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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI DUVVURU RL REDDY, HON’BLE & SHRI S BALAKRISHNAN, HON’BLE
PER S. BALAKRISHNAN, Accountant Member :
This appeal filed by the assessee is against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [Ld. CIT(A)-NFAC] vide DIN & Order No. ITBA/NFAC/S/250/2022-23/1049707754(1) dated 13/2/2023 arising out of the intimation U/s. 143(1) of the Income Tax Act, 1961 [the Act] for the AY 2020-21 on 30/11/2021.
2 2. Brief facts of the case are that the assessee claimed relief U/s. 11 of the Act for Rs. 7,04,10,670/-. In this regard, the assessee filed Form-10B on 31/3/2021. The CPC while processing the return of income U/s. 143(1) of the Act has denied the exemption claimed by the assessee U/s. 11 of the Act citing that Form-10B was filed belatedly. However, during the First Appellate Proceedings, the assessee submitted an order from the Ld. CIT(Exemptions), dated 17/1/2023 condoning the delay in filing of Form-10B for the AY 2020-21. The Ld. CIT(A)-NFAC, considered the condonation granted to the assessee. However, the Ld. CIT(A)-NFAC found that the assessee has filed its return of income belatedly U/s. 139(5) of the Act and hence concluded that the denial of exemption by the CPC U/s. 11 of the Act is valid. Aggrieved by the order of the Ld. CIT(A)-NFAC, the assessee is in appeal before us by raising the following grounds of appeal:
“1. The order of the Ld. CIT(A) is contrary to the facts and also the law applicable to the facts of the case. 2. The Ld. CIT(A) is not justified in holding that the: (a) appellant is not eligible for exemption U/s. 11 of the Act on the ground that the return of income was not filed in time. (b) The issue of delay in filing the return of income is not the subject matter of appeal and as such outside the scope of powers of enhancement.
3 (c) Without prejudice to Ground (b) above, the Ld. CIT(A) erred in adjudicating a new issue without granting opportunity to appellant.
3. The Ld. CIT(A) ought to have held that the adjustment is outside the scope of intimation U/s. 143(1) of the Act.
4. The Ld. CIT(A) ought to have directed the Assessing Officer to accept the income returned at Rs. NIL instead of directing the Assessing Officer to allow only the expenditure incurred by the appellant. 5. Any other grounds may be urged at the time of hearing.”
The main issue emanating from the grounds raised by the assessee is with respect to denial of exemption U/s. 11 of the Act on the ground that the return of income was not filed on time.
At the outset, the Ld. AR argued that originally the denial of exemption U/s. 11 of the Act by the CPC is related to the delayed filing of Form-10B of the Act. The Ld. AR further submitted that after submitting the condonation of delay in filing the Form-10B of the Act for the AY 2020-21, the Ld. CIT(A) has resorted to deny the exemption U/s. 11 of the Act stating that the return of income was filed belatedly on 31/3/2021. The Ld. AR vehemently submitted that this was not the subject matter of appeal before the Ld. CIT(A)-NFAC. The Ld. AR relied on the Clarification in F.No.173, dated 23/4/2019 wherein the exemption U/s. 11 cannot be denied for a Trust Registered U/s. 4 12AA of the Act if the return of income is filed within the time allowed U/s. 139 of the Act. The Ld. AR further submitted that this clarificatory Circular states to allow the exemption U/s. 11 of the Act if the return of income is filed U/s. 139 of the Act does not specify whether it should be U/s. 139(1) or U/s. 139(4) of the Act. The Ld. AR further submitted that these clarificatory amendments are binding on the Revenue and hence the denial of exemption U/s. 11 of the Act is not valid.
Per contra, the Ld. DR fully supported the orders of the Ld.
Revenue Authorities.
We have heard both the parties and perused the material available on record as well as the orders of the Ld. Revenue Authorities. It is found from the submissions made by the assessee that the return of income was filed on 31/3/2021 U/s. 139(4) of the Act. Further, it is also found that Form-10B has also been filed on 31/3/2021. We also noted that due to COVID the due date of filing of return of income was extended upto 15/3/2021 whereas the due date for filing of return U/s. 139(4) of the Act remained at 31/3/2021. The clarificatory Circular of the CBDT in F.No. 173/193/2019-ITA-1, dated 23/4/2021 is extracted below:
SECTION 12A OF THE INCOME-TAX ACT, 1961 - CHARITABLE OR RELIGIOUS TRUST - REGISTRATION OF - CLARIFICATION WITH REGARD TO TIME ALLOWED FOR FILING OF RETURN OF INCOME SUBSEQUENT TO INSERTION OF CLAUSE (ba) IN SUB-SECTION (1) OF SECTION 12A CIRCULAR F. NO. 173/193/2019-ITA-I, DATED 23-4-2019 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 under section 139(4) of the Income-tax Act, 1961 (Act), the following is being communicated under section 143(l)(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 under section 11 i.e. sl.no. 4(i) and 4(viii) in schedule Part BTI is not allowed." Based on this, exemption under section 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 under section 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."
3. Additionally, an excerpt of circular No. 2/2018 dated 15-2-2018 "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 6 chargeable to income-tax shall furnish the return of income within the time allowed under section 139 of the Income-tax Act."
3. Thus, for a trust registered under section 12AA of the Act to avail the benefit of exemption under section 11 shall inter-alia file its return of income within the time allowed under section 139 of the Act. Accordingly, orders under section 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).”
From the above Circular, we find that it was clarified with regard to the time allowed for filing of return of income subsequent to insertion of Clause-(ba) in Sub-section (1) of section 12A of the Act. These clarificatory amendments apply in relation to AY 2018-19 and subsequent assessment years. Since it has been clarified by the CBDT that if the return of income is filed within the time allowed U/s 139 of the Act, the demand raised by the CPC while processing the return of income U/s 143(1)(a) of the Act be rectified by the CPC. We therefore direct the Ld. AO to follow the Circular (supra) and allow the claim made by the assessee with respect to exemption U/s. 11 of the Act as the assessee has filed the return of income on 31/3/2021 along with Form-10B which is well within the time limit specified U/s. 139(4) of the Act. Therefore, we allow the grounds raised by the assessee.
In the result, appeal of the assessee is allowed. 7.
7 Pronounced in the open Court on10th August, 2023.