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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: SMT.ANNAPURNA GUPTA & T.R. SENTHIL KUMAR
आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद �यायपीठ आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण अहमदाबाद �यायपीठ अहमदाबाद �यायपीठ ‘SMC’ अहमदाबाद। अहमदाबाद �यायपीठ अहमदाबाद। अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD ] ] BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND T.R. SENTHIL KUMAR, JUDICIAL MEMBER ITA No.242/Ahd/2021 Assessment Year : 2015-16 Shree Harsaniji Public Charitable Trust ITO (Exemption) 32, Shiv Society Part-2 Vs Palanpur. Nr.B.K. Cinema Mehsana 384 002. PAN : AAATS 7750 B.
(Applicant) (Responent) Assessee by : Shri Parimalsinh B. Parmar, AR Revenue by : Shri Alpesh Parmar, Sr.DR सुनवाई क� तार�ख/Date of Hearing : 07/04/2022 घोषणा क� तार�ख /Date of Pronouncement: 24/06/2022 आदेश/O R D E R PER T.R. SENTHIL KUMAR, JUDICIAL MEMBER
This appeal is filed by the assessee against order dated 17.8.2021 passed by the Commissioner of Income-tax (Exemptions), National Faceless Appeal Centre (“NFAC”) relating to the Asst.Year 2015-16.
Solitary ground raised by the assessee is that the ld.CIT(A), NFAC, Delhi has grossly erred in law and on facts in confirming the order of the DCIT (CPC), Bangalore by not allowing deduction of Rs.20,00,000/- under section 11(2) of the Income Tax Act, 1961 ("the Act" for short) for late filing of Form-10 for the Asstt.Year 2015- 16.
ITA No.242/Ahd/2021 2 3. Brief facts of the case is that the assessee is a public charitable trust. For the Asst.Year 2015-16, it has filed its return of income on 1.10.2015 declaring NIL total income. The return was processed under section 143(1) by intimation order dated 15.9.2016 denying the claim of deduction of Rs.20 lakhs under section 11(2) of the Act and demanded a tax of Rs.2,86,525/-. As against the intimation order, the assessee filed rectification petition under section 154 of the Act, claiming that the assessee failed to file Form No.10 along with return of 1.10.2015. However, Form No.10 was uploaded by online on 2.1.2017 thereby the assessee requested the ld.AO to grant deduction of Rs.20.00 lakhs under section 11(2) of the Act. The assessee further claimed that there was no regular assessment under section 143(3) for the Asst.Year 2015-16, hence, the Form No.10 filed online on 2.1.2017 was to be taken into consideration by the AO, while passing the order under section 154 of the Act. The assessee has also further submitted that the filing of the Form No.10 along with return of income is mandatory w.e.f. 1.4.2016 i.e for the Asst.Year 2016-17 onwards. However, the rectification application was rejected by the DCIT(CPC) vide order dated 31.10.2019 as follows:
“Subject: Rejection of request for Rectification, Under Section 154 of the Income Tax Act, 1961- reg. Please refer to the rectification request filed by you for the Assessment Year:2015-16 in respect of above mentioned order and received at Centralized Processing Center on 01/10/2019. "On Verification, it is seen that there is no prima facie error in the order which you have sought to be rectified. There fore, your application for Rectification under Sec.154 is rejected, for the following reasons(if any)" Your rectification request could not be considered at CPC the rectification rights, in your case are being transferred to your Assessing Officer.
ITA No.242/Ahd/2021 3 In view of this, this rectification application is rejected. Kindly contact your Jurisdictional A.O for the same. The details of the Jurisdictional Assessing Officer are available on the website.
