Debatable issues on charitable trust exemption under section 11 cannot be disallowed via prima facie adjustment in section 143(1) processing without assessee's explanation; matter remitted for verification.

ORDER

(A) This appeal vide I.T.A. No.186/JAB/2024 has been filed by the assessee for assessment year 2020-21 against impugned appellate order dated 23.10.2024 (DIN & Order No.ITBA/APL/S/250/2024- 25/1069887964(1) of Ld. Addl/Joint Commissioner of Income Tax (Appeals) [“JCIT(A)” for short], the First Appellate Authority.

(B) The dispute in the present appeal started with the adjustment made during processing of assessee’s return u/s 143(1) of the Income Tax Act, 1961 (“Act”, for short) whereby intimation was issued and adjustment was made to assessee’s income enhancing the assessee’s income from returned income of Nil to Rs.17,41,999/-. The assessee’s appeal against the aforesaid adjustment was dismissed by the Ld. CIT(A) vide impugned appellate order dated 23.10.2024. In the course of appellate proceedings in Income Tax Appellate Tribunal (“ITAT”), a paper book containing the following particular was filed from the assessee’s side: -

(B.1) The aforesaid paper book contained copy of assessee’s written submissions filed during the appellate proceedings before the Ld. CIT(A); which is reproduced below, for the ease of reference: -

“In addition to verbal submissions advanced by the counsel, I would like to submit as under for your honors kind consideration.

1. In the first ground of appeal the assessee is contesting the assessee society has received intimation under section 143(1) by CPC vide DIN no CPC/2021/A7/164799645 of dated 30/11/2021 and assessing the income of Rs 17,41,999/- of the assessee society and demand of Rs 3,72,020 was determined.

1.1 OURS SUMBISSION;- That the assessee society has received intimation under section 143(1) by CPC vide DIN no CPC/2021/A7/164769645 dated 30.11.2021 assessing the income of Rs. 17,41,999/ of the assessee trust and demand of Rs. 3,72,020/- was determined therein on account of disallowance of expenses as claimed under section 11 of the income tax act. Copy of intimation under section143(1) as received is enclosed as page no 8 to 27 of this reply.

1.2 Assessee is a charitable institution and is registered under section 12A vide order dated 22.07.1999 and accordingly has claimed exemption under section 11 of the Income Tax Act. Copy of registration certificate under section is enclosed as page no 28 of this reply. In lieu of above said registration assessee trust has rightly claimed the deduction of Rs.17,41,99/- under section 11(2) and hence income of trust remains as NIL. The copy of computation of income of assessee is also enclosed as page number 29 of this reply. Henceforth it is requested that as assessee has correctly claimed the exemption under section 11A and AO has accepted same in next years intimation under section 143(1). Copy of intimation under section 143(1) of next years are enclosed as page number 30 to 34 of this reply, hence AO may kindly be directed to consider income of the assessee as NIL instead of Rs 17,41,999/-.

2. In the second ground of the appeal the assessee has contested the assessee society is a charitable institution and is registered under section 12A vide order dated F. No. CIT-I/JBP/TECH/80G/07/09-10 dated 17.12.2009 and has claimed exemption under section 11 of the Income Tax Act.

2.1 OUR SUMBISSION: In lieu of submission given in para 1.1 to 1.2 above it is proved that Id AO was not justified in considering the aggregate of income (referred to under section 11 and 12) at Rs.1,32,77,585/ when it was duly agreed by Id AO himself at page 18 of intimation under section 143(1) that the expenditures were to the tune of Rs 17,41,999/-. Ie the expenses were agreed to be in parallance with the return filled and CPC has not shown there disagreement on quantum of the expenses. At this stage when assessee is having due registration under section 11 and 12 making expenses allowable deduction against income the disallowance of genuine expenses are against as natural justice and law. Henceforth the income of the assessee may kindly be ordered to at NIL

3. In the third and four