CEYLON PENTECOSTAL MISSION,KANNYAKUMARI vs. THE ACIT (CPC), BANGALORE

This appeal filed by the assessee is directed against the order passed by the CIT(A), National Faceless Appeal Centre, (NFAC), Delhi, u/s.250 of the Income Tax Act, 1961, dated 02.08.2021 and pertains to assessment year 2015-16.

The assessee has also filed present stay application seeking stay of outstanding demand of `8,36,039/- for the assessment year 2015-16. Since, appeal itself is taken up for disposal, stay application filed by the assessee becomes infructuous and accordingly, same is dismissed.

The assessee has raised following grounds of appeal:-

Brief facts of the case are that the assessee is a society registered u/s.12AA of the Income Tax Act, 1961, as charitable trust. The assessee has filed its return of income for assessment year 2015-16 on 25.08.2015 and subsequently, revised return on 16.06.2016. The Assessing Officer processed return of income filed by the assessee u/s.143(1) of the Income Tax Act, 1961 on 11.10.2016 and determined total income at Rs.27,88,457/-, after making additions towards capital gain income of Rs.21,48,579/- derived from sale of property and further denied accumulation of income u/s.11(2) of the Income Tax Act, 1961 for Rs.6,39,878/-. The assessee has filed rectification application u/s.154 of the Income Tax Act, 1961, but application filed by the assessee has been rejected by the Assessing Officer. Thereafter, the assessee preferred an appeal before the CIT(A) and challenged additions made by the Assessing Officer towards capital gain and rejection of accumulation of income claimed u/s.11(2) of the Income Tax Act, 1961, on the ground that adjustment made by the S.P. No.33/Chny/2021 Assessing Officer, while issuing intimation u/s.143(1) of the Act is bad, because while processing return of income u/s.143(1), the Assessing Officer cannot make any addition except as provided therein under Explanation to section 143(1) of the Act. The assessee had also challenged rejection of accumulation of income u/s.11(2) of the Act on the ground that although the assessee has accumulated income by passing resolution before end of the relevant financial year and further, invested said sum in specified investments, but Form No.10 could not be uploaded along with return of income due to technical glitches in web portal at the time of filing return of income.

The learned CIT(A), after considering relevant submissions of the assessee has rejected arguments taken by the assessee on the ground that there is no error in adjustment made by the Assessing Officer to total income computed by the assessee while processing return u/s.143(1) of the Act, because unless the assessee attach Form No.10 along with return, the Assessing Officer cannot give benefit of accumulation of income u/s.11(2) of the Income Tax Act, 1961.

The learned A.R for the assessee submitted that the learned CIT(A),NFAC has erred in not considering issue in right perspective of law, even though the assessee has filed various evidences to prove that Form No.10 was available with the assessee, but same could not be uploaded along with return of income due to technical glitches in web portal. The learned AR

The learned DR, on the other hand, strongly supporting order of the CIT(A) submitted that at the time of processing return u/s.143(1), Form No.10 was not available with the return of income filed by the assessee and thus, the Assessing Officer cannot allow benefit of accumulation of income u/s.11(2) of the Income Tax Act, 1961. In this regard, he relied upon decision of the Hon'ble Supreme Court in the case of CIT Vs. Nagpur Hotels Owners’ Association (2001) 247 ITR 201 (SC).

We have heard both the parties, perused materials available on record and gone through orders of the authorities below. It is an admitted fact that 143(1) intimation is not an assessment. Time and again, various Courts have categorically held that 143(1) intimation cannot be considered as a regular assessment. Therefore, once there is no regular assessment, then question that needs to be considered is whether the Assessing Officer can make adjustments towards capital gains and accumulation of income u/s.11(2) of the Income Tax Act, 1961, while processing return u/s.143(1) of the Act. The provisions of section 143(1) deals with summary adjustment, as per which, where a return has been filed u/s.139, such return shall be processed in the following manner. As per said section, except as provided under Explanation, no adjustment can be made towards total income reported by the assessee.

