Intimation u/s 143(1) Quashed as Disallowance of Application of Funds Not Permitted for Charitable Trust: ITAT [Read Order]
Observing that the CPC lacked the jurisdiction under Section 143(1) of the Income Tax Act to disallow the application of funds and bring the gross receipts of a charitable trust to tax, the Tribunal ruled the intimation was erroneous and unsustainable.
Charitable-trust-taxscan
Charitable-trust-taxscan
The Cuttack Bench of the Income Tax Appellate Tribunal (ITAT) held that the intimation issued under Section 143(1) of the Income Tax Act was invalid and liable to be quashed, as the provision does not permit the disallowance of applied funds of a charitable trust.
Maharaja Agrasen Trust (assessee), a charitable institution registered under Section 12A of Income Tax Act, filed its return of income for the Assessment Year (AY) 2023-24, declaring a net income of ₹14,112. The trust's gross receipts were ₹8,08,100.
During the processing of the return, the Central Processing Centre (CPC) issued an intimation under Section 143(1) of the Act, which did not allow the application of funds amounting to ₹7,93,988. Consequently, the CPC effectively brought the entire gross receipt of the assessee to tax as its income.
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Aggrieved by the intimation, the assessee filed an appeal before the Additional/Joint Commissioner of Income Tax (appeals)[Addl/JCIT(A)]. The appeal was subsequently dismissed by JCIT(A).
Aggrieved by the JCIT(A)’s order, the assessee filed an appeal before the ITAT. The Counsel for the assessee submitted that the intimation under Section 143(1) was invalid in so far as the provisions of that section do not provide for the disallowance of the application of funds, especially for a registered charitable trust.
The counsel argued that treating the entire receipts as income was not permissible under the summary assessment process.
The Single Member Bench, comprising George Mathan (Judicial Member)observed that the assessee was admittedly registered as a charitable trust. The Tribunal noted that if the CPC desired to make any adjustments in the intimation under Section 143(1), it was only possible to make adjustments that are specifically permissible under that section.
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The tribunal observed that the act of bringing the entire gross receipts of a registered charitable trust to tax by disallowing the application of funds was observed to be not permissible.
The Tribunal concluded that the intimation issued under Section 143(1) of the Income Tax Act was erroneous and unsustainable and quashed it. In the result, the appeal of the assessee was allowed.
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