AI Insights
The case involves Dayspring Enterprises of India, which appealed against the order of the Commissioner of Income Tax (Appeals) at the Faceless Appeal Centre, Delhi, concerning the assessment year 2016-17. The primary issue was the shortfall in the application of income for charitable purposes as mandated under section 11 of the Income Tax Act, 1961. The A.O. had initially accepted the nil income return filed by the assessee but later, following an order under section 263 by the Principal Commissioner of Income Tax (Exemptions), Hyderabad, reassessed the income, leading to additions for shortfall in application of income. The ITAT found that the A.O. erred in not accepting the corrected calculations provided by the assessee, which were based on the audited financial statements for the relevant years.
Appeal Details
Counselvise Citation
[2025] 140 COUNSELVISE.COM (IT) 785717 (ITAT-HYDERABAD)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
10 month(s) 26 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
29-10-2025
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
DB-A
Assessment Year
2016-2017
Appeal Filed On
03-12-2024
Judgement Text
"आयकर अपीलीय न्यायाधिकरण में, हैदराबाद ‘ए’ बेंच, हैदराबाद IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ A ‘ Bench, Hyderabad श्री मंजूनाथ जी, माननीय लेखा सदस्य एवं श्री रवीश सूद, माननीय न्याययक सदस्य SHRI G. MANJUNATHA, HON’BLE ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, HON’BLE JUDICIAL MEMBER आयकरअपीलसं./I.T.A.No.1261/Hyd/2024 (निर्धारण वर्ा/ Assessment Year: 2016-17) Dayspring Enterprises of India, Medchal Road, Jeedimetla Village, Secunderabad – 500067. PAN : AAATD2907P. Vs. The Income Tax Officer, Exemption Ward-1(1), Hyderabad. (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) करदाता का प्रतततितित्व/ Assessee Represented by : Shri Aniruddha Abhyankar, C.A. राजस्व का प्रतततितित्व/ Department Represented by : Shri Gurpreet Singh, Sr.A.R. सुिवाई समाप्त होिे की ततति/ Date of Conclusion of Hearing : 14.10.2025 घोर्णध की तधरीख/ Date of Pronouncement : 29.10.2025 O R D E R PER MANJUNATHA G., A.M : This appeal filed by the assessee is directed against the order of the learned Commissioner of Income Tax (Appeals), National Printed from counselvise.com 2 ITA No.1261/Hyd/2024 Dayspring Enterprises of India Faceless Appeal Centre [in short “NFAC”], Delhi, dated 03.12.2024 relating to the assessment year 2016-17. 2. The brief facts of the case are that, the assessee filed its return of income for A.Y. 2016-17 on 06-06-2016, declaring nil income after claiming exemption u/s 11 of the Income-tax Act, 1961 (for short “the Act”). The assessment has been completed u/s 143(3) of the Act on 23-06-2018 and accepted the returned income or loss. Subsequently, the Ld. PCIT (Exemptions), Hyderabad had passed an order u/s 263 of the Act, and set aside the assessment order passed by the A.O. u/s 143(3) of the Act dated 23.06.2018 with a direction to the A.O. to examine the issues with reference to shortfall in application of income of the trust for the objects. The assessee challenged the order passed by the Ld. PCIT(E) before the ITAT, Hyderabad, and the ITAT, Hyderabad dismissed the appeal filed by the assessee and upheld the order passed by the Ld. PCIT(E) u/s 263 of the Act. 3. Consequent to the order passed by the Ld. PCIT(E) u/s 263 of the Act, dated 30-03-2021, the A.O. had taken up the assessment proceedings and called upon the assessee to file necessary Printed from counselvise.com 3 ITA No.1261/Hyd/2024 Dayspring Enterprises of India evidences in support of its case, including relevant financial statements, Form No.10B, and details of accumulation of income, if any. In response, the assessee filed a revised computation of gross receipts, accumulation of income u/s 11(1)(a) and accumulation of income u/s 11(2), and application of income for the objects of the trust as per ITR filed for A.Ys. 2015-16 and 2016-17 and corrected calculation for the A.Ys. 2015-16 and 2016-17. The assessee further submitted that, by an inadvertent error, the accumulation of income @ 15% u/s 11(1)(a) has been taken at Rs.78,32,246/- instead of Rs.2,15,04,978/-, and because of this, the assessee has set apart a sum of Rs.8,00,00,000/- u/s 11(2) of the Act, to be applied for charitable purposes in subsequent financial years. However, as per the corrected calculations, the assessee is required to set apart only Rs.6,63,25,268/-. Further, because of this mistake, in the subsequent assessment year i.e., A.Y. 2016-17, there was a shortfall in application of income to the extent of Rs.1,15,31,465/- , and the same has been observed by the Ld. PCIT(E) in his order passed u/s 263 of the Act. However, if we consider the correct calculation as per the provisions of u/s 11(1)(a) of