In this connection, we rely on the Supreme Court decision in the case of State of West Bengal Vs Kolkata Club Limited (110 Taxmann.com.47). X. With regard to your query regarding filing of Form 10B later, we submit as under: The appellant club has been registered as early as on 14.02.1941 as a society under the Societies Registration Act 1860. The amount received by the Club is exempt from income tax on the principle of mutuality. At the 6 ITA No.354/Del/2024 The South India Club vs. ITO time of filing the return of income for the assessment year 2018-19 the club has not been granted registration/s. 12A. Therefore, at time of filing the return of income report in Form 10B was not filed. Subsequently, the CIT(E) granted registration under section 12AA r.w.s 12A on 05.01.2021. As at the time of grant of registration the Assessment proceedings of the preceding assessment year 2018-19 was pending, we became eligible for the benefit of section 11 and 12 as per second proviso to section 12A(2) which is extracted in para VII above. The only condition prescribed by the second proviso for becoming eligible for the benefit of section 11 and 12 to the pending preceding assessment year was the object and activities of such trust or institution remains the same for such preceding assessment year". We have satisfied this condition. The second proviso did not prescribe any other pre-condition to become eligible for benefit of section 11 and 12.As the statute itself (second proviso) has prescribed the precondition, which we have satisfied, we were under the impression that Form 10B need not be filed. Therefore, we have not filed Form 10B. XI. We are submitting herewith copy of the following documents: a. Return of income. b. Show cause notice issued by CPC u/s. 143(1)(a). c. Copy of ITAT Order directing to grant registration. d. copy of order of CIT(E) u/s.12AA r.w.s. 12A/254 dated 05.01.2021 granting registration. e Supreme Court decision in the case of Kolkata Club Limited. (110) Taxmann.com 47). XII. This is to inform you that for the assessment year 2018-19, the assessment was completed u/s.143(3) r.w.s.143(3A) and 143(3B) on 08.02.2021, wherein the Assessing Officer has denied the exemption claimed u/s.11 and we have filed appeal before CIT(A), NFAC and the same is pending. XIII. For the reasons stated above, the CIT(A) may be pleased to hold that the appellant is entitled to the exemption claimed and delete the addition of Rs 6,00,35,500/-.” 7 ITA No.354/Del/2024 The South India Club vs. ITO 5. After considering the detailed submissions, Ld. CIT(A) rejected the claim made by the assessee and dismissed the grounds raised by the assessee on the basis of non-filing of Form 10B before the CPC to process the return u/s 143(1)(a) of the Act. 6. Further, the assessee has taken the following alternate plea before the Ld. CIT(A) for the sake of clarity, the same is reproduced below: “1. Registration application was made on 27.03.2019 2. Application was rejected by CIT(E) vide his order dated 30.9.2019 3. The order of the CIT(E) was appealed and we received favourable decision of Hon'ble ITAT in I.T.A. No: 8338/Del/2019 dated 13.08.2020 4. CIT (Exemptions) granted registration by order dated 05.01.2021. (Copy of the order enclosed). 5. Second Proviso to Sec. 12A(2) of Income Tax Act, which reads as under, is squarely applicable to our case 6. When the CIT (Exemptions) granted registration on 05.01.2021 the income tax scrutiny assessment for the assessment year 2018-19 was pending which, was completed on 08.02.2021.” 7. After considering the above submissions, the Ld. CIT(A) dismissed the above claim by observing as under: “5.13 The appellant is admitting that order u/s 143(3) was passed on 08.02.2021 and the order u/s 143(1) gets merged with the 143(3) order and the order under section 143(1) and the appeal on this has become infructuous. But still the issue of filing the return within time u/s 139(4) and filing of form 10B before the filing of return is compulsory to grant exemption u/s 11 in a 143(3) order also. Hence the appellant has to get the delay condoned first and can raise the ground Sec. 12A(2) of Income Tax Act is squarely applicable before the appellate authority in the appeal 8 ITA No.354/Del/2024 The South India Club vs. ITO against the 143(3) order. The order u/s 143(1) is correct and the appeal is dismissed as infructuous.” 