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TMI Blog2024 (5) TMI 1125X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gistration 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). 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 asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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: 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome 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. d) Further, though the JCIT(A) Coimbatore held that 143(1) is subsumed in Section 143(3) order, he di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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