2022 (6) TMI 1079 - AT - Income Tax

Tribunal overturns tax disallowances, emphasizes no resolution in section 143(1)(a) intimation

City Manager Association Ahmedabad Municipal Corporation West Zone Office Ahemdabad Versus DCIT, CPC Bangaluru

The Tribunal allowed the appeal, overturning the disallowances under sections 11(1) and 11(2) of the Income Tax Act for the assessment year 2016-17. The ... Exemption u/s 11 denied - disallowances being made under section 143(1) - Scope of debatable issue - HELD THAT:- Respectfully following the Co-ordinate Bench decision in the assessee’s own case for the Asst.Year 2015- 16 [2019 (8) TMI 1822 - ITAT AHMEDABAD] wherein the disallowances were being made under section 143(1) of the Act, and similar disallowance is also made for the present year viz. Asst.Year 2016-17, we hold that debatable issue should not be done in an intimation under section 143(1)(a) of the Act. Therefore, we allow the appeal of the assessee and delete both the disallowances. Assessee appeal allowed. Issues:1. Disallowance of deduction under section 11(1) of the Income Tax Act, 1961.2. Disallowance of deduction for the accumulated amount under section 11(2) of the Income Tax Act, 1961.Analysis:1. The appeal involved a charitable trust registered under the Income Tax Act, 1961, claiming benefits under sections 11 and 80G. The dispute arose when the income tax department reduced the claimed deduction of Rs. 5,40,082 to Rs. 2,51,182 and disallowed Rs. 21,75,000 claimed under section 11(2), resulting in an increased total income. The Commissioner of Income-tax (Appeals) dismissed the appeal, citing various case laws. The assessee challenged this decision, arguing that the deductions were valid under section 11(1) and 11(2) of the Act.2. The Tribunal considered the previous year's case for the assessment year 2015-16, where a similar issue was dismissed. However, the Tribunal noted that the appeal for the previous year was later decided in favor of the assessee. The Tribunal referred to the Kolkata High Court case regarding the accumulation of income by a trust under section 11(3) of the Act. The Tribunal observed that debatable issues should not be decided under section 143(1)(a) of the Act, as adjustments in such cases are impermissible. Relying on the Kolkata High Court judgment and the previous year's decision, the Tribunal allowed the appeal, deleting both disallowances under sections 11(1) and 11(2) for the current assessment year 2016-17.In conclusion, the Tribunal allowed the appeal of the assessee, setting aside the disallowances made by the income tax authorities and the Commissioner of Income-tax (Appeals). The decision was based on the principle that debatable issues should not be decided in an intimation under section 143(1)(a) of the Act, following the precedent set in the assessee's previous case and the Kolkata High Court judgment.