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Facts
The assessee, an educational institution, claimed exemption under Section 11(2) of the Income Tax Act, 1961, but Form 10 for income accumulation was filed belatedly. This led to the disallowance of the exemption by the Assessing Officer and confirmation by the Jt. CIT(A). The assessee's subsequent appeal to the Tribunal was also filed with a 14-day delay, which was condoned.
Held
The Tribunal, relying on High Court and ITAT precedents, held that the belated filing of Form 10 is a procedural omission and not a substantive defect, as long as the form is available with the Assessing Officer during assessment. Since Form 10 was filed before the assessment date, the benefit of accumulation under Section 11(2) should not be denied. The matter was remanded to the AO to allow the benefit of accumulation.
Key Issues
Whether the belated filing of Form 10 for claiming accumulation of income under Section 11(2) of the Income Tax Act, 1961, constitutes a procedural or substantive defect that warrants the denial of exemption, especially when the form is available before the Assessing Officer during assessment proceedings.
Sections Cited
250, 143(1), 11(2), 12AA, 12A, 11(5), 13(9), 139(1), 11(1)
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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI B.M. BIYANI & SHRI UDAYAN DAS GUPTA
आदेश/ O R D E R
Per UDAYAN DAS GUPTA, J.M.:
This appeal is filed by the assessee against the order of the Ld. Addl./JCIT (A)-1 Nashik passed u/s 250 of the Income Tax Act, 1961 dated 20.02.2024, which has emanated from the order of the Assessing Officer dated 18.05.2020 passed u/s 143(1), CPC, Bangaluru.
It is pointed out by the registry that the appeal has been filed belatedly by 14 days, the last date of filing hearing the appeal before the Tribunal was 20th April but the same is belatedly filed on 4th May 2024. The assessee has filed an application for condonation of delay in the form of an affidavit sworn Page 1 of 8 appellant society is an educational institution and during the months of February and March 2024, the Schools Board Examinations were held and the results of class X & XII were announced in April, 2024 after the examination, the entire school staff got occupied in the subsequent admission process of new students for the new session. As such it was submitted by the Ld. AR of the assessee that because of this on going admission session the filing of the appeal which was supposed to have been filed within 60 days, was belatedly filed on 4th May 2024 which was delayed by 14 days and he prays that since the assessee was prevented by sufficient cause from filing the appeal within the time, the delay in filing the same may please condoned and the appeal may be please admitted to be heard on merits.
Ld. DR has not objected to the same and considering the grounds stated by the assessee we condone the delay of 14days and admit the appeal to be heard on merits.
Grounds of appeal has taken by the assesee in form 36 are as under:
“1. On the facts and in the circumstances of the case and in law, the Ld. Additional/ Joint Commissioner of Income Tax (Appeals) 1, Nashik ['the Ld. Jt. CIT(A)'] has erred in confirming the disallowance of income accumulated u/s. 11(2) of the Income Tax Act, 1961 ('the Act') made by the Ld. CPC, Bengaluru ('the Ld. AO') which is wrong and contrary to the facts of the case and provisions of the Act. Thus, exemption u/s. 11(2) of the Act may kindly be allowed to the appellant society.
Page 2 of 8 AY 2019-20, 2. On the facts and in the circumstances of the case and in law and without prejudice to the above, the Ld. Jt. CIT(A) and the Ld. AO have erred in disallowing the exemption u/s 11(2) of the Act merely because Form 10 could not be uploaded within due date of ITR without appreciating that e-filing of Form 10 is merely a technical procedure. Thus, the exemption should u/s. 11(2) of the Act should not be denied merely due to delay in e-filing of Form No. 10 to genuine charitable (educational) society which is registered u/s. 12AA of the Act.
3. On the facts and in the circumstances of the case and in law and without prejudice to the above, the Ld. AO has erred in disallowing the exemption u/s 11(2) of the Act without appreciating that adjustments u/s. 143(1)(a) of the Act can only be made for only prima facie adjustment and not for issues which are debatable in nature. Thus disallowance of the exemption u/s. 11(2) of the Act is wrong and is liable to be deleted.
4. On the facts and in the circumstances of the case and in law, the Ld. Jt. CIT(A) has erred in not allowing exemption u/s. 11(2) of the Act without providing proper opportunity of being heard, which is against the provisions of the Act. Thus, the Order dated 20.02.2024 passed by the Ld. Jt. CIT(A) is liable to be deleted.” 5.Brief facts of the case are that the assessee is an educational institution and has filed its return claiming exemption u/s 11(2) of the Act, alongwith all necessary particulars. The claim u/s 11(2) was disallowed on the ground that the assessee has filed form no.10 belatedly after due date as prescribed.
It is seen from the order u/s 143(1) that the institution is registered u/s 12A/12AA and has claimed exemption u/s 11(2) of the Act but the institution has not filed Form No.10 within the due date and as such the exemption claimed in serial no.4vi of Schedule Part B-TI- “Amount in addition to amount referred to in (v) above, accumulated or set part for specified purposes if all the conditions in section 11(2) and 11(5) are fulfilled.” are not allowed in accordance with the provisions of section 13(9) of the Income Tax Act. As per the provisions of section 13(9) for claiming of exemption u/s Page 3 of 8 139(1) of the Act. In the instant case the due date of filing of the form 10 was 31.10.2019 and form 10 has been belatedly filed on 11.12.2019 and subsequently return has been filed on 12.12.2019. As such the claim u/s 11(2) has been disallowed by the AO for not filing of form 10 within the specified period.
5.1 The matter was carried in appeal before the Ld. J CIT(A) and it is seen from the order of the First Appellate Authority that the assessee has not filed any written submission or explanations before the Ld. JCIT(Appeals) in spite of notice of hearing being issued to the assessee on two different dates.
It is also seen from the appellate order that the Ld. JCIT(A) has specifically condoned the delay in filing of this appeal which has been belatedly filed with delay of 1034 days because of Covid -19 pandemic and even after condoning the same, the JCIT(A) has not adjudicated the case on merits.
The appeal has been dismissed without adjudicating the grounds of appeal contained in form 35 on merits of the case.
6. During the course of hearing before us the Ld. AR of the assessee has submitted that filing of form 10 belatedly was not intentional and he has submitted that the form 10 has been filed on 11.12.2019 which is before filing of the return on 12.12.2019. He further submitted that filing of form 10 is directory in nature and not mandaotry and it may be treated as sufficient compliance if form no.10 is available before the AO in course of Page 4 of 8 11.12.2019 the said form was before the AO, CPC Bangaluru at the time of assessment proceedings which should not have been ignored. In support of his contention he has relied upon judgment of the Hon’ble Gujarat High Court in the case of Association of Indian Panelboard Manufacturer vs. DCIT Appeal No.655 of 2022 and he further relied upon the judgment of Delhi High Court in case of Associated Chambers of Commerce and Industry of India vs. DCIT Appeal No.40791/2023 to press his contention that since the form 10 was before the AO on the date of assessment the same should have been considered during the course of assessment proceedings, and claim of exemption u/s 11(2) may please be allowed.
7. Per contra Ld. DR relied upon the order of the Ld. CIT(A) and submitted that no submission or explanations has been filed before the first Appellate Authority and the first appellant authority has not disposed of grounds of appeal containing in form 35 on merits of the case.
We have considered the rival submissions and the material on record. We find that in the instant case there has not been any compliance or submissions by the assessee before the first appellate authority and no submissions on merits has been filed. We find that the claim of accumulation of funds amounting to Rs. 14,50,000/- u/s 11(2) of the Act 61 , has not been allowed by CPC, Bangalore , for violation of the prescribed procedure laid down in section 13(9) of the Act, because the statement
Page 5 of 8 has not been furnished on or before the due date specified under section 139(1) for furnishing the return .
8.1 This issue has already been decided by the Hon’ble Gujrat High Court in the case of Association of Indian Panel board manufacturer vs DCIT (Tax vide its judgment dated 21.03.2023 the Hon’ble Appeal No.655 of 2022)
Court has held as under:
The moot aspect thus centres around to the requirement of the availability of the audit report when the assessment was undertaken by the Assessing Officer even though the same may not have been filed along with the return of income. Filing of audit report is held to be substantive requirement but not the mode and stage of filing, which is procedural. Once the audit report in Form 12B is filed to be available with the Assessing Officer, before assessment proceedings take place, the requirement of law is satisfied. In that view, the Income Tax Tribunal was not justified in dismissing the appeal of the assessee.
6.1 The appellant assessee has to be held to be eligible and entitled to exemptions under Section 11(1) and 11(2) of the Act and the alleged ground of non-filing of audit report alongwith return of income which was at the best procedural omission, could never to an impediment in law in claiming the exemption. 6.2 Accordingly the substantial questions of law have to be decided in favor of the appellant.
They are accordingly decided. The appeal is allowed. 8.2 It is also noted that Hon’ble Delhi High Court in the case of Associated Chambers of Commerce and Industry of India vs DCIT vide its judgment dated 21.03.2023 relying on the aforesaid judgment of Hon’ble Division
Page 6 of 8 Manufacturer vs. DCIT held as under:
“33. Though rendered in the context of Form 10B, in our considered opinion, the legal position as enunciated in the aforesaid judgment would equally apply to the submission of Form 10.”
8.3 On a similar issue, the Hon’ble Chennai ITAT in the case of Ceylon Pentecostal Mission vs. ACIT (ITA No.320/Chny/2021) vide its order dated 08.10.2021 held as under:
“14. 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 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.”
As such Respectfully following the observation of the Hon’ble Gujrat High Court in the case of Association of Indian Panelboard Manufacturer vs. DCIT( supra ) and the Hon’ble Delhi High Court in the case of Associated Chambers of Commerce and Industry of India vs DCIT ( supra ) and also considering the views expressed by the coordinate Bench in ) , we hold that the Form 10 filed by the assessee on 11th December, 2019, claiming the accumulation of funds u/s 11(2) of the Act 61 , is to be considered by the assessing officer , because the same was already before the AO , CPC , Bangalore , on the date of assessment on 18th May, 2020, which could not have been ignored. As such we set aside the Page 7 of 8 AY 2019-20, matter to the AO with direction to consider the said form 10 , for allowing the benefit of accumulation u/s 11(2) of the Act 61 .
As a result the appeal of the assessee is allowed.
Order pronounced in the open court on 31.01.2025.