Tribunal Rules for Assessee: Capital Expenses Allowed, COVID-19 Extension Recognized, Trust Income Computed Commercially

The Tribunal ruled in favor of the assessee, setting aside the disallowance of capital and revenue expenses, statutory exemption under Section 11(1)(a), and adjustments made by the Assessing Officer. The Tribunal accepted the explanations for late filing due to the COVID-19 pandemic and fire incident, emphasizing compliance with extended deadlines. Additionally, the Tribunal agreed that income from trust property should be computed on commercial principles. The order passed under Section 143(1) was deemed invalid due to the Assessing Officer's failure to provide intimation before making adjustments. The appeal was allowed, directing the Assessing Officer to grant the exemption claimed under Section 11 of the Act.

---

---

Issues Involved:
1. Disallowance of capital and revenue expenses due to late filing of return and Form 10B.
2. Disallowance of statutory exemption under Section 11(1)(a) due to late filing of return and Form 10B.
3. Computation of income derived from trust property on commercial principles.
4. Delay in filing return and Form 10B due to fire and COVID-19 pandemic.
5. Jurisdiction of the Assessing Officer to make adjustments without intimation.

Summary:

Issue 1: Disallowance of Capital and Revenue Expenses
The Tribunal addressed the disallowance of capital expense of Rs. 64,52,436/- and revenue expense of Rs. 5,52,52,167/- on the grounds that the return of income and Form 10B were not filed on time. The Tribunal noted that the assessee filed the return on 31.03.2021 and Form 10B on 30.03.2021, while the extended due date was 15.02.2021. The Tribunal ruled that due to the COVID-19 pandemic, the Supreme Court had extended the limitation period, and thus, the return and Form 10B were filed within the permissible time. Consequently, the disallowance was deemed incorrect.

Issue 2: Disallowance of Statutory Exemption under Section 11(1)(a)
The Tribunal examined the disallowance of the statutory exemption of Rs. 93,31,921/- under Section 11(1)(a) due to late filing. The Tribunal reiterated that the return and Form 10B were filed within the extended period as per the Supreme Court's order, and therefore, the exemption should not have been disallowed.

Issue 3: Computation of Income Derived from Trust Property
The Tribunal considered the assessee's argument that income derived from trust property should be computed on commercial principles, referencing Circular No. 5-P(LXX-6) of 1968. The Tribunal agreed with the assessee, noting that the computation should follow commercial principles, and thus, the disallowance was unjustified.

Issue 4: Delay Due to Fire and COVID-19 Pandemic
The Tribunal acknowledged the assessee's explanation that the delay in filing was due to a fire in the office and the COVID-19 pandemic, which caused severe disruptions. The Tribunal found these reasons valid and aligned with the Supreme Court's extension of the limitation period.

Issue 5: Jurisdiction of the Assessing Officer
The Tribunal addressed the additional ground regarding the jurisdiction of the Assessing Officer to make adjustments without intimation. The Tribunal found that the Assessing Officer, CPC, failed to follow the mandate of the first proviso to Section 143(1)(a), which requires intimation to the assessee before making adjustments. Consequently, the Tribunal quashed the order passed under Section 143(1) as invalid and nullity in the eyes of the law.

Conclusion:
The Tribunal allowed the appeal of the assessee, setting aside the order of the CIT(A) and directing the Assessing Officer to allow the exemption claimed under Section 11 of the Act. The Tribunal's decision was pronounced in open court on May 23rd, 2023.

---