RAJASTHAN STATE BHARAT SCOUT AND GUIDE,JAIPUR vs. ASSISTANT COMMISSIONER OF INCOME TAX HOLDING CHARGE OF ITO EXEMPTIONS, JAIPUR

There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk.

It must be grasped that the judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so. We further place reliance on the following judicial pronouncements:

Auto Centre vs. State of Uttar Pradesh (2006) 278 ITR 291 (All) "In the matter of condonation of delay a pragmatic view should be taken and there should be a liberal approach. The law of limitation is enshrined in the maxim interest reipublicaeut sit finislitium (it is for the general welfare that a period be put to litigation). Rules of limitation are not meant to destroy the rights of the parties, rather the idea is that every legal remedy must be kept alive for a legislatively fixed period of time."

In the result, the appeal of the appellant is dismissed.’’ 3.2 During the course of hearing, the ld.AR of the assessee has filed a detailed written submission of both the appeals relating to the assessment years 2010-11 and 2011-12 with the prayers to delete the addition made by the AO and confirmed by the ld. CIT(A). He further submitted that all the information which are covered under the Form 10 was duly available with the AO. Copy of balance sheet, income and expenditure account, audit report etc. were submitted to the AO during the course of assessment proceedings. Hence, mere non-submission of Form 10 cannot become the ground of adding the income of charitable organization. The ld. AR placed reliance in the case of CIT vs Moti Ram Gopi Chand ChairtableTrust, 360 ITR 598 (Alld.). The submission made by the assessee before the Bench is reproduced as under:- ‘’BRIEF FACTS The appellant Society is registered under the Rajasthan Societies Registration Act, 1958. It is a government-aided, non-profit organization functioning under the & 382/JPR/2025 RAJASTHAN STATE BHARAT SCOUT AND GUIDE VS ITO (EXEMPTION), WARD -1, JAIPUR guardianship of the Hon'ble President of India and the Governor of the respective state The Society operates across the country with the objective of promoting the overall development of school and college students and organizes various camps throughout the year to fulfil this mission In Assessment Year (AY) 2010-11, the Society reported a surplus of 20,57 100/-, out of which 13,65,812/- was treated as taxable income by the Ld Assessing Officer (AO) on account of non-submission of Form 10 and Income Tax Return (ITR). Similarly, for AY 2011-12, against a reported surplus of ₹28.39.836/-, an amount of ₹19,44,570/- was added to the taxable income. These additions have been confirmed by the Ld. CIT(A). As the facts in both appeals are identical, we are submitting a common gist of submissions for both assessment years GROUNDS OF APPEAL

There was surplus of Rs. 20,57,100/- in the AY 2010-11 and Rs 19,44,570/- in the AY 2011-12. It is undisputed fact that the said surplus has been deposited / invested as per the requirement of Section 11(5) of the Income Tax Act, 1961.

