UMAKANT GAJANAN FOUNDATION,PUNE V. ITO, WARD-1(1), PUNE, PUNE

ITA 863/PUN/2025

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The case involves the Umakant Gajanan Foundation, a charitable trust, which appealed against the decision of the Commissioner of Income Tax (Appeals) confirming a disallowance made by the CPC. The disallowance of Rs.2,64,260 was initially made by the CPC on the grounds that this amount was not accounted for in the trust's return of income as expenditure towards the objects of the trust. The CIT(A) upheld this disallowance, stating that the amount was included in the total expenditure of Rs.10,37,511. However, the Tribunal found that this amount was actually applied from the trust's accumulated income of earlier years and not from the current year's income, thus it was incorrectly included in the disallowance.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 396351 (ITAT-PUNE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2023-2024
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MADHAN THIRMANPALLIL
• Assessee Lawyers: NIKHIL PATHAK
• Keywords: Charitable institution
• Section: 11; 12A

Judgement Text

" आयकर अपीलीय अिधकरण ”एस एम सी” Ɋायपीठ पुणेमŐ। IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES “SMC” :: PUNE BEFORE DR.DIPAK P. RIPOTE, ACCOUNTANT MEMBER AND SHRI VINAY BHAMORE, JUDICIAL MEMBER आयकर अपील सं. / ITA No.863/PUN/2025 िनधाᭅरण वषᭅ / Assessment Year: 2023-24 Umakant Gajanan Foundation, E-3/5, Shirine Garden, Opp.ITI, Aundh, Pune – 411007. Maharashtra. V s The Income Tax Officer, Ward-1(1), Pune. PAN: AAATU5190M Appellant/ Assessee Respondent / Revenue Assessee by Shri Nikhil Pathak – AR Revenue by Shri Madhan Thirmanpallil – Addl.CIT(DR) – Date of hearing 15/05/2025 Date of pronouncement 30/05/2025 आदेश/ ORDER PER DR. DIPAK P. RIPOTE, AM: This is an appeal filed by the assessee directed against the order of ld.Commissioner of Income Tax(Appeal)/Add.CIT(A)-3, Hyderabad under section 250 of the Income Tax Act, 1961 dated 11.02.2025 for the A.Y.2023-24 emanating from the order u/s.143(1) of the Act dated 02/12/2024. The Assessee has raised the following grounds of appeal : ITA No.863/PUN/2025 [A] 2 “1] The learned Addl. CIT(A) erred in confirming the addition of Rs.2,64,260/- made by the learned CPC without appreciating that the addition made was not justified at all and the same should have been deleted. 2] The learned Addl CIT (A) erred in holding that the amount of expenditure of Rs.10,37,511/- debited to Income & Expenditure Account also included the amount of Rs.2,64,260/- being out of the amount accumulated in F.Y. 2019-20 and therefore, the learned CPC had rightly made the addition of Rs.2,64,260/-. 3] The learned Addl. CIT(A) failed to appreciate that the amount of Rs.2,64,260/- was not included in the amount of Rs. 10,37,511/- and therefore, there was no question of making any addition of Rs.2,64,260/-made by the learned CPC. 4] The learned Addl. CIT(A) failed to appreciate that the amount of Rs.2,64,260/- being the amount accumulated in F.Y. 2019 20 was separately spent and the same did not form part of the expenditure of Rs.10,37,511/- and the same was very clear from the balance sheet and Income and Expenditure account of the applicant trust and therefore, there was no reason to confirm the addition of Rs.2,64,260/-. 5] The learned Addl. CIT(A) erred in holding that the claim of the appellant was misleading without understanding and appreciating the correct facts of the case and hence, the addition made of Rs.2,64,260/- may kindly be deleted. 6] The learned Addl. CIT(A) failed to appreciate that the reason given by the CPC for making the disallowance was totally different and the appellant had already demonstrated as to how the said addition ITA No.863/PUN/2025 [A] 3 made by the CPC was incorrect and therefore, there was no reason to sustain the said addition made by the CPC. 7] The assessee requests that the appropriate cost may be levied against the Addl CIT(A). 8] The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal.” Submission of ld.AR : 2. Ld.AR for the Assessee vehemently argued that ld.CIT(A) without any basis observed that Rs.10,37,511/- includes Rs.2,64,260/-. Ld.AR submitted that the amount of Rs.2,64,260/- was applied for Charitable Purpose out of accumulation of earlier years. It is not part of Rs.10,37,511/-. Ld.AR took us through the Audit Report and Return of Income. 2.1 Ld.AR filed written submission as under : “1] Ground Nos. 1-6: Addition of Rs.2,64,260/- 1.1] The assessee is a charitable trust registered u/s 12A of the Act. For this year, the assessee had claimed exemption u/s 11 and had filed the return declaring total income at Rs. NIL. The learned CPC passed an intimation order u/s 143(1) wherein the total income was worked out at Rs.2,64,260/- as against Rs. NIL declared by the assessee. It is to be noted that the CPC has made the addition of Rs.2,64,260/- on the ground that the said amount was indicated as a disallowance of ITA No.863/PUN/2025 [A] 4 expenditure in the audit report filed in Form 10BB but was not taken into account in computing the total income of the assessee. On that basis, the learned CPC had made a disallowance of Rs.2,64,260/-. 