Shafa Home, New Delhi V. ITO, (Exemption) Ward 2(1), New Delhi

ITA 725/DEL/2023

AI Insights

The case involves Shafa Home, a charitable trust, appealing against the order of the Commissioner of Income-tax (Appeals), which upheld the disallowance made by the Assessing Officer regarding the accumulation of income claimed under section 11(2) of the Income-tax Act. The primary contention was the non-submission of Form No. 10 at the time of filing the return, which led to the disallowance of Rs. 7,56,576. The Tribunal examined various precedents and the statutory provisions, ultimately deciding in favor of the assessee by directing the Assessing Officer to consider the belatedly submitted Form No. 10.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 112547 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 26-07-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 15-03-2023
• Other Referred Cases: CIT v. Moti Ram Gopi Chand Charitable Trust [2014] 360 ITR 598 (All), Institution of Civil Engineers Society v. ACIT [2021] 91 ITR (T) 56 (Chandigarh ITAT), ITO (E) v. Shri Laxmanarayan Dev Shrishan Seva (ITA No. 410/Ahd/22) (Ahmedabad ITAT), SS Charitable Trust Vs. ITO, Exemption (ITA no. 49/Ran/2022 for A.Y. 2016-17) order dated 28.04.2023
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution; Principle of natural justice; Condonation of delay; Set aside
• Section: 12; 11; 139; 143(3); 119(2)(b); 139(1); 13; 119

Judgement Text

1 ITA No. 725/Del/2023 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “SMC”: NEW DELHI BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER ITA No. 725 /DEL/2023 Assessment Year: 2017-18 Shafa Home, Plot no. 130, Pocket-1, Sector-20, Rohini, New Delhi-110086. PAN-AACTS5244E Vs Income-tax Officer (Exemption), Ward-2(1), New Delhi APPELLANT RESPONDENT Assessee represented by Shri Satyajeet Goel, CA Department represented by Shri Om Parkash, Sr. DR Date of hearing 27.07.2023 Date of pronouncement 31.07.2023 O R D E R PER KUL BHARAT, JM: This appeal, by the assessee, is directed against the order of the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 13.01.2023, pertaining to the assessment year 2017-18. The grounds of appeal raised by the assessee are as follows: “1. That the impugned order dated 13.01.2023 passed by the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi is bad in law and wrong on facts. 2. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in law in upholding the disallowance made in the order of the Ld. 2 ITA No. 725/Del/2023 Assessing Officer and by ignoring the submissions of the Appellant and the Order passed by the CIT(A) is also not a self-speaking order which is against the principle of natural justice. 3. That the Ld. CIT(A) consequent to the above, erred in law in upholding the disallowance u/s 13(9) of the Act of Rs. 7,56,576/- claimed by the Appellant as accumulation u/s 11(2) of the Act under clause (2) of the explanation to sub section (1) of section 11 of the Act. 4. That the appellant craves leave to add, alter, amend, substitute, forego any or all the grounds of appeal before or at the time of hearing. 2. Facts, in brief, are that in this case the assessee filed its return of income on 24.09.2017 declaring income at nil after claiming application of income u/s 11 of the Income-tax Act, 1961 (the “Act”). The case was selected for scrutiny and the assessment was framed u/s 143(3) of the Act vide order dated 27.12.2019. Thereby the AO did not accept the explanation given by the assessee on the basis that the claim of accumulation u/s 11(2) of the Act amounting to Rs. 7,56,576/- under clause (2) of the explanation to sub section (1) of section 11 of the Act was disallowed on account of non-submission of Form 10 along with ITR. Aggrieved against this the assessee preferred appeal before the learned CIT(Appeals), who dismissed the appeal by sustaining the addition made by the AO. Aggrieved against this now the assessee is in appeal before this Tribunal. 3. Learned counsel for the assessee submitted that the addition has been made purely on the ground that the assessee could not file Form no. 10B, as provided 3 ITA No. 725/Del/2023 under the provisions of the Act. He, however, submitted that the Form was furnished during the course of assessment proceedings. He submitted that even if the Form is submitted during the course of assessment proceedings the AO ought to have given benefit to the assessee. In support of this contention he has relied upon various case, including – - CIT v. Moti Ram Gopi Chand Charitable Trust [2014] 360 ITR 598 (All); - Institution of Civil Engineers Society v. ACIT [2021] 91 ITR (T) 56 (Chandigarh ITAT); - ITO (E) v. Shri Laxmanarayan Dev Shrishan Seva (ITA No. 410/Ahd/22) (Ahmedabad ITAT); and - SS Charitable Trust Vs. ITO, Exemption (ITA no. 49/Ran/2022 for A.Y. 2016-17) order dated 28.04.2023. 3. On the other hand, learned DR opposed the submissions and submitted that statutory provisions mandate the furnishing of Form no. 10 along with the ITR and if the same is not done in that event the AO is empowered to reject the claim of accumulation. 4. I have heard rival submissions and perused the record. I find that under identical facts the Division Bench of ITAT Ranchi in the case of SS Charitable Trust Vs. ITO, Exemption (ITA no. 49/Ran/2022 for A.Y. 2016-17) in para 6 of its order dated 28.04.2023, has observed as under: “6. We have considered the rival contentions. Since the assessment year 2016-17 was the first year for which Form 10 was to be e-filed and since the 4 ITA No. 725/Del/2023 assessee-trust was having reasonable belief that the assessee-trust has applied 85% of its income for charitable purposes and, therefore, the assessee-trust was not required to file Form 10 for shortfall in application of income and claiming accumulation thereof, and since the assessee-trust has filed the Form 10 during the assessment proceedings, in our view, the Assessing Officer should consider the said Form 10 and grant relief to the assessee as per the relevant provisions, if the assessee is otherwise so found eligible. With the above observations, the impugned order of the CIT(A) is set aside and the Assessing Officer is directed to grant relief to the assessee a admissible under the provisions of section 11 and 12 of the act.” 4.1. The Hon’ble Allahabad High Court in the case of CIT v. Moti Ram Gopi Chand Charitable Trust [2014] 360 ITR 598 (All), in para 11 of the order has observed as under: “11. We do not find any error of law in the order of the Tribunal. When a request by way of letter, which complies with the requirement and furnishes all the information required in Form 10 was made available on record and there was sufficient proof before the Assessing Officer that the amount was not only kept apart but was also spent in the next year, the adherence to the form and not substance was not valid exercise of power by the Assessing Officer and the Commissioner of Income-tax (Appeals)”. 4.2. Further, the Division Bench of ITAT Chandigarh in the case of Institution of Civil Engineers Society vl ACIT [2021] 91 ITR (T) 56 (Chandigarh ITAT), in paras 17 & 18 of its order dated 30.07.2021 has observed as under: “17. We have considered the submissions of both the parties and perused the material available on the record. In the present case it is not in dispute that as per section 11(2) of the Act read with Rule 17 of the Income Tax Rules, as mandated with effect from A.Y. 2016-17 the assessee was required to e-file Form No. 10 by due date mentioned under section 139 of the Act. 5 ITA No. 725/Del/2023 However, in the present case the assessee filed Form No. 10 on 17/11/2018 i.e; during the course of assessment proceedings. The A.O. denied the claim of the assessee since the Form No. 10 was not furnished before filing the return of income under section 139 of the Act. 17.1 In this regard the CBDT has issued Circular No. 6/2020 dt. 19/02/2020 which read as under: Circular No. 6/2020 “ F.NO.197/55/2018-ITA-I Government of India, Ministry of Finance Department of Revenue Central Board of Direct Taxes ***** New Delhi, the 19 February, 2020 Sub: Condonation of delay under section 119(2)(b) of the Income-tax Act, 1961 in filing of Return of Income for A.Y 2016-17,2017-18, and 2018- 19 and Form No.9A and Form No. 10.- Reg. Representations have been received seeking condonation of delay in filing Return of Income by the Charitable institutions for the Assessment Year 2016- 17 onwards on the grounds of hardship. The Board has issued Circulars authorizing the Commissioners of Income Tax to admit belated applications of Form 9A and Form 10 and to decide on merit the condonation of delay U/S 11 9(2)(b) of the Income-tax Act, 1961 (Act). However, in those cases where the Income Tax Returns have also been filed beyond the due date prescribed under section 139(1) of the Act, the condonation of delay in filing of Form 9A & Form 10 by the Commissioners is not of any help to the assessee, as section 13(9) of the Act, inserted w.e.f. 01.04.20 16, stipulates twin conditions of filing of Form 9A/Form 10 and also of filing Return of Income before the due date. 2. Accordingly, in continuation of earlier Circulars issued in this regard, with the view to prevent hardship to the assessee and in exercise of powers conferred under section I 19(2)(b) of the Act, the CBDT has decided that where the application for condonation of delay in filing Form 9A and Form 10 has been filed, and the Return of Income has been filed on or before 31 S1 March of the respective assessment years i.e. Assessment Years 20 16- 17, 20 17- 18 and 2018- 19, the Commissioners of Income-tax (Exemptions) 6 ITA No. 725/Del/2023 arc authorised u/s 119(2)(b) of the Act, to admit such belated applications for condonation of delay in filing Return of Income and decide on merit. 3. For all other application for condonation of delay not mentioned above, the power of condonation of delay u/s I 19(2)(b) of the Act will continue with the respective authorities as per the extant Rules and Practice.” 17.2 Earlier also a Circular No. 7/2018 dt. 20/12/2018 was issued by the CBDT which read as under: “SECTION 119 OF THE INCOME-TAX ACT, 1961 - CONDONATION OF DELAY UNDER SECTION 119(2)(b) OF THE INCOME-TAX ACT, 1961 IN FILING OF FORM NO. 10 AND FORM NO. 9A FOR AY 2016-17 CIRCULAR NO. 7/2018 [F.NO.197/55/2018-ITA-I], DATED 20-12-2018 Under the provisions of section 11 of the Income-tax Act, 1961 (hereafter 'Act') the primary condition for grant of exemption to trust or institution in respect of income derived from property held under such trust is that the income derived from property held under trust should be applied for the charitable purposes in India. Where such income cannot be applied during the previous year, it has to be accumulated and applied for such purposes in accordance with various conditions provided in the section. 2. The Finance Act, 2015 amended section 11 and section 13 of the Act with effect from 1- 4-2016 (A.Y. 2016-17). Consequently, Income-tax Rules, 1962 (hereafter 'Rules') were also amended vide the Income-tax (1st Amendment) Rules, 2016. As per the amended provisions of the Act read with rule 17 of the Rules, while 15% of the income can be accumulated indefinitely by the trust or institution, 85% of income can only be accumulated for a period not exceeding 5 years subject to the conditions, inter alia, that such person submits the prescribed Form No. 10 electronically to the Assessing Officer within the due date specified under section 139(1) of the Act 3. Further, where the income from the property held under trust and applied to charitable or religious purposes falls short of 85% of the income derived during the previous year for the reason that the income has not been received during that year or any other reason, then on exercise of the option by submitting in Form No.9A electronically by the trust/institution on or before the due date of furnishing the return of income, such income shall be deemed to have been applied for charitable or religious purpose. 7 ITA No. 725/Del/2023 4. Representations have been received by the Board/ field authorities stating that the Form No. 9A and Form No. 10 could not be filed in the specified time for AY 2016-17, which was the first year of e-filing of these forms. It has been requested that the delay in filing of Form No. 9A and Form No.10 for AY 2016-17 may be condoned under section 119(2) (b) of the Act. 5. Accordingly, in supersession of earlier Circular/Instruction issued in this regard, with a view to expedite the disposal of applications filed by trusts for condoning the delay and in exercise of the powers conferred under section 119(2)(b ) of the Act, the Central Board of Direct Taxes hereby authorizes the Commissioners of Income-tax, to admit belated applications in Form No. 9A and Form No. 10 in respect of AY 2016-17 where such Form No. 9A and Form No. 10 are filed after the expiry of the time allowed under the relevant provisions of the Act 17 6. The Commissioners will, while entertaining such belated applications in Form No. 9A and Form No. l0, satisfy themselves that the assessee was prevented by reasonable cause from filing of applications in Form No. 9A and Form No. 10 within the stipulated time. Further, in respect of Form No. 10 the Commissioners shall also satisfy themselves that the amount accumulated or set apart has been invested or deposited in any one or more of the forms or modes specified in sub-section (5) of section 11 of the Act. 17.3 From the aforesaid Circular it would be clear that in the genuine case of belated application in Form No. 10, the delay may be condone. In the present case the assessee furnished the Form No. 10 before completion of the assessment. 17.4 On a similar issue the Hon'ble Apex Court in the case of CIT Vs. Nagpur Hotel Owners’ Association (supra) held as under: “It is abundantly clear from the wordings of sub-section (2) of section 11 that it is mandatory for the person claiming the benefit of section 11 to intimate to the assessing authority the particulars required, under rule 17 in Form No. 10. If during the assessment proceedings the Assessing Officer does not have the necessaiy information, the question of excluding such income from assessment does not arise at all. As a matter of fact, the benefit of excluding this particular part of the income from the net of taxation arises from section 11 and is subject to the conditions specified therein. Therefore, it is necessary that the assessing authority must have this information at the time it 8 ITA No. 725/Del/2023 completes the assessment. In the absence of any such information, it will not be possible for the assessing authority to give the assessee the benefit of such exclusion and once the assessment is so completed, it would be futile to find fault with the assessing authority for having included such income in the assessable income of the assessee. Therefore, even assuming that there is no valid limitation prescribed under the Act and the Rules, even then it is reasonable to presume that the intimation required under section 11 has to be furnished before the assessing authority completes the concerned assessment because such requirement is mandatory and without the particulars of the income, the assessing authority cannot entertain the claim of the assessee under section 11. Therefore, compliance of the requirement of the Act will have to be any time before the assessment proceedings.” 17.5 Similarly their Lordships of the Hon'ble Bombay High Court in the case of CIT Vs. Sakal Relief Fund (supra) observed in para 13 as under: “13. It is only with regard to the decision of the Apex Court in Nagpur Hotel Owners' Association {supra) that Mr. Tejveer Singh expressed reservation. According to him, the observations of the Apex Court that Form 10 has to be filed before completion of Assessment Proceedings were rendered in the context of fact that it was not filed during the Assessment Proceedings. Therefore, the fact situation being different, the observations therein cannot be applied to the present facts. In fact, we note that the Apex Court in the above case has observed that for the purposes of excluding an income of the trust from the net of taxation, the intimation in Form 10 has to be filed with the Assessing Officer before he completes the Assessment. In fact, it is the context of the above finding of the Apex Court, that it observed that Form 10 has to be filed before completion of Assessment Proceedings. In fact, the Delhi High Court in the case of Association of Corporation & Apex Societies of Handlooms {supra) has also relied upon and so understood the decisions of the Apex Court in Nagpur Hotel Owners' Association {supra). Therefore, we do not find any merit in the reservations expressed by Mr. Singh, learned Counsel for the Revenue on the 18 applicability of the Supreme Court order in case of Nagpur Hotel Owners' Association {supra) to the present facts.” 9 ITA No. 725/Del/2023 18. We therefore by considering the totality of the fact as discussed hereinabove and by keeping in view the ratio laid down by the Hon'ble Apex Court and the Hon'ble Bombay High Court in the aforesaid referred to cases, are of the view that the Form No. 10 furnished by the assessee during the course of assessment proceedings before completion of the assessment should have been considered by the A.O. while considering the claim for benefit under section 11(2) of the Act. We order accordingly.” 4.3. Therefore, respectfully following the binding precedents, I hereby direct the Assessing Officer to allow the claim of the assessee regarding accumulation u/s 11 of the Act after verifying the same. Grounds of appeal stands allowed for statistical purposes. 5. Appeal of the assessee is allowed for statistical purposes. Order pronounced in open court on 31 st July, 2023. Sd/- (KUL BHARAT) JUDICIAL MEMBER *MP* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI