HAMDARD NATIONAL FOUNDATION (INDIA),NEW DELHI V. ACIT CIRCLE EXEMPT 1(1) , NEW DELHI

ITA 3166/DEL/2024

AI Insights

The case revolves around the appeal by Hamdard National Foundation (India) against the order of the Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre (NFAC), which had upheld the disallowance made by the Assessing Officer regarding the accumulation of income for a specific purpose under section 11(2) of the Income Tax Act, 1961. The primary contention was whether the accumulation of Rs.2,56,03,360 for establishing an English Medium Higher Secondary School was valid, given that the resolution to accumulate was passed after the filing of the return of income and Form 10B. The Tribunal examined the timelines and compliance with statutory provisions, ultimately deciding in favor of the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 474636 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2018-2019
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK KUMAR UPADHYAY
• Assessee Lawyers: R. M. MEHTA
• Section: 142(1); 143(2); 11; 13; 139; 10B

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘B’: NEW DELHI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER and SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA No.3166/DEL/2024 (Assessment Year: 2018-19) Hamdard National Foundation (India), vs. ACIT 2A/3, Hamdard Building, Circle Exempt 1(1), Asaf Ali Road, New Delhi. Delhi – 110 002. (PAN : AAATH0843G) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri R.M. Mehta, CA REVENUE BY : Shri Vivek Kumar Upadhyay, Sr. DR Date of Hearing : 18.11.2024 Date of Order : 07.02.2025 O R D E R PER S. RIFAUR RAHMAN, JM: 1. This appeal has been filed by the assessee against the order of ld. Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi dated 06.05.2024 for the Assessment Year 2018-19. 2. Brief facts of the case are, assessee filed its return of income on 12.10.2018 declaring total income of Rs.nil after claiming exemption under section 11 of the Income-tax Act, 1961 (for short ‘the Act’) to the extent of Rs.2,56,03,360/-. The case was selected for scrutiny through 2 ITA No.3166/DEL/2024 CASS for the reason continuous accumulation of profit in Trust, tax credit claimed in ITR is less than tax credit available in 26AS, large amount of donation given to other organization in schedule ER and claim of large value refund. Accordingly, notices u/s 143(2) and 142(1) of the Act were issued and served on the assessee. In response, ld. AR of the assessee submitted the relevant information as called for. 3. During assessment proceedings, the Assessing Officer observed that assessee has accumulated Rs.2,56,03,360/- over and above 15% accumulation of receipts for the purpose of establishment of an English Medium Higher Secondary School and the assessee has filed the Form 10 along with return of income and in support of the above claim, the assessee was asked to submit resolution of Board of Directors by which decision to make such an accumulation was taken. The assessee has submitted the relevant information. On perusal of the same, the Assessing Officer observed that the date of resolution filed by the assessee is 24.10.2018 while the date of filing of Form 10B is 06.10.2018 and the date of filing of return for the relevant assessment year was 12.10.2018. The Assessing Officer observed that from the chronology of events, the date of resolution i.e. 24.10.2018 by which the decision of the purpose of accumulation was taken after the date of filing of return of income. He observed that at the time of filing the return of income and 3 ITA No.3166/DEL/2024 filing of Form 10B i.e. on 06.10.2018, the assessee was not clear on the intentions and purposes for which the accumulation is being done. With the above observation, assessee was issued a show-cause notice on the proposed addition why it should not be made. In its reply dated 13.05.2021, the assessee has submitted that accumulation is not an after- thought as alleged in the show-cause notice and the accumulation satisfies the statutory requirements envisaged in section 11 (2) of the Act read with Rule 17 (2) of the Income-tax Rules, 1962. There is no specific date mentioned in the Act or Rule for the passing of the resolution and it emphasised only on the date of filing of notice in Form 10. After considering submissions of the assessee, Assessing Officer disallowed the same. 4. Aggrieved with the above order, assessee preferred an appeal before the NFAC, Delhi and made submissions. After considering the grounds of appeal and submissions of the assessee, ld. CIT (A) dismissed the grounds raised by the assessee with the following observations :- Paras 6.3.1. to 6.3.4 5. Aggrieved with the above order, assessee is in appeal before us raising following grounds of appeal :- “1. The Ld. CIT(A) erred both on facts and in law in upholding the order passed by the AO denying the benefit of accumulation 4 ITA No.3166/DEL/2024 made u/s 11 (2) of the Income Tax Act,1961 (“the Act”) to the tune of Rs.2,56,03,360/-. 2. That both the Ld. CIT(A) and the AO have ignored the Statutory Provisions, specifically brought to their notice, the contention being that there was due compliance on the part of the Appellant and the rejection of the claim for accumulation was on grounds which were not tenable in law . 3. That the view of the AO that the accumulation was an \"after thought\" was contrary to the facts, similarly the view of the Ld. CIT(A) that the accumulation was not for any \"determinate purpose\" was factually erroneous. 4. That the order of the Ld. CIT(A) is bad in law, in as much as it does not decide the question raised by the AO vis the accumulation being an \"after thought\" but proceeding to question the specification of the \"purpose\" for the accumulation. 