ITW INDIA GRATUITY FUND, GURGAON, HARYANA V. ACIT, Exemption Circle-1(1), HYDERABAD

ITA 105/Hyd/2023

AI Insights

The case involves ITW India Gratuity Fund, which is an approved Gratuity Fund Trust, contesting the denial of tax exemption for the assessment year 2014-15. The primary issues arose from the incorrect filing of the tax return in Form ITR-7 instead of ITR-5, and the erroneous claim of registration under section 12A instead of seeking exemption under section 10(25)(iv). The Central Processing Center (CPC) in Bangalore processed the return, denying the exemption and taxing the receipts as income due to these errors. The CIT (A) upheld the CPC's decision, leading to the appeal before the Tribunal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 128950 (ITAT-HYDERABAD)
• Duration Of Justice: 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Next Hearing Date: 15-03-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 08-02-2023
• Other Referred Cases: ITA Nos.378 & 379/Hyd/2021
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SURYA KIRAN MOTAMARRI; PROVIDING ADEQUATE; PROVIDING ADEQUATE TIME; THEREAFTER
• Keywords: Rectification of order; Procedural lapse
• Section: 154; 12A; 10B; 143(1); 10(23C)

Judgement Text

ITA No 105 of 2022 ITW India Gratuity Fund Page 1 of 6 आयकर अपीलȣय अͬधकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ B ‘ Bench, Hyderabad Before Shri R.K. Panda, Accountant Member AND Shri K. Narasimha Chary, Judicial Member ITA No.105/Hyd/2023 Assessment Year: 2014-15 ITW India Gratuity Fund, Gurgaon, Haryana PAN:AAATI5254L Vs. A.C.I.T. Exemption Ward-1(1) Hyderabad (Appellant) (Respondent) Assessee by : Shri Surya Kiran Motamarri, CA Revenue by: Shri Kumar Aditya, DR Date of hearing: 16/03/2023 Date of pronouncement: 20/03/2023 ORDER Per R.K. Panda, A.M This appeal filed by the assessee is directed against the order dated 28.12.2022 of the learned CIT (A)-NFAC, relating to A.Y.2014-15. 2. Facts of the case, in brief, are that the assessee AOP is an approved Gratuity Fund Trust recognized by the Commissioner of Income tax. The assessee filed its return of income in Form ITR- 7 by mentioning that its income is exempt u/s. 10(23C) (iv) and that it erroneously mentioned in the tax return that it was granted registration under section 12A. The books of accounts were audited as per the normal accounting practice. Even in the ITR 7 filed by the assessee, it was erroneously mentioned that ITA No 105 of 2022 ITW India Gratuity Fund Page 2 of 6 audit was conducted under the provisions of Section 12A. However, such audit report u/s. 12A in Form 10B was not obtained by the assessee. The return of income was processed by the CPC, Bangalore u/s. 143(1) denying the exemption and thereby taxing the entire receipts as income of the assessee for the reasons as erroneous mention of the assessee as entitled for registration u/s. 12A., and failure to upload audit report in Form 10B in the portal. 2.1 The assessee filed a rectification application before the CPC. The CPC passed the rectification order without granting any relief to the assessee on the grounds that the return was filed in incorrect form i.e. ITR-7 instead of correct form i.e. ITR-5 and also for not obtaining the audit report in Form 10B. 3. In appeal, the learned CIT (A)-NFAC dismissed the appeal filed by the assessee by observing as under: “10.1 I have considered the facts and grounds of the case. I have also perused the detailed submission of the appellant fled on different occasions, the original grounds of appeal, the revised grounds of appeal and the rectification order. I do not find any merit in the contention of the appellant. The appellant though a very old and approved Gratuity Fund formed to administer the statutory obligations w.r.t. Gratuity Fund requirement of its Company and employees Ought to have known the basics in filing of return and cannot make a mistake in choosing a wrong Form in filing its return of income and later to ratify the mistake make wrong statement of having registered under 12A and upon denial of exemption by the AO/CPC has gone for rectification stating that it had committed an error of not obtaining Form 10B and filing return in wrong form The whole event goes to show that there are serious lapses and latches on the part of the appellant. The appellant despite having all the professional competence and services of a CA cannot take the benefit by merely stating that the ITR was chosen wrongly and that made a mistake in not obtaining Form 108. Also, the revenue will be at a loss if this serious mistake is pardoned or condoned at this level. Moreover, this return cannot be revised now i.e. Form 5 and consequent exemption to be availed by the appellant. The Hon'ble CBDT's circular also may not ITA No 105 of 2022 ITW India Gratuity Fund Page 3 of 6 be applicable and help the appellant in this situation. Therefore considering the entire submissions of the appellant and even though the appellant is entitled for exemption u/s. 10(25) (iv), in the present scenario there does not appear to be any remedy for rectifying the base mistake in filing TR in some other form. 10.2 Taking into account the facts and circumstances, as discussed above, and the past and subsequent submissions made will not come to any help for the appellant. Therefore, it is held that the AO is justified in disallowing the entire income earned by the appellant. Therefore the grounds 3 to 6 of appeal filed by the appellant is dismissed and the action of the AO is upheld.” 4. Aggrieved with such order of the learned CIT (A) NFAC, the assessee is in appeal before the Tribunal by raising the following grounds: “1. That the CIT(A) erred on facts and in law in upholding the order dated 28.02.2016 passed by the assessing officer/CPC under section 143(1) read with order dated 27.09.2019 under section 154, while denying exemption under section 10(25) to the appellant and determining total income of Rs. 99,49,460 and raising tax demand of Rs.36,73,370 on the ground that, (i) the appellant filed return of income in the wrong Form (Form 7), instead of correct Form, (i.e. Form 5); as also - (ii) since the appellant was approved under section 12A, it was not eligible for exemption under section 10(25) in terms of section 11(7) of the Act, failing to appreciate that the procedural lapse cannot be a ground to collect illegal tax if the same is not permissible as per substantive provisions, since such act is ultravires Article 265 of the Constitution of India. 