1.2] Before the learned CIT(A), the assessee had clarified that the disallowance made is not justified at all. It was explained by the assessee that in the audit report, there was no amount of Rs.2,64,260/- which was indicated as a disallowance of expenditure. The assessee had submitted before the CIT(A) that the amount of Rs.2,64,260/- was reported in the audit report as the amount utilised during the year under consideration out of the income accumulated in F.Y. 2019-20. Thus, it was explained that the reasoning given by the CPC for making the disallowance was incorrect and therefore, the addition made was required to be deleted. 1.3] The learned CIT(A) has not accepted the contention of the assessee. According to him, the total expenditure incurred by the assessee trust on the objects of the trust amounted to Rs.10,37,511/- and the amount of Rs.2,64,260/-was part of the said amount. Thus, he has stated in para 5.7 of his order that after excluding the amount of Rs.2,64,260/- from the total expenditure of Rs. 10,37,511/-, only an amount of Rs.7,73,251/- was incurred towards the objects of the trust out of the income of the current year. 1.4] He has held that the amount applied towards the expenditure on the objects of the trust of Rs. 10,37,511/- was found to include an amount of Rs.2,64,260/- being the amount accumulated in F.Y. 2019-20. Thus, according to the learned CIT(A), the assessee's claim is incorrect and not supported by documentary proof. He has held that the claim made seems to be misleading and hence, he has confirmed the disallowance made. ITA No.863/PUN/2025 [A] 5 1.5] The assessee submits that the disallowance made is not justified at all. At the outset, it is submitted that the copy of the income and expenditure account is given on page 42 of the paper book. From the perusal of the same, it would be noticed that the total income during the year under consideration is Rs. 12,15,545/- and the expenditure incurred out of the current year's income towards the objects of the trust is Rs. 10,37,375/-. Further, an amount of Rs.2,64,260/- was applied out of the income accumulated in the earlier years and the said amount has been reduced from the fund created of Rs.3,50,000/-. In the balance sheet, on page 41. it would be noticed that the amount of Rs.2,64,260/- has been reduced from the ear-mark fund of Rs.3,50,000/- and the balance amount of Rs.85,740/- has been caried forward. Thus, it is clear that the amount of Rs.2,64,260/- incurred out of the accumulated amount is not part of the total expenditure incurred out of the current year's income of Rs.10,37,375/. The learned CIT(A) has not appreciated that the amount of Rs.2,64,260/- is not part of the amount of Rs.10,37,511/- and hence, the finding arrived by him in para 5.11 is totally incorrect. 1.6] It is further stated that in audit report filed given on pages 48 to 57, the amount incurred of Rs.2,64,260/- was reported in column 27A which refers to application of income out of the income accumulated under 11(2). The same is reflected on page 51 of the paper book. Thus, the reporting in the audit report was correct since the amount of Rs.2,64,260/-was applied out of the income accumulated in the earlier years. Thus, the CPC has totally erred in making the said disallowance. Secondly, the finding of the learned CIT(A) that the amount of Rs.2,64,260/- was part of the amount of Rs. 10,37,511/- is totally incorrect. As clarified above, the amount of Rs.10,37,511/- is reflected in the income and expenditure account since the same was incurred out ITA No.863/PUN/2025 [A] 6 of current year's income and the amount of Rs.2,64,260/- was incurred out of the accumulated income and therefore, the same was reduced from the ear-marked fund in the balance sheet. Accordingly, it is evident that the amount of Rs.2,64,260/- is not part of Rs. 10,37,511/- and therefore, the finding of the learned CIT(A) is grossly incorrect and the addition confirmed by him may kindly be deleted.” Submission of ld.DR : 3. Ld.Departmental Representative(ld.DR) for the Revenue relied on the order of the ld.CIT(A). Findings & Analysis : 4. We have heard both the parties. It is observed that the Assessee is a charitable trust duly registered u/s.12A r.w.s 12AB of the Act. The Assessee filed return of Income on 18/10/2023 and due date for filling Return of Income was 30/11/2023. Thus, the assessee filed Return of Income u/s.139(1) within the statutory time. The Assessee claimed exemption u/s.11 of the Act. 4.1 The Return of Income was processed by CPC. An order u/s.143(1) of the Act, dated 02/12/2024 was passed by Centralized Processing Center (CPC) partly disallowing assessee’s claim for exemption u/s.11. The CPC made a disallowance of Rs.2,64,260/-. Aggrieved by the order u/s.143(1) of the Act, the Assessee filed an ITA No.863/PUN/2025 [A] 7 appeal before the ld.CIT(A) and also filed an application u/s.154 before the CPC. The CPC vide its order dated 04/02/2025 u/s.154 of the Act, rectified the mistake allowing the entire claim of exemption and arriving at Total Income of Rs.NIL as per the Return of Income filed by the Assessee. 