Facts of the Case

The assessee society filed its return declaring NIL income and claimed exemption under Sections 11 and 12, despite not having registration under Section 12A at the relevant time. The return was processed under Section 143(1), and exemption was denied, resulting in a demand.

Later, the assessee filed a rectification application under Section 154 claiming exemption under Section 10(23C)(iiiad), asserting that it was engaged in educational activities and had university recognition. The Assessing Officer rejected the claim, noting absence of educational receipts and lack of supporting evidence.

The CIT(A) upheld the rejection, observing that the society incurred expenditures on activities not related solely to education and did not qualify as an institution existing exclusively for educational purposes. The matter was appealed before the Tribunal for Assessment Years 2011-12 and 2013-14.

Issues Involved

  1. Whether a fresh exemption claim under Section 10(23C)(iiiad) can be introduced through rectification under Section 154.
  2. Whether the assessee qualified as an educational institution existing solely for educational purposes.
  3. Whether absence of registration under Section 12A and lack of educational income defeats exemption claims.

Petitioner’s (Assessee’s) Arguments

  • The society was engaged in educational activities and running an institution.
  • Its receipts were below the statutory threshold for exemption under Section 10(23C)(iiiad).
  • Registration under Section 12A was subsequently granted.
  • University recognition supported its educational character.
  • The matter should be restored for fresh examination.

Respondent’s (Revenue’s) Arguments

  • The assessee originally claimed exemption under Sections 11 and 12 without holding valid registration.
  • No claim under Section 10(23C)(iiiad) was made in the return.
  • A new claim cannot be raised via rectification proceedings.
  • The assessee had no educational receipts during the relevant year.
  • Recognition relied upon did not apply to the assessment year in question.

Court Order / Findings (ITAT)

  • The assessee did not claim exemption under Section 10(23C)(iiiad) in the original return.
  • Section 154 proceedings cannot be used to introduce a completely new claim.
  • Rectification is confined to correcting mistakes apparent from the record.
  • No evidence established that the assessee carried out educational activities during the relevant period.
  • Recognition relied upon was not applicable to the year under consideration.
  • Belated returns cannot be revised to introduce new claims.

Important Clarification

  • Rectification under Section 154 has limited scope and cannot substitute assessment proceedings.
  • Exemption under Section 10(23C)(iiiad) requires proof of existence solely for educational purposes.
  • Subsequent registration under Section 12A does not validate earlier claims automatically.
  • Claims not made in the original return generally cannot be entertained later through rectification.

Link to download the order - .https://itat.gov.in/public/files/upload/1659418869-09%20and%2010%20Alld%202021.pdf

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