the Act, the Printed from counselvise.com 4 ITA No.1261/Hyd/2024 Dayspring Enterprises of India assessee is required to set apart Rs.6,63,25,268/-, and if we consider the said amount, there is no shortfall in application of income, as computed by the Ld. PCIT(E) for the A.Y. 2016-17. The A.O., after considering the submissions of the assessee and also taking note of the relevant provisions of Section 11 of the Act observed that, although the assessee has filed correct calculations of accumulation of income u/s 11(1)(a) and 11(2) for both the assessment years, the correct calculations filed by the assessee cannot be admitted because, any fresh claim of deduction/exemption can be made only by filing a revised return of income, as held by the Hon’ble Supreme Court in the case of Goetze (India) Ltd. Vs. CIT (2006) 284 ITR 323 (SC). The A.O. has discussed the issue with reference to the provisions of u/s 11(1) and 11(2) and observed that, unless the assessee files Form No.10B/10/9A as required under the law on or before the due date u/s 139(1) of the Act, any modification in accumulation or set apart income for the subsequent year cannot be accepted. Therefore, the A.O. rejected the arguments of the assessee and assessed the total income at Rs.1,96,81,404/- towards shortfall in application of income u/s 11(1)(a) of the Income Tax Act, 1961. Printed from counselvise.com 5 ITA No.1261/Hyd/2024 Dayspring Enterprises of India 4. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A). 5. Before the Ld. CIT(A), the assessee has narrated the facts of its case and also the reasons for filing corrected Form No.10B indicating correct amount of application of income for charitable purposes u/s 11(1)(a) of the Act, and also accumulation of income u/s 11(2) of the Act, by filing revised Form No.10B, dated 13-01- 2022. During appellate proceedings, the Ld. CIT(A) has posted the case for hearing on five occasions, but there was no compliance from the assessee. Therefore, the Ld. CIT(A) disposed of the appeal filed by the assessee ex parte for non-prosecution and also decided the issue on merits and upheld the additions made by the A.O. towards shortfall in application of income u/s 11(1)(b) of the Income Tax Act, 1961. The Ld. CIT(A) had discussed the issue at length in light of the relevant income-tax return filed by the assessee for both the assessment years and corrected calculation of gross receipts, accumulation of income, and income set apart u/s 11(2) of the Act, and held that, in the absence of a revised return filed by the assessee, the A.O. cannot admit fresh claim of accumulation of income and thus, observed that, there is no error Printed from counselvise.com 6 ITA No.1261/Hyd/2024 Dayspring Enterprises of India in the reasons given by the A.O. to assess the income u/s 11(1)(b) of the Income Tax Act, 1961. 6. Aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before the Tribunal. 7. The learned counsel for the assessee Shi Anirudhha Abhyankar, C.A. submitted that, the Ld. CIT(A) erred in upholding the additions made by the A.O. towards shortfall in accumulation of income u/s 11(1)(b) of the Act, even though the assessee has explained the reasons for filing incorrect income-tax returns for A.Y. 2015-16 which resulted in a cascading effect of artificial increase of deemed income for A.Y. 2016-17. The learned counsel for the assessee further, referring to the income tax returns filed for A.Ys. 2015-16 and 2016-17 and corrected calculations as filed before the A.O. along with revised Form No.10B, dated 13-01- 2022 submitted that, the assessee by an inadvertent error, taken the wrong amount of accumulation u/s 11(1)(a) at Rs.78,33,246/- even though, the correct amount of accumulation was at Rs.2,15,04,978/- on the gross receipts of the financial year 2014- 15. Further, this fact has been explained before the A.O. by filing Printed from counselvise.com 7 ITA No.1261/Hyd/2024 Dayspring Enterprises of India revised calculations and also revised Form No.10B. Further, the assessee has explained the shortfall in accumulation of income computed by the Ld. PCIT(E) in the revision proceedings and it is only a deemed income as per Section 11(2) of the Act, for the A.Y. 2016-17 and because of the incorrect amount, the income to be applied for A.Y. 2016-17 has been artificially increased to the extent of Rs.1,15,31,404/-. Although these facts have been explained to the A.O., but the A.O. just because not filing return of income, has rejected the claim of the assessee and made additions to the income. The Ld. CIT (A) also did not appreciate the relevant facts and sustained the additions made by the A.O. even though the assessee has filed the relevant details. Therefore, he submitted that, the additions made by the A.O. should be deleted. 