5. Without prejudice to all the other grounds and on the assumption that there has been a default on the part of the Appellant, the same is highly technical and does not warrant an adverse view.” 6. At the time of hearing, ld. AR for the assessee submitted that assessee has followed the due procedure and in this regard, he submitted as under :- “1. The due date for filing the return of income was 31.10.2018 and which was filed within time i.e. on 12.10.2018. 2. The Audit Report in Form No.10B u/s Section 12A(b) of the Act read with Rule 17B, was required to be filed one month prior to the due date of filing the return of income i.e. 30.09.2018 in the present case. The said Report dated 24.09.2018 was filed in time. 3. The statement for accumulation in Form No.10 was required to be filed before the expiry of the time allowed u/s 139(1), for furnishing the return of income. (PI see Section 11(2)(C) of the Act read with Rule 17(2)). The said Form was filed on 25.10.2018 along with the Resolution dated 24.10.2018, which is due compliance with the Statutory Provisions. 5 ITA No.3166/DEL/2024 It is apparent that (1) & (3) above have a common date for compliance viz 31.10.2018 but there is no requirement to file the return and statement in Form No.10 together. At this stage a reference is made to the Provisions of Section 13(9) of the Act, which was inserted by the Finance Act 2015 w.e.f. 01.04.2016 as follows: \"(9) Nothing contained in sub-section (2) of section 11 shall operate so as to exclude any income from the total income of the previous year of a person in receipt thereof, if- (i) the statement referred to in clause (a) of the said sub- section in respect of such income is not furnished on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for the previous year; or (ii) the return of income for the previous year is not furnished by such person on or before the due date specified under sub- section (1) of section 139 for furnishing the return of income for the said previous year.” The above provision refers to two situations independent of each other, whereby the \"accumulation' can be rejected and factually neither is attracted in the present case, since the return of income and the statement of accumulation are filed within the time stipulated. The AO instead of deciding the matter as per law has gone on a different tangent of the accumulation being an “afterthought” erroneously comparing the Board Resolution date with the dates of filing the Return of Income and the Audit Report, when no such comparison is stipulated by the Act, other than the conditions set off in section 13 (9) of the Act.” 7. On the other hand, ld. DR of the Revenue relied on the findings of the lower authorities. 8. Considered the rival submissions and material placed on record. We observed that assessee has filed its return of income on 12.10.2018 and filed the auditor report in Form 10B. The abovesaid Form 10B was dated 6 ITA No.3166/DEL/2024 24.09.2018. It is a fact on record that assessee has accumulated Rs.2,56,03,360/- for the purpose of establishing an English Medium Higher Secondary School. When the assessee was asked to submit Form 10 as per the provisions of Rule 17(2) of the Rules, the assessee has to furnish Form 10 along with return of income. The assessee has submitted the relevant Board Resolution dated 24.10.2018 and filed Form 10 on 25.10.2018. After considering Form 10, the Assessing Officer was of the view that assessee has accumulated the above funds after considering the income over expenditure accumulated during the year and this act of accumulation is after-thought based on the fact that the resolution was passed only on 24.10.2018. After considering the facts on record, we observed that assessee has filed its return of income and duly declared accumulation of income for current year in Schedule – I of ITR-7 declaring the purpose to establish higher secondary school and the assessee also submitted Form 10B dated 24.10.2018 i.e. before the filing of return of income. We further observed that assessee also accumulated a sum of Rs.9,40,00,000/- in previous assessment year for the similar purpose. No doubt Form 10 has to be filed along with return of income. The assessee has filed the same only on 25.10.2018. We observed form the record that the books of account were duly audited and in the income & expenditure account which was duly certified by the management 7 ITA No.3166/DEL/2024 dated 31st March, 2018 wherein the above accumulation u/s 11(2) was separately disclosed in the Balance Sheet as on 31.03.2018. The Balance Sheet was duly certified and also audited. The same was accompanied by Form 10B, it clearly shows that the management has already approved the same before finalising the Balance Sheet. The Assessing Officer has to corroborate all the information submitted before him. Mere submission of resolution which was dated 24.10.2018, which is mere formality. He can come to different conclusion when the Balance Sheet was prepared with different proposition and the proposed allocation in the Board resolution is different. In this case, the information submitted before Assessing Officer is very much same and identical. Therefore, considering the fact that the information available in the Balance Sheet and in the Form 10 is exactly similar, the Assessing Officer cannot take contrary view. Accordingly, the appeal filed by the assessee is allowed. 9. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on this 7th day of February, 2025. Sd/- sd/- (VIKAS AWASTHY) (S.RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 7.2.2025 TS 8 ITA No.3166/DEL/2024 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals). 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "