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Facts
The assessee filed its return declaring income of Rs. 2,55,240. The case was selected for scrutiny and an addition of Rs. 1,36,45,240 was made on account of violation of Section 11(2)(c) r.w.s. 13(9) of the Act due to non-filing of Form 10 within the due date.
Held
The Tribunal condoned the delay in filing the appeal and directed the Assessing Officer to consider the audit certificate filed during the assessment proceedings and allow the benefit of accumulation of income as per Section 11 of the Act.
Key Issues
Whether the benefit of exemption under Section 11 and 12 of the Act can be denied solely on account of late filing of Form 10, especially when it was filed during assessment proceedings and the delay was condoned.
Sections Cited
143(3), 11(1), 11(2)(c), 13(9), 11, 12
AI-generated summary — verify with the full judgment below
Before: MS. KAVITHA RAJAGOPAL & SMT. RENU JAUHRI
सुिवधई की िधरीख / Date of Hearing 17.04.2025 घोर्णध की िधरीख/Date of Pronouncement 29.04.2025 आदेश / O R D E R PER RENU JAUHRI [A.M.] :- This appeal is filed by the assessee against the order of the Learned Commissioner of Income-tax (Appeals), Mumbai/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] dated 24.06.2024 passed
The assessee has raised the following grounds of appeal:
1. On the facts and in law, the CIT(A) erred in confirming the impugned assessment Order dated 11/12/2017 passed by Ld. AO. making impugned addition of Rs. 1,36,45,240/-.
2. On the facts and in law, the Ld. Assessing Officer [in short Ld. AO] erred in wrongly adding back the figure of Income of Rs. 1,36,45,240/- on account of denial of exemption under Section 11(1) of the Act as it is unwarranted, unjustified and bad in law.
3. On the facts and in law, the Ld. AO has erred in wrongly mentioning the facts in the body of the order which are not applicable to the Assessee, You are requested to kindly delete the entire additions and oblige.
4. On the facts and in law, the Appellant prays that the addition/disallowance of Rs. 1,36,45,240/- as states in the order may be deleted.
5. On the facts and in law, the provision regarding furnishing of Form 10 with the return must to be treated as a procedural proviso and therefore substantial compliance must suffice. The benefit of exemption should not be denied merely on account of furnishing of Form 10 at the time of assessment proceedings.
6. On the facts and in law, all the relevant details relating to accumulation as per section 11(2) of the Act, were made available before the Assessing officer, in Form 10B filed before filing of return of income and therefore, mere filing of Form 10 at the time of filing of assessment proceedings should be treated as sufficient compliance.
7. On the facts and in law, the Ld. CIT(A) erred in dismissing appeal filed by the Appellant for non-prosecution and on the Assumption that the Appellant did not receive any physical notices even when the Appellant had opted for option for sending notices and communication through physical manner.
8. On the facts and in law, the Ld. CIT(A) erred by failing to send the notices on the email id provided under the caption for sending notices in Form No.35 thereby making it impossible for the appellant respond to such notice.
9. The appellant craves leave to add to alter, modify, revise, or delete any ground (s) in the interest of justice.”
3. At the outset, it is noticed that the appeal is delayed by 165 days. The assessee has filed an application for condonation of delay, wherein it has been submitted that the assessee was unaware of the proceedings as well as the order of the Ld. CIT(A) as all the notices were sent online, even though the assessee A.Y. 2017-18 Kerala Catholic Association had opted for ‘no notice or communication via email’ while filing the appeal. Since the staff of the trust was not familiar with the compliances on the Income Tax Portal, and no physical notice was received, the assessee remained unaware of the appellate proceedings before Ld. CIT(A). Subsequently, the Chartered Accountant, upon checking the ITBA portal, informed the assessee about the order of Ld. CIT(A), and hence, the appeal was filed belatedly by the assessee. In view of the submissions made by the assessee, we hereby condone the delay in filing the appeal of 165 days.
