M/s Bunts Sangha , Mangalore V. The Income Tax Officer (Exemptions) Ward-1, Mangalore

ITA 569/BANG/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5062 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 01-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P RENUGA DEVI JT BENGALURU
• Assessee Lawyers: V SRINIVASAN
• Keywords: Charitable institution
• Section: 12AA; 154; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ , ACCOUNTANT MEMBER I TA NO. 569/BANG/2018 ASSESSMENT YEAR : 2014 - 15 M/S. BUNTS SANGHA, DOOR NO.18-51A, MULKI, MANGALURU 574 154. PAN: AAATB 27 3 1P VS. THE INCOME TAX OFFICER (EXEMPTIONS), WARD 1, MANGALURU. APPELLANT RESPONDENT APPELLANT BY : SHRI V. SRINIVASAN, ADVOCATE RE SPONDENT BY : S MT. P. RENUGA DEVI , JT.CIT(DR)(ITAT), BENGALURU. DATE OF HEARING : 14 .06 .201 8 DATE OF PRONOUNCEMENT : 03.08. 2018 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE OR DER DATED 27.12.2017 OF THE CIT(APPEALS)-10, BENGALURU RELATI NG TO ASSESSMENT YEAR 2014-15. 2. THE ASSESSEE IS A CHARITABLE TRUST REGISTERED U /S. 12AA OF THE INCOME-TAX ACT, 1961 [THE ACT]. FOR THE AY 2014- 15, THE ASSESSEE FILED A NIL RETURN OF INCOME ON 15.09.2014. THE AO ISSUED A N INTIMATION U/S. 143(1) OF THE ACT DATED 14.01.2016 DETERMINING THE TOTAL INCOME AT RS.9,73,831. WHILE PROCESSING THE RETURN U/S. 143( 1) OF THE ACT, THE AO DISALLOWED THE CLAIM OF ASSESSEE FOR EXEMPTION U/S. 11(2) OF THE ACT FOR THE ITA NO. 569/BANG/2018 PAGE 2 OF 7 REASON OF NON-FILING OF FORM 10. U/S. 11(2) OF THE ACT, 85% OF THE INCOME OF A CHARITABLE TRUST HAS TO BE APPLIED FOR CHARITABLE PURPOSES. TO THE EXTENT IT IS NOT SO APPLIED, ASSESSEE IS ENTITLED TO ACCUMULA TE INCOME FOR APPLICATION FOR CHARITABLE PURPOSES IN FUTURE. FOR THIS PURPOS E, THE ASSESSEE HAS TO GIVE A NOTICE IN FORM 10 TO THE AO STATING THE PURP OSE FOR WHICH THE INCOME IS ACCUMULATED, PERIOD FOR WHICH THE ASSESSEE SEEKS TO ACCUMULATE, ETC. SINCE FORM 10 WAS NOT FILED, THE AO BROUGHT TO TAX INCOME TO THE EXTENT ASSESSEE WAS NOT ENTITLED TO ACCUMULATE. 3. THE ASSESSEE FILED AN APPLICATION U/S. 154 OF TH E ACT SEEKING TO RECTIFY THE INTIMATION U/S. 143(1) DATED 14.01.2016 . THE ASSESSEE IN THE APPLICATION U/S. 154 CONTENDED THAT IN THE ORIGINAL RETURN FILED FOR THE A.Y 2014-15, THE FACT OF ACCUMULATION OF INCOME U/S 11( 2) WAS MENTIONED. THE APPELLANT HAD ALREADY PREPARED AN APPLICATION FOR A CCUMULATION IN FORM 10. HOWEVER, THE SAME WAS NOT SUBMITTED AT THE TIME OF FILING RETURN SINCE THE RETURN OUGHT TO BE FILED ONLINE WITHOUT ANNEXURE. T HE ASSESSEE POINTED OUT THAT THE GOVERNING BODY OF THE TRUST AT ITS MEETING HELD ON 19-08-2014, RESOLVED TO ACCUMULATE PURSUANT TO SECTION 11(2) OF THE INCOME TAX ACT, 1961, A SUM OF RS. 9,73,831/- AND A RESOLUTION TO T HIS EFFECT WAS PASSED. IN THE USUAL COURSE, ONLINE FILING OF RETURN CAN BE UPLOADED WITHOUT ANY REQUIRED ATTACHMENTS BEING ATTACHED OR ENTERED. ALS O THE DEPARTMENTAL EARLIER CIRCULARS