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Facts
The assessee, a registered charitable organization, is in appeal against the orders of the CIT(A) confirming additions made by the AO. The additions were based on the non-submission of Form 10 for assessment years 2010-11 and 2011-12, which the AO held was mandatory for claiming exemption on accumulated funds.
Held
The Tribunal condoned the delay in filing the appeals. The Tribunal held that for the assessment years in question, there was no mandatory requirement to file Form 10. Moreover, considering the nature of the organization and the belated submission of Form 10 and other documents, the delay should have been condoned and the benefit of exemption should not have been denied on a technicality.
Key Issues
Whether the non-submission of Form 10, a procedural lapse, can be a ground for denying exemption to a charitable organization, especially when substantial compliance and delay condonation were sought.
Sections Cited
147, 144, 253(5), 271(1)(c), 11(5), 11(2), 12AA, 11, 139, 250(4), 250(6), 10(23C)
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Income Tax Appellate Tribunal, JAIPUR BENCHES,’’SMC” JAIPUR
ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM Both these appeals filed by the assessee are directed against two different orders of the learned Commissioner of Income Tax, National Faceless Appeal Centre, Delhi[ for short CIT(A)/NFAC] dated 02.01.2024 & 03-10-2023 for the assessment years 2010-11 & 2011-12 raising therein following grounds of appeal.
& 382/JPR/2025 RAJASTHAN STATE BHARAT SCOUT AND GUIDE VS ITO (EXEMPTION), WARD -1, JAIPUR ‘’1. On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in confirming the action of the Learned Assessing Officer (AO) in treating the surplus of Rs. 13,65,811/- as total income for the Assessment Year 2010-11 The action of the Id. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said additions 2. On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in confirming the action of the Learned AO by not considering that the surplus for the Financial Year 2009-10 had been duly invested in accordance with Section 11(5) of the Income Tax Act, 1961 The action of the Id. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said additions.
3. On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in confirming the action of the Learned AO in treating the surplus as taxable income merely due to the non-filing of Form No. 10 along with the return of income. The action of the Id. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said additions.
4. On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in upholding the assessment order passed by the Learned AO. which was based on grounds different from those on which the assessment proceedings were initiated. The action of the Id. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said additions.’’ -A.Y.2011-12 ‘’1. On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in confirming the action of the Learned Assessing Officer (AO) in treating the surplus of Rs. 19,44,570/- as total income for the Assessment Year 2011-12. The action of the Id CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said additions 2 On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in confirming the action of the Learned AO by not considering that the surplus for the Financial Year 2010-11 had been duly invested in accordance with Section 11(5) of the Income Tax Act, 1961 The action of the Id. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said additions.
3. On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in confirming the action of the Learned AO in treating the surplus as taxable income merely due to the non-filing of Form No. 10 along with the return of income. The action of the Id. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said additions
& 382/JPR/2025 RAJASTHAN STATE BHARAT SCOUT AND GUIDE VS ITO (EXEMPTION), WARD -1, JAIPUR 4. On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in upholding the assessment order passed by the Learned AO. which was based on grounds different from those on which the assessment proceedings were initiated. The action of the Id. CIT(A) is illegal, unjustified. arbitrary and against the facts of the case. Relief may please be granted by deleting the said additions. 2.1 During the course of hearing, the Bench noted that in the appeals of the assessee for the assessment year 2010-11 and 2011-12, there is delay of 345 days and 436 days respectively in filing the appeals by the assessee for which the ld. AR of the assessee has filed two applications for condonation of delay relating to Assessment year 2010-11 and 2011-12. The narration as made in the condonation application for the assessment year 2010-11 is reproduced as under:- ‘’Application for Condonation of delay u/s 253(5) of the Income Tax Act, 1961. Hon'ble Sirs, Most respectfully submitted that the income tax assessment of the Trust for the Assessment Year 2010-11 was completed under Section 147 r.ws 144. Aggrieved by the said assessment order, the appellant filed an appeal before the Ld. CIT(A), Jaipur, which was disposed of as per the details below: S.N. Assessment Date of AO Date of CIT(A) year order Order