Brief facts of the case are that the assessee had filed its return declaring income of Rs. 2,55,240/-. The case was selected for scrutiny and assessment was completed u/s 143(3) at an income of Rs. 1,36,45,240/- after making an addition of Rs. 1,34,00,000/- on account of violation of provisions of section 11(2)(c) r.w.s. 13(9) of the Act.
Aggrieved with the order of Ld. AO, the assessee preferred an appeal before CIT(A). The assessee did not make any compliance before Ld. CIT(A) for the reasons stated in Para 3 hereinbefore, and therefore, Ld. CIT(A) examined the assessee’s grounds and dismissed the appeal after holding that the assessee had not filed Form 10 on or before the due date of filing of return, which is a mandatory requirement for claiming the benefit of accumulation of income.
Aggrieved with the order of Ld. CIT(A), the assessee is in appeal before the Tribunal. Ld. AR has submitted that the disallowance has been made only A.Y. 2017-18 Kerala Catholic Association for the reason that the requisite form giving details of accumulation was not filed within time. As per the amended provision applicable w.e.f. AY 2017-18, this form was required to be submitted on or before filing of the return. However, the same was filed only after receipt of notice u/s 143(2) of the Act. On this issue, Ld. AR has relied on the various decisions of the Hon’ble Apex Court, Hon’ble High Courts and coordinate benches, wherein under similar circumstances, the issue has been decided in favour of the assessee. Specifically, the assessee has relied on the following decisions: 1. “Sarvodaya Charitable Trust Vs. Income Tax Officer (Exemption) [2021] 125 taxmann.com 75 (Gujrat) 2. Al Jamia Mohammediyah Education Society Vs. Commissioner of Income tax (Exemptions) - [2024] 162 taxmann.com 114 (Bombay) 3. Rajasthan Medical Relief Society Vs. Income-tax Officer - [2024] 162 taxmann.com 568 (Jaipur-Trib) 4. Shree Vardhman Stanakvasi Jain Shravak Trust Vs. Income Tax Officer - [2025] 173 taxmann.com 165 (Ahmedabad-Trib.) 5. Commissioner of Income-tax (Exemptions), UP Vs. Reham Foundation LKO - [2019] 111 taxmann.com 379 (Allahbad)”
On the other hand, Ld. DR has strongly relied on the orders of lower authorities, and has argued that after the amendment in the Act, it is now mandatory for the assessee to file the requisite audit report before filing of return. Accordingly, he submitted that the decision of the Ld. AO deserves to be upheld.
We have heard the rival submissions and considered the relevant facts in the light of judicial pronouncements cited before us. It is seen that the issue is squarely covered in the writ petition in the case of AI Jamia Mohammediyah A.Y. 2017-18 Kerala Catholic Association Education Society v/s CIT (Exemptions) (supra) wherein it has been held that when the delay in filing of Form 10 was not intentional or deliberate, the same should be condoned.
Similarly, in the writ petition in the case of Survodaya Charitable Trust v/s ITO (supra), the Hon’ble High Court has held that where the assessee substantially satisfied condition of availing the benefit of exemption, it could not be denied the exemption merely on bar of limitation to submit Form No. 10, especially when a legislature had conferred vide discretionary powers to condone the such delay to the authorities concerned.
In the case of Shri Vardhman Stanak Vasi Jain Sharvarak Trust v/s ITO (supra), the coordinate bench in identical circumstances, relying on the decision of the coordinate bench in the case of Swami Narayan Charitable Trust v/s ITO in has held that the exemption u/s 11 and 12 of the Act cannot be denied only on account of late filing of Form 10, especially when the same was available before conclusion of the proceedings.
In the present case also, the assessee has filed the requisite audit report in Form 10 during the course of assessment proceedings, and therefore, we are of the view that the benefit of the same cannot be denied to the assessee as has been held in the various decisions cited above. Accordingly, we direct the Ld. AO to take into account the requisite audit certificate filed during the course of A.Y. 2017-18 Kerala Catholic Association assessment proceedings and allow the benefit of accumulation of income as per the provisions of section 11 of the Act.
In view of the above, appeal of the assessee is allowed. Order pronounced in the open court on 29.04.2025.