8. Aggrieved with the above order, the assessee is in appeal before us raising the following grounds of appeal: “1. The order of the Additional / JCIT(A)-1, Coimbatore, for the Assessment year 2018-19 u/s 250 dated 07.12.2023 is against law and facts of the case. 2. The Additional / JCIT(A)-1 erred in dismissing the appeal as infructuous after giving adverse findings on merits of the issues agitated in the appeal against the section 143(1) proceeding and the demand. 3. The Additional /JCIT(A)-1 erred in holding that the section 143(1) proceeding is subsumed in section 143(3) order without giving a specific opportunity of being heard to the appellant on that point of view. 4. After holding that the section 143(1) proceeding is subsumed in section 143(3) order, the Additional / JCIT(A)-1 erred in giving adverse findings on merits of the appellant's claim for exemption u/s 11 and thus prejudging the issues in the appeal against section 143(3) order which was not before him. 5. The Additional/JCIT(A)-1 erred in not directing the AO to cancel the demand. as per section 143(1) proceeding after holding that the said proceeding and demand got subsumed in section 143(3) order. 6. The Additional/JCIT(A)-1 erred in holding that the appellant had not furnished its Return of Income u/s 139 and that the appellant had not filed Form 10B The CIT(A) failed to note that the appellant had furnished its Return of Income on 30.03.2019 and that it submitted Form 10B on 05.09.2023 7. The Additional / JCIT(A)-1 erred in not appreciating the fact that when registration u/s 12A was granted by the CIT(E), assessment for the Assessment Year 2018-19 was pending and therefore, the appellant is entitled to the benefit of section 11 and 12 as per first proviso to section 12A(2) and that the only pre condition to become eligible for benefits of section 11 and 12 is that the objects and activities of such trust or institution remains the same for such preceding assessment year which the appellant has satisfied. 9 ITA No.354/Del/2024 The South India Club vs. ITO 8. The Additional/JCIT(A) -1 erred in not appreciating the fact that the First proviso to section 12A (2) has not prescribed any other precondition to get the benefits of section 11 and 12. 9. The Additional/JCIT(A)-1 erred in not appreciating the fact that as per Second proviso to section 12A, no action u/s 147 shall be taken by the Assessing Officer in case of such trust or institution for any assessment year preceding the aforesaid assessment year only for non-registration of such trust or institution for the said assessment year and this proviso also indicates that the appellant's income cannot be taxed. 10. The Additional / JCIT(A)-1 erred in not appreciating the fact that the First and Second proviso to section 12A(2) were benevolent provisions to mitigate hardship in cases where the receipts have been utilised for charitable purposes. 11. The Additional/JCIT(A)-1 erred in overlooking the following's decisions/CBDT Circular which stated that the exemption is available for the earlier pending assessment years. (i) ITAT Raipur Bench's decision in the case of Shivom Vidyapeeth Shikshan Samithi 201 ITD 144 Raipur Tribunal which stated that the exemption is available for earlier pending assessment years. ii) ITAT Amritsar Sai Wiran Wali Educational Trust I.T.A. No.104 (ASR) / 2015 dated 11.09.2018. iii) Sri Sri Ramakrishna Samity (156 ITD 646) Kolkotta ITAT. iv) CBDT Circular No. 1/2015 dated 21.01.2015. 12. Without prejudice to the above grounds, the following ground is raised. a. The Additional/JCIT(A) -1 erred in overlooking the fact that the donation received from Shriram Transport Finance Company Limited of Rs.6,00,00,000/-, a Parton member of the society, cannot be brought to tax on the principle of mutuality which govern the society. In this connection the appellant relies on Supreme Court decision in the case of State of West Bengal Vs Calcutta Club Limited (110 Taxmann.com 47). 13. For these and other grounds that may be adduced before or at the time of hearing the Hon’ble ITAT may be pleased to hold that the appellant’s income is exempt u/s.11 and delete the addition.” 9. At the time of hearing, the Ld. AR submitted as under: 10 ITA No.354/Del/2024 The South India Club vs. ITO 2. The appellant, The South India Club, (formerly known as The South Indian Association) has been registered on 14.02.1941 as a society under the Societies Registration Act, 1860. The appellant Society was granted Registration u/s 12AA r.w. 12A/254 by the Commissioner of Income Tax (Exemptions), New Delhi effective from the Assessment Year 2019-20 vide his order in F.No.CIT (E)/12AA/ 254/2020- 21 dated 05-01-21 consequent to the Income Tax Appellate Tribunal, "G" Bench, New Delhi Bench Order dated 13-08-2020 directing the CIT (E) to grant registration. 