TaxTMI 
TaxTMI 
2026 (9) TMI 505
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.... assessee itself in the return/audit report. The assessee has assailed this finding contending that the amount in question represents income accumulated under section 11(2) in an earlier year and duly applied for its charitable objects during the year under consideration, and that the adjustment has arisen solely on account of an inadvertent and demonstrable error in reporting the corresponding figures in one of the schedules to the return. 2. The assessee, Council for Fair Business Practices ("CFBP"), is a non-profit organisation incorporated under section 25 of the erstwhile Companies Act and is registered under section 12A of the Act. It was established in the year 1966 with the principal objects, inter alia, of promoting high ethical standards in business and professions, educating consumers regarding their rights and responsibilities, providing a mechanism for redressal of consumer grievances without recourse to litigation, and promoting a code of conduct amongst businesses for ensuring fair trade practices. Thus, broadly speaking, the assessee functions as a self-regulatory and consumer-oriented institution seeking to foster fair business practices and to provide an interf....
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....roversy before us, the revised Form 10-BB records the application of Rs. 76,36,546 out of income accumulated under section 11(2) during an earlier previous year. Thus, the source, character and utilisation of the disputed amount are capable of being traced from the contemporaneous return and audit material itself. 5. The actual error which resulted in the impugned adjustment is equally important. While filling Schedule A of the return, the assessee correctly reflected Rs. 76,36,546 as a source of funds available for meeting its revenue and capital application, being income accumulated under section 11(2) in an earlier year. However, after bringing this amount into the source side of the computation, the corresponding amount was inadvertently not added to the figure of expenditure/application reflected on the other side. In other words, the accumulated income was correctly recognised as a source available for application during the year, but its corresponding utilisation was not appropriately carried into the relevant field of the electronic schedule. The result was a mismatch broadly corresponding to the very same sum of Rs. 76,36,546. The assessee has explained that although th....
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....nsic character of the amount or create a tax liability which otherwise did not arise under the substantive provisions of the Act. The learned Sr. DR, on the other hand, relied upon the orders of the authorities below and submitted that the adjustment was made on the basis of the information furnished by the assessee itself and, therefore, there was no infirmity in the action of CPC or in the order of the learned CIT(A). 8. We have heard the rival submissions and carefully perused the material placed before us. In our opinion, the controversy has to be examined first from the substantive statutory provisions rather than from the manner in which a particular figure happened to be populated in an electronic schedule. Section 115BBI is attracted where the total income of a trust or institution referred to therein includes income by way of "specified income". The provision prescribes a special rate of tax on the aggregate of such specified income. Thus, the sine qua non for invoking section 115BBI is the existence of an item which answers the statutory description of "specified income". The charge cannot arise merely because a figure appears in a particular column or because an incon....
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....where such accumulation is otherwise not allowed under the Act. Mere utilisation during the year of income validly accumulated under section 11(2) in an earlier year is qualitatively different. Indeed, application of such accumulation for the stipulated charitable purposes is precisely the event contemplated when an accumulation under section 11(2) is made. Therefore, unless the Revenue demonstrates a statutory event by which such accumulation has become deemed income or otherwise falls within the expression "specified income", the mere fact that its utilisation was inaccurately carried into one field of the return cannot bring section 115BBI into operation. 11. There is yet another aspect which, in our opinion, goes to the root of the reasoning adopted by the learned CIT(A). In paragraph 4.1.2 of the impugned order, while dealing with the assessee's case, the learned CIT(A) has recorded that the assessee had stated that the net profit from an "eligible unit", i.e. income earned from "SEZ", was Rs. 39,35,46,782, that Rs. 7,47,44,241 was profit from business in Schedule PGBP, and that gross total income including profits earned from the specified undertaking/eligible unit was Rs.....
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....error in its reporting cannot be permitted to transmute the transaction itself. Income validly accumulated under section 11(2) and subsequently applied for the stipulated objects does not acquire the character of specified income merely because, while electronically filling the return, the corresponding utilisation was omitted from one particular field. Taxability is a consequence of the statute applied to facts; it cannot be the consequence of an inadvertent data-entry incongruity divorced from those facts. 14. We also cannot lose sight of the fact that the impugned adjustment has been made at the stage of processing the return under section 143(1). The jurisdiction at that stage is essentially computational and is circumscribed by the adjustments specifically contemplated by the provision. Where the return and the accompanying material themselves disclose facts which, when read together, reveal an apparent reporting inconsistency requiring substantive examination, the processing mechanism cannot selectively adopt one entry, disregard the corresponding disclosures elsewhere, and thereby convert a mismatch into an item of substantive taxable income under a special charging provi....
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....'ble Supreme Court observed, in substance, that where an assessee, by mistake, inadvertence or ignorance, includes in its income an amount which is either exempt or is otherwise not income within the contemplation of law, the statutory authorities are not precluded from granting the relief which is legitimately due. Similar principle has been enunciated by the Hon'ble Bombay High Court in Balmukund Acharya v. Dy. CIT [2009] 310 ITR 310 (Bom.), emphasising that the authorities administering the Act are required to assess and collect only such tax as is lawfully due and an assessee should not be prejudiced merely on account of a mistake or misconception. The decision of the Hon'ble Bombay High Court in CIT v. Pruthvi Brokers & Shareholders (P.) Ltd. [2012] 349 ITR 336 (Bom.) has also been relied upon for the proposition that legitimate claims can be entertained by the appellate authorities even if the same had not been correctly or completely made at an earlier stage. We have referred to these decisions only as reinforcing the conclusion which, in the present case, otherwise flows directly from the statutory provisions and the admitted factual matrix. The issue before us is not to gr....
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....nds available for meeting the revenue and capital application during the year. However, while populating the corresponding application/expenditure field, the same amount was not simultaneously added to the expenditure figure, resulting in a mismatch substantially equivalent to Rs. 76,36,546. The error, therefore, lay not in the underlying transaction, nor in the actual utilisation of the accumulated income, but in the manner in which the two sides of the same transaction were electronically reported in Schedule A. What assumes further significance is that in the specific portion of the return dealing with income chargeable under section 115BBI, the assessee itself had shown the amount as Nil. Thus, the return, when read as a whole and not by isolating one computational entry from the rest, does not support the conclusion that the assessee had declared Rs. 76,36,546 as specified income chargeable under section 115BBI. On the contrary, the various disclosures reveal that the assessee treated the said amount as earlier accumulated income which had been brought forward and applied during the year for its charitable purposes. 19. This distinction, in our opinion, goes to the root of ....
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....the complete trail of the accumulation and its subsequent application. Once the assessee had disclosed the earlier accumulation, had shown its utilisation during the year in the revised Form No. 10-BB, and had simultaneously declared the income chargeable under section 115BBI at Nil, the matter could not have been concluded by treating the computational inconsistency itself as determinative of taxability. A processing provision cannot be employed to convert an apparent reporting discrepancy into an independent substantive liability when such liability does not clearly emerge from the return read together with the accompanying statutory disclosures. What is capable of adjustment at the stage of section 143(1) is an inconsistency contemplated by the provision; what cannot be done is to attribute a new statutory character to an amount merely because the software-driven computation notices that two corresponding fields do not reconcile. 21. We also find considerable infirmity in the manner in which the learned CIT(A) has approached the controversy. In paragraph 4.1.2 of the impugned order, the learned CIT(A) has referred to alleged profit from an eligible unit/SEZ of Rs. 39,35,46,78....