CPC denied my trust's section 11 exemption in a section 143(1) intimation for a late Form 10B, and a regular assessment has since been completed and separately appealed. What happens to my appeal against the intimation, and to the demand in it?
It becomes infructuous. The Delhi Bench of the Tribunal held that when the return has been taken up in regular assessment the intimation loses its individuality and merges with the regular assessment, so the appeal against the intimation no longer serves any purpose. The first appellate authority was right to say so. But he was wrong to go further and record findings on the section 11 claim on merits when he knew an appeal against the regular assessment on the same issue was pending; the Tribunal said in terms that he should have stopped. The exemption question itself was not decided here.
Decided by the ITAT (Income Tax Appellate Tribunal, Delhi Bench) on 2024-05-22, reported as IT Appeal No. 354 (Delhi) of 2024, assessment year 2018-19. It bears on section 143(1), section 143(3), section 11, section 12A(2) of the Income Tax Act 1961, in Charitable Trusts & Exemption, Assessment & Scrutiny and Appeals matters.
Trusts routinely end up with two live appeals on the same point - one against the CPC intimation that denied section 11 for a late Form 10B, and one against the scrutiny assessment that did the same thing. This order tells you which one carries the dispute: the assessment appeal. The intimation loses its separate existence, and the appeal against it is not decided but shelved as infructuous. Just as usefully, it tells the first appellate authority not to pronounce on the merits of a shelved appeal, so that adverse observations made in it do not travel into the live one. Contrast Orient Craft Ltd v DCIT, where the intimation and the assessment dealt with different issues, no merger arose and the intimation stood final.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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For assessment year 2018-19 the assessee, a club assessed as a charitable institution, claimed exemption under section 11 but did not file Form 10B along with its return. The return was processed by the Centralised Processing Centre and an intimation under section 143(1) was issued on 10 November 2019, bringing Rs 6,00,35,500 to tax and raising a demand. A notice under section 143(2) had been issued on 22 September 2019, and a regular assessment under section 143(3) was completed on 8 February 2021, dealing with the same exemption question. The assessee appealed against both. In the appeal against the intimation the first appellate authority, the Additional/Joint Commissioner (Appeals), held that the intimation had merged with the regular assessment and that the appeal was infructuous, but went on to record findings against the assessee on the merits of the section 11 claim. The assessee came to the Tribunal against that order.
The Tribunal agreed that the section 143(1) intimation merges with the regular assessment under section 143(3): when the return has been taken up and processed in regular assessment, the intimation loses its individuality and merges with it, and the validity of an intimation under section 143(1) is in any event limited to intimating the correctness and accuracy of the income declared. The appeal against the intimation was therefore infructuous. On the second point the Tribunal held against the first appellate authority: having reached that conclusion he should have stopped with it and should not have proceeded to decide the issue on merits, because it had been brought to his knowledge that the assessee had filed an appeal against the regular assessment order. The section 11 exemption question was accordingly not decided in this proceeding, and was left to the appeal against the regular assessment.
Two ideas are doing the work. The first is the ordinary doctrine of merger applied to section 143. An intimation is a limited thing - it confirms the arithmetic and accuracy of what was declared, nothing more. When the same return is taken into a regular assessment under section 143(3) that determines the same total income for the same year, the earlier and lesser determination cannot survive alongside it; it is absorbed. Once absorbed, there is no order against which the appeal can operate, which is why the appeal is treated as infructuous rather than dismissed on the merits. The second idea follows from the first and is about appellate discipline. If the intimation has ceased to exist, the first appellate authority hearing an appeal against it has nothing before him on which to pronounce; and when he has been told that the same issue is alive in an appeal against the regular assessment, findings recorded in the dead appeal can only prejudice the live one. The Tribunal therefore separated the two questions cleanly - it upheld the conclusion of infructuousness and disapproved the merits findings, without itself expressing any view on whether the late Form 10B defeated the section 11 claim.
When the assessment was processed under regular assessment then it loses its individuality and merges with the regular assessment.
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Handle my notice → Ask a CA on WhatsAppIt becomes infructuous. The Delhi Bench of the Tribunal held that when the return has been taken up in regular assessment the intimation loses its individuality and merges with the regular assessment, so the appeal against the intimation no longer serves any purpose. The first appellate authority was right to say so. But he was wrong to go further and record findings on the section 11 claim on merits when he knew an appeal against the regular assessment on the same issue was pending; the Tribunal said in terms that he should have stopped. The exemption question itself was not decided here. This was decided by the ITAT (Income Tax Appellate Tribunal, Delhi Bench) and bears on section 143(1), section 143(3), section 11, section 12A(2) of the Income Tax Act 1961. It is reported as IT Appeal No. 354 (Delhi) of 2024, assessment year 2018-19. Trusts routinely end up with two live appeals on the same point - one against the CPC intimation that denied section 11 for a late Form 10B, and one against the scrutiny assessment that did the same thing. This order tells you which one carries the dispute: the assessment appeal. The intimation loses its separate existence, and the appeal against it is not decided but shelved as infructuous. Just as usefully, it tells the first appellate authority not to pronounce on the merits of a shelved appeal, so that adverse observations made in it do not travel into the live one. Contrast Orient Craft Ltd v DCIT, where the intimation and the assessment dealt with different issues, no merger arose and the intimation stood final. If it applies to you, the first step is this: Keep the appeal against the section 143(3) assessment as the principal appeal and argue the section 11 and Form 10B question there.
