Charitable Trust’s Income Tax Exemption Disallowed by CPC without Prior Intimation: ITAT Restores Matter to AO [Read Order]

The Income Tax Appellate Tribunal(ITAT), Jodhpur Bench, held that denying exemption claimed by charitable trust under Section 11 during processing by the Central Processing Centre (CPC) without issuing prior intimation to the assessee, was not in accordance with law.

Accordingly, the matter was restored to the Assessing Officer for fresh examination of the exemption claim.

The appellant, Shree Tarak Guru Jain Granthalya, a charitable trust in Udaipur, filed its return of income and claimed exemption of income tax under section 11(2) of the income tax act, 1961 for assessment year 2017-18 and 2019-20. The returns were filed beyond the due date provided under section 139(1)

The respondent revenue department rejected the claim of exemption during the CPC processing under section 143(1)(a) of the Act. The department rejected the claim by invoking section 13(9), which provides that exemption under section 11 shall not be allowed when the return is filed beyond the due date.

The appellant counsel, CA Yogesh Pokharna, contended that the CPC has limited power under section 143(1)(a) and cannot make adjustments involving interpretation of law or deny statutory exemptions. It was argued that AO or CPC has no authority to deny the benefits.

It was also submitted by the appellant counsel that section 13(9) and section 12A(1)(ba) both govern the filing of returns when the exemption is claimed under section 11 of the Act. It was further contended that no prior intimation was issued to the appellant before making the adjustment under section 143(1)(a) which is mandatory requirement under law.

K.C. Meena appeared as counsel for the Revenue Department.

Sudhir Pareek, Judicial member and Mithal Lal Meena, accountant member, observed that the adjustment made under Section 143(1)(a) of the Act was made without prior intimation to the appellant. It was noted by the tribunal that the contentions of the appellant was not rebutted by the department.

In the light of facts and circumstances, the tribunal restored the matter to AO for fresh examination of the claim of exemption under section 11. Accordingly, both the appeals were restored to the file of the Assessing Officer for de novo adjudication.

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