ITW INDIA GRATUITY FUND, GURGAON V. DCIT, EXEMPTION, HYDERABAD

ITA 378/Hyd/2021

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 5674 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2021
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Appeal Filed On: 22-09-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rectification of order; Reasonable cause; Procedural lapse; Condonation of delay
• Section: 154; 12A; 143(1)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH “SMC”, HYDERABAD (Through Virtual Hearing) BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA No. 378/Hyd/2021 ` A.Y. 2015-16 ITW India Gratuity Fund, Gurgaon. PAN AAATI 5254 L VS. DCIT (Exemption), Hyderabad. (Appellant) (Respondent) ITA No.379/Hyd/2021 A.Y. 2016-17 ITW India Gratuity Fund, Gurugram. PAN AAATI 5254 L VS. DCIT (Exemptions), Hyderabad. (Appellant) (Respondent) Assessee by: Shri Gaurav Jain & Sanket Gupta Revenue by: Smt. Aditi Goyal, DR Date of hearing: 10/11/2021 Date of pronouncement: 23/12/2021 ORDER Both the captioned appeals are filed by the assessee against the orders of the Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi in DIN No. ITBA/NFAC/S/250/2021-22/1034452619(1) and ITBA/NFAC/S/250/2021-22/1034452338(1), dated 27/07/2021 for the AYs 2015-16 and 2016-17. 2 2. The assessee has raised four grounds in its appeal for the A.Y. 2015-16 and three grounds for the A.Y. 2016-17 which are reproduced herein below for reference: Grounds of appeal for the A.Y. 2015-16: (1) That the Ld. CIT(A) erred on facts and in law in dismissing the appeal filed by the appellant after delay of 1090 days holding the same to be time barred failing to appreciate that (i) the appellant was pursuing alternate remedy of rectification U/s. 154 for the desired relief and (ii) the appellate forums ought to adopt liberal approach and substantial cause of justice while deciding application for condonation of delay. (2) That the CIT(A) erred on facts and in law in not quashing the order dated 15/09/2016 passed by the Assessing Officer/CPC U/s. 143(1) while denying exemption U/s. 10(25) to the appellant and determining the total income of Rs. 31,46,243/- and raising tax demand of Rs. 9,63,780/- on the ground that, the appellant filed return of income in the wrong Form (Form 7), instead of Correct Form (ie Form 5) and erroneously mentioning claim of exemption U/s. 12A, 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. (3) 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. 31,46,243/- immediately. (4) Without prejudice, that the CIT(A) erred on facts and in law in not quashing the order dated 03/02/2018 passed U/s. 143(1) on the ground that, if the return of income filed in wrong Form was invalid, then the limitation passed U/s. 143(1) processing such invalid return and raising tax demand thereon was also invalid and non-est in the eyes of law.” Grounds of appeal for the A.Y. 2016-17: (1) That the CIT(A) erred on facts and in law in upholding the order dated 03/02/2018 passed by the assessing officer / CPC u/s. 143(1) read with order dated 27/09/2019 U/s. 154, while denying exemption u/s. 10(25) to the appellant and determining total income of Rs. 27,11,340/- and raising tax demand of Rs. 8,33,107/- on the ground that – (i) the appellant filed return of income in the wrong Form (Form 7), instead of correct Form, (ie Form 5); as also – (ii) since the appellant was approved under section 12A, it was not eligible for exemption U/s. 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 3 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. 27,11,340/- immediately. (3) Without prejudice that the CIT(A) erred on facts and in law in not quashing the order dated 03/02/2018 passed U/s. 143(1) read with order dated 27/09/2019 U/s. 154 on the ground that, if the return of income filed in wrong Form was invalid, then the intimation passed U/s. 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.” 3. For the A.Y. 2015-16, there is a delay of 1090 days in filing the appeal before the Ld. CIT(A) and the Ld. CIT(A) refused to condone the delay and dismissed the appeal of the assessee. The assessee had made the following submission before the Ld. CIT(A): “Before adjudicating the grounds of appeal, it is seen that the impugned appeal has been filed with delay of 1090 days. In this regard, the appellant has filed condonation in Column 15 of Form No 35 explaining the reasons behind such delay here as under: "The Trustees managing the Gratuity fund were not aware of the appeal proceedings and were filing rectification petitions on the CPC portal several times which were getting rejected. The latest rejection letter was received by the trustee on 26th June 2019. Then the trustees sought legal and the present appeal is being filed. We request your honours to condone the delay as the trustees were not fully aware of the extant income tax rules." Since the reasons given by the appellant in column no. 15 of Form no. 35 were not forming sufficient and reasonable cause, a show- cause notice was issued on 23/02/2021 requiring the appellant to provide a reasonable and sufficient cause for delay on or before 10103/2021. In response to the notice issued, the appellant filed submission regarding condonation of delay which is reproduced as under:- "1. The order u/s 143(7) which was under the current appeal was received by us on 30th September, 2016. Accordingly, the due date of filing such an appeal falls due on 30th October, 2016. However, the appeal was filed online on 25th October, 2019. Thus there was a delay of 1,090 days in filing the appeal. 