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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: Shri Waseem Ahmed & Shri Siddhartha Nautiyal
आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:-
This assessee’s appeal for A.Y. 2020-21, arises from order of National Faceless Appeal Centre, Delhi dated 30-09-2022, in proceedings under section 250 of the Income Tax Act, 1961; in short “the Act”.
Page No 2 Shri Rajkot Vishashrimali Jain Samaj vs. ITO
2. The assessee has taken the following grounds of appeal:-
“1. That the Hon'ble CIT(A) NFAC Delhi has grievously erred in confirming the assessment of the returned income of Rs. 1,32,610 by the CPC at Rs. 14,05,398/-.
2. That alternatively and without prejudice to the above the Hon'ble CIT(A) NFAC Delhi has grievously erred in confirming the taxation of the gross income of the appellant without allowing for any expenditures.
3. That the Hon'ble CIT(A) NFAC Delhi has grievously erred in confirming that the adjustment so done confirmed by the Ld. CPC is within the jurisdiction vested us 143(1) of the Act.
4. That the appellant craves for leave to add, amend and/or modify the grounds of appeal.”
The brief facts of the case are that the assessee is a public charitable trust duly registered under the provisions of Mumbai Trust Act, 1950 and Section 12A of the Income Tax Act, 1960. For the year under consideration, the assessee e-filed its return of income on 10-02-2021 declaring total income and expenditure as under:-
For the assessment year under consideration the appellant e-filed its return of income on 10/02/2021 declaring therein income and expenditures as under:
Particulars Amount (Rs.) Voluntary contribution other than corpus fund 12,000 Income u/s 11/12 13,93,398 Gross Income 14,05,398
Less: Total Deductions / Exemptions claimed u/s 11 (12,72,788)
Page No 3 Shri Rajkot Vishashrimali Jain Samaj vs. ITO
---------- Net Total Income 1,32,610 The CPC while processing u/s. 143(1) of the Act denied the claim of deduction of the assessee u/s. 11 of the Act on the ground that the assessee failed to furnish form 10B along with the return of income u/s. 139 as required under the Act. During the year under consideration, the return of income for assessment year 2020-2021 as well as from 10B were filed by the assessee on 18-03-2021, which, admittedly was beyond the prescribed time limit for furnishing of return of income u/s. 1391(1) of the Act (in the present case the time limit was extended to 15-02-2021). This resulted in denial of exemption u/s. 11 while processing the return of income u/s. 143(1) of the Act. Posterior to the processing of return u/s. 143(1) of the Act and filing of appeal before CIT(A), the delay in filing of form 10B has since been condoned by CIT(exemption), Ahmedabad vide order dated 11- 04-2022 in exercise of powers vested u/s. 119(2)(b) of the Act. Accordingly, the assessee contended before ld. CIT(A) that the claim of exemption u/s. 11 of the Act should be allowed to the assessee. Alternatively, the assessee contended that it is a charitable trust and cannot be taxed on gross basis simply on account of delay in filing of return of income (even if it were to be admitted that it is not eligible to claim deduction u/s. 11 of the Act), since section 143 does not encompass within its scope to deny all expenses claimed by the assessee and tax income on gross basis only on account of delay in filing of return of income. The ld. CIT(A), however, dismissed the appeal of the assessee on both counts. The ld. CIT(A) made the following observations, while passing the order.
Page No 4 Shri Rajkot Vishashrimali Jain Samaj vs. ITO
“4.4. Submissions of the appellant were carefully considered. Section 12A of the Income-tax Act, 1961 provides for conditions for applicability of sections 11 and 12 of the Act. One such condition under clause (b) of sub-section (1) thereof is that where the total income of the trust or institution computed without giving effect to section 11 and 12 exceeds the maximum amount not chargeable to income-tax in any previous year, its accounts for that year have to be audited by an accountant as defined in the Explanation below sub- section (2) of section 288. It further provides that the person in receipt of said income should furnish along with the return of income for the relevant assessment year the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed Rule 178 of the Income Tax Rules, 1962 provide that said report of audit of the accounts of a trust or institution shall be in Form No. 108 As per the provisions of Section 12A(b) of the Income Tax Act, 1961, and under Rule 17B of the Income Tax Rules, Audit Report in Form 108 has to be filed along with the return of income for the relevant year. However, in appellant's case, the delay in furnishing of Form 10B stands condoned as on date, by the order of CIT(Exemption), cited supra.
4.5 Further, as per sub section (9) of Section 13, twin conditions are imposed on the assessee seeking exemption under section 11/12, whereby the return of income as well as the Audit Report are ought to be filed within the prescribed due date u/s 139(1) of the Act. The relevant provisions of the Act are extracted as under: Section 11 not to apply in certain cases Section 13
(9) Nothing contained in sub-section (2) of section 11 shall operate so as to exclude any income from the total income of the previous year of a person in receipt thereof if (i)the statement referred to in clause (a) of the said sub-section in respect of such income is not furnished on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for the previous year.
Page No 5 Shri Rajkot Vishashrimali Jain Samaj vs. ITO
(ii) the return of income for the previous year is not furnished by such person on or before the due date specified under sub- section (1) of section 139 for furnishing the return of income for the said previous year.
4.6. In appellant's case, the return of income itself has been filed beyond the prescribed due date u/s 139(1) of the Act. The appellant has not furnished any order of condonation of delay in filing of return within the prescribed time limit u/s 139(1) of the Act issued by the appropriate authority. Therefore, the claim of the appellant for exemption under section 11 ought to be denied on this count itself. Hence, while processing the return u/s 143(1), the claim of exemption u/s 11/12 has been rightly denied by CPC.
4.7 Regarding the contentions raised by the appellant that denial of exemption u/s.11 is beyond the scope of section 143(1), it may be noted that as per the amended provisions of section 143(1), an incorrect claim, included the failure to furnish the information in support of a claim made in the return, in appellant's case, failure to furnish Form 108 as on the date of processing of return. The Explanation to Section 143(1), is reiterated hereunder
Explanation-For the purposes of this sub-section--
(a) "an incorrect claim apparent from any information in the return" shall mean a claim on the basis of an entry in the return,-
(i) of an item, which is inconsistent with another entry of the same or some other item in such return;
(ii) in respect of which the information required to be furnished under this Act to substantiate such entry has not been so furnished or (iii) in respect of a deduction, where such deduction exceeds specified statutory limit which may have been expressed as monetary amount or percentage or ratio or fraction; Page No 6 Shri Rajkot Vishashrimali Jain Samaj vs. ITO
4.8. Further, the delay in filing of return of income beyond the prescribed due date u/s 139(1) of the Act will also fall under the ambit of an incorrect claim under 143(1)(a)(m) of the Act. Reliance is placed on the judgment of Hon'ble Madras High Court in the case of Aa520 Veerappampalayam Primary Agricultural Cooperative Credit Society Ltd Vs DCIT, CPC, Bangalore in W.P.No.7038 of 2020 dated 7th April, 2021. The relevant extracts from the ruling are as under: xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 4.9. Regarding the contention that the Gross receipts should not be taxed and expenditure claimed should be allowed, it is pertinent to note that processing of return u/s 143(1) does not envisage examination of such alternate pleas and unless and until a claim is validly made in the return, no such relief can be granted under section 143(1) of the Act. Since the appellant had failed to furnish the return of income within the prescribed time limit u/s 139(1), in the absence of any condonation thereof by the appropriate authority in exercise of powers granted u/s 119(2) of the Act, claim of exemption under section 11 and 12, would automatically stand negated u/s 143(1) of the Act.
4.10. It may be pertinent to quote the Hon'ble Bombay High Court in the case of Commissioner of Income-tax v. Shivanand Electronics 209 ITR 63 to emphasis the point:
"When the Legislature casts a duty on the assessee claiming certain benefit, to comply with requirements which are associated with such benefit, the assessee cannot get the benefit without doing his part of the duty. He cannot be allowed to say that it was for the ITO to ask him to do so. If the assessee does not do his part of the statutory duty, the ITO may proceed to decide the allowability or otherwise of the relief on the basis of the facts and material
4.11. For detailed reasons cited as above, intimation issued u/s.143(1) of the Act by CPC for AY 2020-21 does not warrant any interference on facts and in law. Appellant's Grounds fail on this issued.
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4.21. In the result, the appeal is treated as "dismissed".
The assessee is in appeal before us against the aforesaid order passed by ld. CIT(A). Before us, the counsel for the assessee submitted that the assessee filed its return of income for assessment year 2020-21 on 18-03- 2021 as against due date prescribed u/s. 139(1) of the Act of 15-02-2021. The audit report in form 10B was also filed on 18-3-2021 as against the due date prescribed u/s. 44AB which was 15-01-2021. In the present case, the delay in filing form 10B was condoned by CIT(Exemption) Ahmedabad vide order dated 11-04-2022. The ld. CIT(A) has also taken this on record in para 4.2 of his order. Accordingly, since there is no delay in filing form 10B, no consequence as a result thereof falls upon the assessee with regard to the claim of deduction u/s. 11 of the Act. So far as delay in filing of return of income is concerned, the case of the assessee is governed by the provisions of section 13(9) of the Act, which applies to only sub-section 2 of section 11 of the Act and stipulates that the claim u/s. 11(2) of the Act made by the assessee would not be allowed if the assessee fails to furnish either form 10B in time or fails to furnish the return of income within the due date u/s. 139(1) of the Act. Therefore, section 13(9) does not make reference to any other sub-section of section 11 and only makes reference to section 11(2) of the Act. Notably, section 11(2) of the Act refers to accumulation that a public charitable trust is expected to make in the event it is unable to spend 85% of the income earned by it during the course of assessment year under consideration. In the instant year, it is evident from the statement of income of the assessee that the assessee has not made any claim of accumulation u/s. 11(2) of the Act and hence the provisions of section 13(9)
Page No 8 Shri Rajkot Vishashrimali Jain Samaj vs. ITO of the Act are not applicable to the assessee’s set of facts. Accordingly, the ld. CIT(A) erred in not appreciating that section 13(9) of the Act does not apply to the entire section 11 and its applicability is limited only to section 11(2). However, the assessee did not make any claim of deduction/accumulation u/s. 11(2) of the Act. Further, since the delay in filing appeal has been condoned by CIT(Exemption), no question of invoking section 12A(b) arises. In the alternative, the counsel for the assessee submitted that the provisions of section 143(1) of the Act do not encompass within its scope disallowance of expenditure claimed by the assessee in its computation of income. Accordingly, even if it were to be assumed that the assessee is not eligible to claim deduction u/s. 11 of the Act, even otherwise the expenses claimed by the assessee cannot be denied u/s. 143(1) of the Act. Finally, the counsel for the assessee agreed that CPC processed the order u/s. 143(1) without prior intimation to the assessee as to which specific adjustment so made by the assessee is in contravention of the first and second proviso to sub-section (1) of section 143. Accordingly, the order passed by CPC u/s. 143(1) of the Act is erroneous in law and hence liable to be set aside.
In response, the ld. Departmental Representative placed reliance on the observations made by the ld. CIT(A) in the appellate order.
We have heard the rival contentions and perused the material on record. We shall sub-divide our analysis and conclusions, for better understanding of situation before us and applicability of law on the issue.
Page No 9 Shri Rajkot Vishashrimali Jain Samaj vs. ITO 6.1 The first issue for consideration is the impact of delay in furnishing Form 10B beyond the due date prescribed under the Act. Section 12A(b) of the Act mandates that Form 10-B has to be furnished within the specified date (which in the instant case is 15-10-2021) as referred to in section 44AB of the Act, failing which the provisions of section 11 and 12 would not be applicable. The assessee filed Form 10-B on 18-02-2021 and hence there was admittedly a delay in filing Form 10-B beyond the due prescribed date. However, we observe that the CIT(Exemptions), Ahmedabad has condoned the delay in filing Form 10-B vide order dated 11-04-2022 and copy of order has been produced for our perusal. Accordingly, we are of the view that delay in filing Form 10-B would not have any impact on claim of the assessee under section 11 and 12 of the Act, once the delay has been condoned by CIT(Exemptions), Ahmedabad. In the case of Sarvodaya Charitable Trust v. ITO (Exemptions) [2021] 125 taxmann.com 75 (Gujarat), the Assessee, a public charitable trust registered under section 12A, filed its return of income declaring income of certain amount. The Assessee had not furnished audit report in Form No. 10B. Thus, Assessing Officer denied exemption to assessee trust. Thereafter, assessee filed audit report in Form No. 10B belatedly and sought to condone such delay. The same was rejected for reason that no ground for condonation of delay was made out by assessee. The Gujarat High Court held that since assessee was a public charitable trust for past 30 years who substantially satisfied condition for availing benefit of exemption, assessee could not be denied exemption merely on bar of limitation to submit Form no. 10, especially, when legislature had conferred wide discretionary powers to condone such delay on authorities concerned. In the case of Jaya Educational Trust v Page No 10 Shri Rajkot Vishashrimali Jain Samaj vs. ITO DCIT [2021] 130 taxmann.com 225 (Chennai - Trib.), ITAT held that where assessee had filed return of income within due date specified under section 139(4) and also filed Form No. 10 electronically before completion of assessment, assessee could not be denied exemption under section 11. Accordingly, in view of the above discussion, delay in filing Form 10-B would not have any impact on the assessee’s claim of deduction u/s 11 and 12 of the Act.
6.2 The second issue for consideration is whether delay in filing the return of income beyond the due prescribed date would impact the claim of exemption to the assessee under section 11 and 12 of the Act. In the instant facts, the due date of filing of return of income u/s 139(1) of the Act was 15- 02-2021, while the assessee filed return of income on 18-03-2021. Accordingly, admittedly there is a delay in filing return of income on part of the assessee. However, the CBDT vide Circular CBDT F. No.173/193/2019 –ITA –I dated 23.04.2019 has clarified with regard to the time allowed for filing of the return of income subsequent to the insertion of clause (ba) in sub section (1) of section 12A of the IT Act which includes the IT return filed within the time allowed u/s. 139 of the Act. Notably, the Delhi ITAT in the case of Conference of Religious India v. Ward Exemption 1(3) in (for assessment year 2020-21) has held that benefit of exemption u/s. 11 of the Income Tax Act was available to the assessee as the income tax return was filed within the specified time limit of sub-section 139 of the Income Tax Act. The ITAT made the following observations while passing the order:
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In my considered opinion the language of the aforementioned Circular is very clear and unambiguous in so far as the return of income filed u/s. 139 of the Act is concerned. Section 139 has several sub sections (1), (2), (3), (4), (4a), (5). I am of the considered view that if the return is filed within the specified time limit of sub section of 139 would be eligible for the benefit given by the above mentioned CBDT circular and should avail the benefit of exemption u/s. 11 of the Act. In my considered opinion the CIT(A) erred in misinterpreting the aforementioned circular and, therefore, to that extent the order of the CIT(A) is erroneous and deserves to be set aside the grievance of the assessee is allowed.
6.3 In view of the above discussion, we are of the view that once return of income has been filed within the time prescribed u/s 139(4) of the Act, benefit of section 11 and 12 cannot be denied to the assessee by invoking the provisions of clause (ba) to sub section (1) of section 12A of the Act.
6.4 Another issue for consideration is whether delay in filing return of income beyond time prescribed u/s 139(1) of the Act or delay on filing of Form 10-B, would disentitle the assessee to benefit of exemption u/s 11 of the Act in view of the language of section 13(9) of the Act. It would be useful to reproduce section 13(9) of the Act for sake of reference:
(1) Nothing contained in section 11 or section 12 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof— Page No 12 Shri Rajkot Vishashrimali Jain Samaj vs. ITO
(9) Nothing contained in sub-section (2) of section 11 shall operate so as to exclude any income from the total income of the previous year of a person in receipt thereof, if— (i) the statement referred to in clause (a) of the said sub-section in respect of such income is not furnished on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for the previous year; or (ii) the return of income for the previous year is not furnished by such person on or before the due date specified under sub- section (1) of section 139 for furnishing the return of income for the said previous year.
6.5 A perusal of aforesaid provision suggests that impact of section 13(9) of the Act is restricted to sub-section (2) of section 11 of the Act, relating to amounts set aside for accumulation and scope of section 13(9) of the Act does not extend to whole of section 11 of the Act. Since, during the year under consideration, the assessee did not claim any benefit sub-section (2) of section 11 of the Act, in our considered view, section 13(9) of the Act would have no applicability to the facts of the instant case.
6.6 In view of the above discussion, Ground Number 1 of the assessee’s appeal succeeds and the same is allowed.
6.7 Since we have already decided the issue in favour of the assessee with respect to Grounds of Appeal Number 1 of the assessee, we are not adjudicating on other Grounds of Appeal raised by the assessee.
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In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 13-03-2023