Aggrieved against the rejection of rectification application, the assessee filed appeal before the ld.CIT(A), NFAC. The assessee pleaded before the ld.CIT(A), NFAC that it has claimed deduction under section 11(2) of Rs.20.00 lakhs for the first year. Though the assessee-trust filed return of income within the prescribed time limit, however, Form No.10 was uploaded on 2.1.2017, hence request by way of 154-petition to rectify the mistake and grant deduction under section 11(2) of the Act. The assessee also pleaded that filing of Form No.10 along with return of income became mandatory w.e.f. 1.4.2016 i.e. for the Asst.Year 2016-17 whereas the assessment year involved herein is A.Y.2015-16. The delay in filing Form No.10 may be condoned under section 119(2)(b) of the Act. In this connection, the assessee invited Circular No.273 dated 3.6.1980 issued by CBDT, which reads as under: “In exercise of the powers conferred under section 119(2)(b ) of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby authorise the Commissioners to admit applications under section 11(2) read with rule 17 of the Income-tax Rules, 1962 from persons deriving income from property held under trust wholly for charitable or religious purposes for accumulation of such income to be applied for such purposes in India when the aforementioned applications are filed beyond the time stipulated. The Commissioners will, while entertaining such applications, satisfy themselves that the following conditions are fulfilled:
(a) that the genuineness of the trust is not in doubt; (b) that the failure to give notice to the Income-tax Officer under section 11(2) of the Act and investment of the money in the prescribed securities was due only to oversight; (c) that the trustees or the settlor have not been benefited by such failure directly or indirectly; (d) that the trust agrees to deposit its funds in the prescribed securities prior to the issue of the Government sanction extending the time under section 11(2); and
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(e) that the accumulation or setting apart of income was necessary for carrying out the objects of the trust.”
4.1 The assessee has also drawn attention to Circular No.14 (XI- 35) of 1955 dated 11.4.1955 issued by the CBDT, which is reproduced as under:
“ Officers of the Department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the Officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the Department for it would inspire confidence in him that he may be sure of getting a square deal from the Department. Although, therefore, the responsibility for claiming refunds and reliefs rests with assessees on whom it is imposed by law, officers should :—
(a) draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other;
(b) freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs.”
4.2 The assessee further relied upon the Hon’ble Supreme Court judgment in the case of CIT Vs. Nagpur Hotel Owners Association, 247 ITR 201 wherein it is held as follows:
“6. 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 it 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
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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, therefore, compliance of the requirement of the Act will have to be any time before the assessment proceedings. Further, any claim for giving the benefit of section 11 on the basis of information supplied subsequent to the completion of assessment would mean that the assessment order will have to be reopened. In our opinion, the Act does not contemplate such reopening of the assessment. In the case at hand it is evident from the records of the case that the respondent did not furnish the required information till after the assessments for the relevant years were completed. In the light of the above, we are of the opinion that the stand of the revenue that the High Court erred in answering the first question in favour of the assessee is correct, and we reverse that finding and answer the said question in the negative and against the assessee. In view of our answer to the first question, we agree with Mr. Verma that it is not necessary to answer the second question on the facts of the case.
In view of the above findings of ours, the second question referred will not arise for consideration. Accordingly, these appeals are allowed.”
4.3 The assessee further relied on jurisdictional High Court in the case of CIT Vs. Mayur Foundation 274 ITR 562 wherein it is held as follows:
“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. In these circumstances, in the present case, the Tribunal was well within its jurisdiction to entertain the new ground by which the assessee claimed the benefit under section 11(2) of the Act and adjudicate the tax liability of the assessee. As already noticed hereinbefore, the Tribunal has categorically found that "the additional
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ground involves the question relating to interpretation of section 11(2) and the facts on the basis of which such a decision is to be given regarding interpretation of section 11(2) are not at all in dispute". In the circumstances, there is no infirmity in the order of the Tribunal, holding that the assessee is entitled to benefits allowable under section 11(2) of the Act.
The question referred to the court is accordingly answered in the light of the opinion expressed hereinbefore in favour of the assessee and against the Revenue. There shall be no order as to costs.”
4.4 The assessee has also further relied on other High Courts and Tribunal’s judgments, and pleaded to allow rectification petition filed under section 154 of the Act, and grant deduction of Rs.20 lakhs under section 11(2) of the Act.