8. The learned senior A.R. for the Revenue Shri Gurpreet Singh, on the other hand, supporting the order of the Ld. CIT(A), submitted that, there is no dispute with regard to the fact that, as per the ITR filed by the assessee for A.Y. 2015-16, the assessee has set apart a sum of Rs.8,00,00,000/- u/s 11(2) of the Act. However, when it comes to A.Y. 2016-17, the assessee has shown sum of Rs.6,63,25,268/- by filing corrected calculation without Printed from counselvise.com 8 ITA No.1261/Hyd/2024 Dayspring Enterprises of India filing any revised return of income as required under the law. Therefore, the A.O. has rightly rejected the corrected calculation filed by the assessee in view of the decision of the Hon’ble Supreme Court in the case of Goetze (India) Ltd. Vs. CIT (supra). The Ld. CIT(A), after considering relevant facts, has rightly sustained the additions made by the A.O. Therefore, he submitted that the order of the Ld. CIT(A) should be upheld. However, he fairly agreed that since there is a mistake in calculation of accumulation of income u/s 11(1)(a) and 11(2) of the Act, in all fairness, the matter may be remanded back to the file of the A.O. for verification on the facts and decide the case as per law. 9. We have heard both parties, perused the material available on record, and had gone through the orders of the authorities below. There is no dispute with regard to the fact that, as per ITR filed by the assessee for A.Y. 2015-16, the assessee has computed accumulation of income u/s 11(1)(a) of the Act for Rs.78,33,246/- on gross receipts of Rs.14,36,66,521/-. It is also not in dispute that, the assessee had accumulated or set apart a sum of Rs.8,00,00,000/- u/s 11(2) of the Act, and filed its return of income declaring nil income. Further, while filing the return of Printed from counselvise.com 9 ITA No.1261/Hyd/2024 Dayspring Enterprises of India income for A.Y. 2016-17, the assessee has taken deemed income of Rs.8,00,00,000/- towards accumulation of income u/s 11(2) for A.Y. 2015-16 and computed total income to be applied for the year at Rs.10,23,60,061/- and after accumulation of income u/s 11(2) of Rs.3,05,00,000/-, shown net amount to be applied for charitable purposes at Rs.7,18,50,061/-. The assessee had applied income for charitable purposes for the F.Y. 2015-16 for Rs.6,03,18,596/-, which resulted in shortfall in application of income of Rs.1,15,31,465/-, and the same has been observed by the Ld. PCIT (E) in the order passed u/s 263 of the Act. 10. During the re-assessment proceedings in consequent to revision order, the assessee has furnished revised computation with reference to the financial statements for F.Ys. 2014-15 and 2015-16 and claimed that, there is a mistake in computation of income u/s 11(1)(a) at 15% in as much as instead of Rs.2,15,04,978/-, the assessee has wrongly taken Rs.78,30,246/- which resulted in accumulation or set apart u/s 11(2) to the tune of Rs.8,00,00,000/- even though there is no income available with the assessee in excess of Rs.6,63,25,268/- as per the corrected calculation. We find that, the assessee has furnished revised or Printed from counselvise.com 10 ITA No.1261/Hyd/2024 Dayspring Enterprises of India corrected calculation of gross receipts, accumulation of income u/s 11(1)(a), accumulation of income u/s 11(2), income to be applied for F.Ys. 2014-15 and 2015-16, and actual amount of income applied for charitable purposes for both the assessment years. Upon careful verification of relevant details filed by the assessee, we find that, while filing return for F.Y. 2015-16, the assessee made a computation error u/s 11(1)(a) and took sum of Rs.78,30,246/-, even though, 15% amount works out to Rs.2,15,04,978/- on gross receipts of Rs.14,33,66,521/-. If we consider accumulation u/s 11(1)(a) for Rs.2,15,04,978/-, and amount applied for charitable purpose u/s 11(1) of the Act, for Rs.5,55,36,275/-, then the assessee needs to accumulate or set apart u/s 11(2) of the Act for Rs.6,63,25,268/- instead of Rs.8,00,00,000/-, as reported in the ITR filed for A.Y. 2015-16. This fact has been further strengthened by filing revised Audit Report in Form No.10B issued by the Chartered Accountant, dated 13-01-2022, for A.Y. 2015-16, where the auditor has correctly certified the accumulation of income u/s 11(1)(a) of the Act, for Rs.6,63,25,268/-. Therefore, in our considered view, once the financial statements of the assessee show that the actual amount Printed from counselvise.com 11 ITA No.1261/Hyd/2024 Dayspring Enterprises of India of accumulation u/s 11(2) is only at Rs.6,63,25,268/-, then in our considered view, the A.O. ought to have taken into account the revised or corrected calculation filed by the assessee indicating correct accumulation of income u/s 11(2) instead of accumulation of income shown by the assessee in the return of income filed by the assessee for A.Y. 2015-16 . To this extent, we do not appreciate the reasons given by the A.O. to compute shortfall in application of income of Rs.1,96,81,404/-. 11. Coming back to the reasons given by the A.O. to reject corrected calculations furnished by the assessee. The A.O. rejected the revised computation of income field by the assessee along with Form 10B, dated 13.01.2022 in light of the decision of the Hon’ble Supreme Court in the case of Goetze (India) Ltd. Vs. CIT (supra) and observed that, unless the assessee files a revised return of income, no fresh claim of deduction/exemption can be allowed. We have gone through the decision relied upon by the A.O. to reject the corrected calculation furnished by the assessee and in our considered view, the case law relied upon by the A.O. is not applicable to the facts of the present case for the simple reason that, in the above case, the facts before the Hon’ble Printed from counselvise.com 12 ITA No.1261/Hyd/2024 Dayspring Enterprises of India Supreme Court was whether the A.O. is having power to admit a fresh claim of deduction/exemption without filing a valid revised return as required under the law. Under those facts, the Hon’ble Supreme Court came to the conclusion that, unless by filing a valid revised return, the A.O. cannot admit fresh claim of deduction/exemption. In the present case, going by the facts available on record, the assessee has not made any fresh claim of deduction/ exemption to file revised return of income. Further, the assessee has only corrected the incorrect claim of accumulation of income u/s 11(1)(a) of the and 11(2) by filing corrected calculation on the basis of very same audited financial statements filed by the assessee while filing return of income for A.Ys. 2015-16 and 2016-17. In other words, the assessee has not made a fresh claim of any deduction/exemption, but only corrected the exemption claimed u/s 11 of the Act, by filing corrected calculation of accumulation of income u/s 11(1)(a) and 11(2) of the Act. Therefore, in our considered view, the reasons given by the A.O. to reject the claim of the assessee in light of decision of Hon'ble Supreme Court in the case of Goetze (India) Ltd. (supra) is devoid of merit and cannot be accepted. Printed from counselvise.com 13 ITA No.1261/Hyd/2024 Dayspring Enterprises of India 12. In this view of the matter and considering the facts and circumstances, we are of the considered view that, the A.O. is erred in not admitting the corrected calculation filed by the assessee indicating correct amount of accumulation of income u/s 11(1)(a) and set apart of income to be applied for charitable purpose in subsequent financial years u/s 11(2) of the Act by filing revised or corrected calculation along with revised Form No.10B dt.13.01.2022. The Ld. CIT(A), without appreciating relevant facts, simply upheld the reasons given by the A.O. to compute short fall in application of income u/s 11(1)(b) of the Act. Thus, we set aside the order of the Ld. CIT(A) and restore the issue to the file of the A.O. with a direction to admit the corrected calculation filed by the assessee indicating correct amount of gross receipts, accumulation of income u/s 11(1)(a) and accumulation or set apar of income u/s 11(2) and the amount of income to be applied for charitable purpose and short fall/excess application of income, if any for A.Ys. 2015-16 and 2016-17. The A.O. is directed to verify the corrected computation and delete addition towards shortfall in application of income u/s 11(1)(a) of the Act. Printed from counselvise.com 14 ITA No.1261/Hyd/2024 Dayspring Enterprises of India 13. In the result, the appeal filed by the assessee is allowed for statistical purposes in terms of our observations given hereinabove. Order pronounced in the Open Court on 29th October, 2025. Sd/- (श्री रवीश सूद) (RAVISH SOOD) न्यायिक सदस्य/JUDICIAL MEMBER Sd/- (मंजूिधथ जी) (MANJUNATHA G.) लेखा सदस्य/ACCOUNTANT MEMBER Hyderabad, dated 29.10.2025. TYNM/sps आदेशकी प्रनतनलनप अग्रेनर्त/ Copy of the order forwarded to:- 1. निर्धाररती/The Assessee : Dayspring Enterprises of India, 2-2-95, Logos Bhavan, Medchal Road, Jeedimetla Village, Secunderabad – 500067. 2. रधजस्व/ The Revenue : The Income Tax Officer, Exemption Ward -1(1), Hyderabad. 3. The Principal Commissioner of Income Tax (Exemptions), Hyderabad. 4. नवभधगीयप्रनतनिनर्, आयकर अपीलीय अनर्करण, हैदरधबधद / DR, ITAT, Hyderabad 5. गधर्ाफ़धईल / Guard file आदेशधिुसधर / BY ORDER Sr. Private Secretary ITAT, Hyderabad Printed from counselvise.com "
Other Referred Cases
Goetze (India) Ltd. Vs. CIT (2006) 284 ITR 323 (SC)
Laws Referred To
Income-tax Act, 1961
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