For assessment year 2018-19 the assessee, a club assessed as a charitable institution, claimed exemption under section 11 but did not file Form 10B along with its return. The return was processed by the Centralised Processing Centre and an intimation under section 143(1) was issued on 10 November 2019, bringing Rs 6,00,35,500 to tax and raising a demand. A notice under section 143(2) had been issued on 22 September 2019, and a regular assessment under section 143(3) was completed on 8 February 2021, dealing with the same exemption question. The assessee appealed against both. In the appeal against the intimation the first appellate authority, the Additional/Joint Commissioner (Appeals), held that the intimation had merged with the regular assessment and that the appeal was infructuous, but went on to record findings against the assessee on the merits of the section 11 claim. The assessee came to the Tribunal against that order. The matter was decided on 2024-05-22 by the ITAT (Income Tax Appellate Tribunal, Delhi Bench). On those facts the ITAT held as follows. The Tribunal agreed that the section 143(1) intimation merges with the regular assessment under section 143(3): when the return has been taken up and processed in regular assessment, the intimation loses its individuality and merges with it, and the validity of an intimation under section 143(1) is in any event limited to intimating the correctness and accuracy of the income declared. The appeal against the intimation was therefore infructuous. On the second point the Tribunal held against the first appellate authority: having reached that conclusion he should have stopped with it and should not have proceeded to decide the issue on merits, because it had been brought to his knowledge that the assessee had filed an appeal against the regular assessment order. The section 11 exemption question was accordingly not decided in this proceeding, and was left to the appeal against the regular assessment.
Two ideas are doing the work. The first is the ordinary doctrine of merger applied to section 143. An intimation is a limited thing - it confirms the arithmetic and accuracy of what was declared, nothing more. When the same return is taken into a regular assessment under section 143(3) that determines the same total income for the same year, the earlier and lesser determination cannot survive alongside it; it is absorbed. Once absorbed, there is no order against which the appeal can operate, which is why the appeal is treated as infructuous rather than dismissed on the merits. The second idea follows from the first and is about appellate discipline. If the intimation has ceased to exist, the first appellate authority hearing an appeal against it has nothing before him on which to pronounce; and when he has been told that the same issue is alive in an appeal against the regular assessment, findings recorded in the dead appeal can only prejudice the live one. The Tribunal therefore separated the two questions cleanly - it upheld the conclusion of infructuousness and disapproved the merits findings, without itself expressing any view on whether the late Form 10B defeated the section 11 claim. In the words reproduced by the source cited on this page: "When the assessment was processed under regular assessment then it loses its individuality and merges with the regular assessment."
It was decided by the ITAT on 2024-05-22 and is reported as IT Appeal No. 354 (Delhi) of 2024, assessment year 2018-19. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 143(1), section 143(3), section 11, section 12A(2), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. The Tribunal agreed that the section 143(1) intimation merges with the regular assessment under section 143(3): when the return has been taken up and processed in regular assessment, the intimation loses its individuality and merges with it, and the validity of an intimation under section 143(1) is in any event limited to intimating the correctness and accuracy of the income declared. The appeal against the intimation was therefore infructuous. On the second point the Tribunal held against the first appellate authority: having reached that conclusion he should have stopped with it and should not have proceeded to decide the issue on merits, because it had been brought to his knowledge that the assessee had filed an appeal against the regular assessment order. The section 11 exemption question was accordingly not decided in this proceeding, and was left to the appeal against the regular assessment. It arises in Charitable Trusts & Exemption, Assessment & Scrutiny and Appeals matters, on section 143(1), section 143(3), section 11, section 12A(2) of the Income Tax Act 1961, and was decided by Income Tax Appellate Tribunal, Delhi Bench. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Do not let the first appellate authority decide the merits in the intimation appeal - point out, on record, that the same issue is pending in the assessment appeal and ask him to stop at infructuousness. If merits findings have already been recorded in the infructuous appeal, take the point in the live appeal that they were made without jurisdiction over a merged order. Watch the distinction: merger is available only where the assessment covers the same issue as the intimation.
Still good law. No appeal against this order was traced and nothing later doubting it was found. It applies the merger reasoning of the Calcutta High Court in C.E.S.C. Ltd. v. DCIT (22 April 2003), which is itself undisturbed. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The full order page on indiankanoon returned a 403 on repeated attempts and the order had to be read through that site's fragment views, so parts of it were not seen. In particular I could not read the operative paragraph, so what the Tribunal formally directed about the demand raised in the intimation, and whether it expressly vacated the first appellate authority's merits findings, is not established here - what is established is that it held he should not have made them. The names of the Members who signed the order could not be read from the copy available and are therefore not given. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The Tribunal agreed that the section 143(1) intimation merges with the regular assessment under section 143(3): when the return has been taken up and processed in regular assessment, the intimation loses its individuality and merges with it, and the validity of an intimation under section 143(1) is in any event limited to intimating the correctness and accuracy of the income declared. The appeal against the intimation was therefore infructuous. On the second point the Tribunal held against the first appellate authority: having reached that conclusion he should have stopped with it and should not have proceeded to decide the issue on merits, because it had been brought to his knowledge that the assessee had filed an appeal against the regular assessment order. The section 11 exemption question was accordingly not decided in this proceeding, and was left to the appeal against the regular assessment.
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We charge fees for our public utility work. Does that cost us charitable status under s.2(15)?
My return was only processed under 143(1). Does that stop the department reopening it later?
Our trust was formed weeks ago and has done nothing yet. Can registration be refused for that?
No s.143(2) notice was issued at all. Does s.292BB save the assessment?