1. 2010-11 09-12-2017 02-01-2024 The appeal before the Hon'ble ITAT was required to be filed within 60 days from the date of receipt of the Ld. CIT(A)'s order. However, the accountant, who received the order, was unaware of the subsequent procedural requirements. Consequently, no appropriate action was initiated at that time. Subsequently, the appellant received a show cause notice for the imposition of penalty under Section 271(1)(c) on 07.02.2025. Upon receiving the notice, the appellant engaged a Chartered Accountant to prepare the response. During the case analysis, it came to light that the appellant had inadvertently failed to file the & 382/JPR/2025 RAJASTHAN STATE BHARAT SCOUT AND GUIDE VS ITO (EXEMPTION), WARD -1, JAIPUR appeal before the Hon'ble ITAT against the Ld. CIT(A)'s order, resulting in a delay of 374 days in filing the appeal for AY 2010-11 The delay was purely inadvertent and caused by the lack of awareness on the part of the accountant. It was not due to willful negligence or any deliberate attempt to disregard the legal process. The appellant was under a bona fide belief that the matter had been settled at the CIT(A) level, as no immediate follow-up action was taken by the department after the CIT(A)'s order. Furthermore, it is respectfully submitted that the delay was neither intentional nor due to any lack of diligence. The appellant, having limited knowledge of legal and procedural matters, was unaware of the specific timelines and procedural requirements for filing the appeal. Now, having understood the consequences of the omission, the appellant is committed to complying with the law under proper legal assistance. The delay is non deliberate and occurred due to genuine and reasonable circumstances. In light of the above facts, the appellant humbly prays before the Hon'ble Tribunal for the condonation of delay in filing the appeal. The appellant also submits the Affidavit in support of this request. We are also enclosing the penalty notice received on 07.02.2025. In view of above, Hon'ble Bench is requested to condone the delay and admit the appeal. Your honors attention is drawn to the judgement of Hon'ble Supreme Court in the case of Collector, Land Acquisition vs. Mst. Katiji [1987] 167 ITR 471wherein the Hon'ble Apex Court has held that liberal approach in condonation of delay may be adopted. The relevant portion of the order is reproduced below: "3. The legislature has conferred the power to condone delay by enacting s. 5 of the Limitation Act of 1963 in order to enable the Courts to do substantial justice to parties by disposing of matters on "merits". The expression "sufficient cause" employed by the legislature is adequately elastic to enable the Courts to apply the law in a meaningful manner which subserves the ends of justice that being the life purpose of the existence of the institution of Courts. It is common knowledge that this Court has been making a justifiably liberal approach in matters instituted in this Court. But the message does not appear to have percolated down to all the other Courts in the hierarchy. And such a liberal approach is adopted on principle as it is realized that: 1. Ordinarily, a litigant does not stand to benefit by lodging an appeal late.
1. & 382/JPR/2025 RAJASTHAN STATE BHARAT SCOUT AND GUIDE VS ITO (EXEMPTION), WARD -1, JAIPUR 2. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties. 3. "Every day's delay must be explained" does not mean that a pedantic approach should be made. Why not every hour's delay, every second's delay? The doctrine must be applied in a rational common sense and pragmatic manner 4. When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right in injustice being done because of a non- deliberate delay.
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:
1.
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."
2. N. Balakrishnan vs. M. Krishnamurthy (1998) 7 SCC 123 "The primary function of a Court is to adjudicate the dispute between the parties and to advance substantial justice. The time limit fixed for approaching the Court in different situations is not because on the expiry of such time a bad cause would transform into a good cause. Rules of limitation are not meant to destroy the rights of parties. They are meant to see that parties do not resort to dilatory tactics, but seek their remedy for the redress of the legal injury so suffered. The law of limitation is thus founded on public policy."
3. M/s GMG Engineering Industries vs. M/s Issa Green Power Solution (Civil Appeal No. 4473/2015) With A.C. Govindaraj and Ors. vs. M. Krishnamoorthy & Ors. (Civil Appeal No. 4473/2015):
& 382/JPR/2025 RAJASTHAN STATE BHARAT SCOUT AND GUIDE VS ITO (EXEMPTION), WARD -1, JAIPUR In this case, Hon'ble Supreme Court held in Para 8 as under: "It is well settled that the expression 'sufficient cause' is to receive liberal construction so as to advance substantial justice. When there is no negligence, inaction or want of bonafide is imputable to the appellants, the delay has to be condoned. The discretion is to be exercised like any other judicial discretion with vigilance and circumspection. The discretion is not to be exercised in any arbitrary, vague or fanciful manner. The true test is to see whether the applicant has acted with due diligence." In view of above, Hon'ble Bench is requested to condone the delay and admit the appeal.’’ For A.Y. 2011-12, the ld. AR of the assessee has also filed the similar application for condonation mentioning therein the assessment year 2011- 12, date of AO order 13-11-2018 and date of CIT(A) order dated 03-10- 2023 and other narrations are same as in the assessment year 2010-11 which is not required to repeat. Besides the applications for condonation of delay for the assessment year 2010-11 and 2011-12, the ld. AR of the assessee filed affidavits of Shri Giriraj Kumar Pareek, Distt. Secretary of Rajasthan State Bharat Scout and Guide (A.Y. 2011-12& 2011-12) who mainly deposed therein that ‘’the delay was purely inadvertent and caused by the lack of awareness on the part of the accountant. It was not due to willful negligence or any deliberate attempt to disregard the legal process’’. 2.2 On the other hand, the ld. DR submitted that in both the appeals of the assessee, there is inordinate delay but the Court may decide the issue as deemed fit and proper in the cases.