4.2 However, the Ld.CIT(A) vide order dated 11/02/2025 held as under : Quote“5.11 It has been explained in detail in paras 5.6 to 5.8 that owing to the information furnished in the ROI filed and the audit report with regard to the amount of Rs.2,64,260/- the adjustment was made in the intimation. The claim of amount applied being expenditure towards objects of the trust was Rs. 10,37,511/-was logically found to include the amount of Rs.2,64,260/- being out of amount accumulated in FY:2019-20 based on information furnished in the ROI filed and the audit report. 5.12 Therefore, the claim of expenditure towards the objects of the trust of Rs. 2,64,260/-(included in Rs.10,37,511/-) from the income of the previous year 2022-23 relevant to AY 2023-24 was correctly treated as not allowable as exemption u/s 11 of the Act. The said claim being an incorrect claim apparent from information furnished in return of income as was therefore correctly treated as adjustment to total income as per provisions of section 143(1)(a)(ii) of the Act. 5.13 Further, the mentioning of amount of Rs.2,64,260/- in the audit report clearly suggested that this amount of expenditure during the previous year 2022-23 relevant to AY 2023-24 has been met out of ITA No.863/PUN/2025 [A] 8 amount accumulated of FY 2019-20 and not out of the income of trust of Rs.12,15,545/- for the previous year 2022-23 relevant to AY 2023-24. Accordingly, the amount of Rs.2.64,260/-out of income of trust of the previous year 2022-23 relevant to AY 2023-24 was clearly not allowed as application/expenditure and was therefore correctly treated as adjustment as per provisions of section 143(1)(a)(iv) of the Act.” Unquote. 4.2.1 Aggrieved by the Order of the Ld.CIT(A), the Assessee has filed present appeal. 4.3 We have perused the Return of Income filed by the Assessee. In the Return of Income the assessee has shown as under : ITA No.863/PUN/2025 [A] 9 4.4 Thus, in the Return of Income in column number 6(i) the Assessee has categorically shown Rs.10,37,511/- as amount applied during the previous year excluding deemed application, application out of previous years accumulation. 5. Inspite of this clear fact mentioned in the Return of Income the Ld.CIT(A) observed that Rs.2,64,260/- is included in the amount of Rs.10,37,511/-. The Assessee had submitted before the Ld.CIT(A) that Rs.2,64,260/- was the amount applied for charitable purpose out of the earlier year’s accumulation. The said fact is evident from the Audit Report of the Assessee,Column Number 27. The Audit report was filed by the assessee before filling the return of Income. Thus, the fact that Rs.2,64,260/- was applied for charitable purpose out of the earlier years Accumulation is evident from the Return of Income and the Audit report. Therefore, the observation and finding of the Ld.CIT(A) is incorrect and factually wrong. Therefore, Ld.CIT(A) has erred in confirming the disallowance made u/s.143(1) of the Act. Therefore, the order of ld.CIT(A) is quashed. 5.1 It is also a fact that the CPC vide its order dated 04/02/2025 had rectified the mistake and accepted the Return of Income ITA No.863/PUN/2025 [A] 10 showing NIL income. Thus, even the CPC has accepted that the adjustment made by the CPC vide order u/s.143(1) was incorrect and factually wrong. 6. In these facts and circumstances of the case Grounds of appeal number 1 to 6 raised by the assessee are allowed. 8. Vide Ground Number 7, Assessee has asked for appropriate cost, however, during the hearing Ld.AR for the Assessee submitted that the assessee is not pressing for the said ground. Accordingly the ground number 7 is dismissed. 8.1 No ground was amended altered hence Ground Number 8 is dismissed. 9. Accordingly appeal of the assessee is partly allowed. Order pronounced in the open Court on 30 May, 2025. Sd/- Sd/- (VINAY BHAMORE) (DIPAK P.RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 30 May, 2025/ SGR ITA No.863/PUN/2025 [A] 11 आदेशकᳱᮧितिलिपअᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A), concerned. 4. The Pr. CIT, concerned. 5. िवभागीयᮧितिनिध, आयकर अपीलीय अिधकरण, “एस एम सी” बᱶच, पुणे / DR, ITAT, “SMC” Bench, Pune. 6. गाडᭅफ़ाइल / Guard File. आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे/ITAT, Pune. "