3. For the Assessment Year 2018-19, the appellant filed the return of income on 30.03.2019 admitting Total Income at "Nil". The Return of Income was processed u/s 143(1) on 10.11.2019, before the order granting registration and Rs.6,00,35,500/- being the amount claimed as exempt u/s 11 was brought to tax. An appeal was filed against the intimation u/s 143(1) before the Commissioner of Income Tax (Appeals) on 20.12.2019. The Appeal was assigned to Joint Commissioner of Income Tax (Appeals)-1, Coimbatore as per E-Appeal Scheme. The JCIT(A)-1, Coimbatore vide his Order dated 07.12.2023 in I. T.A No. CIT(A), Delhi - 18/10255/2019-20 dismissed the appeal. Against the Order of CIT(A), the assessee filed present appeal before the Hon'ble Income Tax Appellate Tribunal, Delhi 4. Subsequent to proceedings of intimation u/s 143(1), the case was selected for scrutiny under e-assessment scheme 2019 and notice u/s 143(2) was issued on 22.09.2019. In the course of Assessment Proceedings, the AO issued a notice u/s 142(1) dated 09.12.2020 & 04.01.2021. The Assessing Officer (National e- Assessment Centre), Delhi, completed the assessment u/s 143(3) r.w.143(3A) & 143(3B) on 08.02.2021. In the Assessment, the Assessing Officer did not allow exemption claimed u/s 11 of Rs.6,00,35,500/- and brought to tax the same. The assessee filed Appeal filed before CIT(A) on 04.03.2021 in I.T.A No. NFAC/2017 against the Order u/s 143(3) dated 08.02.2021 and it is pending as on date. 5. 143(1) merges with 143(3): a) We submit that once an assessment was selected for scrutiny; notice u/s 143(2) has been issued and an order has been passed u/s 143(3), the intimation u/s 143(1) merges into the assessment order and looses its standalone existence. The chronological of events in our case is as under: i) Intimation u/s 143(1): 10.11.2019 11 ITA No.354/Del/2024 The South India Club vs. ITO ii) Notice u/s 143(2) issued on 22.09.2019 iii) Assessment order u/s 143(3): 08.02.2021 iv) CIT(A) Order against 143(1) intimation: 07.12.2023 v) CIT(A) Order against 143(3) Order: Pending. From the above it could be seen that 143(1) dated 10.11.2019 got subsumed in the Section 143(3) Order dated 08.02.2021 b) In this regard, we rely on the following ITAT Decisions which is squarely applicable to our case: 1) Income Tax Appellate Tribunal, Gauhati Bench, Order in I.T.A No. 13/Gty/ 2022 dated 09.06.2023 for the Assessment Year 2018-19. (Page No. 16 to 18 of Paper Book) "Considering these facts, we find that the present appeal being against intimation u/s. 143(1) challenging the adjustment made which has already been taken into consideration for the purpose of addition in the assessment completed u/s. 143(3) of the Act, is rendered as infructuous. Accordingly, we dismiss the present appeal as infructuous. 2) Income Tax Appellate Tribunal, Gauhati Bench, Order in I.T.A No. 49/Gty/ 2022 dated 14.06.2023 for the Assessment Year 2018-19 (Page No. 19 to 22 of Paper Book) 3) Income Tax Appellate Tribunal, Indore Bench, Order in I.T.A No. 424 & 426/ Ind/2022 dated 30.08.2023 for the Assessment Year 2016-17 & 2017-18. (Page No. 23 to 29 of Paper Book) "The Hon'ble High Court has held that once the assessment u/s 143(3) has been completed then the order passed u/s 143(1)(a) merges with the order passed u/s 143(3) of the Act. Therefore, the order passed u/s 143(1) of the Act ceased to be operative. Accordingly in the facts and circumstances of the case as well as various binding precedents on the point we hold that the order passed u/s 143(1) by CPC after the scrutiny assessment proceedings were initiated by the AO for A.Ys 2016-17 & 2016-18 are not valid and liable to be set aside. We order accordingly." c) Relying on the above judicial precedents, we kindly request that Hon'ble ITAT may be pleased to set aside the Order of CIT(A) and quash the intimation u/s 143(1) and its demand. 12 ITA No.354/Del/2024 The South India Club vs. ITO d) Further, though the JCIT(A) Coimbatore held that 143(1) is subsumed in Section 143(3) order, he did not give a specific opportunity of being heard; he erred in giving adverse findings on merits of the appellant's claim for exemption u/s 11 and thus prejudging the issues in the appeal against 143(3) order which was not before him and he erred in not directing the AO to cancel the demand as per section 143(1) proceeding after holding that the said proceeding demand got subsumed in section 143(3) order. 