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Income Tax Appellate Tribunal, DELHI BENCH “A”: NEW DELHI
Before: SMT DIVA SINGH & SHRI PRASHANT MAHARISHI
O R D E R PER PRASHANT MAHARISHI, A. M. 1. This is appeal filed by the assessee against the order of the ld CIT (A), Ghaziabad dated 09.11.2015 for the Assessment Year 2012-13. 2. The assessee has raised the following grounds of appeal:- “That the ld CIT (Appeals) was erred in confirming the addition of Rs. 6,00,734 /- on account of short utilization.”
3. Despite the notice of hearing, none appeared on behalf of the assessee and therefore the issue is decided on merits.
4. The brief facts of the case are that the assessee is a public charitable trust registered u/s 12AA of the Income Tax Act carrying on educational activities. The assessee filed return of income on 17.01.2013 declaring Nil income. During the course of assessment proceedings it was found that assessee has short utilized a sum of Rs. 600734/- and has not filed Form NO. 10 for accumulation of income in time. Therefore, the ld Assessing Officer assessed the income of the trust without granting benefit for accumulation u/s 11 and 12 of the Income tax Act. Assessee preferred an appeal before ld CIT (A) submitting that it has set aside the amount Rs. 8600734/- for the purchase of the building and its construction and submitted photocopy of the purchase deed along with the resolution. However, the ld CIT (A) rejected Page 2 of 6 the contention of the assessee as Form NO. 10 along with the resolution were not filed in time. Therefore, the assessee is in appeal before us.
Ld DR submitted that Form No. 10 for accumulation of income by all the trusts registered u/s 12AA should have been filed along with the return of income. He further submitted that as the assessee has submitted net benefit of accumulation u/s 11 and 12 of the Act cannot be granted.
On perusal of the facts it is noted that the assessee has filed the resolution as well as form No. 10 before the lower authorities however same was not filed in time before the Assessing Officer as the return was required to be e-filed and there was no place for attaching annexures online therein. Therefore, it could not be submitted along with the return of income. It is not the case of the revenue that assessee has not filed Form No.10 along with the requisite resolution before the lower authorities. In fact, in the written submission filed before the ld CIT (A) assessee submitted Form No. 10 along with the necessary resolution. Hence, it is apparent that as Form No. 10 was not filed before expiry of time allowed u/s 139(1) the benefit of accumulation of income was not granted to the assessee. The form No. 10 is required to be filed as per requirement of Rule 17 of the Income Tax Rules, 1962 that provides that Form No. 10 being a notice u/s 11(2) shall be in Form No. 10 and shall be delivered before the expiry of time allowed u/s 139(1) of the Act. On perusal of the section 11(2) there is no such notice prescribed to the Assessing Officer. With effect from 01.04.2016 by Finance Act 2015, such requirement has been included u/s 11(2) of the Act. Therefore, in the assessment year in appeal before us i.e. AY 2012-13 there was no such time limit prescribed under the Act. Therefore, if such notice is filed any time before the conclusion of the assessment proceedings the assessee should be granted benefit of accumulation. Our View also get support from the decision of Hon'ble Gujarat high court in CIT v Mayur Foundation 274 ITR 562 where in form no 10 filed before the ITAT for the first time, the benefit of accumulation of income was allowed to the assessee trust. Honourable high court held as under :-
“5. The Tribunal admitted the additional ground and after hearing both the sides, held that, in the absence of any specific time-limit prescribed under section 11(2) for submission of the notice as prescribed, and in the absence of any express or clear implication of any delegation to the rulemaking authority of any power to impose any time-limit, such limit prescribed in rule 17 for submission of Form No. 10 by the rule- making authority was invalid and also contrary to various judgments. The Tribunal further held that, while interpreting the provisions of section 11 of the Act, the object with which such provision has been enacted has to be borne in mind and, accordingly, the provisions have to be interpreted in a manner that would advance a genuine cause of charity and should not deprive an assessee of the statutory benefit on the basis of mere technicalities. The Tribunal has further held that even if the interpretation of such a beneficial provision is reasonably capable of more than one interpretation, one which does not result in deprivation of such an intended relief, should be accepted.
Page 3 of 6 6. On the facts, the Tribunal has found that, in the present case, the genuineness of the trust is not in doubt ; that the trust has set apart the aforesaid amount of donation for the purpose of purchasing land and constructing an orphanage thereupon ; that the funds received by way of donations had been kept apart in fixed deposit receipts of nationalised banks ; and that the trustees or the settlors had not benefited by the failure or delay on the part of the trust to give notice of such accumulation. Accordingly, the Tribunal has held that the assessee-trust had complied with all the requirements stipulated by the provisions of section 11(2) of the Act.
Heard Mr. Tanvish U. Bhatt, learned standing counsel, on behalf of Mr. B. B. Naik, for the applicant-Revenue. Inviting attention to the decision in the case of CIT v. Nagpur Hotel Owners' Association [2001] 247 ITR 201 (SC), it was submitted that it was mandatory for a person claiming benefit of section 11 to intimate to the assessing authority the prescribed particulars under rule 17 in Form No. 10 of the Income-tax Rules, 1962. That, if the assessing authority does not have the information at the time when the assessment is completed, it will not be possible for the assessing authority to give the benefit of exclusion. In other words, a particular portion of income, according to learned counsel, could not be excluded from the net of taxation in the absence of compliance with the provisions of section 11 read with relevant rules. That, as laid down by the said decision, the particulars have to be submitted before the completion of assessment proceedings and if the information is supplied subsequent to the completion of the assessment, it would mean that the assessment order will have to be reopened and the Act does not contemplate such reopening of assessment. He, therefore, urged that, in the light of the ratio of this decision, the Tribunal was in error in granting benefit to the assessee and upholding the contention that the assessee-trust was entitled to exemption in relation to the accumulated income under section 11(2) of the Act.
Mr. Manish J. Shah, the learned advocate for the respondent-assessee, read extensively from the order of the Tribunal and submitted that, in the light of the backdrop of facts in which the assessee-trust was put, the order made by the Tribunal was perfectly legal and calls for no interference. He invited attention to the orders of the lower authorities, including the Commissioner of Income-tax (Administration), refusing to condone the delay in submitting Form No. 10, and fixing a notional time-limit by reference to the provisions of section 139(1) or 139(2) of the Act, to submit that the said proposition was not borne out by the provisions of the Act and the rulemaking authority could not curtail the scope of such provisions by imposing a time-limit by way of rules. Mr. Shah further submitted that the findings recorded by the Tribunal regarding genuineness of the trust, the setting apart of the income, investment in prescribed securities, non-utilisation of funds by the trustees, etc., are relevant factors for the purposes of determining the controversy and in the light of such findings, the approach of the revenue authorities in denying legitimate relief to an assessee who was bona fide litigating, requires that the order of the Tribunal be confirmed by answering the question in favour of the assessee.
The facts, as stated hereinbefore, are not in dispute. The only question which the court is required to decide is, as to whether, in the absence of any specific time-limit prescribed under section 11(2) of the Act, whether the time-limit prescribed in rule 17 for submission of Form No. 10 by the rule-making authority is valid. In the case of Nagpur Hotel Owners' Association [2001] 247 ITR 201 (SC), the following two questions came up for consideration before the Bombay High Court (page 203) : " (1) Whether, on the facts and circumstances of the case, the Income-tax Appellate Tribunal is correct in holding that the applica tion in Form No. 10 under rule 17 of the Income-tax Rules, 1962, could be filed even after the assessment is completed ? (2) Whether, on the facts and circumstances of the case, the Income-tax Appellate Tribunal is correct in holding that the Income- tax Rules could not fix any time-limit for submitting an application in Form No. 10 under rule 17 of the Income-tax Rules, 1962 ?"
Page 4 of 6 10. The High Court of Bombay held that, once rule 17 of the Rules did not prescribe any time-limit and the limitation of six months commencing from the end of the previous year for issuing the notice as required under section 11(2) of the Act, was only in Form No. 10, it was not permissible for the rule-making authority to fix such a period of limitation because the Legislature did not impose a limitation for giving a written notice to the assessing authority. The Revenue having carried the matter before the apex court, after referring to the provisions of section 11 of the Act, the apex court has enunciated the law in the following words (page 204) : " It is abundantly clear from the wording of sub-section (2) of sec tion 11 that it is mandatory for the person claiming the benefit of sec tion 11 to intimate to the assessing authority the particulars required, under rule 17 in Form No. 10 of the Rules. If during the assessment proceedings, the Assessing Officer does not have the necessary information, the 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 with 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."
At first blush, the reading of the aforesaid pronouncement gives an impression that the stand of the Revenue is correct, inasmuch as a notice in writing furnishing the prescribed particulars should be submitted before the assessing authority and a completed assessment cannot be reopened, if such particulars are furnished subsequent to the completion of the assessment. However, it is apparent that the apex court has stated that the details have to be furnished before completion of the assessment proceedings and any information supplied subsequent to the completion of assessment cannot be taken into consideration. The question, therefore, that arises is when can an assessment be said to be complete or till what point of time the assessment proceedings can be said to be alive.
In the case of Rambhai Jethabhai Patel v. CIT [1977] 108 ITR 771, this court was called upon to decide the question as to till what point of time an assessment can be said to be pending. This court referred to various interpretations of the word " pending" at page 784 of the reported decision, and ultimately, relied upon the decision of the apex court in the case of Asgarali Nazarali v. State of Bombay, AIR 1957 SC 503, to hold that it can safely be said that a matter can be said to be pending in a court of justice when any proceedings can be taken in it and that is the test to be applied. In Stroud's Judicial Dictionary, Fourth Edition, Volume 4, at page 1975, it is stated : " A legal proceeding is ' pending' as soon as commenced and until it is concluded, i.e., so long as the court having original cognisance of it can make an order on the matters in issue, or to be dealt with, therein."
Applying the aforesaid principle, can it be stated that when the matter is pending before the Tribunal by way of an appeal, the assessment proceeding is pending ? The Page 5 of 6 answer has to be in the affirmative. The assessing authority is empowered and is duty bound, to pass an order giving effect to the order of the Tribunal for the purposes of assessing the tax liability of the assessee for the assessment year which was under consideration before the Tribunal. In these circumstances, it cannot be contended on behalf of the Revenue that the assessment proceedings come to an end when the assessment order is framed. The contention on behalf of the Revenue to equate the assessment order with assessment proceeding is based on a fallacious premise.
The aforesaid view that this court is taking finds support from the decision of the apex court in the case of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383. The apex court held that the Tribunal has jurisdiction to examine a question of law which arose from the facts as found by the income-tax authorities and having a bearing on the tax liability of the assessee. The powers of the Tribunal under section 254 of the Act and the discretion that the Tribunal has to entertain or not to entertain a new ground, have been explained in the following words, in the aforesaid decision (headnote) : " Under section 254 of the Income-tax Act, 1961, the Appellate Tri bunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is, thus, expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial deci sion given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, there is no reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the rele vant facts are on record in respect of the item. There is no reason to restrict the power of the Tribunal under section 254 only to decide the grounds which arise from the order of the Commissioner of Income- tax (Appeals). Both the assessee as well as the Department have a right to file an appeal/cross-objections before the Tribunal. The Tri bunal should not be prevented from considering questions of law arising in assessment proceedings, although not raised earlier. The view that the Tribunal is confined only to issues arising out of the appeal before the Commissioner of Income-tax (Appeals) is too nar row a view to take of the powers of the Tribunal. Undoubtedly, the Tribunal has the discretion to allow or not to allow a new ground to be raised. But where the Tribunal is only required to consider the question of law arising from facts which are on record in the assessment proceedings, there is no reason why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee."
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 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