The surplus of Rs. 20,57,100/- of the AY 2010-11 and Rs 19,44,570/- of the AY 2011-12 has been added as an taxable income by the Id AO due to non- submission of Form 10 and ITR 5. It is humbly submitted that there was no mandatory requirement to file the ITR for accumulation of fund as per the conditions of section 11(2) for the Α.Υ. 2010-11 & 11-12. Mandatory requirement of filing the ITR for the purpose of accumulation of fund has been introduced first time by the Finance Act. 2015 which is applicable from AY 2016-17 Therefore, therewas no requirement to file the ITR by the appellant for the said assessment years 6 Below is the extract of Explanatory Notes to the Provisions of Finance Act, 2015 | vide Circular No 19/2015, Issues on 27.11.2015] "12. Rationalisation of provisions of section 11 of the Income-tax Act relating to accumulation of Income by charitable trusts and institutions 12.1 Under the provisions of section 11 of the Income-tax Act, the primary condition for grant of exemption to trust or institution in respect of income derived from property held under such trust is that the income derived from property held under trust should be applied for chantable purposes in India. Where such income cannot be applied during the previous year, it has to be accumulated and applied for such purposes in accordance with various conditions provided in the section. While 15% of the income can be accumulated indefinitely by the trust or institution, 85% of income can only be accumulated for a period not exceeding 5 years subject to the conditions that such person submits the prescribed Form 10 to the Assessing Officer in this regard and the money so accumulated or set apart is invested or deposited in the specified forms or modes. If the accumulated income & 382/JPR/2025 RAJASTHAN STATE BHARAT SCOUT AND GUIDE VS ITO (EXEMPTION), WARD -1, JAIPUR is not applied in accordance with these conditions, then such income is deemed to be taxable income of the trust or institution. 12 2 In order to remove the ambiguity regarding the period within which the assessee is required to furnish Form 10, and to ensure due compliance of the above conditions within time, the Income-tax Act has been amended to provide that the Form 10 shall be furnished before the due date of furnishing the return of income specified under section 139 of the income-tax Act for the fund or institution in case the Form is not submitted before this date, then the benefit of accumulation would not be available and suich income would be taxable at the applicable rate. Further, the benefit of accumulation would also not be available if return of income is not furnished before the due date of furnishing the return of income 12.3 Under section 11 of the Income-tax Act, it has also been provided that if the income from the property held under trust and applied to chantable or religious purposes falls short of 85% of the income derived during the previous year for the reason that the income has not been received during that year or any other reason. then on exercise of the option by the trustinstitution in writing on or before the due date of fumishing the return of income, such income shall be deemed to have been applied for charitable or religious purpose. There was no standard format for exercising the option Accordingly, the provisions of section 11 have also been amended to prescribe a format for exercise of option by the trust/institution for the purposes of clause (2) of the Explanation to sub-section (1) of section 11 of the Income-tax Act 12.4 Applicability: These amendments take effect from 1stApril, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years."

