TMI Blog2022 (12) TMI 866X X X X Extracts X X X X X X X X Extracts X X X X ..... t hearing the parties and/or giving the party an opportunity to submit proof in support of its claim. In the absence of section 143(1)(a) being read in the above manner i.e. debatable issues cannot be adjusted by way of intimation under section 143(1)(a), would lead to arbitrary and unreasonable intimations being issued, leading to chaos. In the instant case we also note that no opportunity was granted to the assessee to put forth its stand before disallowing the deduction claimed. The issue in the present appeal is debatable and therefore the revenue was not right on their part to unilaterally proceed by disallowing the claim. In the interest of justice, we remand this issue back to Ld.AO to grant opportunity of being heard to assessee in a physical hearing and to consider the claim in accordance with law. - ITA Nos. 584 & 563/Bang/2022 - - - Dated:- 29-9-2022 - SHRI. CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER Assessee by : Mrs. Suman Lunkar, CA Revenue by : Smt. S. Praveena, CIT DR ORDER PER BEENA PILLAI, JUDICIAL MEMBER Present appeals are filed by the assessee against order dated 04/02/2022 and 20/05/2022 for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act and the learned CIT(A), NFAC has erred in confirming the same on the ground that the Appellant had not complied with the provisions of section 11(5) of the Act. The conclusion drawn being wholly erroneous. both on facts and law applicable, is to be deleted. 2.2 In any case, the Authorities below have erred in not appreciating the fact that the Appellant having complied with the provisions of section 11(5) of the Act by investing the accumulation made u/s 11(2) of the Act in the specified investments has rightly claimed the accumulation u/s 11(2) of the Act and same is to be allowed to the Appellant. 3. The denial of credit for TDS being erroneous, both on facts and law applicable, is to be allowed. 4. The learned DCIT (CPC) has erred in levying interest u/s 234B and 234C of the Act. The action of the DCIT(CPC) being erroneous, both on facts and law. is to be negated and the interest levied be deleted. 5. In view of the above and on the grounds to be adduced at the time of hearing, it is requested that the claim of accumulation made by the Appellant u/s 11(2) of the Act be allowed and interest levied be deleted. 2. Brief facts of the case are as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the income was accrued. This 15% accumulation is an indefinite accumulation and the organisation does not have to apply it for charitable purposes in subsequent years. it can be retained as a part of its corpus of capital. Accumulation beyond 15% of income under sec 11(2). Such accumulations are subject to application within a maximum permissible period of 5 years. In other words income in excess of 15% cannot be retained by a charitable or religious organisation. If the income is not spent in the current year then the assessee is permitted to spend it within the next five years. In short where a trust or institution is unable to apply 85% of its income from property held under them, the income is still exempt if the following conditions are met. 1. The income is deemed to have been applied for charitable purposes in specified scenarios (section 11(1)). 2. 85% of income is neither applied nor deemed to have been applied, e trust is allowed to accumulate such unapplied portion of income under specified conditions to claim the exemption (11(2)). Deemed application under sec 11(1): Where whole or any part of the income has not been received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed expenses on the revenue account as well as under capital expenses. The reason given by the assessing officer for disallowance of these expenses in the 143(1) intimation is - ...Further, assessee has claimed exemption exemption u/s 11 of the IT Act, but has not furnished details of audit in the Schedule Audit Information and Form 10B in Audit Report is not E-filed along with the return or before filing the return. The taxpayer has not furnished the details of audit during the appeal proceedings also. The assessing officer has stated that Form 10B in audit report is not E -filed. In the absence of E-filing of audit report and Form 10B being done, it is difficult to verify the veracity of the figures given here. E-filing of audit report and Form 10B is mandatory. The assessing officer is directed to collect the Audit Report and Form 10B if available and give credit to the amounts of capital and revenue expense. Any amount which is taxable (not falling under the exempt category) shall be taxed. The revenue expenditure claimed by the taxpayer is Rs 74,91,09,587 and the capital expenditure claimed is Rs.4,70,10,101. As far as accumulation is concerned the taxp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 12AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in subclause (iv) or sub-clause (v) or sub-clause (vi) or sub clause (via) of clause (23C) of section 10, shall not be treated as application of income for charitable or religious purposes, either during the period of accumulation or thereafter.] The conditions specified are that the taxpayer applies to the assessing officer the purpose for accumulation of income as well as the period of accumulation and that the money so accumulated or set apart is invested in the deposits specified in sec 11(5). The specified deposits as per sec 11(5) are reproduced here. Provisions of sec 11(5). (5) The forms and modes of investing or depositing the money referred to in clause (b) of sub-section (2) shall be the following, namely :- (i) investment in savings certificates as defined in clause (c) of section 293 of the Government Savings Certificates Act, 1959 (46 of 1959), and any other securities or certificates issued by the Central Government under the Small Savings Schemes of that Government; (ii) d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Amount in Rs. Gross receipts/income (GR/GI) 176,99,71,699 Income accumulated u/s 11(1)(a) not exceeding 15 percent of GR/GI 26,54,95,755 Application of income Revenue Expenditure 74,91,09,587 Capital Expenditure 4,70,10,101 Total application 75,61,19,688 Accumulation sought u/s 11(21 70,83,56,256 Further in para 6. it is stated that for the online rectification filed for the rectification order, it was directed that the rectification application is to be filed with the Assessing officer, since assessment rights had been transferred by the CPC to the AO. Further in para 7 it is stated that in view of the above position, we are submitting this application Ws 154 for rectification to the CPC rectification order dated 09.07.2018 (Ann-D) by considering the application of income and accumulation uis 11(1)(a) and (21, as detailed at Para 3 and making the taxable income and demand as 0 and re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the orders passed by the authorities below. We have perused the submissions advanced by both sides in light of records placed before us. 4. During the relevant assessment year, the assessee had claimed deduction under section 11(1) and 11(2) the act that was disallowed by the CPC in intimation issued under section 143(1) of the Act. Even the rectification filed by the assessee was not entertained. It is the contention of the assessee that no disallowance can be made on a debatable issue under in an intimation issued under section 143(1) of the Act. Whereas, the revenue contends that all kinds of adjustments can be made in an intimation under section 143(1) of the Act. 4.1 Section 143(1) as it was applicable for the relevant period 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;[or] (ii) an incorrect claim, if such incorrect claim is apparent from any informati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt for arithmetical mistakes and/or an incorrect claim that is apparent from any information in the return. The scope of permissible adjustments under section 143(1)(a) for the relevant year is much narrower. 4.3 Hon ble Bombay High Court in case of Khatau Junkar Ltd. v. K.S. Pathania reported in (1992) 196 ITR 157 , has observed that, where a claim has been made which requires further inquiry, it cannot be disallowed without hearing the parties and/or giving the party an opportunity to submit proof in support of its claim. In the absence of section 143(1)(a) being read in the above manner i.e. debatable issues cannot be adjusted by way of intimation under section 143(1)(a), would lead to arbitrary and unreasonable intimations being issued, leading to chaos. Similar view has been taken by Hon ble Bombay High Court in case of Bajaj Auto Finance Ltd.Vs. CIT reported in (2018) 93 taxmann.com 63. 4.4 Further in the instant case we also note that no opportunity was granted to the assessee to put forth its stand before disallowing the deduction claimed. The issue in the present appeal is debatable and therefore the revenue was not right on their part to unilaterally proceed by di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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