Be that as it may, but fact remains that the assessee has admitted Nil capital gain income from transfer of property by claiming exemption u/s.11(1A) of the Act for reinvestment of sale consideration for acquiring another capital asset to be so held for charitable purposes. Once the assessee has reinvested sale consideration for acquiring another capital asset, then whole capital gain is exempt u/s.11(1A) of the Act.

As regards accumulation of income u/s.11(2) of the Income Tax Act, 1961, it was claim of the assessee before the learned CIT(A) that although, the assessee has accumulated income and complied with provisions of section 11(2) by passing Board resolution, but Form No.10 could not be uploaded along with return of income due to technical glitches in web portal. Although, the assessee has explained reasons for not filing Form No.10 along with return, the CIT(A) has rejected explanation filed by the assessee and confirmed additions made towards rejection of accumulation of income u/s.11(2) of the Act only for the reason that the assessee has not attached Form No.10 along with return of income. No doubt, if an assessee wants to claim benefit of accumulation of S.P. No.33/Chny/2021 income u/s.11(2), then the assessee should make available requisite Form No.10 to the Assessing Officer before completion of assessment proceedings. Unless the assessee files necessary Form No.10 along with other evidences, the Assessing Officer cannot give benefit of accumulation of income u/s.11(2) of the Income Tax Act, 1961.

There is no dispute on this legal aspect, but what is to be considered is whether intimation issued u/s.143(1) is an assessment and the Assessing Officer can make adjustment towards rejection of accumulation of income u/s.11(2) of the Income Tax Act, 1961 or not has to be seen. It is well settled position of law by the decision of various courts that 143(1) intimation is not a regular assessment. Therefore, once an intimation issued by the Assessing Officer u/s.143(1) is not an assessment, then next question that needs to be considered is whether the Assessing Officer can make adjustments to total income for non-submission of Form No.10 along with return of income. In our considered view, except as provided under Explanation to section 143(1), no adjustments can be made to total income. In this case, the Assessing Officer has made

In this case, the assessee claims that requisite Form No.10 was ready while filing return of income, but same could not be uploaded along with return of income due to technical glitches in web portal provided for filing return of income . The assessee has also filed copies of Form No.10 along with copy of resolution before us, as per which income has been accumulated for specified purposes vide Board resolution and further said sum was also invested in specified investments referred to u/s.11(5) of the Act. Therefore, we are of the S.P. No.33/Chny/2021 considered view that the assessee is entitled for accumulation of income u/s.11(2) of the Income Tax Act, 1961.

As regards case law cited by the learned DR in the case of CIT Vs.Nagpur Hotel Owners’ Association (supra), we find that the Hon'ble Supreme Court made it very clear that intimation required u/s.11(2) read with rule 17 of the I.T. Rules, 1962, has to be furnished before assessing authority completes concerned assessment, because such requirement is mandatory. There is no doubt, it is the duty of the assessee to made available required intimation u/s.11(2) before completion of assessment. But, in this case since there was no regular assessment proceedings u/s.143(3), the assessee does not have had an occasion to file necessary Form 10 before the Assessing Officer. Therefore, we are of the considered view that the Revenue cannot take strength on the decision of Hon'ble Supreme Court in the case of Nagpur Hotel Owners’ Association (supra).

In this view of the matter and considering facts and circumstances of this case, we are of the considered view that the learned CIT(A) has erred in not considering claim of the S.P. No.33/Chny/2021 assessee for accumulation of income u/s.11(2) of the Income Tax Act, 1961, even though the assessee made available such Form No.10 before the CIT(A) at the time of appellate proceedings. Hence, we set aside order passed by CIT(A) and restore the issue to the file of the Assessing Officer and direct the AO to allow benefit of accumulation of income u/s.11(2) of the Income Tax Act, 1961 by considering Form No.10 filed by the assessee along with other evidences.

In the result, appeal filed by the assessee is allowed and that of stay petition is dismissed as infructuous. Order pronounced in the open court on 8th October , 2021