Assessee denied Section 10(23C) deduction for missing Form 10B gets partial relief on unclear rejection reasons

ITAT Ahmedabad partially allowed the appeal regarding denial of deduction under Section 10(23C). The assessee claimed exemption under Section 10(23C)(iv) but argued it should have been under Section 11. CPC rejected the claim as mandatory Form 10B was not furnished. The tribunal found the intimation under Section 143(1) unclear regarding reasons for disallowance. Revenue was directed to clarify the exact reason for rejection. The assessee was advised to file rectification under Section 154 or seek remedy under Section 119 as appropriate.

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Issues Involved:
1. Jurisdiction and adjustment u/s 143(1)(a) of the Act.
2. Granting of exemption u/s 11 & 12 of the Act.
3. Remedy u/s 119 of the Act.
4. Appeal remedy u/s 246A of the Act.
5. Principles of Natural Justice.
6. Levying interest u/s 234B/C of the Act.

Summary:

1. Jurisdiction and adjustment u/s 143(1)(a) of the Act:
The Tribunal held that the adjustment made by CPC Bengaluru u/s 143(1) of the Income Tax Act, 1961, denying the exemption u/s 10(23C) due to the non-filing of Form 10BB, was justified. The issue was factual, not debatable, and thus within the purview of "prima-facie adjustment" as envisaged u/s 143(1) of the Act. The assessee's contention that the issue was debatable was dismissed.

2. Granting of exemption u/s 11 & 12 of the Act:
The Tribunal noted that the assessee had mistakenly claimed exemption u/s 10(23C) instead of u/s 11 in the return. The claim for exemption u/s 11 was made during the appellate proceedings, and the necessary Audit Report in Form 10B was filed later. The Tribunal upheld the JCIT(A)'s decision that the primary requirement was to claim the deduction u/s 11 in the return of income, which was not fulfilled. Hence, the exemption could not be allowed based solely on Form 10B filed during appellate proceedings.

3. Remedy u/s 119 of the Act:
The Tribunal agreed with the JCIT(A) that the appropriate remedy for the assessee was to seek relief u/s 119(2)(b) of the Act, which allows for condonation of delay and admission of claims for exemption or deduction after the specified period. The JCIT(A) was not empowered to condone such delays or allow claims not made in the return.

4. Appeal remedy u/s 246A of the Act:
The Tribunal acknowledged that the remedy u/s 119 of the Act is additional and does not bar the appellant from opting for an appeal u/s 246A. However, it emphasized that the primary requirement of claiming the deduction in the return was not met.

5. Principles of Natural Justice:
The Tribunal found no breach of the principles of natural justice. The JCIT(A) had provided the assessee with a proper opportunity and passed a speaking order. Thus, the ground regarding the breach of natural justice was found infructuous.

6. Levying interest u/s 234B/C of the Act:
The issue regarding the charging of interest u/s 234B/C of the Act was deemed consequential and dependent on the outcome of the primary issues.

Conclusion:
The appeal filed by the assessee was partly allowed. The Tribunal directed the Revenue to provide the exact reason for disallowing the claim while processing the return. The assessee was advised to file an application u/s 154 to rectify the mistake or to avail the remedy u/s 119 if desired. The order was pronounced in the Open Court on 19th April 2024 at Ahmedabad.

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