In the case of RambhaiJethabhai Patel v Commissioner of Income Tax, Gujarat-l, (1977) 108 ITR 771, this Court was called upon to decide the question as to till what point of time an assessment can be said to be pending. This Court referred to various interpretations of the word "pending" at page 784 of the reported decision, and ultimately relied upon the decision of the Apex Court in case of AsgaraliNazarali v State of Bombay, AIR 1957 SC 503, to hold that it can safely be said that a matter can be said to be pending in a court of justice when any proceedings can be taken in it and that is the test to be applied In Stroud's Judicial Dictionary, fourth edition, volume 4, at page 1975, it is stated "A legal proceeding is "pending" as soon as commenced and until it is concluded, i.e. so long as the court having original cognizance of it can make an order on the matters in issue, or to be dealt with,therein’’ 11 Applying the aforesaid principle, can it be stated that when the matter is pending before the Tribunal by way of an appeal, the assessment proceeding is pending? The answer has to be in the affirmative. The assessing authority is empowered and is duty bound, to pass order giving effect to the order of the Tribunal for the purposes of assessing the tax liability of an assessee for the assessment year which was under consideration before the Tribunal. In these circumstances, it cannot be contended on behalf of the revenue that the assessment proceedings come to an end when the assessment order is framed. The contention on behalf of the revenue to equate the assessment order with assessment proceeding is based on a fallacious premise 13. Thus, the proceedings before the Tribunal are meant to correctly assess the tax liability of an assessee. If this be so, it follows that the assessment proceeding cannot be said to be complete and is pending till the appeal is heard and disposed of by the Tribunal and the order of the Tribunal is given effect to by the assessing authority by computing the correct tax liability of an assessee. In other words, whether an assessee is required to pay tax or becomes entitled to a refund, would be ascertained by the assessing authority after giving effect to the order of the Tribunal.’’ 17 Similar issue came before the Hon'ble Agra ITAT in the case of JCIT vs. Sewa Education Trust [ITA No. 157/Agra/2013, AY 2006-07] wherein the Hon'ble Bench after considering the relevant available judgements held that additions must not be made for such a non-compliance of technical issue. Relevant extract is as below:- "8. Considering the facts of the case in the light of findings of the Id CIT(A) and above decisions, we do not find any merit in the departmental appeal. The & 382/JPR/2025 RAJASTHAN STATE BHARAT SCOUT AND GUIDE VS ITO (EXEMPTION), WARD -1, JAIPUR assessee submitted the complete details before the authorities below and made a claim that it was running school in the name of Wisdom Public School, Aligarh The assessee also claimed that the assessee exists solely for educational purpose Claim of the assessee was not disputed by the AO It is also not in dispute that total receipts of the assessee in the assessment year under appeal were less than Rs. 1 crore. Therefore, the claim of the assessee for exemption u/s 10(23C)(iliad) on additional ground was correctly raised. The issue was legal in nature, therefore, the Id. CIT(A) correctly admitted the additional ground for the purpose of hearing. Hon'ble Allahabad High Court in the case of Bar Council of Uttar Pradesh vs CIT (supra) has specifically held that both the above provisions are not mutually exclusive and they can have simultaneous application if the necessary ingredients of the provisions are made out. Thus. the assessee has been able to prove that apart from claiming deduction u/s 11 & 12 of the IT Act, the assessee would be entitled for exemption u/s. 10(23C) of the IT Act. The Id. CIT(A) has given specific finding that the conditions of above provisions are fulfilled in the case of assessee. No adverse material is produced before us to contradict the finding of fact recorded by the id. CIT(A) Therefore, the Id. CIT(A) was justified in admitting the additional grounds of appeal and deciding the same in favour of the assessee. We may also note that ground No. 2 raised by the Revenue is defective because the Revenue did not challenge admission of additional ground of appeal but challenged the admission of additional evidence, for which no case is made out before us. Therefore, ground No. 2 of appeal of the Revenue has no merit. The same is accordingly dismissed. In view of these findings, addition of Rs.9,93,960/- would not stand. Any how, on going through the evidences and material on record, we are of the view that ground No. 1 is also squarely covered in favour of the assessee by the judgment of Hon'ble Gujrat High Court in the case of Mayur Foundation (supra). The assessee has produced sufficient evidences and material on record to show that the assessee made full compliance of provisions of section 11(2) & (5) of the IT Act because resolution was passed to the effect of accumulation of surplus fund in the assessment year under appeal by way of converting the amount into FDR with Nationalized Bank, which was to be used for the purpose of construction of school building Copies of the resolution, balance sheet and audit report are filed to indicate the intention of the assessee to accumulate the funds for the purpose of making construction in the subsequent assessment year. The assessee also later on made a request for condonation of delay in filing Form No. 10 belatedly before the AO as well as CIT Therefore, in the facts and circumstances of the case, particularly when surplus funds were accumulated and deposited with the Nationalized Bank, the delay in filing Form No. 10 should have been condoned by the AO and the id CIT. Further, when the assessee exists solely for educational purposes, therefore, on mere technical issue, the AO should not have made the addition against the assessee. Considering the totality of facts and circumstances. in the light of above decision, we are of the view that the id. CIT(A) correctly allowed the claim of assessee under both the provisions above. There is no merit in the departmental appeal. The same is accordingly dismissed."

Hon'ble Gujarat High Court in the case of ACIT vs. Stock Exchange Ahmedabad held that rule 17 is directory in nature. Relevant extract is as under [Appeal Number Tax Appeal No. 207 TO 213 OF 2000) "11 in the light of the above discussion, it is not possible to state that there is any legal infirmity in the impugned order of the Tribunal in holding that rule 17 of the Rules is directory in nature and in holding that the assessee had duly complied with the requirements of sub-section (2) of section 11 of the Act’’ 20. in a similar nature of case where submission of Audit report was under discussion where the Hon'ble High Court in the case of Trust For Reaching The Unreached through Trustee v. CIT [2021] 126 taxmann.com 77/279 Taxman 229 (Guj.) had held that the provision regarding furnishing of audit report with the return has to be treated as a procedural proviso. It is directory in nature and its substantial compliance would suffice. In case where the assessee had not produced the audit report along with the return of income but produced the same before the completion of the assessment, the benefit of exemption should not be denied merely on account of delay in furnishing the same and it is permissible for the assessee to produce the audit report at a later stage either before the Income- tax Officer or before the appellate authority by assigning sufficient cause Similarly, In the case of Calcutta Management Association v. ITO (1992) 42 ITD 62 the Hon'ble Calcutta bench of the Tribunal held that the Audit Report can even be filed at the time of appeal before the Commissioner (Appeals) Similar analogy is applicable for Form 10 as well.