& 382/JPR/2025 RAJASTHAN STATE BHARAT SCOUT AND GUIDE VS ITO (EXEMPTION), WARD -1, JAIPUR 2.3 We have heard both the parties and perused the materials available on record and the case laws cited by the ld. AR (supra). In this case, the Bench in nutshell noted that there is sufficient cause in not timely filing the appeals of the assessee and there is merit in the application of the assessee. Thus, the delays are condoned. 3.1 Apropos grounds of appeal of the assessee for the assessment year 2010-11 and 2011-12, it is noticed that the ld. CIT(A) passed two different orders by dismissing the appeals of the assessee (except there is change in amount). The narration as made by the ld. CIT(A) in his respective orders are reproduced as under:- A.Y. 2010-11 ‘’5. Decision: in this case, the addition has been made by the Assessing Officer worth Rs. 13,65,812/- as the appellant has not filed Form No. 10 to the Assessing Officer during the course of assessment proceedings. The Assessing Officer has held that filing of Form No. 10 is mandatory for getting the benefit of accumulation of funds and investment u/s. 11(5) of the Act. During the course of appellate proceedings, the written submission has been filed. It has been stated that the appellant registered u/s. 12AA of the Income Tax Act. It has been stated that filing of Form No.10 belatedly should be condoned. Since Form No.10 has not been filed before the Assessing Officer during due time, hence the Assessing Officer is correct in disallowing the appellant the benefit of accumulation of funds and investment u/s 11(5) of the Income Tax Act. Hence, the order of the Assessing Officer is confirmed and appeal of the appellant is dismissed. However, the appellant may file condonation petition for delay before the Commission of Income Tax (Exemption) In the result, the appeal of the appellant is dismissed.’’ A.Y. 2011-12
6. Decision: In this case, the addition has been made by the Assessing Officer worth Rs. 19,44,570/- as the appellant has not filed Form No.10 to the Assessing & 382/JPR/2025 RAJASTHAN STATE BHARAT SCOUT AND GUIDE VS ITO (EXEMPTION), WARD -1, JAIPUR Officer during the course of assessment proceedings. The Assessing Officer has held that filing of Form No. 10 is mandatory for getting the benefit of accumulation of funds and investment u/s 11(5) of the Act. During the course of appellate proceedings, the written submission has been filed, It has been stated that the appellant registered u/s. 12AA of the Income Tax Act, It has been stated that filing of Form No. 10 belatedly should be condoned. Since Form No 10 has not been filed before the Assessing Officer during due time, hence the Assessing Officer is correct in disallowing the appellant the benefit of accumulation of funds and investment u/s. 11(5) of the Income Tax Act. Hence, the order of the Assessing Officer is confirmed and appeal of the appellant is dismissed. However, the appellant may file condonation petition for delay before the Commission of Income Tax (Exemption).
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
AY 2010-11 Ground No.
1. Addition of Rs 13,65,811/- Ground No.
2. Ld. AO added the surplus amount as Taxable Income without considering the fact that the surplus has been invested as per section 11(5) Ground No. 3 Surplus Amount added as Taxable Income due to non-submission of Form 10 AY 2011-12 Ground No.
1. Addition of Rs 19,44,570/- Ground No.
2. Ld. AO added the surplus amount as Taxable Income without considering the fact that the surplus has been invested as per section 11(5) Ground No.
3. Surplus Amount added as Taxable Income due to non-submission of Form 10: SUBMISSIONS All the grounds are inter-linked; therefore, we are submitting the common submissions for all the Grounds: 1 The organisation is working towards the development of school and college students. It's a registered charitable organisation.
& 382/JPR/2025 RAJASTHAN STATE BHARAT SCOUT AND GUIDE VS ITO (EXEMPTION), WARD -1, JAIPUR 2. Under the provisions of section 11 and 12 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 charitable 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 is not applied in accordance with these conditions, then such income is deemed to be taxable income of the trust or institution.
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."
7. As mentioned in the above mentioned explanatory notes, before Finance Act, 2015, there was no clarity in the Act regarding the due date of submission of Form 10 and ITR. Therefore, law has been amended and due dates has been given in the law by the Finance Act, 2015 which are applicable from AY 2016-17 8. It is respectfully submitted that for Assessment Years 2010-11 and 2011-12. there was no specific due date prescribed under the Income-tax Act. 1961 for furnishing Form 10 in the absence of any statutory deadline, the mere non-filing of Form 10 within a presumed timeframe should not result in denial of exemption under section 11 of the Act. Further, it is also submitted that the appellant institution is a government-funded and government-aided charitable organization working under the guardianship of the Hon'ble President of India and the Hon'ble Governor of the State. In such a scenario, the possibility of any malafide intention does not arise The surplus generated by the institution is bound to be utilized strictly as per the government-sanctioned objectives and guidelines & 382/JPR/2025 RAJASTHAN STATE BHARAT SCOUT AND GUIDE VS ITO (EXEMPTION), WARD -1, JAIPUR 9. Moreover, during the assessment years in question, there existed considerable ambiguity and lack of awareness regarding procedural requirements such as the filing of Form 10, especially in cases where no due date was prescribed under the law. Therefore, taxing the surplus income of a charitable institution on account of such a technical and procedural lapse-despite its bona fide conduct and government affiliation-is not only harsh but also contrary to the spirit of the exemption provisions under section 11 10 Additionally, it is most humbly submitted that the present financial situation of the trust is not sound. Currently, the trust is not generating any surplus income and is operating under a financial deficit. All the funds available with the trust have already been utilized for the charitable activities for which it was established. In such a scenario, imposing a substantial tax liability merely for a technical procedural breach may result in the closure of the trust itself, as it will not be in a position to pay the demanded tax. This would defeat the very purpose of the charitablework carried out under government supervision and cause grave injustice. We humbly request your Honours to kindly consider the genuine circumstances and condone the procedural lapse in the larger interest of justice 11. It is humbly submitted that the appellant has submitted the Form 10 with the Id CIT(A) with the request ofdelay condonation. However, Id CIT(A) has not commented anything on the same. Also, Id CIT(A) has not passed the speaking order and dismissed the appeal of the assessee The facts which are assailed by the assessee in the written submissions. there was no proper adjudication done by the NFAC nor any enquiry conducted nor any report was called. The order is not in terms with Section 250(4) & (6) of the Act, since the Appellate Authority has to exercise its jurisdiction and adjudicate any matter on merits as held in the following judicial pronouncements CIT (Central) v. Premkumar Arjundas Luthra (HUF [2016] 69 taxmann.com 407/240 Taxman 133 (Bombay) CIT v. S. Cheniappa Mudaliar [1969] 74 ITR 41 (SC) Dolphin Metal India Ltd. v. ITO, [2021] 127 taxmann.com 244/280 Taxman 21/431 ITR 666 (Gujarat) Govt. Telecommunications Employees Co-op Society Ltd. v. ITO [2019] 111 taxmann.com 28/268 Taxman 17 (Madras) 12. The legal reasoning given in the abovementioned judicial pronouncements signifies the fact that legislation has mandated in terms with section 250(4) & (6) that Id CIT(A) shall conduct independent enquiry into the merits of the matter, if required call for a report from the Assessing Officer and then pass a speaking order The reasoning in the & 382/JPR/2025 RAJASTHAN STATE BHARAT SCOUT AND GUIDE VS ITO (EXEMPTION), WARD -1, JAIPUR order and the decision arrived at should be such that the reader can understand the basis on which the final decision is arrived at therein so that it is a speaking order passed by the first appellate authority in the present case, when the detailed written submissions have been filed by the assessee before the id CIT(A), which has been simply reproduced and held that the assessment order does not need any interference. hence, the entire appeal has been dismissed. Such kind of order has to be held perverse, bereft of any findings and bad in law 13. During the course of assessment proceedings, it was submitted that excess funds has been invested as per the requirement of section 11(5) Also, the said fund has been used in the subsequent years as per the objects of the organisation. If the funds have been used for the objects of the organisation in the subsequent years, addition of the income is not justified Reliance is placed on the judgement of Hon'ble Allahabad High Court in the case of CIT vs. Moti Ram Gopi Chand Charitable Trust. [360 ITR 598] 14. It is also submitted that appellant submitted the Form 10 to Id CIT Exemption (for AY 2010-11) with delay condonation request, however same has been rejected. 