THE DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTIONS) CIRCLE-1 , MANGALORE vs. M/S KARNATAKA LAW SOCIETY , BELGAUM

O R D E R Per Jason P. Boaz, A.M. This appeal by Revenue is directed against the order of CIT(A) - Belgavi, dated 29.06.2018, for Assessment Year 2014-15.

2.1 The assessee, a trust, filed its return of income for Assessment Year 2014-15 on 30.09.2014 declaring NIL income. The return was processed under section 143(1) of the Act on 10.03.2016 by CPC, Bangalore, wherein the assessee’s income was determined at Rs.72,58,82,734/- as against the NIL income returned by the assessee; by rejecting the assessee’s claims for exemption under section 11 of the Act. Aggrieved, the assessee filed a rectification application before the CPC which was rejected vide order dated 16.03.2017 on the ground that the assessee had not filed Form No.10 electronically within the due date for filing the return of income.

2.2 The assessee, being aggrieved by the order of the CPC dated 16.03.2017, rejecting its rectification application for Assessment Year 2014-15, carried the matter in appeal before the CIT(A) – Belgavi. The CIT(A), vide the impugned order dated 29.06.2018, allowed the assessee’s appeal; directing the Assessing Officer (AO) to treat the Form No.10 which was filed manually within the due date for filing the return of income for Assessment Year 2014-15 and allow the assessee’s claim for accumulation under section 11(2) of the Act on the ground that the requirement for filing Form No.10 electronically was mandatory only w.e.f. 01.04.2016 and therefore applicable from Assessment Year 2016-17 only.

3.1 Revenue, being aggrieved by the order of the CIT(A), Belgavi dated 29.06.2018 for Assessment Year 2014-15, has preferred this appeal, wherein it has raised the following grounds:-

2. Claim of accumulation u/s 11(2) 2.1 on account of assessee's failure to spend 85% of the Total Income and the failure to comply with section 11(2) read with rule 17 of the Income Tax Rules, 1962. 2.2 The Ld CIT(A) erred in considering the manual submission of Form No. 10 though as per the rule 17 r.w.s 11(2), every assessee is required to e-file Form 10 online within the due date for filing a return of income. This provision was made available in the online portal to upload the Form 10 along with the return of income which the assessee failed to adhere to.

2.3.The ILI CIT(A) erred in admitting the manual submission of Form No.10 without appreciating the fact that the power to condone the delay in submission of Form No. 10 is granted only to the Commissioner and ought to have appreciated that condonation was beyond his power in view of the CBDT circular. 2.4 The Lc1CIT(A) ought to have appreciated that, the AO is not empowered to consider the manual submission of Form No.10 unless the same is condoned by CIT( Exemptions) subject to certain conditions specified in CBDT circular. 2.5 The Ld CIT(A) erred in admitting the manual submission of Form No.10 without appreciating the fact that the returns are processed in CPC electronically and to consider the claim of accumulation u/s 11(2) submission of Form No. 10 electronically was mandatory from AY 201415 per the rule 17 r.w.s 11(2).

4. The appellant craves leave to add, alter or amend all or any of the grounds of appeal before or at the time of the hearing of the appeal. 3.2 In the grounds (supra), the sole issue raised by Revenue is that the CIT(A) erred in considering the manually submitted Form No.10 filed before the due date of filing the return of income for Assessment Year 2014-15 in the case on hand; without appreciation that, as per the law, the assessee was required to e-file Form No.10 online within the due date of filing the return, which was mandatory from Assessment Year 2014-15, as per Rule 17 of Income Tax Rules, 1962 (in short ‘the Rules’) r.w.s. 11(2) of the Act.

3.3.1 We have considered the rival contentions and perused the material on record. From an appraisal thereof, it is seen that the only issue raised in Revenue’s appeal is that the impugned order of the CIT(A) is erroneous for having considered the manually submitted Form No.10 filed before the due date of filing the Return of income for Assessment Year 2014-15 and thereby allowing the assessee accumulation claimed by it under section 11(2) of the Act. It is Revenue’s case that the Form No.10 was required to be electronically filed by the assessee mandatorily for Assessment Year 2014-15; which had not been done; and therefore the assessee ought not to have been allowed the accumulation claimed under section 11 of the Act.

3.3.2 On a careful perusal of the Income Tax Rules, 1962 (in short ‘the Rules’), we find that as rightly pointed out by the CIT(A), the requirement to mandatorily file Form No.10 electronically before the due date for filing the return under section 139(1) of the Act has come into effect by substitution of Rule 17 of ‘the Rules’ by IT (First Amendment) Rules, 2016, w.e.f. 01.04.2016 i.e., it is applicable from Assessment Year 2016-17 onwards. Therefore, it is amply clear that the said requirement of the assessee having to mandatorily file Form 10 electronically was not applicable to those Assessment Years prior to Assessment Year 2016-17. The present appeal pertains to Assessment Year 2014-15 which is prior to the amendment, and therefore, in our view, the CIT(A) was correct in holding that in this year, the requirement to file Form No.10 electronically was not mandatory to the assessee in the case on hand. The CIT(A) has also rendered the factual finding that assessee has filed requisite Forms and the return of income within the due date for filing the return of income i.e., 30.09.2014 and therefore the assessee is eligible for accumulation under section 11(2) of the Act. In the circumstances, as narrated above, we find no reason for interference in the impugned order of the CIT(A) on this issue and therefore uphold his finding in the matter. Consequently, finding absolutely no merit in the grounds raised by Revenue, by misquoting the provisions of the Act relevant for Assessment Year 2014-15 on the issue before us, the said grounds are dismissed.

Pronounced in the open court on 28th August, 2019.