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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “SMC”, MUMBAI BEFORE SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER AND SHRI GAGAN GOYAL, ACCOUNTANT MEMBER (A.Y. 2017-18) Archana Foundation More House 28, New India Housing Society North South Road No.11, JVPD, Juhu, Mumbai-400049. PAN: AABTA0873E ...... Appellant Vs. ITO (Exemption)-1(1), Piramal Chambers, Lalbaug, Mumbai-400012. ..... Respondent Appellant by : Sh. Amit Agrawal Respondent by : Sh. Pramod Nikalje Date of hearing : 13/06/2022 Date of pronouncement : 05/09/2022 ORDER PER GAGAN GOYAL, A.M:
This appeal by the assessee is directed against the order of National Faceless Appeal Centre, Delhi [hereinafter referred to as (‘NFAC’] dated 31.05.2021 for the Assessment Year (AY) 2017-18. The assessee has raised the following grounds of appeal:
“1. under the facts & in the circumstances of the case & in law, the id. Commissioner of Income tax (Appeals) was not justified in denying the exemption u/s 11(2) of the act and confirming the addition of Rs 16,19,720 made by the AO for late filing of form no 9A and Income tax return, 2. Under the facts & in the circumstances of the case & in law, Id. Commissioner of Income tax (Appeals) was not justified in stating that appellant had not submitted copy of application for condonation of delay made before CIT (Exemptions) whereas such copy and documents already submitted before him.
3. Under the facts & in the circumstances of the case & in law, Id. Commissioner of Income tax (Appeals) did not consider the fact that Appellant had applied under sec 119(2b) of the Act before CIT(Exemptions) for condonation of delay on 18 12-2019 but due to COVID, no order received 4. Under the facts & in the circumstances of the case & in law, Id. Commissioner of Income tax (Appeals) was not justified in not considering the CBDT circular no 6/2020 dt 19-2-2020 regarding condonation of delay in late filing of form no 9A and Income tax return for AY 2017-18 till the end of the year.”
Brief facts of the case are that the assessee trust filed its return of income on 30-03-2018 declaring total income of Rs. NIL, return was filed along with form No. 10B, Form 10 and Form 9A. The case was selected for scrutiny under CASS. Assessee is a registered charitable organisation u/s 12A of the Act and is engaged in education and runs a school, old age home and also conducts medical camps at khadavli, Balwadi, Shahpur and BMC School at Juhu. The assessee filed Form No- 9A on 30-03-2018 claiming accumulation u/s 11(1), explanation 2. This Form No- 9A has to be filed before due date of filing of return as prescribed in sec 139(1).
As per assessee the trust doesn’t have any full time staff. The trust is being managed only by women and most of them are senior citizens, not very conversant with digital filing compliance etc. One of the requirements of filing the form no-9A was that the signatories’ Aadhar should be linked; there was some delay in getting it done. Based on this delay A.O passed the order denying the benefits of section 11(1). A.O passed the order on 12-12-2019. Thereafter assessee filed an application before CIT (Exemption) for condonation of delay in filing Form No-9A on 23-12-2019 (vide pg no-12 of PB).
Thereafter assessee filed an appeal before Ld. CIT (A)-1 Mumbai challenging the assessment order in its submission before Ld. CIT(A) assessee filed copy of petition for condonation of delay along with its submissions justifying its claim for section 11(1). Ld CIT (A) also passed the order on 31-05-2021 without waiting for the outcome of petition filed by the assessee before CIT(Exemption). Although Ld. CIT(A) vide its order, page no -6 categorically denied about filing of copy of petition for condonation of delay before CIT(Exemption). Whereas the same document assessee filed twice on 23-02-2021 and 16-04-2021 vide page no-2 and 5 of the assessee’s paper book dated 10-06-2022.
After a long gap of time after almost more than two years Ld. CIT (Exemption) rejected the petition filed by the assessee (vide page no-15 of PB). The Ld. CIT (Exemption) also, rejected this petition merely on the ground of some discrepancies in the figures in form no-9A, form no-10B and ITR-7. This discrepancy shows some inadvertent negligence on the part of the assessee and more on the part of consultant of the assessee who prepared and uploaded all these forms without bothering for cross examination of exact column and figures. If the Ld. CIT (Exemption) would have taken a lenient view of the facts of the case and would have provided an opportunity to the assessee, Assessee would have explain this small discrepancy very effectively.
With the facts and documents mentioned supra, we observe that finding of the Ld. CIT(A) about non furnishing the copy of petition for condonation of delay is perverse in nature (page -6 of Ld CIT(A) order). In the given situation Ld. CIT(A) was duty bound to wait for the outcome of petition filed before Ld CIT(Exemption) by assessee. His denial of filing the same before him proves his gross negligence and fractured delivery of justice.