Other various Courts also took the view that the benefit of exemption should not be denied merely on account of delay in furnishing the audit report and it is permissible for the assessee to produce the audit report at a later stage, either before the AO or the appellate authority. This view has been reiterated by the Hon'ble Court in the recent judgement of Hon'ble Gujarat High Court in the case of Sarvodaya Charitable Trust v. ITO (Exemption) [2021] 125 taxmann.com 75/278 Taxman 148 Same is considered by the Hon'ble Jaipur ITAT in the case of Deputy Commissioner of Income-tax (Exemption) vs. State Institute of Health & Family Welfare 1 [2023] 153 taxmann.com 740 (Jaipur -Trib.) [2023] 202 ITD 480 (Jaipur Trib.) (12-07-2023] where court observed as below:-

The Hon'ble Bombay High Court in the case of Sitaldas K. Motwani vs DGIT [2010] 323 ITR 223 (Bombay) held that when substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred. 23 We further rely on the judgment of Gujarat High Court in the case of CIT v. Mayur Foundation [2005] 274 ITR 562 (Guj.), in which, it was held that provisions have to be interpreted in a manner that would advance a genuine cause of charity and should not deprive an assessee of the statutory benefit oh the basis of mere technicalities it was further held that if the genuineness of the trust is not in doubt and the trust has set apart the aforesaid amount and the trustees or the settlors had not benefited by the failure or delay on the part of trust to give notice of such accumulation, the assessee trust had complied with all the requirements stipulated by the provisions of section 11(2) of the IT Act 24. Hon'ble Supreme Court in the case of KapurchandShrimal v. CIT [1981] 131 ITR 451 held that appellate authority has jurisdiction and (duty to correct all errors in the proceedings under appeal and to issue necessary directions to the authorities to dispose of whole matter afresh. Admittedly, in this case, assessee filed application for condonation of delay in filing Form No. 10 before the CIT. Ujjain. The Assessing Officer observed that the delay in filing Form No 10 was abnormal. The learned CIT(A) rejected the explanation of the assessee for condonation of delay on the ground that once resolution was passed about & 382/JPR/2025 RAJASTHAN STATE BHARAT SCOUT AND GUIDE VS ITO (EXEMPTION), WARD -1, JAIPUR accumulation of certain amount, same would indicate that assessee was having knowledge of law and further change of the administrator of assessee is no ground for condonation of delay and that ignorance of law cannot be accepted as an excuse. Though, this point is not agitated, but the facts noted in the impugned order clearly shows at the most, it was a technical mistake on procedure in not furnishing Form No. 10 as per finding of the Assessing Officer The authorities below should have considered the objects of provisions of section 11 with which such provision has been enacted while considering the issue and, accordingly, the provisions have to be interpreted in a manner that would advance a cause of charity and should not deprive an assessee of the statutory benefit on the basis of mere technicalities and venial breach, Hon'ble Supreme Court in the case of Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh [1979] 118 ITR 326 held that there is no presumption that everybody knows the law The explanation of assessee that there was ignorance of law on account of frequent change of office-bearers was not considered by the authorities below in proper perspective as well as in the light of the objects and chantable activities of assessee trust. The authorities below including the learned CIT should have considered the case of the assessee sympathetically and should have condoned the delay in Form No. 10 belatedly if they were not satisfied with the explanation of the assessee’’ 3.3 On the other hand, the ld. DR supported the orders of the lower authorities and submitted that the ld. CIT(A) has already taken a lenient view of the matter directing the assessee to file condonation of delay and therefore he supported the order of the ld. CIT(A). 3.4 We have heard both the parties and perused the materials available on record. Brief facts of the case are that the Appellant- assessee is a government aided non-profit organization under the Guardianship of Honble President of India and Governor of the state, the employees of the organization get their salary and other emoluments from the government as per the government finance and accounts rules, the organization work purely for charitable purpose. The organization is working throughout the & 382/JPR/2025 RAJASTHAN STATE BHARAT SCOUT AND GUIDE VS ITO (EXEMPTION), WARD -1, JAIPUR country for overall development of school and college students and youths, creating positive attitude among them for humanity, developing skills for disaster management and doing such other social activities. During the A.Y.2010-11 and 2011-12, the organization has shown total surplus of Rs. 20,57,100/- and Rs.28,39,836/- respectively which are more than 15 percent of total receipt, however the same are invested by the assessee in terms of section 11(5) of the Act to fulfill the charitable objects of the organization and are being utilized in subsequent years. It is noted that in A.Y.2010-11, the Society reported a surplus of Rs.20,57,100/- out of which Rs.13,65,812/- was treated as taxable income by the AO on account of non-submission of Form 10 and Income Tax Return. Similarly for A.Y 2011- 12, against a reported surplus of Rs.28,39,836/- an amount of Rs.19,44,570/- was added to the taxable income of the assessee by the AO. These additions have been confirmed by the ld. CIT(A). The Bench noted that the Hon’ble Gujarat High Court in the case of ACIT vs Stock Exchange Ahemdabad (ITA No. 207 to 213 of 2000) held that rule 17 is directory in nature. Relevant extract is as under:- ‘’11 In the light of the above discussion, it is not possible to state that there is any legal infirmity in the impugned order of the Tribunal in holding that rule 17 of the Rules is directory in nature and in holding that the assessee had duly complied with the requirements of sub-section (2) of Section 11 of the Act.’’ We also draw inference from the order of the Hon’ble Gujarat High Court in the case of CIT vs Mayur Foundation [2005] 274 ITR 562 dated 29-12- 2004) wherein the Hon’ble Court held as under:- Section 11 of the Income-tax Act, 1961 Charitable or religious trust Exemption of income from property held under Assessment year 1980-81 Assessee charitable trust had received voluntary contributions of certain amount Assessing Officer after granting permissible accumulation of 25 per cent, levied tax in hands of assessee which was upheld by Commissioner (Appeals) - During pendency of appeal before Tribunal, assessee moved an application before Commissioner accompanied by Form No. 10 and a copy of resolution passed by trustees to effect that donation might be treated as general donation and assessee be permitted to accumulate trust income under section 11(2) by condoning delay in filing Form No. 10 Commissioner, however, rejected said application Assessee filed additional ground before Tribunal stating that trust was not taxable in view of resolution of accumulation and notice thereof to ITO under section 11(2) Tribunal admitted additional ground and taking view that since assessee had complied with all conditions prescribed in section 11(2) concluded that assessee-trust was entitled to benefit allowable under said provision Whether, on facts, Tribunal was well within its jurisdiction to entertain new ground by which assessee claimed benefit under section 11(2) and adjudicate tax liability of assessee-Held, yes - Whether, therefore, there was no infirmity in order of Tribunal allowing benefit to assessee under section 11(2)- Held, yes Thus, the decision was taken in favour of the assessee. Hence, it is noted that the assessee had filed the Form 10 for the assessment year 2010-11 and 2011-12 before the ld. CIT(A) for his consideration and it was available before him. Hence, in view of the decision of Hon’ble Gujarat High Court in the case of CIT vs Mayur Foundation (supra), the Bench feels that there was no requirement to file Form 10 again and there was no judgement to this effect and it was applicable only after 2016-17 mandatorily. Therefore, & 382/JPR/2025 RAJASTHAN STATE BHARAT SCOUT AND GUIDE VS ITO (EXEMPTION), WARD -1, JAIPUR liberal view should be taken and the benefit of the late filing of Form 10 be given to the assessee. Hence, the Bench in view of the above facts and circumstances of the does not concur with the findings of the ld. CIT(A in connection with both the appeals (supra) and thus the appeals of the assessee are allowed. 4.1 During the course of hearing, the ld. AR of the assessee has not pressed Ground No. 4 of both the appeals. Hence, the same are dismissed being not pressed. 5.0 In the result, both the appeals of the assessee are partly allowed. Order pronounced in the open court on 16/07/2025.