6. Merits of the Case: a) The chronological of events in our case is as under: i) Return of Income filed for the Assessment Year 2018-19: 30.03.2019 ii) Notice u/s 143(2) issued by AO: 22.09.2019 iii) Intimation u/s 143(1) issued by CPC: 10.11.2019 iv) Notice u/s 142(1) issued by AO: 09.12.2020 v) Notice u/s 142(1) issued by AO 04.01.2021 vi) Registration granted by CIT(E) 05.01.2021 vii) Assessment Order passed by AO: 08.02.2021 From the above, it could be seen that when the CIT (Exemptions) granted registration to the appellant vide his Order dated 05.01.2021 w.e.f. Assessment year 2019-20, the Scrutiny Assessment was pending before the AO for the Assessment Year 2018-19. b) First Proviso to Sec. 12A(2) of Income Tax Act (FA 2018), which reads as under, is squarely applicable to our case. "Provided further that where registration has been granted to the trust or institution under section 12AA, then, the provisions of sections 11 and 12 shall apply in respect of any income derived from property held under trust of any assessment year preceding the aforesaid assessment year for which assessment proceedings are pending before the Assessing Officer as on the date of such registration and the objects and activities of such trust or institution remain the same for such preceding assessment year" [Page No. 30 to 32 of the Paper Book] c) There was no change in the objects and activities of the appellant's society during the financial year. Therefore, the benefit of registration granted to appellant is available for the assessment year 2018-19 also. 13 ITA No.354/Del/2024 The South India Club vs. ITO This is a statutory benefit given to appellant to which the appellant society is entitled and which cannot be denied. d) We rely on the following's decisions/CBDT Circular which stated that the exemption is available for the earlier pending assessment years. i) ITAT Raipur Bench's decision in the case of Shivom Vidyapeeth Shikshan Samithi 201 ITD 144 Raipur Tribunal which stated that the exemption is available for earlier pending assessment years. (Page No. 33 to 40 of Paper Book) ii) ITAT Amritsar Sai Wiran Wali Educational Trust I.T.A. No. 104 (ASR) / 2015 dated 11.09.2018. (Page No. 41 to 46 of Paper Book) iii) Sri Sri Ramakrishna Samity (156 ITD 646) Kolkotta ITAT. (Page No. 47 to 58 of Paper Book) iv) Extract of CBDT Circular No. 1/2015 dated 21.01.2015. (Page 59 to 61 of Paper Book) e) Further, the First proviso to section 12A(2) has not prescribed any other precondition to get the benefits of section 11 and 12. This proposition gets strengthened from the fact that the second proviso guarantees that no proceedings u/s 147 shall be initiated for any assessment year preceding the year from which registration is granted on the footing that Section 11 is not applicable in the absence of registration. 7. Relying on the above submissions, we humbly request the Hon'ble ITAT to hold that the appellant's income is exempt u/s 11 and delete the addition.” 10. On the other hand, the Ld. DR submitted that there is no decision of jurisdictional High Court available on the issue of initiation of regular assessment by issue of notice u/s 143(2) of the Act, also does not preclude from passing of the order u/s 143(1) of the Act, therefore, he heavily relied on the findings of the Ld. CIT(A). Further, with regard to pending assessment at the time of granting of registration issue is concern, he agreed that the 14 ITA No.354/Del/2024 The South India Club vs. ITO assessment was pending at the time of grant of registration, however, he submitted that whether other conditions for claiming deductions u/s 11 are fulfilled or not has to be verified, therefore, he supported the findings of Ld. CIT(A) in this regard. 11. Considered the rival submissions and material placed on record. We observe that the issue raised by the assessee that the order passed u/s 143(1) of the Act, otherwise called as intimations, in which the CPC has denied the benefit claimed u/s 11 of the Act with the observation that the audit report in form 10B was not filed on time. This is fact on record that the assessee has not filed the form 10B along with the return of income due to the fact that it did not had the registration u/s 12A, and the assessee was claiming the benefits under the concept of mutuality. We observe that the assessee has applied for registration before filing the return of income for the current assessment year on 27.03.2019 and subsequently filed the ROI on 30.03.2019. The ROI was processed u/s 143(1) of the Act on 10.11.2019 and denied the benefit u/s 11 on the basis of not filing the Form 10B on time. 