Loading judgment…
Facts
The assessee, KM Educational & Rural Development Trust, filed its Return of Income belatedly for AY 2018-19, claiming exemption under Section 11 of the Income Tax Act. The CPC denied this exemption, citing the late filing of the return and audit report. The CIT(A) upheld this decision, stating that the return was filed after the due date prescribed under Section 139(1).
Held
The Tribunal noted that the assessee had filed its Return of Income within the time allowed under Section 139(4A) of the Act, as clarified by CBDT Circular No.F.No.173/193/2019-ITA-I dated 23.04.2019. The Tribunal found that the CIT(A) erred in not following this circular, as it mandates rectification of orders where exemption is denied due to belated filing within the permissible timeframe.
Key Issues
Whether the assessee is eligible for exemption under Section 11 of the Income Tax Act, 1961, when the return of income was filed belatedly but within the time allowed under Section 139(4A).
Sections Cited
11, 139(1), 143(1), 12A, 139(4A), 44AB, 10B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI
Before: SHRI ABY T. VARKEY & SHRI JAGADISH
आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee Trust against the order of the Learned Commissioner of Income Tax, Appeal, (hereinafter in short "the Ld.CIT(A)”), Addl.JCIT (A)-2, Vadodara, dated 04.03.2024 for the Assessment Year (hereinafter in short "AY”) 2018-19.
The main grievance of the assessee is against the action of the CPC denying the exemption claimed u/s.11 of the Income Tax Act, 1961 (hereinafter in short "the Act") only on the ground that the assessee didn’t file the return of income (RoI) within the time limit prescribed u/s.139(1) of the Act.
The brief facts are that the assessee is a Trust, which enjoyed section 12A registration and filed its Return of Income [RoI] for AY 2018- 19 belatedly on 30.11.2018 declaring total income of Rs.NIL and claimed refund of Rs.1,96,656/-. However, the CPC while processing the return u/s.143(1) of the Act on 30.09.2019 computed the total income at Rs.2,14,33,895/- and raised demand of Rs.92,83,542/- instead of refund of Rs.1,96,656/- as claimed by the assessee. The reason for disallowing the exemption claimed u/s.11 of the Act was that the assessee didn’t e- filed its ITR/RoI, and Audit Report in Form 10B on or before due date as
per the Act. On appeal, the Ld.CIT(A) noted that the assessee had filed the return on 30.11.2018, whereas the due-date for filing of return u/s.139(1) of the Act was 30.09.2018 and Audit Report in Form 10 was filed only on 31.10.2018 due date for the relevant AY was on 30.08.2018 [since as per provisions of Sec.44AB of the Act, Audit Report had to be filed one month prior to the due date of filing of ITR]. The Ld.CIT(A) also noted that the competent authority has condoned the delay in filing of the Audit Report u/s.10B vide order dated 30.01.2024. But since, the assessee filed the ITR after the due date u/s.139(1) of the Act, he upheld the action of the CPC denying the exemption claimed u/s.11 of the Act.
Against this impugned action of the Ld.CIT(A), the assessee is before us.
The Ld.AR assailing the action of the Ld.CIT(A) brought to our notice that CBDT Circular No.F.No.173/193/2019-ITA-I dated 23.04.2019, which clarifies that if an assessee Trust files its RoI belatedly but within time allowed u/s.139(4A) of the Act, then the AO/CPC must allow the claim u/s.11 of the Act. The ibid Circular reads as under:
Undersigned is directed to refer to the representation (s) received on above mentioned subject stating that while processing of ITR-7 for the A.Y. 2018- 19, in respect of the belated returns filed u/ s 139(4) of the Income Tax Act, 1961 (Act), the following is being communicated u/s 143(1)(a) of the Act:-
“As per section 12A(1)(ba) of the Income -tax Act , 1961 the person in receipt of the income has furnished the return of income for the previous year in accordance with the provisions of sub-section (4A) of section 139, within the time allowed under that section. Otherwise the exemption u/s-11 i.e. sr. no 4(i) and 4 viii in schedule Part BTI is not allowed.”
Based on this, exemption u/s 11 of the Act has been denied to otherwise eligible trust, thereby creating huge demand.
In the matter, the memorandum explaining the relevant provisions of the Finance Bill, 2017 reads as under:
“as per the existing provisions of said section, the entities registered under section 12AA are required to file return of income under sub- section (4A) of section 139, if the total income without giving effect to the provisions of sections 11 and 12 exceeds the maximum amount which is not chargeable to income-tax. However, there is no clarity as to whether the said return of income is to be filed within time allowed u/s.139 of the Act or otherwise. In order to provide clarity in this regard , it is proposed to further amend section 12A so as to provide for further condition that the person in receipt of the income chargeable to income-tax shall furnish the return of income within the time allowed under section 139 of the Act. These amendments are clarificatory in nature.
These amendments will take effect from 1st April, 2018 and will, accordingly, apply in relation to assessment year 2018-19 and subsequent years.”
Additionally, an excerpt of circular 02/2018 dated 15.02.2018 “Explanatory Notes to the Provisions of the Finance Act, 2017” on insertion of clause (ba) in Sub section (1) of section 12A is quoted as under:
“the entities registered under section 12AA are required to file return of income under sub-section (4A) of section 139 of the Income –tax Act, if the total income without giving effect to the provisions of sections 11 and 12 exceeds the maximum amount which is not chargeable to income-tax. Amendment to section 12A of the Income-tax has been made so as to provide for additional condition that the person in receipt of the income chargeable to income-tax shall furnish the return of income within the time allowed under section 139 of the Income -tax Act.”
Thus, for a trust registered U/s 12AA of the Act to avail the benefit of exemption u/s 11 shall inter-alia file its return of income within the time allowed u/s 139 of the Act. Accordingly, orders u/s 143(1)(a) in those cases in which demand has been raised on this issue may please be rectified.
This issues with the approval of Chairman(CBDT).[Emphasis given by us]
On the strength of the aforesaid Circular, the Ld.AR submitted that since the assessee is registered u/s.12AA of the Act, in order to claim benefit of exemption u/s.11 of the Act, the requirement of Law was only to file the return of income within the time allowed u/s.139 of the Act and the CPC as well as Ld CIT(A) erred in prescribing the time limit as the due date u/s.139(1) of the Act. According to him, such time restriction can’t be placed by CPC/Ld CIT(A) and deny the benefit of exemption u/s 11 of the Act. In other words, if the assessee has filed its RoI within the time allowed u/s.139 of the Act, [i.e. even if it is filed belatedly before the time allowed u/s.139(4A) of the Act], then the CBDT circular (supra) has directed CPC to rectify its orders passed u/s.143(1)(a) of the Act as well as demands raised be also rectified. Since CBDT Circular is binding on the Income Tax Authority, we find that the Ld.CIT(A) erred in not following it, since assessee has filed its ITR/RoI well before time allowed u/s 139(4A) of the Act. Therefore, we set aside the impugned order of the Ld.CIT(A) and restore this issue back to the file of the Ld.CIT(A) with a direction to pass rectification order as per the CBDT Circular No.173/193/2019-ITA–I dated 23.04.2019 (supra).
Needless to say that assessee to be diligent and file written submissions/relevant documents before the Ld.CIT(A) if advised to do so, and the Ld.CIT(A) to pass order in accordance to law.
In the result, appeal filed by the assessee is allowed for statistical purposes.
Order pronounced on the 04th day of December, 2024, in Chennai.