15 Further, it is humbly submitted that all the information which is covered under the Form 10 was duly available with the Id AO. Copy of Balance Sheet, Income and Expenditure Account. Audit Report etc were submitted to the Id AO during the course of assessment proceedings Considering all these facts, mere non submission of Form 10 cannot become the ground of adding the income of charitable organization Reliance is placed on the judgement of Hon'ble Allahabad High Court in the case of CIT vs. Moti Ram Gopi Chand Charitable Trust. [360 ITR 598] 16. Assessment proceedings cannot be said to be completed unless it is settled by the appellate authorities. If any matter is pending before the Hon'ble CIT (A)/ITAT the legal proceedings are meant to correctly assess the tax liability of an assessee. Considering this proposition, the appellant had duly submitted Form 10 before the Ld. CIT(A) However. the same has not been taken into consideration while passing the appellate order We now humbly request Your Honour to kindly consider the submitted Form 10, so that the correct income may be assessed, and justice may be rendered to the charitable organization in accordance with the provisions of law. (Paper Book Page Number 1) Reliance is placed on the judicial pronouncement in the case of CIT v. Mayur Foundation, (2005) 274 ITR 562 (Guj.) Relevant extracts of the said case law are as below "9. At first blush, the reading of the aforesaid pronouncement gives an impression that the stand of the revenue is correct, inasmuch as a notice in writing furnishing the prescribed particulars should be submitted before the assessing authority and a completed assessment cannot be re-opened, if such particulars are furnished subsequent to the completion of the assessment. However, it is apparent that the & 382/JPR/2025 RAJASTHAN STATE BHARAT SCOUT AND GUIDE VS ITO (EXEMPTION), WARD -1, JAIPUR Apex Court has stated that the details have to be furnished before completion of the assessment proceedings and any information supplied subsequent to the completion of assessment cannot be taken into consideration. The question, therefore, that anse is when can an assessment be said to be complete or till what point of time the assessment proceedings can be said to be alive.
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."
& 382/JPR/2025 RAJASTHAN STATE BHARAT SCOUT AND GUIDE VS ITO (EXEMPTION), WARD -1, JAIPUR 18. The time-limit for filing of the application has not been prescribed under section 11(2) of the Act and denying the benefit would result in depriving the assessee of the benefit conferred under a substantive provision of the Act. The time-limit prescribed in rule 17 is only a procedural provision. and it cannot be said that it is mandatory in the case of CIT v. Mumtaz YarudDowla Waqf (1999) 153 CTR (AP) 149 it was held by Andhra Pradesh High Court that period prescribed in rule 17 is directive and not mandatory even if the notice is not issued within the period prescribed under rule 17, the assessee would be entitled to the benefit of section 11 provided the notice is issued before the assessment is made.
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:-
& 382/JPR/2025 RAJASTHAN STATE BHARAT SCOUT AND GUIDE VS ITO (EXEMPTION), WARD -1, JAIPUR ‘’It is also noted in the instant case that the assessee submitted the Form 10 dated 28.11 2014 during the assessment proceedings on 20-9-2016 and the same is also confirmed by the assessing officer in the assessment order The audit report was also available before the assessing officer during the assessment proceedings as well as before the CIT(A) during the appellate proceedings. As per the case laws mentioned above, the Hon'ble Courts 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 AD 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 Chantable Trust v ITO (Exemption) [20211 125 taxmann.com 75/278 Taxman 148 It is further noted that the Id. CIT(A) in view of the above discussions held that the AO erred in not allowing deduction to the/assessee for the amount accumulated under the provisions of section 11 of the Income-tax Act, 1961 The Id. CIT(A) further observed that it was merely a procedural lapse on part of assessee to not file Form 10 along with return of income. The id CIT(A) thus observed that the assessee submitted the audit report at a later stage after filing the return of income and thus the benefit of exemption under section 11 of the Act cannot be denied merely on account of delay in furnishing audit report. We found that the observation of the Id. CIT(A) does not suffer from any infirmity and we find no reason to interfere in the order of the Id. CIT(A)"
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.