STATED THAT DOCUMENTS NEED NOT BE ATTACHED WHILE FILING E- RETURN AND ONLY WHEN THE ANNEXURE/DOCUMENTS ARE SOU GHT BY THE ASSESSING OFFICER, THE SAME SHOULD BE PRODUCED. SIN CE, THERE WAS A DEMAND, THE APPELLANT FILED E-COPY OF FORM 10 ON 29 -03-2016. ON THE QUESTION WHETHER ACCUMULATION CAN BE DENIED ON THE GROUND OF NON- FURNISHING OF FORM NO.10 ALONG WITH THE RETURN OF I NCOME, THE ASSESSEE POINTED OUT THAT A READING OF FORM NO.10 R.W. RULE 17, WOULD THAT THAT FOR CLAIMING OF THE BENEFIT OF SEC 11, IT IS NECESSARY TO INTIMATE TO THE ITA NO. 569/BANG/2018 PAGE 3 OF 7 ASSESSING AUTHORITY, THE PARTICULARS REQUIRED, AT A NY TIME DURING THE ASSESSMENT PROCEEDINGS. THE ASSESSEE POINTED OUT TH AT THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS MAYUR FOUNDATION (2005) 194 CTR GUJ 197, 2005; 274 ITR 562 (GUJ) , HAS TAKEN THE VIEW THAT APPLICATION FOR ACCUMULATION OF INCOME IS ENTERTAINED EVEN DURI NG THE COURSE OF APPEAL BECAUSE THE PROCEEDINGS ARE MEANT TO CORRECTLY ASSE SS THE TAX LIABILITY OF AN ASSESSEE. IN THE INSTANT CASE, THERE IS NO ASSES SMENT PROCEEDINGS PENDING FOR THE AFORESAID AY AND ONLY AN INTIMATION U/S.143(1) WAS SERVED ON THE ASSESSEE WHICH HAS TO BE RECTIFIED U/S.154 O F THE ACT. 4. THE AO, HOWEVER, REJECTED THE CLAIM OF ASSESSEE OBSERVING AS FOLLOWS:- ON VERIFICATION OF THE DETAILS SUBMITTED BY YOU FO R CONSIDERING YOUR REQUEST FOR RECTIFICATION U/S 154 OF INTIMATIO N U/S 143(1) DT 14.01.2016 FOR THE-AY 2014-1.5, IT IS NOTICED THAT FOR ACCUMULATION PURPOSE U/S 11(2), FORM 10 WAS NOT UPL OADED ELECTRONICALLY BEFORE THE DUE DATE AND IT WAS UPLOA DED ONLY AFTER RECEIPT OF INTIMATION U/S 143(1). YOUR APPLICATION FOR RECTIFICATION U/S 154 CANNOT BE CONSIDERED FOR THE FOLLOWING REAS ONS. 1. AS PER RULE 17 R.W.S 11(2), FORM 10 IS REQUIRED TO BE FILED ON OR BEFORE THE DUE DATE OF FILING OF RETURN OF IN COME FOR CORRESPONDING AY BUT IN THE ABOVE MENTIONED CASE, F ORM 10 WAS FILED BELATEDLY. 2. IT WAS MADE MANDATORY FOR UPLOADING FORM 10 FOR THE AY 2014-15 TO AVAIL THE BENEFIT OF ACCUMULATION U/S 1 1(2). HENCE, YOUR REQUEST FOR RECTIFICATION OF THE ABOV E ORDER CANNOT BE CONSIDERED AND YOUR APPLICATION FOR RECTI FICATION U/S 154 DATED 07.04.2016 IS HEREBY REJECTED. ITA NO. 569/BANG/2018 PAGE 4 OF 7 5. AGGRIEVED BY THE ORDER OF AO, ASSESSEE PREFERRE D AN APPEAL BEFORE THE CIT(APPEALS), WHO CONFIRMED THE ORDER OF AO OBS ERVING AS FOLLOWS:- I HAVE GONE THROUGH THE STATEMENT OF FACTS AND GR OUNDS OF APPEAL. I HAVE ALSO VIEWED THE ORDER 143(1) OF THE ACT DATED 14.01.2016 AND SUBSEQUENT ORDER U/S 154 OF THE ACT DATED 18.11.2016 PASSED BY THE AO. THE AO HAS RELIED ON T HE PROVISION OF RULE 17 OF THE INCOME-TAX RULES. 1962. RULE 17 READS AS UNDER: '17. THE NOTICED TO BE GIVEN TO THE ASSESSING OFFIC ER OR THE PRESCRIBED AUTHORITY UNDER SUB-SECTION (2) O F SECTION 11 OR UNDER THE SAID PROVISION AS APPLICABL E UNDER CLAUSE (21) OR CLAUSE (23) OF SECTION 10 SHALL BE I N FORM NO. 10 AND SHALL BE DELIVERED BEFORE THE EXPIRY OF THE TIME ALLOWED UNDER SUB-SECTION (1) OF SECTION 139, FOR FURNISHING THE RETURN OF INCOME.' FROM THE PROVISION OF THE ABOVE RULE IT IS OBVIOUS THAT FILING OF FORM 10 BEFORE THE EXPIRY OF TIME FOR FURNISHING TH E RETURN IS MANDATORY FOR CLAIMING THE BENEFIT OF SECTION 11(2) OF THE ACT. AS THE APPELLANT HAS FAILED TO DO THAT AND THERE IS NO VALID REASON FOR THE SAME I DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER 143(1) OF THE ACT DATED 14.01.2016 AND SUBSEQUENT O RDER U/S 154 OF THE ACT DATED 18.11.2016 PASSED BY THE AO. THE A CTION OF THE AO IS UPHELD AND GROUND TAKEN BY THE APPELLANT FAIL S. 6. AGGRIEVED BY THE ORDER OF CIT(APPEALS), THE AS SESSEE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 7. WE HAVE HEARD THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE AND THE LD. DR. THE LD. COUNSEL FOR THE ASSESSEE S UBMITTED THAT AS FAR AS AY 2014-15 IS CONCERNED, IT WAS NOT MANDATORY TO FU RNISH FORM 10 ALONG WITH RETURN OF INCOME AND IT WAS SUFFICIENT IF THE SAME IS FURNISHED BEFORE THE SAME IS FILED BEFORE CONCLUSION OF THE ASSESSME NT PROCEEDINGS. THE ASSESSEE SUBMITTED THAT SINCE INTIMATION U/S. 143(1 ) IS NOT AN ASSESSMENT, ITA NO. 569/BANG/2018 PAGE 5 OF 7 THE REQUEST OF THE ASSESSEE TO ACCEPT FORM 10 AND A LLOW ACCUMULATION OUGHT TO HAVE BEEN ACCEPTED AND INTIMATION U/S. 143 (1) RECTIFIED. THE LD. COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON CERTAI N JUDICIAL PRONOUNCEMENTS INCLUDING THE DECISION OF ITAT BANGA LORE IN THE CASE OF BAGALKOT TOWN DEVELOPMENT AUTHORITY V. CIT, (2014) 42 TAXMANN.COM 582 (BANG. TRIB.) . THE LD. DR RELIED ON THE ORDER OF CIT(A). 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. SIMIL AR ISSUE WAS CONSIDERED IN THE CASE OF BAGALKOT TOWN DEVELOPMENT AUTHORITY (SUPRA) BY THIS TRIBUNAL WHEREIN THE FOLLOWING VIEW WAS TAKEN: - A READING OF SEC.11(1) WOULD SHOW THAT INCOME OF T HE PREVIOUS YEAR TO THE EXTENT IT IS APPLIED FOR CHARITABLE PUR POSE IN INDIA WOULD NOT FORM PART OF THE TOTAL INCOME UNDER THE A CT AND WOULD BE EXEMPT. SEC.11(2) MANDATES THAT 85% OF THE INCOM E OF THE PREVIOUS YEAR HAS TO BE APPLIED FOR CHARITABLE PURP OSE AND THE CHARITABLE INSTITUTION IS ALLOWED TO ACCUMULATE UPT O 15% OF THE INCOME OF THE PREVIOUS YEAR FOR APPLICATION FOR CHA RITABLE PURPOSE IN FUTURE. ONE OF THE CONDITION TO BE FULFILLED FOR GETTING TH E BENEFIT OF ACCUMULATING 15% OF INCOME OF THE PREVIOUS YEAR WIT HOUT APPLYING THE SAME FOR CHARITABLE PURPOSE DURING THE PREVIOUS YEAR BUT CARRYING IT FORWARD FOR APPLICATION IN FUTURE Y EARS FOR CHARITABLE PURPOSE IS TO INFORM THE AO IN FORM NO.1 0 AS MANDATED BY RULE 17 OF THE IT RULES, 1962. SUCH NOT ICE WILL HAVE TO BE GIVEN ON OR BEFORE THE DUE DATE SPECIFIE D FOR THE ASSESSEE U/S.139(1) OF THE ACT. ADMITTEDLY THE ASSE SSEE IN THE PRESENT CASE HAS NOT GIVEN SUCH INTIMATION TO THE A O. [PARA 17] IN CIT VS. NAGPUR HOTEL OWNERS ASSOCIATION [2001] 247 ITR 201 (SC), THE HONBLE SUPREME COURT WHILE DEALING W ITH SEC.11(2) OF THE ACT AND RULE 17 OF THE RULES HELD THAT IT WAS ABUNDANTLY CLEAR FROM THE WORDINGS OF SUB-S. (2) OF S. 11 THAT IT IS MANDATORY FOR THE PERSON CLAIMING THE BENEFIT OF S. 11 TO INTIMATE TO THE ASSESSING AUTHORITY THE PARTICULARS REQUIRED , UNDER R. 17 IN FORM NO. 10. ITA NO. 569/BANG/2018 PAGE 6 OF 7 IF DURING THE ASSESSMENT PROCEEDINGS THE AO DOES NO T HAVE THE NECESSARY INFORMATION, QUESTION OF EXCLUDING SUCH I NCOME FROM ASSESSMENT DOES NOT ARISE AT ALL. AS A MATTER OF FA CT, THIS BENEFIT OF EXCLUDING THIS PARTICULAR PART OF THE INCOME FROM T HE NET OF TAXATION ARISES FROM S. 11 AND IS SUBJECTED TO THE CONDITIONS SPECIFIED THEREIN. THEREFORE, IT IS NECESSARY THAT THE ASSESSING AUTHO RITY MUST HAVE THIS INFORMATION AT THE TIME HE COMPLETES THE ASSES SMENT. IN THE ABSENCE OF ANY SUCH INFORMATION, IT WILL NOT BE POS SIBLE FOR THE ASSESSING AUTHORITY TO GIVE THE ASSESSEE THE BENEFI T OF SUCH EXCLUSION AND ONCE THE ASSESSMENT IS SO COMPLETED, IT WOULD BE FUTILE TO FIND FAULT WITH THE ASSESSING AUTHORITY F OR HAVING INCLUDED SUCH INCOME IN THE ASSESSABLE INCOME OF TH E ASSESSEE. THEREFORE, EVEN ASSUMING THAT THERE IS NO VALID LIMITATION PRESCRIBED UNDER THE ACT AND THE RULES EVEN THEN, I T IS REASONABLE TO PRESUME THAT THE INTIMATION REQUIRED UNDER S. 11 HAS TO BE FURNISHED BEFORE THE ASSESSING AUTHORI TY COMPLETES THE CONCERNED ASSESSMENT BECAUSE SUCH REQUIREMENT IS MANDATORY AND WITHOUT THE PARTICULAR S OF THIS INCOME THE ASSESSING AUTHORITY CANNOT ENTERTAIN THE CLAIM OF THE ASSESSEE UNDER S. 11, THEREFORE, COMPLIANCE OF THE REQUIREMENT OF THE ACT WILL HAVE TO BE ANY TIME BEF ORE THE ASSESSMENT PROCEEDINGS. 9. THE VIEW TAKEN BY THE TRIBUNAL IN THE AFORESAID DECISION FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F NAGPUR HOTEL OWNERS ASSOCIATION (SUPRA) IS THAT INTIMATION REQUIRED UND ER S. 11 HAS TO BE FURNISHED BEFORE THE ASSESSING AUTHORITY COMPLETES THE CONCERNED ASSESSMENT. IN THE PRESENT CASE, THERE WAS NO ASSE SSMENT PROCEEDING AND THERE IS ONLY INTIMATION U/S. 143(1) OF THE AC T. AN INTIMATION U/S. 143(1) IS NOT AN ASSESSMENT AS LAID DOWN BY THE HONBLE SU PREME COURT IN THE CASE OF RAJESH JHAVERI STOCK BROKERS IN CIVIL NO.2830 OF 20 07, JUDGMENT DATED 23.05.2007. IN VIEW OF THE LEGAL POSITION AS EXPLAINED ABOVE, W E ARE ITA NO. 569/BANG/2018 PAGE 7 OF 7 OF THE VIEW THAT THE AO OUGHT TO HAVE ACCEPTED THE APPLICATION FOR RECTIFICATION U/S. 154 OF THE ACT. WE ACCORDINGLY DIRECT THE AO TO ALLOW APPLICATION U/S. 154 OF THE ACT AND RECTIFY THE INT IMATION. 10. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS AL LOWED. PRONOUNCED IN THE OPEN COURT ON THIS 3 RD DAY OF AUGUST, 2018. SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVAN ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 3 RD AUGUST, 2018. / D ESAI S MURTHY / COPY TO: 1. THE APP ELL ANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.