The above submissions were uploaded online by the assessee before ld.CIT(A), NFAC. The ld.CIT(A) has simply reproduced the grounds of appeals, and written submissions filed online which is running into 12 pages, however passed a cryptic order as follows: “5. I perused the grounds of appeal, Rectification Order u/s 154, Appellant's submission and material available on record. My observations in respect of the grounds raised by the appellant are as follows:
Appellant did not file Form No. 10 along-with return of income. Hence CPC processed the return u/s 143(1) without giving deduction/exemption of Rs.20,00,000/-claimed u/s.11 (2).
Appellant filed Form No.10 electronically on 2/1/2017 and requested the CPC to pass the rectification order u/s. 154.
CPC rejected the rectification application stating - "There is no prima facie error in the order which was sought to be rectified"
Form No. 10 was not there when the Intimation u/s 143(1) was passed. Hence not considering Form No. 10 does not constitute a mistake which is apparent from record. Hence the same cannot be rectified u/s 154.
For the above stated reasons rejecting the rectification request of the appellant is upheld.
ITA No.242/Ahd/2021 7 7. In result, the appeal of the assessee is dismissed.”
The ld.counsel for the assessee submitted that by way of intimation under section 143(1), CPC denied the claim of deduction under section 11(2) and raised a tax demand. When rectification petition u/s.154 was filed to rectify the mistake, after filing Form No.10 on 2.1.2017 and also indicated that Form No.10 is required to be filed along return w.e.f. 1.4.2016 i.e. Asst.Year 2016-17 only. Though the assessee uploaded Form NO.10 belatedly with request to rectify the mistake, but CPC simply rejected the rectification petition on the ground that there was no prima facie error in the intimation passed under section 143(1) of the Act. The ld.AR further submitted that in the detailed written submission was filed before the ld.CIT(A), NFAC, and the appeal was also dismissed in a cryptic manner without considering that CBDT Circular No.273 dated 3.6.1980, as well as CBDT Circular No.14 of 1955 dated 11.4.1955 and Hon’ble Supreme Court’s judgment in the case of CIT Vs. Nagpur Hotel Owners Association (cited supra) and other case laws relied before it. Thus, the ld.CIT(A) simply dismissed appeal on the ground that Form No.10 was not there, when the intimation under section 143(1) was passed. Hence not considering Form No.10 does not constitute a mistake apparent from record and the same cannot be rectified. The ld.AR further submitted that based on the Circular issued by the Board and the Supreme Court judgment, the assessee ought not have been denied claim of deduction under section 11(2) of the Act, and prayed to quash the orders passed by the lower authorities, and accordingly allow the assessee’s appeal.
Per contra, the ld.DR appearing for the Revenue strongly supported the lower authorities’ order and claimed that no interference is called for.
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We have given our thoughtful consideration and perused the material available on record. At the first instance, the assessee was denied deduction under section 11(2) for the reason that Form No.10 was not accompanied along with return of income, thereby 143(1) intimation was passed. It is thereafter the assessee uploaded Form No.10 by online on 2.1.2017 and filed its rectification application on 6.10.2017. The same was processed by DCIT(CPC) by order dated 31.10.2019 holding that, “on verification it was seen that there was no prima facie error in the order sought to be rectified. Therefore, the rectification petition was rejected”. Thus, DCIT(CPC) has not even discussed why 154-petition has been rejected specially in a case where Form No.10 has been filed belatedly, especially when CBDT’s Circular No.723 dated 3.6.1980 is very much there, and also supported judgments of Apex Court and other High Courts were there. Aggrieved against the same, when the assessee filed further appeal before the ld.CIT(A), NFAC, there also ld.CIT(A) reproduced the entire submission of the assessee into 12 pages, but passed cryptic order by simply dismissing the appeal of the assessee on the ground that no mistake apparent from record. Thus, ld.CIT(A), NFAC miserably failed in adjudicating the appeal filed before it, without application of mind as well as not considering the written submissions placed before it, and passed the impugned order.
