The Ahmedabad Bench of the Income Tax Appellate Tribunal ( ITAT ) held that the Centralized Processing Center (CPC) cannot disallow Section 11 exemption benefits that were previously granted in the intimation under Section 143(1) during rectification proceedings and ruled it acted beyond its scope.
Shree Umiya Education Trust, the assessee is an educational institution registered under section 12AA of the Income Tax Act, 1961, and enjoys exemption under section 11 of the Income Tax Act, 1962.
The assessee filed its original Income Tax Return ( ITR ) on September 29, 2015, for the assessment year 2015-16, along with an audit report in Form 10B, declaring nil income and claiming exemption under section 11 of the Income Tax Act, 1962.
A revised ITR and audit report claiming credit for the cost of acquisition of securities were filed on March 11, 2016. The Centralized Processing Center ( CPC ) issued an intimation under section 143(1) allowing the exemption under section 11 of the Income Tax Act but denying the credit for the cost of acquisition of securities.
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The assessee filed a rectification application under section 154 to claim the denied credit. The CPC passed a rectification order granting the credit for the cost of acquisition of securities but disallowing the previously allowed exemption under section 11 of the Income Tax Act.
Aggrieved by the CPC’s rectification order, the assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who restored the exemption under section 11 of the Income Tax Act.
The CIT(A) observed that the trust met the conditions for exemption under section 11 as it filed the necessary documents (ITR and Form 10B) within allowable timeframes and that the disallowance by CPC did not align with section 143(1) of the Income Tax Act.
The Revenue filed an appeal with the Income Tax Appellate Tribunal (ITAT) challenging the CIT(A)’s decision to grant an exemption under section 11 of the Income Tax Act.
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The two-member bench comprising Annapurna Gupta (Accountant Member) and T.R. Senthil Kumar (Judicial Member) observed that the CPC acted beyond its authority (“functus officio”) by revising its earlier order of granting exemption under section 11 in rectification proceedings.
The tribunal held that debatable issues cannot be addressed under section 154 rectification proceedings as they are restricted to correcting apparent errors. The tribunal upheld the CIT(A)’s findings and confirmed the trust’s eligibility for exemption under section 11 of the Income Tax Act. The tribunal dismissed the Revenue’s appeal.
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