Denial of exemption under Section 11 made by CPC under Section 143(1) – ITAT Mumbai grant relief to Trust

 

In a significant ruling in the case of P.N. Amersey Educational Trust for A.Y. 2021–22, the ITAT Mumbai quashed the denial of exemption under Section 11 made by CPC under Section 143(1). The assessee, a trust registered under Section 12A since 1985, had filed its return on 15.03.2022, well within the extended deadline of 31.03.2022 for re-registration under Section 12AB, as per CBDT Circular 16/2021.

The CPC initially proposed disallowance based on delayed filing of Form 10B but ultimately made the adjustment citing lack of valid 12AB registration—without affording a fresh opportunity to respond. The Tribunal found this change in grounds a clear violation of natural justice. It held that adjustments under Section 143(1)(a) must strictly adhere to the reasons stated in the original notice. Since the trust’s original Section 12A registration was valid at the time of return filing and provisional registration under Form 10AC was later granted on 12.05.2022, exemption could not be denied. The Tribunal upheld the CIT(A)’s decision, ruling that CPC’s adjustment was unsustainable both factually and legally. The department’s appeal was dismissed, and the assessee’s cross-objection was allowed in full. This ruling reinforces that procedural fairness and proper opportunity are non-negotiable in automated tax adjustments.

The copy of the order is as under:

1750926412-nxkKRr-1-TO