As rightly pointed out by the ld.AR, there are circulars issued by the CBDT as early as 1955 wherein the officers have been directed not to take advantage of ignorance of an assessee as to their right, and one of the duties of the officers is to assist a taxpayer in every reasonable way particularly in the matter of claiming of refund or relief. Thus, the Officers should take the initiative in guiding a taxpayer. This attitude would in the long run benefit the department
ITA No.242/Ahd/2021 9 because it would inspire confidence in assessee that he may be sure of getting a square deal from the department.
It is appropriate to consider sub-section 9 of section 139 of the Act provides as follows:
Section 139(9)
Where the [Assessing] Officer considers that the return of income furnished by the assessee is defective, he may intimate the defect to the assessee and give him an opportunity to rectify the defect within a period of fifteen days from the date of such intimation or within such further period which, on an application made in this behalf, the [Assessing] Officer may, in his discretion, allow; and if the defect is not rectified within the said period of fifteen days or, as the case may be, the further period so allowed, then, notwithstanding anything contained in any other provision of this Act, the return shall be treated as an invalid return and the provisions of this Act shall apply as if the assessee had failed to furnish the return : Provided that where the assessee rectifies the defect after the expiry of the said period of fifteen days or the further period allowed, but before the assessment is made, the [Assessing] Officer may condone the delay and treat the return as a valid return.
In our considered view, the AO as well as CIT(A) are not ready to follow 67 years old Circular and the provisions viz. sub-section (9) of section 139 of the Act, in letter and spirit. We also find that the ld.CIT(A), NAFC has simply extracted the written submissions filed by the assessee, wherein Circular No.273 dated 3.6.1980 was also reproduced in which the Board has clearly authorized Commissioners to admit applications under section 11(2) of the Act read with Rule 17 of the Income Tax Rules, 1962 from persons deriving income from property held under trust wholly for charitable or religious purposes for accumulation of such income to be applied for such purpose in India when the aforesaid application (herein Form No.10) are filed beyond the time stipulated, subject to the conditions that –
ITA No.242/Ahd/2021 10 a) that the genuineness of the trust is not in doubt; b) delay is due to oversight mistake; c) trustees or the settlers have not been benefited by such failure directly or indirectly;
Further, Hon’ble Supreme Court in the case of CIT Vs. Nagpur Hotel Owners Association (supra) has held that 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 the Rule 17 in Form No.10 of the Act. Even assuming that there is no valid limitation prescribed under the Act and the Rules, it is reasonable to presume that the intimation required under section 11 in form No.10 has to be furnished before the assessing authority completes the concerned assessment.
We observe that the ld.CIT(A) failed to consider insertion of sub-clause (c) to section 11(2) by the Finance Act, 2015 which reads as under:
“Section 11(2) as applicable for AY 2016-17: "(2) Where eighty-five percent of the income referred to in clause (a) or clause (b) o f 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 furnishes a statement in the prescribed form and in the prescribed manner to the Assessing Officer, stating 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 i n no case exceed five years;
ITA No.242/Ahd/2021 11 (b) the money so accumulated or set apart is invested or deposited in the forms or modes specified in sub-section (5); (c) the statement referred to in clause (1) is furnished on or before the due date specified under sub-section(1) of section 139 for furnishing the return of income for the previous years.”
Further, the ld.CIT(A) failed to take note of CBDT Circular No.7 of 2018 dated 20.12.2018 to condone the delay in filing Form No.10 and 9A for the Asst.Year 2016-17. Para-4 of the above circular reads as under:
"4. Representations have been received by the Board/field authorities stating that Form and Form No. 10 could not be filed in the specific time for AY. 2016-17, which was the first year of e-filing of these forms. It has been requested that the delay in filing of Form No. 9A and Form No. 10 may be condoned under Section 119(2) (b) of the Act."
Thus, going by the insertion of new sub-clause (c) of section 11(2) of the Act, the assessee is required to furnish Form No.10 along with Return of Income from the Asst.Year 2016-17 onwards. As per the CBDT Circular No.7 of 2018, representation from the assessee that Form No.9A and 10 could not be filed in specific time for the Asst.Year 2016-17, which were the first year of efiling of these forms, and also to condone such delay by invoking section 11(2)(b) of the Act. All the above provisions & circulars make it clear that non-filing or delay in filing the Form No.10, there was no time limit prescribed under the Act for the present Asst.Year 2015-16. Following the Supreme Court judgments, if the Form No.10 is filed before the assessing authority before completion of regular assessment, the assessee is eligible for the deduction. We find that in this case only an intimation under section 143(1) has been made rejecting the claim of deduction to the assessee. There is no regular assessment made for the A.Y. 2015-16. The assessee’s rectification petition filed under section 154 of the Act is also rejected without
ITA No.242/Ahd/2021 12 considering insertion of sub-clause (c) in section 11(2) of the Act as well as CBDT Circular No. 7 of 2018. Thus, the ld.CIT(A) has not applied his mind while disposing of the appeal filed by the assessee.
In our considered view, the need for disposal of objections by way of a speaking order by the Assessing Officer, who is performing a quasi-judicial function. The soul of a quasi-judicial decision making is in the reasoning for coming to the decision taken by the quasi-judicial officer. While on this aspect of the matter, we may usefully refer to the observations made by the Hon'ble Supreme Court, in the case of Union Public Service Commission v. Bibhu Prasad Sarangi and Ors., [2021] 4 SCC 516. While these observations are in the context of the judicial officers, these observations will be equally applicable to the decisions by the quasi- judicial officers like us, as indeed the Assessing Officer CPC. In the inimitable words of Hon'ble Justice Chandrachud, Hon'ble Supreme Court has made the following observations:
..... Reasons constitute the soul of a judicial decision. Without them, one is left with a shell. The shell provides neither solace nor satisfaction to the litigant. We are constrained to make these observations since what we have encountered in this case is no longer an isolated aberration. This has become a recurring phenomenon. .........How judges communicate in their judgments is a defining characteristic of the judicial process. While it is important to keep an eye on the statistics on disposal, there is a higher value involved. The quality of justice brings legitimacy to the judiciary.”
These observations of Their Lordships apply equally, and in fact with much greater vigour, to the quasi-judicial functionaries as well. Viewed thus, reasons in a quasi-judicial order constitute the soul of the quasi-judicial decision. A quasi-judicial order, without giving reasons for arriving at such a decision, is contrary to the way the functioning of the quasi-judicial authorities is envisaged.
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Thus, in the present case the immediately after the intimation order was passed on 15.9.2016, the assessee realized the mistake of not upholding Form No.10 along with Return of Income, however, uploaded the same on 02.11.2017 and filed rectification application on 6.10.2017 requesting to rectify the mistake in the intimation. But the DCIT(CPC) simply rejected the rectification by his order dated 31.10.2019 by holding that there is no prima facie error in the order sought to be rectified, and simply rejected the rectification application filed by the assessee. We further observe that the ld.CIT(A) even gone one step further by dismissing the appeal without considering Circulars issued by the CBDT, as well as Hon’ble Supreme Court’s judgment and other High Courts’ judgments placed by the assessee before the ld.CIT(A), NFAC. We further observe that in spite of Circular 14 of 1955, the Departmental Officers are taking advantage of the ignorance of the assessee, instead of assisting the taxpayers more particularly in the matter of claim of relief, issuance of refund, but the officers had not taken any initiative in guiding the taxpayers in accordance with law. This attitude will not give long term benefit to the department and discourage the confidence to the taxpayers. In simple words, when a litigant knocks the doors of the Temple of Justice, Justice to be rendered to his door steps itself and he should not be allowed to run from pillar to post for the Justice.
Thus, taking overall circumstances of the case, we quash the orders passed by the lower authorities, and delete the additions.
ITA No.242/Ahd/2021 14 Thus, the grounds of appeal raised by the assessee are hereby allowed.
In the result, appeal of the assessee is allowed for statistical purpose.
Order pronounced in the Court on 24th June, 2022 at Ahmedabad. Sd/- Sd/- (ANNAPURNA GUPTA) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad, dated 24/06/2022