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Uttrakhand Shiksha Bharti Society , Nanital v. The Income Tax Officer (Exemptions), Dehradun

Income Tax Appellate Tribunal

Jun 30, 2022

Judgment

Subsequent
References

CaseIQ

Smart Summary (Beta)

Concise Analytical Summary of the Opinion

Factual and Procedural Background

The Assessee, Uttrakhand Shiksha Bharti (a society registered under section 12AA), claimed exemption under section 11 read with sections 12A/12AA and section 13 for A.Y. 2016-17. The case was selected for scrutiny. The Assessing Officer (AO) examined the income and expenditure account and found gross receipts of Rs. 3,42,41,610 and applied income of Rs. 1,22,28,155, leaving a surplus of Rs. 2,20,13,455. The AO concluded there was a shortfall of Rs. 1,68,77,213 relative to the 85% utilization threshold and treated the shortfall as deemed application unless Form No. 10 (statement of accumulation) had been filed within the time prescribed by section 139(1).

The Assessee had not filed Form No. 10 with the original return but later electronically filed Form No. 10 along with a revised return on 24.03.2018. The AO disallowed Rs. 1,68,77,213 as set apart for specified purpose and added it to income, holding that Form No. 10 had not been filed within time and section 13(9) makes no provision for reliance on a revised return filing under section 139(4).

The Assessee appealed to the Commissioner of Income Tax (Appeals) who, by order dated 30.07.2021, affirmed the assessment and dismissed the appeal. The Assessee then appealed to the Income Tax Appellate Tribunal (ITAT), Dehradun Bench. The ITAT heard the matter and delivered the order dated 30.06.2022.

Legal Issues Presented

Whether Form No. 10 (statement of accumulation), required to be submitted electronically under Rule 17 as a condition for accumulation under sections 11(2) and 13(9), can be furnished belatedly with a revised return (under section 139(4)) and still satisfy the statutory condition for accumulation for A.Y. 2016-17.
Whether the requirement to file Form No. 10 electronically within the due date under section 139(1) is mandatory (jurisdictional) such that belated filing cannot be accepted, or whether it is directory / susceptible to substantial compliance or condonation.
Whether the Assessing Officer and first appellate authority erred in not considering the Assessee's written submissions about online technical difficulties and the novelty of e-filing of Form No. 10 (effective 01.04.2016), and in not granting relief under the CBDT circulars empowering condonation for A.Y. 2016-17.
Whether the authority below erred in concluding that the stated purpose of accumulation (Education) was not a specified purpose for accumulation.

Arguments of the Parties

Appellant's Arguments (Assessee)

The electronic e‑filing requirement for Form No. 10 was introduced with effect from 01.04.2016; the Assessee was unaware of the new e‑filing procedure and therefore could not file Form No. 10 with the original return, but subsequently filed it electronically with the revised return on 24.03.2018 (prior to the assessment order).
The defect of not filing Form No. 10 within the stipulated time is curative and stands cured by filing it with the revised return under section 139(4); in support the Assessee relied upon case law that allows filing up to completion of assessment.
The CBDT, by Circular No. 7/2018 (and subsequent circulars), authorized Commissioners to admit belated Form No. 10 for A.Y. 2016-17 on satisfaction of reasonable cause; this administrative relief supports the Assessee's position.
The non-filing was bona fide, inadvertent and caused by unawareness and technical/ procedural novelty; the Assessee relied on professional advisors (CAs/Advocates) and rectified the mistake before assessment completion.
No direct or indirect benefit was taken by the Assessee, and revenue suffered no loss or concealment; therefore lenient treatment and consideration of substantial compliance is warranted.

Respondent's Arguments (Department / Revenue)

