CPC can’t disallow Sec. 11 exemption on a debatable issue while processing ITR

Case Details: Rajiv Gandhi University of Health Sciences v. DCIT - [2022] 144 taxmann.com 101 (Bangalore-Trib.)

Judiciary and Counsel Details

• • Smt. Beena Pillai, Judicial Member & Chandra Poojari, Accountant Member
  • Mrs Suman Lunkar, CA for the Appellant.
  • S. Praveena, CIT DR for the Respondent.

Facts of the Case

Assessee was a trust registered under section 12A engaged in providing instructions, training, and research advancement in the sector of medicine and allied sciences. It filed the return of income claiming exemption under section 11 and declaring nil income.

The return of income of the assessee was processed by CPC and intimation under section 143(1) was issued denying the exemption claimed under section 11. The assessee filed a rectification application which was not entertained by the Assessing Officer (AO).

The assessee contended that no disallowance can be made on a debatable issue in an intimation issued under section 143(1). Whereas, the revenue contends that all kinds of adjustments can be made in an intimation under section 143(1).

The CIT(A) also upheld the disallowance made by CPC. Aggrieved-assessee filed the instant appeal before the Tribunal.

ITAT Held

The Tribunal held that the scope of permissible adjustments under section 143(1) is much narrower. It mandates that “no adjustments” can be made other than the items prescribed therein.

Further, in case of a claim which requires further inquiry, it cannot be disallowed without giving an opportunity of being heard to submit the proof in support of the claim. Therefore, debatable issues cannot be adjusted by way of issuing intimation under section 143(1).

Since no opportunity of being heard was provided to the assessee to present any evidence makes the case debatable, the department was not right in disallowing the claim unilaterally.