DDIT, CHENNAI vs. THE MADRAS SEVA SADN, CHENNAI

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

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.

& :- 3 -: CO No.30/2015.

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’’.

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 & :- 4 -: CO No.30/2015.

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 & :- 5 -: CO No.30/2015. 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.

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.

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 & :- 8 -: CO No.30/2015. 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.

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.