2. That the CIT(A) erred on facts and in law in not holding that, the assessing officer was required to provide an opportunity to the appellant to rectify the defect of filing return of income in wrong Form, instead of rejecting such wrong Form and completing assessment at total income of Rs. 99,49,460 immediately. 3. Without Prejudice, that the CIT(A) erred on facts and in law in not quashing the order dated 28.02.2016 passed under section 143(1) read with order dated 27.09.2019 under section 154 on the ground that, if the return of income filed in wrong Form was invalid, then the intimation passed under section 143(1) read with 154 processing such invalid return and raising tax demand thereon was also invalid and non-est in the eyes of law. 4. Considering that the ITAT in its order against appellant's appeal for AY 2015-1b ad AY 2016-17 on similar set of facts had held that "in the interest of justice I hereby remit back the matter to the file of the ITA No 105 of 2022 ITW India Gratuity Fund Page 4 of 6 jurisdictional A.O with direction to re do the assessment after obtaining the rectified return of income from the assessee by providing adequate time and thereafter pass appropriate order in accordance with law and merit giving proper opportunity to the assessee of being heard” - the CIT(A) erred in not considering view expressed by ITAT in the aforesaid Order/directions though the same was placed on record by appellant. Each of the above ground is independent and without prejudice to one another. The appellant craves leave to add, alter, amend or withdraw any ground or grounds of appeal at any time before or during the course of hearing of the appeal.” 5. The learned Counsel for the assessee at the outset filed a copy of the order of the Tribunal in assessees’ own case for the A.Ys 2015-16 and 2016-17 and submitted that identical issue had come up before the Tribunal in assessees’ own case and the Tribunal has restored the issue to the file of the Assessing Officer with certain directions. He submitted that he has no objection if the matter is restored to the file of the jurisdictional Assessing Officer with similar directions. 6. The learned DR, on the other hand, strongly opposed the arguments advanced by the learned Counsel for the assessee and relied on the order of the learned CIT (A) – NFAC. 7. We have heard the rival arguments made by both the sides, perused the orders of the AO and the learned CIT (A) and the paper book filed on behalf of the assessee. We find the CPC Bengaluru processed the return denying the exemption and thereby taxing the entire receipts as income of the assessee on the ground that the assessee has erroneously mentioned regarding registration u/s 12A and failure to upload the audit report in Form 10B in the Portal. Subsequent rectification application filed by the assessee was also rejected by the CPC Bengaluru on the ground that the return was filed in incorrect form i.e. ITR 7 ITA No 105 of 2022 ITW India Gratuity Fund Page 5 of 6 instead of correct Form i.e. ITT-5 and also not obtaining the audit report in Form 10B. We find, the learned CIT (A) NFAC dismissed the appeal filed by the assessee, the reasons of which have already been reproduced in the preceding paragraph. We find identical issue had come up before the Tribunal in assessees’ own case for the A.Ys 2015-16 and 2016-17 and the Tribunal vide ITA Nos.378 & 379/Hyd/2021 order dated 23.12.2021 for A.Ys 2015- 16 & 2016-17, has restored the issue to the file of the Assessing Officer with certain directions by observing as under: “5 On merits, the Ld. AR submitted that the Assessing Officer CPC while passing the orders U/s. 143(1), denied the exemption U/s. 10(25) of the Act on the ground that the assessee has filed its return of income in the wrong Form (Form 7) instead of correct Form (Form 5) and erroneously mentioned the claim of exemption U/s. 12A of the Act. The Ld. AR further submitted that this inadvertent mistake of the assessee cannot be a ground to collect tax from the assessee for which the assessee is not liable. The Ld. DR on the other hand argued in support of the order of the Ld. CIT(A). 6. After hearing both sides, I am of the view that if the assessee is entitled to claim deduction U/s. 10(25) of the Act, the same cannot be denied due to some procedural lapse. Therefore, in the interest of justice I hereby remit back the matter to the file of the jurisdictional A.O with directior1 to re-do the assessment after obtaining the rectified return of income from the assessee by providing adequate time and thereafter pass appropriate order in accordance with law and merit giving proper opportunity to the assessee of being heard. The assessee is also hereby directed to cooperate with the proceedings of the Ld. Revenue Authorities promptly in order to expedite the assessment. Accordingly, the appeal for the A.Y. 2015-16 in ITA No. 378/Hyd/2021 is disposed off.” 8. We, therefore, deem it proper to restore the issue to the file of the Assessing Officer with a direction to redo the assessment in the light of the direction of the Tribunal in assessees’ own case for the two succeeding years. The grounds raised by the assessee are accordingly allowed for statistical purposes. ITA No 105 of 2022 ITW India Gratuity Fund Page 6 of 6 9. In the result, appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the Open Court on 20 th March, 2023. Sd/- Sd/- (K. NARASIMHA CHARY) JUDICIAL MEMBER (R.K. PANDA) ACCOUNTANT MEMBER Hyderabad, dated 20 th March, 2023 Vinodan/sps Copy to: S.No Addresses 1 ITW India Gratuity Fund, Level 1, Lotus Plaza, 732/1 Mehrauli, Gurgaon Road Secto4 14, Gurgaon, Haryana 2 ACIT (Exemption) Circle 1(1) Hyderabad 3 NFAC – Delhi 4 CIT-II, Hyderabad 5 DR, ITAT Hyderabad Benches 6 Guard File By Order