DDIT, CHENNAI vs. THE MADRAS SEVA SADN, CHENNAI

आदेश / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER:

The appeal of the Revenue and Cross Objection by the

assessee are directed against order of the Commissioner of Income-

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tax (Appeals)-VII, Chennai for the assessment year 2010-11 in ITA

No.166/12-13, dt 27.12.2013 passed u/s.143(3) and 250 of the

Income Tax Act, 1961 (herein after referred to as ‘the Act’).

2.1 The ld. CIT(A) erred in holding that the assessee is eligible for accumulation u/s.11(2) as the reasons for the failure to file form 10 was beyond the control of the assessee and hence the assessee was eligible to accumulate the shortfall u/s.11(2) of the Act.

2.2 The ld. CIT(A) to have appreciated that during the assessment proceedings the assessee has neither filed form 10 for accumulation nor exercised its option as per Sec.11(1) before the Assessing Officer, inspire of many opportunities given.

2.3 The ld. CIT(A) failed to note that in the remand report, the Assessing Officer had clearly mentioned about the assessee’s failure to file form 10 during the assessment proceedings, in spite of many opportunities given. But, the Commissioner of Income Tax (Appeals) has granted relief which is not in conformity with the remand report.

2.4 The ld. CIT(A) failed to place reliance on the decision of the Supreme Court in the case of CIT vs. Nagpur Hotel Owners’ Association (247 ITR 201), which is squarely applicable to the facts of this case, wherein it has been held that from the wording of sub-section (2) of Section 11, it is mandatory for the assessee to file form NO.10 before the Assessing Officer during assessment proceedings.

2.5 The ld. CIT(A) failed to note that 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, it would be futile to find fault with the Assessing authority for having included such income in the assessable income of the assessee.

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2.6 The ld. CIT(A) ought to have appreciated that even assuming that there is no valid limitation prescribed under the Act and the Rules even then, as opined by the Supreme Court in the case cited supra, it is reasonable to presume that intimation required under Sec.11(2) has to be furnished before the assessing authority before completion of the concerned assessment’’.

status registered u/s.12A(a) of the Income Tax Act and filed Return of

income on 30.09.2010 admitting Nil income. Subsequently the case

was taken up for scrutiny and notice u/s.143(2) of the Act was issued.

The ld. Authorised Representative of assessee appeared from time to

time and filed information. But ld. Assessing Officer on verification of

the financial statements and details furnished found that assessee

applied 79.88% of its income for charitable purpose and the assessee

has neither exercised option as per clause 2 of the explanation to

11(1) of the Act nor accumulate or set apart the shortfall as per sec.

11(2) of the Act in application of income. On with this findings, the

ld. Assessing Officer finalized the assessment bringing the shortfall of

�.59,96,579/- to tax and raised demand. Aggrieved by the order, the

assessee filed an appeal before Commissioner of Income Tax

(Appeals).

relied on the grounds and further filed separate petition dated

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21.11.2013 with additional grounds, affidavit and paper book. The

ld. Commissioner of Income Tax (Appeals) based on the additional

grounds and other documents including the statutory forms called

for the remand report from Assessing Officer. The ld. Assessing

Officer on verification of additional grounds and evidence filed

remand report dated 04.12.2013 and highlighted the findings of the

assessment order were assessee has not filed any revised Audit

report in form no.10B or Form No.10 for accumulation u/s.11(2) of

the Act for short fall in assessment proceedings and the delay in filing

was not explained with reasonable cause. The ld. Commissioner of

Income Tax (Appeals) considered the remand report and findings of

the Assessing Officer observed in his order at para 7 and allowed the

ground of the appeal with the findings that assessee is entitled for

benefits allowable u/s.11(2) of the Act and by deleting the addition

of shortfall in application of income determined by the Assessing

Officer as under:-

‘’7. I have carefully considered the facts of the case and written submission and affidavit filed by appellant and also the remand report from the Assessing Officer. It is an admitted fact that the form 10B originally filed was erroneous. Also the necessary form 10 was not filed alongwith the return of income. The appellant’s submission was that the said form was not filed within the due date for reasons beyond its control and for bonafide reasons. Nevertheless, the appellant field before me the requisite form 10 along with an affidavit from the Hon’y General Secretary of the Trust setting out reasons for the delayed filing and praying condonation of delay. In my

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considered opinion that in cases where the reasons beyond the control of the assessee, delay occurred in filing the audit report, or for bonafide reasons, form 10 could not be filed on time, the exemption as available to such trust under section 11 and 12 may not be denied. I find from the facts of the case, written submissions and affidavits filed, the unforeseen death of the Auditor and change in subsequent appointment of auditors and the abrupt absentation from work and eventual unilateral leaving from service by the accountant are reasons beyond the control of the appellant for not filing the form 10 on time. I am fortified for the above view by the decisions of Hon’ble High Courts in the case of (i) CIT vs. R.B.B Bissesswarlal Motilal Malwasie Trust (1992) 195 ITR 825 (Cal) (ii) CIT vs. Mayur Foundation (2005) 274 ITR 562 (Guj) and also by Hon’ble ITAT in JCIT vs. Sewa Education Trust (2013) 27 ITR (Trib) 292 (Agra). According to these decisions it was held that where for reasons beyond the control of the assessee some delay had occurred in filing the audit report form 10 alongwith the return of income, the exemption under section 11 and 12 may not be denied.

Aggrieved by the Commissioner of Income Tax (Appeals) order, the

Revenue assailed an appeal before Tribunal.

vehemently argued the findings of Commissioner of Income Tax

(Appeals) erred in accepting the reasons were assessee has claimed

to have appointed Chartered Accountant to conduct the audit of the

assessee trust has expired. The subsequent change of Auditors was

delayed and due to the deficiency of professional work with great

difficulty the assessee could file return of income within the due date

on 30.09.2010. The assessee was not prohibited in filing form 10

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on said date. The assessee has filed form No. 10 for the first time

before Commissioner of Income Tax (Appeals) in the nature of

additional evidence and Rule 46A procedure has to be followed.

Further assessee has not provided proof of investments under

specified modes as per provisions of Sec.11(5) of the Act. The due

date of filing form No.10 by the assessee is 30.09.2010 but the same

was filed in appellate proceedings explaining the accumulation and this

resolution passed on 06.11.2012. The filing of form No. 10 is

mandatory in the assessment proceedings therefore order of

Commissioner of Income Tax (Appeals) be set aside and Assessing

Officer order be restored.

the order of Commissioner of Income Tax (Appeals) and explained the

circumstances of delay in filing form 10 and genuine hardship faced by

the assessee and explained the object of the trust in helping and

supporting the destitute women and other objects and further relied

on the CBDT circular No.273, dated 3.6.1980 in support of arguments

and relied on Commissioner of Income Tax (Appeals) order.

record and department circular. The Department main contention

that ld. Commissioner of Income Tax (Appeals) has not offered

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adequate opportunity to the Assessing Officer in respect of fresh

evidence filed by the assessee. No doubt assessee is a charitable

institution and activities are beneficial to the society. The ld.

Authorised Representative explained the main objects and activities to

protect destitute women in the society and was registered u/s.12A(a)

of Income Tax Act, 1976 and complying the Income Tax Laws and

regular in filing Income Tax Returns. The assessee trust filed return of

income within due date u/s.139(1) of the Act and form 10 for the

purpose of accumulation and set apart of income was not filed for the

reasons beyond the control of the assessee explained in the appellate

proceedings. The ld. Commissioner of Income Tax (Appeals)

considered genuine hardship and circumstances which prevented

assessee to file form 10 within time limit and also there is no dispute

by the ld. Assessing Officer on the objects and activities and

expenditure incurred by the trust except on filing revised form 10B

and 10 by the assessee in appellate proceedings. At the time of

hearing the ld. Departmental Representative explained and filed

written submissions that Assessing Officer was prevented from

verifying the documents filed by the assessee before Commissioner of

Income Tax (Appeals). But on verifying the order at para 6 of the ld.

Commissioner of Income Tax (Appeals) has called for the remand

report and same was produced in the appellate proceedings vide

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report dated 04.12.2013. The Assessing Officer was aware of the

circumstances under which assessee has filed form No. 10 and the

whole crux of issue lies whether the assessee is eligible to set apart

and accumulate as per form 10 as same was filed with delay. The

proceedings of Commissioner of Income Tax (Appeals) are co-terminus

with Assessing Officer and any vital document forming part of

assessment with reasonable explanation can be produced as additional

evidence but due compliance of law under Rule 46A be complied. The

grievance of the ld. Departmental Representative being Assessing

Officer was prevented to verify the genuineness of evidence filed. We

are of the opinion, considering the activities of the trust and genuiness

of the objects and supporting affidavit in explaining the delay, the

assessee should file before Assessing Officer revised form No.10B and

form No. 10 further considering the principles of natural justice and

provisions of Rule 46A, we set aside the entire disputed issue to the

file of the Assessing Officer for limited purpose to verify the genuiness

of evidence and pass the order afresh after providing adequate

opportunity of being heard to the assessee. The Departmental appeal

is partly allowed for statistical purpose.

of 227 days in filing Cross objection by the assessee. At the time of

hearing the ld. Counsel has filed an affidavit explaining the reasons for

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delay and the ld. DR has no serious objections for condonation of delay. After hearing the submissions, we are satisfied with sufficient and reasonable cause for filing the cross objection belatedly and we therefore condone the delay and admit the cross appeal for adjudication.

Order pronounced on Wednesday, the 27th day of April, 2016 at Chennai.

Sd/- Sd/- (ए. मोहन अलंकामणी) (जी. पवन कुमार) (A. MOHAN ALANKAMONY) (G. PAVAN KUMAR) �या�यक सद�य /JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER चे�नई/Chennai �दनांक/Dated: 27th April, 2016. KV आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु�त (अपील)/CIT(A) 4. आयकर आयु�त/CIT 5. �वभागीय ��त�न�ध/DR 6. गाड� फाईल/GF