4 2. We humbly request your goodselves to kindly consider the following factual information. Name of the assessees, being similar funds of the same ITW Group A.Y. Date of receipt of order u/s. 154/143(1) Date of filing the appeal before CIT(A) Days of delay in filing ITW Provident Fund 2014-15 09/10/2019 21/10/2019 NIL ITW Provident Fund 2015-16 09/10/2019 21/10/2019 NIL ITW Provident Fund 2016-17 09/10/2019 21/10/2019 NIL ITW Gratuity Fund 2014-15 09/10/2019 23/10/2019 NIL ITW Gratuity Fund 2015-16 30/09/2016 25/10/2019 1,090 ITW Gratuity Fund 2016-17 09/10/2019 22/10/2019 NIL ITW Superannuation Fund 2014-15 09/10/2019 23/10/2019 NIL ITW Superannuation Fund 2015-16 143(1) 154 27/10/2016 26/06/2019 25/10/2019 1063 ITW Superannuation Fund 2016-17 09/10/2019 22/10/2019 NIL 3. It is humbly submitted that, due to incorrect filing of return forms, the returns of each trust were resulting in adverse automatic processing by CPC, Bangalore and resulting in demands. The trustees of all the three trusts were under bonafide impression that -the filing is correct and hence pursuing the rectification methods, online. 4. In the month of October, 2019 when all most all the trusts received rectification orders which were unfavourable and with huge tax demands, the trustees decided to consult suitable tax consultant to find alternate course of action. During such interaction, tax consultants, M.Bhaskara Rao & Co., Chartered Accountants, Hyderabad informed the trustees that the return forms filed were incorrect and hence any number of rectifications before CPC, Bangalore would not be successful. They advised the trustees to immediately file appeals before CIT(A). 5 5. Immediately, the trustees with the help of tax consultants, filed all the nine appeals in the month of October, 2019 within five days. The trustees were not negligent to file appeals before CIT(A) after getting correct advise from the tax consultants. 6. Out of the nine appeals filed, only two appeals resulted in a delay. Such delay happened because, the trustees were pursing the rectification route through CPC in other cases and they were under the bonafide impression that if such rectification of other cases are successful, then the two appeals wherein delay occurred also can be resolved through rectification mechanism. 7. It is humbly submitted that the demands for the delayed appeals, as on the date of orderunder Section 154 are as under. ITW Gratuity Fund for A. Y.2015-2016 Rs. 9,63,780 ITW Superannuation Fund for A. Y.2015-2016 Rs.48,57,958 8. It is humbly submitted that appellants are charitable trusts established for the benefit of employees. The trust is only managing the funds of employees. If these demands are to be paid, the same have to be paid by the innocent employees who have no role to playing the current events. 9. It is also humbly prayed that the demands arose only due to filing incorrect return form in ITR-7, instead of ITR-5. Such inadvertent mistake coupled with mechanical processing resulted in huge demands for all the years, which could have been avoided if the appellants are allowed to interact with the officer personally to explain the issues. 10. It also humbly submitted that, there was no escapement of income. All the trusts are duly registered and their income is unconditionally exempt under Section 10(25). CBDT vide Circular NO.18/2017 dated 29th May, 2017 clearly mandated that such trusts are not subjected to tax deduction provisions, as their income in unconditionally exempt from tax. Such trusts whose income is not at all liable for tax, ended up in huge demands only due to inadvertent filing of incorrect return forms. 11. It is also humbly submitted once again that, once proper course of action is known to the trustees of the three trusts, there was no lapse on their part to file the appeals within five days. This action of them suggests that, the trustees were not casual in their action and are sincere to protect the interest of various employees to whom they act as trustees. It may kindly be not inferred that the appellants were not interested in pursuing the 6 litigation, which however for certain period of time was the incorrect course of action. 12. In view of the above factual submissions, it is humbly prayed that the delay of 1,090 days in filing the appeal, may kindly be condoned and the appeal may be decided on merits and Oblige.” 4. On perusing the submissions of the assessee, we are of the opinion that the delay in filing the appeal before the Ld. CIT(A) is required to be condoned considering the ratio laid down by the Hon’ble Apex Court in the case of Collector, Land Acquisition vs. MST. Katiji reported in (167 ITR 471) wherein it is held that “when substantial justice and technical consideration are pitted against each other the cost of substantial justice deserves to be preferred”. Therefore, we hereby condone the delay in filing appeal before the Ld. CIT(A). 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 7 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 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 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. 7. In respect of the appeal for the A.Y. 2016-17 in ITA No. 379/Hyd/2021 , since the assessee has raised identical ground with respect to merits, the same decision for the A.Y. 2015-16 is applicable mutatis mutandis. 8. In the result, both the appeals of the assessee are allowed for statistical purposes as indicated herein above. Pronounced in the open Court on the 23 rd December, 2021. Sd/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER Hyderabad, Dated: 23 rd December, 2021. 8 OKK Copy to:- 1) Appellant: ITW India Gratuity Fund, Level-1, Lotus Plaza, 732/1, MG Road, Sector-14, Haryana – 122001. (ii) ITW India Gratuity Fund, 732/1, MG Road, Sector-14, Haryana – 122001. 2) Respondent: DCIT, Exemption, Aayakar Bhavan, Hyderabad, Telangana. 3) The CIT(A), National Faceless Appeal Centre (NFAC), Delhi. 4) The DR, ITAT, Hyderabad. 5) Guard File