SAGUNA RURAL FOUNDATION,MUMBAI vs. EXEM. WARD 2(3), MUMBAI

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ITA 654/MUM/2026Status: DisposedITAT Mumbai05 May 2026AY 2017-1811 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that filing Form No. 10 before the completion of assessment proceedings satisfies the statutory requirement for Section 11(2) exemption, following the jurisdictional High Court's precedent. The matter was restored to the AO for verification of the purpose of accumulation.

What were the facts?

The assessee, a charitable trust, claimed exemption for accumulation of Rs. 10,00,000/- under Section 11(2). The Form No. 10 was filed after the due date for the return of income, leading to the denial of exemption by the CPC and CIT(A).

What were the issues?

Whether the delay in filing Form No. 10 beyond the due date prescribed under Section 139(1) disentitles the assessee to exemption under Section 11(2), and whether the purpose of accumulation aligns with the trust's objects.

Which sections of the Income-tax Act were involved?

Section 11(2),Section 139(1),Section 139(4),Section 143(1),Section 11(1)(a),Section 13(9),Section 119(2)(b),Section 11(3A)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “D” BENCH MUMBAI

For Appellant: Shri Shekhar Patwardhan, CA
For Respondent: Shri Umashankar Prasad (CIT DR)
Hearing: 23.04.2026Pronounced: 04.05.2026

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER & SHRI MAKARAND VASANT MAHADEOKAR, ACCOUNTANT MEMBER ITA No. 654/Mum/2026 (Assessment Year: 2017-18) Saguna Rural Commissioner of Foundation Income Tax 39A, Datar Colony, Vs. (Appeals) Veer Savarkar Marg NFAC/ADDL/JCIT(A)- Near Jankalyan Bank, 1 Delhi/ Bhandup, Mumbai Exem. Ward 2(3), Maharashtra – 400042. Mumbai, Maharashtra- 400020 PAN/GIR No. AAQTS7401K (Applicant) (Respondent) Assessee by Shri Shekhar Patwardhan, CA Revenue by Shri Umashankar Prasad (CIT DR) Date of Hearing 23.04.2026 Date of Pronouncement 04.05.2026 आदेश / ORDER PER MAKARAND VASANT MAHADEOKAR, AM: This appeal by the assessee is directed against the order passed by the ld. Commissioner of Income Tax (Appeals), Addl./JCIT(A)-1, Delhi[hereinafter referred to as "CIT(A)"], under section 250 of the Income Tax Act, 1961 [hereinafter referred to

2 ITA No. 654/Mum/2026 Saguna Rural Foundation as "the Act"]dated 15.12.2025 for the Assessment Year 2017–18, arising out of the intimation issued under section 143(1) of the Act by the Centralized Processing Center (CPC), Bengaluru dated 27.03.2019. Facts in Brief 2. The assessee is a public charitable trust registered under the Bombay Public Trust Act, 1950 and also registered under section 12A of the Act. The return of income for the year under consideration was filed in Form ITR-7 on 20.03.2018 declaring Nil income after claiming exemption under section 11 of the Act. The due date for filing the return under section 139(1) was 07.11.2017.The return of income filed by the assessee was processed by CPC under section 143(1) of the Act vide intimation dated 27.03.2019, whereby the income was determined at Rs. 8,83,482/- as against Nil income returned. The CPC denied the benefit of accumulation claimed under section 11(2) amounting to Rs. 10,00,000/- on the ground that Form No. 10 was not filed within the due date prescribed under section 139(1) of the Act. Consequently, tax liability along with interest under sections 234A, 234B and 234C aggregating to Rs. 3,31,416/- was raised.

3.

Aggrieved by the intimation issued under section 143(1), the assessee preferred an appeal before the ld. CIT(A).The assessee submitted that it had claimed accumulation under section 11(2) of Rs. 10,00,000/- and had filed Form No. 10 on 30.03.2018 declaring that the amount was set apart for “soil and water

3 ITA No. 654/Mum/2026 Saguna Rural Foundation conservation work using Saguna Rice Technique” in terms of resolution of trustees dated 10.04.2017. It was submitted that the delay in filing Form No. 10 was due to delay in finalization of accounts, lack of full-time accounting staff and administrative constraints. It was further contended that the delay was procedural and should be condoned. It was also submitted that the accumulated amount was duly utilised in the subsequent year. The assessee also raised additional grounds before the ld. CIT(A), inter alia, challenging the validity of adjustment under section 143(1)(a)(ii) and alternatively claiming benefit of 15% accumulation under section 11(1)(a).

4.

The ld. CIT(A), after considering the submissions of the assessee, dismissed the appeal. The CIT(A) recorded that in view of the provisions of section 13(9) introduced by the Finance Act, 2015 with effect from 01.04.2016, accumulation under section 11(2) cannot be allowed unless both the return of income and Form No. 10 are filed within the due date prescribed under section 139(1) and since the assessee failed to file Form No. 10 and return of income within the prescribed due date, the benefit of section 11(2) was not allowable. The CIT(A) also noted that the CBDT Circulars permitting condonation of delay confer such power on the jurisdictional Commissioner and not on the appellate authority. The additional ground claiming 15% accumulation under section 11(1)(a) was also rejected on the ground that audit report in Form 10B was not filed within the

4 ITA No. 654/Mum/2026 Saguna Rural Foundation due date prescribed. Accordingly, the ld. CIT(A) dismissed all the grounds raised by the assessee.

5.

Aggrieved by the order of CIT(A), the assessee is in appeal before us raising following grounds of appeal: 1. The Learned CIT (Appeals) National Faceless Appeal Centre has erred in denying exemption u/s 11(2) to the tune of Rs 1000000/- because of the delay in filing the Form No 10 , though the said delay was a procedural lapse and the jurisprudence suggest that the delay need to be condoned. 2. The appellant craves leave to add, alter, amend, and modify the aforesaid grounds of appeal at or any time before the hearing as may be advised from time to time. Relief Claimed (as forming part of Grounds) 1. The exemption u/s 11(2) to the tune of Rs 1000000/- be allowed. 2. Any other Relief as may be deemed fit by the authority.

6.

During the course of hearing before us, the ld. Authorized Representative (AR) reiterated the factual matrix of the case and submitted that the assessee had in fact filed Form No. 10 on 30.03.2018, which was much prior to the processing of the return under section 143(1) by CPC on 27.03.2019. It was contended that Form No. 10 was already on record at the time of processing of return and, therefore, denial of exemption on technical grounds was unjustified. It was further submitted that being the first year of full-fledged operations, delay occurred in finalization of accounts due to absence of full-time accountant and administrative constraints, which in turn led to delay in filing the return and Form No. 10. It was thus submitted that the delay was due to reasonable cause, procedural in nature, and since

5 ITA No. 654/Mum/2026 Saguna Rural Foundation substantive conditions of section 11(2) were fulfilled, the exemption of Rs. 10,00,000/- ought to be allowed.

7.

The ld. AR placed reliance on the judgment of the Hon’ble Bombay High Court in Trustees of Tulsidas Gopalji Charitable &Chaleshwar Temple Trust vs. CIT(207 ITR 368), wherein it has been held that a return filed within the time prescribed under section 139(4) is to be treated as a return filed within the time allowed under section 139(1) and, accordingly, the option exercised along with such return would be valid. The ld. AR also relied upon the judgment of the Hon’ble Bombay High Court in CIT vs. Sakal Relief Fund(295 CTR 561), wherein it has been held that Form No. 10 can be filed at any time before completion of assessment proceedings and even filing during reassessment proceedings would suffice, being within the extended time contemplated under section 139(4). The Hon’ble High Court, after considering the decision of the Hon’ble Supreme Court in Nagpur Hotel Owners’ Association (247 ITR 201), held that filing of Form No. 10 before completion of assessment satisfies the statutory requirement.

8.

Per contra, the ld. Departmental Representative (DR) relied upon the findings recorded in the order of the ld. CIT(A) and submitted that the assessee had admittedly failed to comply with the statutory requirement of filing Form No. 10 within the due date prescribed under section 139(1) of the Act and, therefore, the denial of exemption under section 11(2) was in accordance with law. The ld. DR further drew our attention to the order passed by

6 ITA No. 654/Mum/2026 Saguna Rural Foundation the ld. CIT (Exemptions), Mumbai under section 119(2)(b) of the Act dated 22.06.2022, whereby the application filed by the assessee for condonation of delay in filing Form No. 10 was rejected. 9. We have carefully considered the rival submissions, perused the material available on record including the intimation issued under section 143(1), the order of the ld. CIT(A), and the judicial precedents relied upon by the ld. AR. 10. The undisputed factual position emerging from the record is that the assessee filed its return of income on 20.03.2018 under section 139(4) of the Act and filed Form No. 10 on 30.03.2018 specifying accumulation of Rs. 10,00,000/- for a stated charitable purpose in accordance with the resolution passed by the trustees on 10.04.2017. It is also not in dispute that the return of income was processed under section 143(1) on 27.03.2019, i.e., subsequent to the filing of Form No. 10. 11. The short issue for consideration is whether the assessee is entitled to the benefit of accumulation under section 11(2) in the facts of the present case. 12. We find that the Hon’ble jurisdictional High Court in the case of CIT vs. Sakal Relief Fund(supra) has considered an identical issue and held that for the purpose of availing benefit under section 11(2), Form No. 10 can be filed at any time before completion of assessment proceedings and even filing during reassessment proceedings would suffice, being within the extended time allowed under section 139(4). The Hon’ble High

7 ITA No. 654/Mum/2026 Saguna Rural Foundation Court, after considering the judgment of the Hon’ble Supreme Court in Nagpur Hotel Owners’ Association, held as under: “The Apex Court's decision is to the effect that Form 10 required to be filed under rule 17… could be filed at any time till the completion of assessment and not after the completion of assessment… Therefore, filing of Form 10… is filing of the same within the time allowed for furnishing the return of income under section 139(4).”(para 11) 13. In view of the aforesaid binding precedent, once Form No. 10 is available on record before completion of assessment, the requirement of section 11(2) stands substantially complied with. In the present case, Form No. 10 was admittedly filed on 30.03.2018, i.e., much prior to processing of return under section 143(1) on 27.03.2019. Therefore, the denial of exemption merely on the ground that Form No. 10 was not filed within the due date prescribed under section 139(1) cannot be sustained.

