2025 (9) TMI 1554 - AT - Income Tax

Denial of Section 11 benefits improper where existing trust applied for registration within time; appeals remitted for joint hearing

ITAT held that denial of section 11 benefits was improper where the assessee, an existing trust, applied for registration within time and the cause of ... Denial of benefit of section 11 - intimation u/s 143(1) - HELD THAT:- Since the assessee was an existing Trust and it applied for registration within time, there was no justification for not allowing the benefit of section 11 of the Act and CIT(A) was not justified in dismissing the appeal as the cause of action had arisen in the intimation u/s 143(1) of the Act. Thus, we deem it proper to set aside the matter to the Ld. CIT(A) with the request that both the appeals may be heard together for both the assessment years and the order may be passed at the earliest, preferably within a period of 4 months from the date of receipt of this order. Appeals filed by the assessee are allowed for statistical purposes. ISSUES PRESENTED AND CONSIDERED 1. Whether the Commissioner of Income Tax (Appeals) was justified in dismissing an appeal against rejection of an application u/s 154 of the Income Tax Act on the ground that the original cause of action arose from an intimation u/s 143(1) and hence the appeal was infructuous. 2. Whether an order u/s 143(1) that denies exemption u/s 11 due to an apparent discrepancy in the CPC computation (revenue expenditure shown at two different places with contradictory figures) can be remedied by an application u/s 154 and whether rejection of such rectification without adjudication merits appellate consideration. 3. Whether the CPC's intimation/ order u/s 143(1) which disallows exemption u/s 11 without stating reasons (alleged non-speaking order) violates principles of natural justice and whether such defect is a ground for setting aside the rejection of rectification and remanding for fresh adjudication. 4. Whether related appeals (intimation u/s 143(1) and rejection of rectification u/s 154) may be clubbed and remitted to the CIT(A) for de novo adjudication in view of overlapping factual and legal issues concerning registration under section 12A/12AA/12AB and entitlement to exemption u/s 11. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of dismissal by CIT(A) on ground that cause of action arose under s.143(1) and not s.154 Legal framework: Section 143(1) (intimation) can be appealed to the Commissioner (Appeals) under clause (a) of sub-section (1) of section 246A; clause (c) of section 246A permits appeal against an order made u/s 154 which has the effect of enhancing assessment, reducing a refund or refusing to allow a claim made by the assessee u/s 154. Precedent Treatment: No external judicial precedents were cited or relied upon in the impugned orders; the Tribunal's decision is based on statutory construction of sections 143(1), 154 and 246A as reflected in the record. Interpretation and reasoning: The Tribunal interprets section 246A as permitting appeals both against intimation u/s 143(1) and against orders u/s 154 that refuse to rectify mistakes affecting the assessee's claim. Consequently, rejection of a rectification application u/s 154 is itself a reviewable order before the CIT(A). Dismissing the appeal as infructuous because the original cause of action arose at the stage of s.143(1) ignored the statutory right to challenge the refusal of rectification. The Tribunal holds that the CIT(A) was required to decide the appeal filed against the s.154 order rather than dismiss it on jurisdictional or cause-of-action grounds. Ratio vs. Obiter: Ratio - An appeal against an order refusing rectification u/s 154 is maintainable before the CIT(A) notwithstanding that the original grievance arose from an intimation u/s 143(1); the CIT(A) erred in dismissing such appeal as infructuous. Conclusion: The CIT(A)'s dismissal on the stated ground was incorrect; the matter requires adjudication rather than dismissal. Issue 2: Whether the CPC's refusal to rectify an apparent contradiction in the intimation (computation showing revenue expenditure both NIL and Rs.1,82,71,100) warranted appellate consideration Legal framework: Section 154 allows rectification of mistakes apparent from the record; where an intimation under s.143(1) contains contradictions that produce quantitative changes (e.g., disallowance affecting taxable receipts), the correctness of refusal to rectify is reviewable u/s 246A(c). Precedent Treatment: No prior authority or binding precedent was invoked; determination rests on examining the record for a mistake apparent on the face of the record. Interpretation and reasoning: The Tribunal notes an apparent inconsistency in the CPC's intimation: the Annexure-Schedule ER lists revenue expenditure as Rs.1,82,71,100, whereas the computation earlier in the order shows it as NIL. The discrepancy directly affects the assessee's claim of exemption u/s 11 and the tax liability. The Tribunal reasons that such an apparent contradiction constitutes a mistake apparent from the record that should have been examined and, if necessary, rectified under s.154. Rejection of the rectification application without amending the evident error deprived the assessee of adjudication on merits. Ratio vs. Obiter: Ratio - An apparent contradiction in an assessing intimation that affects substantive relief (exemption u/s 11) is a matter for rectification under s.154 and for appellate scrutiny; refusal to rectify without adjudication is erroneous. Conclusion: The rectification application required substantive consideration; appellate redress against its rejection was maintainable. Issue 3: Allegation of non-speaking order and breach of principles of natural justice Legal framework: Administrative and tax orders must ordinarily state reasons sufficient to enable the affected party to understand and challenge the decision; a non-speaking order that fails to disclose basis for disallowance may attract challenge on grounds of violation of principles of natural justice. Precedent Treatment: The record contains allegations that the intimation did not state reasons for denial of exemption; no case law was cited in the impugned orders or submissions before the Tribunal. Interpretation and reasoning: The Tribunal observes that the intimation did not disclose reasons for denial of exemption u/s 11 and that the rectification application was rejected without correcting the manifest computation inconsistency. Given that the assessee had claimed registration under sections 12A/12AA and sought fresh registration under the statutory timeline, denial of exemption without articulated reasons and without considering rectification raises procedural and substantive fairness issues. The Tribunal does not decide on violation of natural justice on merits but treats the absence of reasoned adjudication as a ground to remit the matter for fresh consideration. Ratio vs. Obiter: Predominantly obiter as to whether the intimation was a nullity for being non-speaking; however, the operative ratio is that lack of reasoned consideration coupled with rejection of rectification necessitates remand for de novo adjudication. Conclusion: The issue of non-speaking order supports remand for fresh adjudication; the Tribunal refrains from deciding entitlement on merits pending de novo consideration. Issue 4: Clubbing of appeals and directions for de novo consideration by the Commissioner (Appeals) Legal framework: Appeals addressing interconnected issues arising from the same factual matrix (intimation u/s 143(1) and rejection of rectification u/s 154) may be consolidated and decided together; procedural rules (including rule 46A of the Income Tax Rules) require opportunity of hearing to the Assessing Officer. Precedent Treatment: No precedents cited; Tribunal applied principles of efficient adjudication and statutory right of hearing. Interpretation and reasoning: The Tribunal finds overlapping facts concerning registration under section 12A/12AA/12AB and entitlement to exemption u/s 11 for consecutive assessment years. For fairness and to avoid piecemeal adjudication, the Tribunal directs that both appeals be remitted to the CIT(A) to be heard and decided together. The CIT(A) is to conduct de novo adjudication, afford opportunity of hearing to the Assessing Officer as per rule 46A, and consider the assessee's submissions on registration and exemption. The Tribunal also imposes an expectation of expedition (order within four months) and cautions against unnecessary adjournments by the assessee. Ratio vs. Obiter: Ratio - Remand for de novo adjudication and consolidation of related appeals is appropriate where the appeals arise from the same factual and legal matrix and where previous appellate authority failed to adjudicate the merits. Conclusion: Appeals are set aside to the CIT(A) for de novo hearing of both matters together, with directions to observe rule 46A, decide on merits (including registration and exemption issues), and preferably conclude within four months; appeals allowed for statistical purposes.