This formality of filing form no-9A r.w.r -17, digitally made applicable first time w.e.f A.Y 2017-18, i.e. the relevant A.Y under consideration. So much of digitisation is going on for betterment to the assessee service on the one hand but on the other hand assessee and even their consultant are not very familiar with the processes to be carried out. In this regard being the first year there should have been a lenient view to be taken by the A.O and Ld. CIT(A). 8. None of the facts submitted by the assessee, emanated from various order in this case and looking at the gender and age profile of the assessee, we don’t see any foul play or advertant defiance by the assessee in complying with the requirements of the Act and benefit of exemption on this technical; breach can’t be denied to the assessee. 9. To arrive at this conclusion we found support from various judicial pronouncements as mentioned below: “[2001] 114 Taxman 255 (SC)/[2001] Commissioner of Income-tax v. Nagpur Hotel Owners’ Association 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 necessary
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 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. Further, any claim for giving the benefit of section 11 on the basis of information supplied subsequent to the completion of assessment would mean that the assessment will have to be reopened. The Act does not contemplate such reopening of the assessment. In the instant case, it was evident from the records of the case that the respondent did not furnish the required information till after the assessments for the relevant years were comp- leted. In the light of the above, the stand of the revenue that the High Court erred in answering the question in favour of the assessee was correct, and that finding was to be reversed. [2021] 130 taxmann.com 506 (Chandigarh - Trib.) Institution of Civil Engineers Society v. ACIT (Exemptions) [2017] 81 taxmann.com 396 (Bombay) Commissioner of Income-tax-III, Pune v. Sakal Relief Fund Section 11 of the Income-tax Act, 1961 read with rule 17 of the Income-tax Rules, 1962 - Charitable or religious trust - Exemption of income from property held under (Accumulation of income) - Assessment years 2000-01 and 2001-02 - Whether for excluding an income of a charitable trust from net of taxation under section 11, intimation in Form 10 was to be filed with Assessing Officer before completion of assessment proceedings - Held, yes - Whether even if Form 10 was filed during re-assessment by assessee-trust, benefit of accumulation under section 11(2) was available because such filing would be considered within time allowed for furnishing return of income under section 139(4) - Held, yes [Paras 12 & 13][In favour of assessee] [2019] 111 taxmann.com 272 (Mumbai - Trib.) Shree Dadar Jain v. Income-tax Officer (E), Mumbai Income-tax Act, 1961, read with rule 17 of the Income-tax Rules, 1962 - Charitable or religious trust - Exemption of income from property held under (Accumulation of income) - Assessment year 2014-15 - Assessee a religious trust claimed deduction under section 11(2), amounting to Rs. 6.50 crores - Assessing Officer denied deduction so claimed on ground that assessee had not filed Form No. 10 for accumulation of income electronically alongwith resolution of Trustee - However, all requirements for claiming accumulation of income as stipulated under section 11(2) were satisfied except that Form No. 10 was not submitted before stipulated time as provided under section 139(1) but same was filed in physical mode before completion of assessment proceedings and there was no dispute between rival parties as to genuineness of deduction so claimed - It was also undisputed that purpose of accumulation of income under section 11(2) was to purchase property for furtherance of activities and objects of assessee, and assessee had invested said accumulation of income in one mode prescribed under section 11(5) by taking FDR's with banks - Moreover, assessee did purchase property in immediately succeeding financial year and aforesaid accumulation of income under section 11(2) stood applied in immediately succeeding year for purposes of objects and activities of assessee trust - Whether therefore, assessee would be entitled to deduction under section 11(2) as claimed - Held, yes [Para 8.19] [In favour of assessee]. [2014] 49 taxmann.com 315 (Allahabad) Commissioner of Income-tax v. Moti Ram Gopi Chand Charitable Trust Section 11 of the Income-tax Act, 1961 - Charitable or religious trust - Exemption of income from property held under (Accumulation of income) - Assessment year 2008-09 - Whether benefit of exemption under section 11 is available on setting apart of 85 per cent amount to be spent in next year before assessment is complete - Held, yes - Whether even when a request by way of letter, which complies with requirement and furnishes all information required in Form 10 was made available on record and there was sufficient proof before Assessing Officer that amount was not only kept apart but was also spent in next year, exemption was to be granted - Held, yes [Paras 9 and 11] [In favour of assessee]”
Keeping in view the facts of the case and judicial pronouncements by the Honorable Apex Court, Honorable Jurisdictional High court and coordinated bench of ITAT, we are inclined to allow the appeal of the assessee. It is hereby directed to the authorities below for deletion of addition made in the guise of withdrawal of exemption u/s. 11(1) of the Act.
In the result, appeal filed by the assessee is allowed. Order pronounced in the open court on 5th day of September, 2022.