J.M. FINANCIAL MUTUAL FUND,MUMBAI V. ITO- 23(2)(1), MUMBAI, MUMBAI

CO 234/MUM/2025

AI Insights

The case involves an appeal by the Revenue against the decision of the CIT(A), which had allowed the exemption claimed by J.M. Financial Mutual Fund under section 10(23D) of the Income-tax Act, 1961. The Revenue contested the CIT(A)'s decision, arguing that the exemption was improperly granted as it was not claimed in the original or revised returns. However, the CIT(A) had noted that the CPC's rectification order had already recognized the exemption, thus nullifying the Revenue's claims. The Tribunal agreed with the CIT(A)'s decision, emphasizing that the exemption for SEBI-registered mutual funds is statutory and should not be denied due to technical mismatches in the return forms.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 781423 (ITAT-MUMBAI)
• Duration Of Justice: 1 month(s) 9 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-09-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2023-2024
• Appeal Filed On: 20-08-2025
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK PERAMPURNA
• Assessee Lawyers: K SHIVRAM RAHUL
• Keywords: Revised return; Rectification of order
• Section: 154

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, ‘F’ BENCH MUMBAI BEFORE: SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER ITA No.4575/Mum/2025 (Assessment Year :2023-24) ITO-23(2)(1), Mumbai Vs. J.M. Financial Mutual Fund, Office B, 8th Floor, Cnergy, Mumbai-400 025 PAN/GIR No.AAATJ2314G (Appellant) .. (Respondent) CO No.234/Mum/2025 (Arising out of ITA No.4575/Mum/2025) (Assessment Year :2023-24) J.M. Financial Mutual Fund, Office B, 8th Floor, Cnergy, Mumbai-400 025 Vs. ITO-23(2)(1), Mumbai PAN/GIR No.AAATJ2314G (Appellant) .. (Respondent) Assessee by Shri K Shivram / Shri Rahul Hakkani Revenue by Shri Vivek Perampurna, CIT- DR Date of Hearing 26/08/2025 Date of Pronouncement 30/09/2025 Printed from counselvise.com ITA No.4575/Mum/2025 J.M. Financial Mutual Fund 2 आदेश / O R D E R PER AMIT SHUKLA (J.M): The present appeal by the Revenue and the cross- objection by the assessee are directed against the order dated 02/05/2025 passed by the learned Addl./JCIT(A), Panchkula, arising from processing of return under section 143(1) of the Income-tax Act, 1961, for the assessment year 2023–24. 2. The Revenue, in substance, has assailed the action of the learned CIT(A) in deleting the disallowance of exemption of ₹110,80,56,197/- claimed under section 10(23D) of the Act. The grievance is twofold: first, that the Assessing Officer was correct in denying such exemption while processing the return of income under section 143(1); and second, that the CIT(A) travelled beyond jurisdiction in entertaining what is alleged to be a “fresh claim” not made in the original return or through a valid revised return. 3. The relevant facts are that the assessee trust was established in 1994 and is a mutual fund duly registered with SEBI. It filed its return of income in Form ITR–7 on 31/10/2023, declaring gross receipts of ₹263,01,28,730/–, application of income to the tune of ₹110,80,56,197/–, and exemption under section 10(23D) amounting to ₹152,20,72,533/–. The return was processed by the Centralized Processing Centre (CPC), wherein an adjustment was carried out by treating the amount of ₹110,80,56,197/–, disclosed under Schedule IE–I (application of income), as Printed from counselvise.com ITA No.4575/Mum/2025 J.M. Financial Mutual Fund 3 income from other sources, thereby reducing the exemption claim. 4. It is an undisputed position in law that income of a mutual fund registered with SEBI enjoys complete exemption under section 10(23D). Notwithstanding this settled position, the CPC, due to a perceived mismatch between different schedules of the return, brought to tax the said amount as income. 5. Aggrieved, the assessee filed a rectification petition under section 154 on 19/09/2024 and, in parallel, also preferred an appeal before the CIT(A) on 20/09/2024. The CPC, in due course, passed a rectification order on 11/11/2024, recognising the exemption and computing total income at “Nil”, though making certain residual observations in relation to the disclosure pattern of the return. 6. When the matter came before the learned CIT(A), he duly noted that the initial variation under section 143(1) had already been obliterated by the rectification order, and that the assessee’s entitlement to exemption under section 10(23D) stood vindicated. He accordingly allowed the appeal of the assessee, with the following observations: “5.1 On grounds of appeal Nos. 1.1 to 3.1:- The issue under consideration is the disallowance of exemption claimed under section 10(23D) of the Act, which was recomputed by the Centralized Processing Centre (CPC) due to mismatch in disclosure between Schedule IE and Schedule OS of the return of income. Printed from counselvise.com ITA No.4575/Mum/2025 J.M. Financial Mutual Fund 4 5.2 The initial adjustment under section 143(1)(a)(ii) leading to disallowance of exemption of 1,10,80,56,197 stands nullified through rectification under section 154 dated 11.11.2024. 5.3. The variance of 1,10,80,56,197 reflected in the rectification order is due to wrong return filed by the appellant. In the return of income Part B2 of Part B – TI appellant should have claimed exemption u/s 10(23D) of Rs 2,63,01,28,730. Therefore, the AO is hereby directed to remove the residual variance and ensure consistency in all related schedules. In view of these facts, these grounds of appeal are allowed.” 7. Learned senior counsel for the assessee has rightly contended before us that the Revenue’s grievance is entirely misplaced. The relief was not granted by way of entertaining any fresh or belated claim but by recognising the rectification order which itself nullified the CPC’s adjustment and restored the statutory exemption. In other words, the CIT(A) has merely endorsed the effect of the rectification, without traversing beyond his appellate remit. 8. We find considerable merit in this submission. Once the CPC, by passing an order under section 154, has itself accepted the assessee’s computation and granted exemption under section 10(23D), the very basis of the Revenue’s appeal does not survive. The allegation that a “fresh claim” was entertained is factually incorrect, since the exemption was already claimed in the original return and only a mismatch in schedules had led to the earlier adjustment. The rectification order merely corrected this error and brought the return in line with the statutory position that income of a SEBI- registered mutual fund is wholly exempt under section 10(23D). In these circumstances, the learned CIT(A) has Printed from counselvise.com ITA No.4575/Mum/2025 J.M. Financial Mutual Fund 5 rightly upheld the rectification and granted the consequential relief. 9. In these circumstances, the Revenue’s appeal is devoid of merit. The exemption under section 10(23D) is a statutory benefit which cannot be denied merely on account of a technical mismatch in the return, once the CPC itself has accepted the position through rectification. The learned CIT(A) has not ventured beyond his jurisdiction, but has simply endorsed what already stood corrected by the rectification order. We therefore find no error, much less any infirmity, in the order of the CIT(A) warranting interference. Accordingly, the appeal of the Revenue is dismissed. 10. Turning to the cross-objection filed by the assessee, we note that it merely supports the conclusions reached by the learned CIT(A). Since we have already upheld those findings in dismissing the Revenue’s appeal, the cross-objection also deserves to be, and is hereby, allowed. 11. In the result, the appeal filed by the Revenue stands dismissed, while the cross-objection of the assessee is allowed. Order pronounced on 30th September, 2025. Sd/- (PRABHASH SHANKAR) Sd/- (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 30/09/2025 KARUNA, sr.ps Printed from counselvise.com ITA No.4575/Mum/2025 J.M. Financial Mutual Fund 6 Copy of the Order forwarded to : BY ORDER, (Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// Printed from counselvise.com "