The denial of tax exemption based on non-filing of required reports can be a curable defect, emphasizing tax on income rather than on total receipts.

ORDER

PER AVDHESH KUMAR MISHRA, AM

The appeal filed by assessee for Assessment Year (‘AY’) 2014-15 is directed against the order dated 10.01.2025 of the Additional/Joint commissioner of Income Tax (A)-7, Kolkata [‘Addl./JCIT(A)’].

2. The core issue raised in this appeal is denial of exemption under section 10(23C)(via) of the Income Tax Act, 1961 (‘Act’) and chargeability of entire gross receipts as income instead of taxing the surplus as per Income & Expenditure Account.

3. The relevant facts giving rise to this appeal are that the assessee filed its Income Tax Return (‘ITR’) on 19.09.2015 declaring NIL income after claiming exemption under section 10(23C)(via) of the Act. The audit report uploaded on the Income Tax Portal/annexed with the ITR was in Form No.10BB of the Income Tax Rules. The Ld. Assessing Officer (CPC), while processing the said ITR under section 143(1) of the Act, denied the claim of exemption under section 10(23C)(via) of the Act on reasoning that the appellant assessee was not eligible for exemption under section 10(23C)(via) of the Act. Further, in absence of the audit report in Form No. 10B of the Income Tax Rules for claiming exemption under section 11 of the Act, the Ld. AO (CPC) also denied the alternative claim of exemption under section 11 of the Act. After denial of claim of exemption under section 10(23C)(via) and 11 of the Act, the Ld. AO (CPC) taxed the entire gross receipts of Rs.1,18,22,502/- as income instead of surplus of Rs.23,47,095/- as per the Income & Expenditure Account.

4. Dissatisfied with the processing of ITR under section 143(1) of the Act, the appellant assessee filed appeal before the Ld. CIT(A)/Addl. CIT(A); who, vide impugned order dismissed the appeal as under:

“5.2 Grounds of appeal number 1 and 3 are against the adjustment made over and above the returned income which the appellant claimed was beyond the scope of mandate given as per sec. 143(1) of the Act. In this regard it is to be stated that as per sub-clause (ii) of sec. 143(1)(a) of the Act, the assessing officer is authorized to carry out adjustment against some incorrect claim, if such incorrect claim is apparent from any information in the return. Facts involved in this issue is that the appellant filed return of income (ITR) claiming itself to be a charitable organization and claiming exemption of its income u/s 11 of the Act. On the other hand, the appellant has filed audit report in Form 10BB which Form is required to be submitted by a university or an educational institute claiming exemption under clause (iv) or (v) or (vi) or (via) of sec. 10(23C). Sr. no. 5 of the said Form 10BB in fact reflects that the appellant is claiming exemption u/s 10(23C)(via) of the Act. The claims made in ITR and Form 10BB are therefore contradictory to each other. AO, CPC therefore rightly disallowed the claim of deduction u/s 11 made in ITR as per sec. 143(1)(a)(ii) of the Act. These grounds of appeal are therefore dismissed.

5.3 Ground number 2 is against charging the entire income / receipts of the appellant to tax. Facts involved in this issue is that the appellant had filed ITR claiming exemption of its income u/s 11. Gross receipts disclosed was Rs.1,18,22,502/- and after claiming expenses on various heads, disclosed income over expenditure at Rs.23,47,095/-. While processing the ITR u/s 143(1) of the Act, CPC taxed the entire receipts of Rs.1,18,22,502/- . On the other hand, the appellant claimed that benefit of expenses should have been given and only the profit amount of Rs.23,47,095/- should have been charged. In this regard, I would like to highlight the heading of chapter III of Income Tax Act. It is "Incomes which do not form part of total income." Both sections 10 and 11 are included within this cha