14.

We have also carefully considered the contention of the ld. DR based on the order passed by the ld. CIT (E) under section 119(2)(b) rejecting the assessee’s application for condonation of delay. The ld. CIT(E), in the said order, has recorded that though the assessee filed original Form No. 10 on 30.03.2018 for accumulation of Rs. 10,00,000/-, a revised Form No. 10 was subsequently filed on 20.04.2019 altering the purpose of accumulation and no prior approval of the Assessing Officer was obtained as required under section 11(3A) of the Act. It has also been observed that the return was filed under section 139(4) and, therefore, in view of section 13(9), the assessee was not eligible

8 ITA No. 654/Mum/2026 Saguna Rural Foundation for accumulation under section 11(2). On this basis, the condonation application was rejected. 15. In this regard, we find that the original Form No. 10 filed on 30.03.2018 is available on record, wherein the amount of Rs. 10,00,000/- has been set apart for the specified purpose in accordance with the resolution passed by the trustees on 10.04.2017. However, the so-called revised Form No. 10 dated 20.04.2019, as referred to by the ld. CIT(E), is not available on record before us.

16.

In our considered view, the issue relating to change of purpose and applicability of section 11(3A) can arise only if such revised Form No. 10 is duly brought on record and verified. In absence of the same, the findings of the ld. CIT(E) on this aspect cannot be conclusively relied upon to deny the benefit. Further, so long as the accumulation as declared in the original Form No. 10 is in accordance with the objects of the trust and supported by the resolution passed by the trustees, the exemption under section 11(2) cannot be denied merely on technical or procedural grounds.

17.

We further note that the lower authorities have not examined, both the original and revised, Form No. 10 from the perspective of whether the purpose for which the amount has been accumulated is in conformity with the objects of the trust and duly supported by the resolution passed by the trustees. The objection raised by the ld. CIT(E) pertains to an alleged change in the purpose of accumulation in a subsequent Form No. 10. In our

9 ITA No. 654/Mum/2026 Saguna Rural Foundation considered view, such aspect, even if assumed, requires only a limited factual verification as to whether the purpose finally adopted for accumulation is in accordance with the objects of the trust and whether any resolution exists evidencing such purpose or change therein. This exercise cannot, by itself, be a ground to deny exemption under section 11(2), once the substantive conditions are otherwise satisfied.

18.

In view of the foregoing discussion and respectfully following the binding precedent of the Hon’ble jurisdictional High Court in Sakal Relief Fund (supra), we hold that the filing of Form No. 10 prior to completion of assessment satisfies the statutory requirement under section 11(2).

19.

However, considering that the issue relating to the purpose of accumulation vis-a-vis the objects of the trust and the alleged change in such purpose has not been examined by the lower authorities, we restore the matter to the file of the Jurisdictional Assessing Officer for a limited purpose.

20.

The Assessing Officer shall verify whether the purpose for which the amount of Rs. 10,00,000/- has been set apart, as reflected in the original Form No. 10, is in accordance with the objects of the trust and supported by the resolution passed by the trustees. In case any revised Form No. 10 is found to have been filed, the Assessing Officer shall examine whether the change in purpose, if any, is backed by a valid resolution and remains within the framework of the objects of the trust. It is

10 ITA No. 654/Mum/2026 Saguna Rural Foundation clarified that this verification is confined only to the aforesaid limited aspect and shall not be construed as permitting denial of exemption under section 11(2) on mere technical grounds.

21.

The Assessing Officer shall decide the issue in accordance with law after affording reasonable opportunity of being heard to the assessee. The Assessing Officer shall, upon such limited verification, and on being satisfied that the purpose of accumulation is in accordance with the objects of the trust and duly supported by the resolution of the trustees, grant the exemption under section 11(2) in respect of Rs. 10,00,000/- and recompute the income in accordance with law.

22.

Accordingly, the ground raised by the assessee is allowed for statistical purposes.

Order pronounced in the open court on 04.05.2026.

Sd/- Sd/- (PAWAN SINGH) (MAKARAND VASANT MAHADEOKAR) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 04/05/2026 Z.U., PS आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : अपीलार्थी / The Appellant 1. प्रत्यर्थी / The Respondent. 2. 3. संबंधित आयकर आयुक्त / The CIT(A) 4. आयकर आयुक्त(अपील) / Concerned CIT धिभागीय प्रधतधिधि, आयकर अपीलीय अधिकरण, मुम्बई / DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. 6. आदेशानुसार/ BY ORDER,

11 ITA No. 654/Mum/2026 Saguna Rural Foundation सत्याधपत प्रधत //True Copy// 1. उि/सहायक िंजीकार ( Asst. Registrar) आयकर अिीिीय अतिकरण, मुम्बई / ITAT, Mumbai

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