ASSOCIATION FOR WELFARE OF THE HANDICAPPED,KOZHIKODE vs. THE ITO EXEMPTION WARD, KOZHIKODE

The brief facts of the case are that the assessee is a society registered under the Societies Registration Act and also registered under section 12AA of the Act. For the A.Y. 2011-12, the assessee filed their return of income on 26/03/2013 declaring a Nil income after claiming the exemption u/s. 11 of the Act. The assessee also filed the form 10 on 27/03/2013 in which they explained the reasons for the accumulation. The assessee also filed a condonation petition for the delay in filing form 10 before the Ld.CIT, Calicut.

Thereafter the assessee’s case was selected for scrutiny through CASS and the AO had completed the assessment u/s. 143(3) of the Act in which the AO had disallowed the exemption claimed u/s. 11 of the Act. The AO had alleged that the assessee had not filed the form 10 before the due date prescribed for filing the return of income. The assessee challenged the said order before the Ld.CIT(A) on the ground that the form 10 was filed well before passing the assessment order and therefore the assessee was eligible for claiming the exemption u/s. 11 of the Act. The Ld.CIT(A) had not accepted the case of the assessee on relying on the provisions and rules.

As against the said order, the assessee is in appeal before this Tribunal.

At the time of hearing, the Ld.AR submitted that the authorities below had erred in assessing the accumulated amount even though notice in form no. 10 was filed well before passing of the assessment order. The Ld.AR further submitted that in this case the return was filed on 26/03/2013 and 10 was filed on 27/03/2013 and therefore the AO ought to have considered the form 10 available before him while passing the assessment order. The Ld.AR further submitted that there is no specific time limit prescribed under the provision 11(2) of the Act during the relevant assessment year and therefore, the form 10 filed before the assessment has been completed is in accordance with the judgment of Hon’ble Supreme Court reported in 247 ITR 201 in the case of CIT vs. Nagpur Hotel Owners Association.

The Ld.DR relied on the order of the lower authorities and also brought to our notice about the order passed by this Hon’ble Tribunal in dated 09/12/2024 in the assessee’s own case for the A.Y. 2012-13 and prayed to dismiss the appeal.

We have heard the arguments of both sides and perused the materials available on record.

In order to appreciate the facts of the present case, we will refer section 11(2)(a) which exists until 31/03/2016 which reads as follows: “11 (2) Where [eighty-five] per cent of the income referred to in clause (a) or clause (b) of sub-section (1) read with the Explanation to that sub-section is not applied, or is not deemed to have been applied, to charitable or religious purposes in India during the previous year but is accumulated or set apart, either in whole or in part, for application to such purposes in India, such income so accumulated or set apart shall not be included in the total income of the previous year of the person in receipt of the income, provided the following conditions are complied with, namely:-] (a) such person specifies, by notice in writing given to the Assessing Officer in the Prescribed manner, the purpose for which the income is being accumulated or set apart and the period for which the income is to be accumulated or set apart, which shall in no case exceed ten years;

From the above said provision existed during the relevant A/Y, we understand that the Act has not prescribed any time limit for filing the Form 10. Therefore prior to the amendment, the Act says that the assessee should give the notice in writing in the prescribed manner but silent about the time limit for filing the said notice in writing. Admittedly, in the present case, the assessee had filed their form no. 10 on 27/03/2013 whereas the AO had made the assessment on 27/03/2014, i.e. after the date of filing of form no. 10 and therefore the AO ought to have considered the said form 10 and granted the benefits conferred under the provisions of the Act. The only reason for not-considering the said form 10 is that the same was filed beyond the statutory period prescribed for filing the returns which in effect denied the exemption and subjected the said income as income of the current year. The AO relied on the Rule 17 in order to come to the above conclusion. We are of the considered view that rule cannot over ride the section. When there is no time limit prescribed under the main Act, by way of rule any restriction could not be made. At the best it can be taken as directory and not mandatory. This is the principle adopted by various High Courts. Therefore in our opinion the order of the AO is not in accordance with the provisions of the Act existed during the relevant A/Y.

We have also considered the judgment of the Hon’ble Supreme Court relied on by the Ld.AR in support of their case which has dealt with the similar facts, that too before the amendment in which it was held as follows: “It is abundantly clear from the wordings of sub-section (2) of Section 11 that it is mandatory for the person claiming the benefit of Section 11 to intimate to the assessing authority the particulars required, under Rule 17 in Form No.10 of the Act. If during the assessment proceedings the Assessing Officer does not have the necessary information, question of excluding such income from assessment does not arise at all. As a matter of fact, this benefit of excluding this particular part of the income from the net of taxation arises from Section 11 and is subjected to the conditions specified therein. Therefore, it is necessary that the assessing authority must have this information at the time he completes the assessment. In the absence of any such information, it will not be possible for the assessing authority to give the assessee the benefit of such exclusion and once the assessment is so completed, in our opinion, it would be futile to find fault with the assessing authority for having included such income in the assessable income of the assessee. Therefore, even assuming that there is no valid limitation prescribed under the Act and the Rules even then, in our opinion, it is reasonable to presume that the intimation required under Section 11 has to be furnished before the assessing authority completes the concerned assessment because such requirement is mandatory and without the particulars of this income the assessing authority cannot entertain the claim of the assessee under Section 11 of the Act, therefore, compliance of the requirement of the Act will have to be any time before the assessment proceedings”

The Ld.CIT(A) had not considered the judgment of the Hon’ble Supreme Court cited supra even though the assessee had relied on the same. Further, we have also seen that the AO had treated the form 10 filed u/s. 11(2) of the Act as the statement filed pursuant to Explanation (2) to section 11(1) of the Act which is not correct.

Now we will consider the order of the Coordinate Bench of this Tribunal cited supra and relied on by the Ld.DR in which the Tribunal has no occasion to consider the provision existed and also the judgment of the Hon’ble Supreme Court. In fact this was not brought to the notice of the Coordinated Bench while deciding the issue. Therefore the order passed by the Coordinate Bench of this Tribunal could not be treated as a precedent and therefore we are not in agreement with the view expressed in the said order. Further, the assessee had sought for the condonation of delay in filing form no. 10 before the Ld.CIT(A), Calicut and the same is still pending for consideration. In our view, there is no necessity for filing the said delay condonation application before the Ld.CIT(A), Calicut in view of the fact that section 11(2) of the Act does not prescribe any time limit for filing the Form 10 and also in view of the judgment of the Hon’ble Supreme Court cited

In the result, the appeal filed by the assessee is allowed.