15 ITA No.354/Del/2024 The South India Club vs. ITO 12. Further we observe that the statutory notice u/s 143(2) was issued on 22.09.2019. Further notices u/s 142(1) were issued in order to proceed with the regular assessment. Accordingly the assessment u/s 143(3) was completed. When regular assessment was completed and the relevant intimation issued u/s 143(1) will automatically merges with the assessment passed u/s 143(3). Therefore, it loses its relevance once the regular assessment is processed and it is only an intimation towards the accuracy of the information submitted by the assessee. In the given case, the assessee has claimed deduction u/s 11 and failed to file the form 10B along with the ROI. Based on the above observation, the claim of the assessee was denied by the AO in sec.143(1) proceedings. Therefore, there is no denial of fact that AO can make the above disallowance, however, the validity of the intimation issued u/s 143(1) is limited to mere intimation of correctness and accuracy of the income declared in ROI and its accuracy based on the information submitted along with the ROI. It does not carry the legitimacy of an assessment. When the assessment was processed under regular assessment then it loses its individuality and 16 ITA No.354/Del/2024 The South India Club vs. ITO merges with the regular assessment. We are in agreement with the findings of Ld CIT(A) that the intimation u/s 143(1) merges with the order passed u/s 143(3) of the Act and the appeal against the above intimation becomes infructuous. In our view, he should have stopped with the above findings and should not have proceeded to decide the issue on merits, because it is brought to his knowledge that the assessee has filed appeal against the regular assessment order. Therefore, he has travelled beyond the mandate. The issue of allowability of section 11 is already considered in the regular assessment and that issue is already in appeal before FAA. Therefore, reviewing the same is uncalled for. 13. Coming to the submissions of the Ld AR, the assessee also not disputing the fact that the intimation merges with the regular assessment when the proceedings are initiated u/s 143(3) of the Act. Therefore, the admitted fact that the appeal against the intimation is infructuous. The grievance of the assessee is that Ld CIT(A) has not stopped with the findings but gave findings on the merits. After considering the submissions, we are also of the view that the findings on allowability u/s 11 is uncalled. Particularly 17 ITA No.354/Del/2024 The South India Club vs. ITO when the issue under consideration is under challenge before another Appellate Authority. 14. The next issue raised by the Ld AR is, the assessee was granted the 12A registration on 5.1.2021 and the notice u/s 143(2) was issued on 22.09.2019. At the time of grant of registration, the assessment was pending and the same was passed only on 8.2.2021. That is subsequent to grant of registration i.e., on 5.1.2021. He submitted that the assessee is eligible to claim exemption u/s 11 for the impugned assessment year also. This is accepted fact on record that the assessee is eligible to claim exemption after the introduction of first proviso to sec.12A(2) of the Act with the applicable conditions in Finance Act 2018. Since there is no change in the objects and activities in the case of the assessee, there is no doubt that the assessee is eligible to claim the benefit. However, in our view, this issue has to be raised before the FAA in the appeal against regular assessment passed u/s 143(3) of the Act. Since the issue is still under appeal before FAA, this issue can be decided by the FAA without taking any clue from the appeal decided u/s 143(1) of the Act by the 18 ITA No.354/Del/2024 The South India Club vs. ITO present CIT(A). Therefore, the issue raised against the intimation order is decided in favour of the assessee and hold that the order passed u/s 143(1) is merged with the regular assessment passed u/s 143(3) and it does not have legs to stand on its own once the regular assessment proceedings are initiated. At the same time, we are also hold that the findings of the Ld CIT(A) on the maintenance of the appeal as infructuous, hence, the demand raised in the 143(1) intimation does not survive. 15. In the result, the appeal filed by the Assessee is partly allowed. Order pronounced in open Court on 22 nd May, 2024. Sd/- Sd/- (YOGESH KUMAR U.S.) (S.RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 22/05/2024 Pk/sps Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI