SAI JANKALYAN EDUCATION SANSTHA ,MUMBAI V. ITO EXEM WARD 2(3), MUMBAI

ITA 3397/MUM/2025

AI Insights

The case involves Sai Jankalyan Education Sanstha, a registered charitable trust, which appealed against the order of the Commissioner of Income Tax (Appeals) confirming the addition of Rs. 67,50,000 under Section 115BBI of the Income Tax Act for the Assessment Year 2023-24. The trust had accumulated these funds during FY 2016-17, intending to utilize them within five years as per the Act. However, the funds were utilized in FY 2022-23, leading to the dispute. The primary legal contention was whether the addition of these funds in AY 2023-24 was valid, given the funds were accumulated and intended for use within the statutory period.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 711736 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2023-2024
• Other Referred Cases: CIT vs. Vatika Township Pvt. Ltd. (2014) 367 ITR 466 (SC)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SWAPNIL CHOUDHARY; DR
• Assessee Lawyers: HARIDAS BHAT; AR
• Keywords: Set aside; Retrospective amendment; Principle of natural justice; Deemed to accrue or arise in india; Charitable institution
• Section: 143(3); 11; 12A; 139; 10

Judgement Text

" | आयकर अपीलीय अिधकरण ा यपीठ, मुंबई | IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE SHRI NARENDRA KUMAR BILLAIYA, HON’BLE ACCOUNTANT MEMBER & SHRI ANIKESH BANERJEE, HON’BLE JUDICIAL MEMBER I.T.A. No. 3397/Mum/2025 Assessment Year: 2023-24 Sai Jankalyan Education Sanstha Sai Drushti, Plot No. 117/118 Sector 19C, Koparkhairne Navi Mumbai - 400079 [PAN: AACTS2264G] Vs ITO, Exem. Ward – 2(3), Mumbai अपीला थ\u0016/ (Appellant) \u0017\u0018 यथ\u0016/ (Respondent) Assessee by : Shri Haridas Bhat, A/R Revenue by : Shri Swapnil Choudhary, Sr. D/R सुनवाई की तारीख/Date of Hearing : 23/07/2025 घोषणा की तारीख /Date of Pronouncement: 25/07/2025 आदेश/O R D E R PER NARENDRA KUMAR BILLAIYA, AM: This appeal by the assessee is preferred against the order of the ld. Commissioner of Income Tax, Appeal/Addl./JCIT(A), Faridabad [hereinafter ‘the ld. CIT(A)’] dated 30/03/2025 pertaining to AY 2023-24. 2. The grievance of the assessee reads as under:- “Ground I A. On the facts and the circumstances of the case, and in law, the NFAC erred in confirming the addition of Rs. 67,50,000/- U/s 115BBI of the Income Tax Act. B. On the facts and circumstances of the case and in law the CIT failed to appreciate that i) The said amount which is added back was accumulated in F. Y. 2016-17, hence to be added in F.Y. 2021-22, corresponding to A. Y. 2022-23. Therefore Making the addition in A.Y. 2023-24 is bad in law. ii) The amendment made with regard to the use of accumulated funds is prospective, thus making the addtions of two years in one year is not the intent of jurisdiction. iii) The stand confirmed by the CIT(A) makes an impossible situation of spending the accumulated fund for F. Y. 2016-17, which is not the intent of law. Printed from counselvise.com I.T.A. No. 3397/Mum/2025 2 iv) The appellant acted in accordance with the law as it stood at the time of accumulation, with a legitimate expectation of being permitted to utilize the accumulation within five years i.e., by 31.03.2023. Any retrospective interpretation adversely affects this legitimate expectation and violates the principles of natural justice. C. Your appellant therefore prays the addition of Rs.67,50,000/ - may please be deleted. Ground II WITHOUT PREJUDICE TO THE ABOVE A. On the facts and circumstances of the case, and in Law, the NFAC erred in confirming the addition made by CPC, making the addition of Rs. 67,50,000/- U/s 115BBI of the Income Tax Act. u/s 143(1) of the Act which is bad at law. B. On the facts and circumstances of the case and in law the CPC failed to appreciate i) No addition can be made u/s 143(1) unless there is some clerical or technical discrepancies in the return. ii) CPC processed the return with making the addition of accumulated fund utilized during the year. iii) No reason for adjustment u/s. 115BBl of the Act was brought on record by the CPC. iv) The issue concerning such adjustment u/s. 115BBl of the Act is highly debatable in nature, and, consequently, no adjustment in this regard could have been made by the A.O. in an intimation u/s. 143 (1) of the Act. v) In this case, the amount disallowed is a disallowance that cannot be made without assessment proceedings u/s 143(3) of the Act. C. The appellant, therefore, prays that the disallowance made u/s 143(1) of the Act is bad at law and shall be deleted.” 3. Briefly stated the facts of the case are that the assessee is a registered charitable trust u/s 12A of the Act who filed his return of income on 16/11/2023 declaring total income at Nil, after claiming exemption u/s 11 of the Act. For the FY 2016-17, the assessee had accumulated funds of Rs. 67.50 Lakhs u/s 11(2) of the Act which were intended to be utilised within the prescribed period. These accumulated funds were subsequently utilised during FY 2022-23 relevant to AY 2023-24 which is the impugned assessment order. The utilisation of the accumulated funds were disallowed u/s 143(1) of the Act on the ground that the prescribed period had expired. Printed from counselvise.com I.T.A. No. 3397/Mum/2025 3 4. The claim of the assessee is that the accumulated funds have been utilized as per the provisions of the Act. 5. We find the relevant provisions of Memorandum explaining provisions of the Finance Bill, 2022 read as under: “4. Bringing consistency in the provisions of two exemption regimes As mentioned earlier, there is a requirement for alignment of certain provisions of the two regimes as they both intend to grant similar benefit. 4.1. Accumulation provisions i) Under the existing provisions of the Act, a trust or institution is required to apply 85% of its income during any previous year. However, if it is not able to apply 85% of its income during the previous year, it is allowed to accumulate such income for a period not exceeding 5 years as per the following provisions, namely: (I) sub-section (2) of section 11 of the Act for the trusts or institution under the second regime; and (II) third proviso to clause (23C) of section 10 of the Act for trusts or institution under the first regime. ii) However, the accumulation of income, as per the provisions of sub-section (2) of section 11 of the Act is allowed subject to the fulfilment of certain conditions while there are no such conditions specifically provided under the third proviso to clause (23C) of section 10 of the Act; iii) Similarly, sub-section (3) of section 11 of the Act provides for the specific previous year in which the accumulated income will be subjected to tax in case of different types of violations. It, inter alia, provides that if the accumulated income is not applied within 5 years, it shall be taxed in the 6th year. While, on the other hand, there are no such specific provisions under clause (23C) of section 10 of the Act and therefore, if the accumulated income is not applied within 5 years, the same shall be taxed in the 5th year itself. iv) In order to bring consistency in the two regimes, the following are proposed:- A) It is proposed to amend the provisions of sub-section (3) of section 11 of the Act to provide that any income referred to in sub-section (2) which is not utilised for the purpose for which it is so accumulated or set apart shall be deemed to be the income of such person of the previous year being the last previous year of the period, for which the income is accumulated or set apart under clause (a) of subsection (2) of section 11, but not utilised for the purpose for which it is so accumulated or set apart. B) It is proposed to insert Explanation 3 to the third proviso to clause (23C) of section 10 of the Act to provide that for the purposes of determining the amount of application under this proviso, where eighty-five per cent of the income referred to in clause (a) of the third proviso, is not applied, wholly and exclusively to the objects for which the trust or institution under the first regime is established, during the previous year but is accumulated or set apart, either in whole or in part, for application to such objects, such income so accumulated or set apart shall not be Printed from counselvise.com I.T.A. No. 3397/Mum/2025 4 included in the total income of the previous year of the person in receipt of the income, provided the following conditions are complied with, namely:— such person furnishes a statement in the prescribed form and in the prescribed manner to the Assessing Officer, stating the purpose for which the income is being accumulated or set apart and the period for which the income is to be accumulated or set apart, which shall in no case exceed five years; (a) the money so accumulated or set apart is invested or deposited in the forms or modes specified in sub-section (5) of section 11; and (b) the statement referred to in clause (a) of Explanation 3 is 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; C) It is proposed to insert a proviso to the proposed Explanation 3 to the third proviso to clause (23C) of section 10 of the Act to provide that in computing the period of five years referred to in sub-clause (a), the period during which the income could not be applied for the purpose for which it is so accumulated or set apart, due to an order or injunction of any court, shall be excluded. D) It is also proposed to insert an Explanation (Explanation 4) to third proviso to clause (23C) of section 10 to provide that any income referred to in the proposed Explanation 3 shall be deemed to be the income of the previous year in which the following takes place— (a) the income is applied for purposes other than wholly and exclusively to the objects for which the trust or institution under the first regime is established or ceases to be accumulated or set apart for application thereto, or (b) the income ceases to remain invested or deposited in any of the forms or modes specified in sub-section (5) of section 11, or (c) the income is not utilised for the purpose for which it is so accumulated or set apart during the period referred to in clause (a) of the proposed Explanation 3, (d) the income is credited or paid to any trust or institution under the first or second regime. For the circumstances referred to in clause (c), it is proposed that the income shall be deemed to be the income of previous year which is the last previous year of the period, for which the income is accumulated or set apart under sub-clause (a) of clause (iii) of the proposed Explanation 3, but not utilised for the purpose for which it is so accumulated or set apart. Printed from counselvise.com I.T.A. No. 3397/Mum/2025 5 E) It is proposed to insert an Explanation (Explanation 5) to third proviso to clause (23C) of section 10 of the Act to enable the Assessing Officer to allow trusts or institutions under the first regime in circumstances beyond their control to apply such accumulated income for such other purpose in India as is specified in the application by such person subsequent to fulfilment of specified conditions. These other purposes are required to be in conformity with the objects for which the trust or institution under the first regime is established. If it is done, the provisions of Explanation 4 to third proviso to clause (23C) of section 10 shall apply as if the purpose specified by such person in the application under this Explanation were a purpose specified in the notice given to the Assessing Officer under clause (a) of the proposed Explanation 3 of the third proviso to clause (23C) of section 10. F) It is proposed to insert a proviso to proposed Explanation 5 to third proviso to clause (23C) of section 10 of the Act to provide that the Assessing Officer shall not allow the application of any accumulated income, as referred to in the proposed Explanation 3, to be credited or paid to any trust or institution under the first or second regime, as referred to in clause (d) of proposed Explanation 4 to the third proviso to clause (23C) of section 10 v) These amendments will take effect from 1st April, 2023 and will accordingly apply in relation to the assessment year 2023-24 and subsequent assessment years. [Clauses 4 and 5 ] ” 6. We find the Hon'ble Supreme Court in the case of CIT vs. Vatika Township Pvt. Ltd. (2014) 367 ITR 466 (SC) on the issue of interpretation of taxing statutes about retrospective amendment and prospective amendment, has held as under:- 30. A legislation, be it a statutory Act or a statutory Rule or a statutory Notification, may physically consists of words printed on papers. However, conceptually it is a great deal more than an ordinary prose. There is a special peculiarity in the mode of verbal communication by a legislation. A legislation is not just a series of statements, such as one finds in a work of fiction/non fiction or even in a judgment of a court of law. There is a technique required to draft a legislation as well as to understand a legislation. Former technique is known as legislative drafting and latter one is to be found in the various principles of ʻInterpretation of Statutesʼ. Vis-à-vis ordinary prose, a legislation differs in its provenance, lay-out and features as also in the implication as to its meaning that arise by presumptions as to the intent of the maker thereof. 31. Of the various rules guiding how a legislation has to be interpreted, one Printed from counselvise.com I.T.A. No. 3397/Mum/2025 6 established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. If we do something today, we do it keeping in view the law of today and in force and not tomorrowʼs backward adjustment of it. Our belief in the nature of the law is founded on the bed rock that every human being is entitled to arrange his affairs by relying on the existing law and should not find that his plans have been retrospectively upset. This principle of law is known as lex prospicit non respicit : law looks forward not backward. As was observed in Phillips vs. Eyre[3], a retrospective legislation is contrary to the general principle that legislation by which the conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transactions carried on upon the faith of the then existing law. 32. The obvious basis of the principle against retrospectivity is the principle of 'fairnessʼ, which must be the basis of every legal rule as was observed in the decision reported in LʼOffice Cherifien des Phosphates v. Yamashita-Shinnihon Steamship Co.Ltd[4]. Thus, legislations which modified accrued rights or which impose obligations or impose new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect; unless the legislation is for purpose of supplying an obvious omission in a former legislation or to explain a former legislation. We need not note the cornucopia of case law available on the subject because aforesaid legal position clearly emerges from the various decisions and this legal position was conceded by the counsel for the parties. In any case, we shall refer to few judgments containing this dicta, a little later. 33. We would also like to point out, for the sake of completeness, that where a benefit is conferred by a legislation, the rule against a retrospective construction is different. If a legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally, and where to confer such benefit appears to have been the legislators object, then the presumption would be that such a legislation, giving it a purposive construction, would warrant it to be given a retrospective effect. This exactly is the justification to treat procedural provisions as retrospective. In Government of India & Ors. v. Indian Tobacco Association[5], the doctrine of fairness was held to be relevant factor to construe a statute conferring a benefit, in the context of it to be given a retrospective operation. The same doctrine of fairness, to hold that a statute was retrospective in nature, was applied in the case of Vijay v. State of Maharashtra & Ors.[6] It was held that where a law is enacted for the benefit of community as a whole, even in the absence of a provision the statute may be held to be retrospective in nature. However, we are confronted with any such situation here. 34. In such cases, retrospectively is attached to benefit the persons in contradistinction to the provision imposing some burden or liability where the presumption attaches towards prospectivity. In the instant case, the proviso added to Section 113 of the Act is not beneficial to the assessee. On the contrary, it is a provision which is onerous to the assessee. Therefore, in a case like this, we have to Printed from counselvise.com I.T.A. No. 3397/Mum/2025 7 proceed with the normal rule of presumption against retrospective operation. Thus, the rule against retrospective operation is a fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication. Dogmatically framed, the rule is no more than a presumption, and thus could be displaced by out weighing factors.” 7. In light of the above, we find that a similar quarrel was decided by the Co-ordinate Bench in ITA No. 505/Pun/2025; AY 2023-24 order dated 23/06/2025. The relevant findings read as under:- “21. In light of the above discussion, we are of the considered opinion that since the assessee in the instant case has utilized the accumulated surplus funds in the year immediately following the prescribed period of 5 years i.e. before 31.03.2023 and the amendment to the provisions of section 11(3) are held to be prospective in nature, therefore, the Ld. Addl / JCIT(A) in our opinion is not justified in upholding the intimation of the CPC making adjustment of Rs.90,70,20,511/- u/s 11(3) as deemed income of the assessee which was accumulated in the financial year 2016-17 and when the provisions at the relevant time prescribed the utilization of the amount within a period of 5 years or in the year immediately following the prescribed period of 5 years. Even otherwise also we find merit in the argument of the Ld. Counsel for the assessee that the 5 year period ends on 31.03.2022 and therefore the unutilized amount could have been brought to tax in assessment year 2022-23 and not in assessment year 2023-24. In the light of the above discussion, we set aside the order of the Ld. Addl / JCIT(A) on this issue and direct the Assessing Officer/CPC to delete the adjustment. The grounds raised by the assessee are accordingly allowed. 8. Respectfully following the decision of the Co-ordinate Bench, we set-aside the impugned order of the ld. CIT(A) and direct the AO/CPC to delete the adjustment. 9. In the result, appeal of the assessee is allowed. Order pronounced in the Court on 25th July, 2025 at Mumbai. Sd/- Sd/- (ANIKESH BANERJEE) (NARENDRA KUMAR BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 25/07/2025 *SC SrPs *SC SrPs *SC SrPs *SC SrPs Printed from counselvise.com I.T.A. No. 3397/Mum/2025 8 आदेश की \u0014ितिलिप अ\u0019ेिषत/Copy of the Order forwarded to : 1. अपीलाथ\u001b / The Appellant 2. \u0014 थ\u001b / The Respondent 3. संबंिधत आयकर आयु! / Concerned Pr. CIT 4. आयकर आयु! ) अपील ( / The CIT(A)- 5. िवभागीय \u0014ितिनिध ,आयकर अपीलीय अिधकरण, मुंबई /DR,ITAT, Mumbai, 6. गाड% फाई/ Guard file. आदेशानुसार/ BY ORDER TRUE COPY Assistant Registrar आयकर अपीलीय अिधकरण ITAT, Mumbai Printed from counselvise.com "