Filing of Form No. 10 from 01.04.2016 onwards is mandatory; in the absence of a timely filed electronic Form No. 10, the Assessee is not entitled to the benefit under section 11 for accumulation.
The orders passed by the AO and the Commissioner (Appeals) were correct and should be upheld.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
CIT vs. Nagpur Hotel Owners Association (2001) 247 ITR 201 (SC)	Form No. 10 can be furnished by the Assessee up to the stage of completion of assessment under section 143(3) of the Act.	The Tribunal relied on this apex court dictum to support the proposition that Form No. 10 filed before completion of assessment satisfied the statutory requirement and favored acceptance of the Form No. 10 filed with the revised return before assessment.
CIT vs. G.M. Knitting Industries Pvt. Ltd. (2015) 376 ITR 456 (SC)	Reports (and related certificates) can be filed at any stage up to the assessment; filing before the assessment order can cure earlier non-filing with the return.	The Tribunal cited this authority for the proposition that filing of the required documentation before the assessment order amounts to substantial compliance and supports admitting Form No. 10 filed prior to the assessment order.
CIT vs. Panama Chemical Works (2000) 113 Taxman 717 (Allahabad High Court)	Furnishing the audit report during assessment proceedings amounts to substantial compliance with the statutory requirement.	The Tribunal referenced this High Court decision to reinforce the view that filing during assessment proceedings is substantial compliance and to justify considering Form No. 10 filed before completion of assessment.
Nimittaben and Bhatt vs. CIT (Exemption), Ahmedabad (R/Special Civil Application No. 8977 of 2022; decided 22.12.2020)	The Gujarat High Court condoned delay and quashed orders where exemption under section 12 was denied due to non-filing or belated filing of Form No. 10; it followed earlier Gujarat High Court dicta treating furnishing of audit report as procedural/directory.	The Tribunal relied on this High Court decision (and the reasoning it adopted from prior Gujarat High Court authority) to support the approach that Form No. 10's belated filing can be condoned and that the procedural requirement is directory/substantially complied with if filed during assessment.
CIT vs. Gujarat Oil and Allied Industries Ltd. (1993) 201 ITR 325 (Gujarat High Court)	Furnishing an audit report with the return is a procedural proviso that is directory in nature; substantial compliance suffices and delay should not automatically result in denial of exemption.	The Tribunal cited this authority (as relied upon in Nimittaben & Bhatt) to support the principle that the benefit of exemption should not be denied merely due to delay in furnishing the audit report and that production during assessment may be acceptable upon sufficient cause.

Court's Reasoning and Analysis

The Tribunal analyzed the matter in several sequential steps, drawing on statutory amendments, administrative instructions and judicial authorities cited in the record:

Statutory starting point: The Tribunal observed that Finance Act, 2015 made amendments to sections 11 and 13, effective from 01.04.2016 (A.Y. 2016-17), introducing a condition that Form No. 10 be submitted electronically within the due date specified by section 139(1) as a condition for accumulation under sections 11 and 13.
Administrative relief: The Tribunal noted that the CBDT issued Circular No. 7/2018 (dated 20.12.2018) empowering Commissioners of Income Tax to admit belated applications in Form No. 9A and Form No. 10 for A.Y. 2016-17 where filed after the time allowed, provided the Commissioner is satisfied that the Assessee was prevented by reasonable cause; the Commissioners were also to satisfy themselves regarding investment/deposit in modes specified by section 11(5). The Tribunal further recorded that the CBDT issued subsequent circulars (30/2019, 03/2020 and 06/2020) indicating recognition of general difficulties in e‑filing Form No. 10 for that year.
Judicial precedents: The Tribunal examined higher court decisions which it regarded as supportive of the proposition that requisite reports/forms filed before completion of assessment amount to substantial compliance (citing Nagpur Hotel Owners Association (SC), G.M. Knitting (SC), Panama Chemical Works (Allahabad HC), and Gujarat High Court decisions like Nimittaben & Bhatt and Gujarat Oil & Allied).
Factual application: The Tribunal found that the e‑filing requirement was newly introduced for A.Y. 2016-17, and the Assessee's failure to e‑file Form No. 10 with the original return prima facie appeared bona fide and unintentional. Importantly, the Assessee filed Form No. 10 electronically along with the revised return on 24.03.2018 and thus made the form available to the Assessing Officer before the date of the assessment order (27.11.2018).
Disposition of authorities below: Given the above, the Tribunal concluded that the AO should have taken into consideration Form No. 10 filed on 24.03.2018. The Tribunal also took into account the CBDT circulars which permitted condonation where reasonable cause existed.
Remedy ordered: The Tribunal set aside the assessment order and the impugned CIT(A) order and remitted the matter to the Assessing Officer for fresh decision after taking into consideration the Form No. 10 filed with the revised return and affording the Assessee a proper and reasonable opportunity of being heard.

Holding and Implications

Holding: The appeal filed by the Assessee is ALLOWED (for statistical purposes); the assessment order dated 27.11.2018 and the impugned CIT(A) order are set aside and the case is remanded to the Assessing Officer for fresh decision after taking into consideration the Form No. 10 filed with the revised return and after affording the Assessee a proper and reasonable opportunity of being heard.

Implications:

Direct effect: The assessment and appellate orders that disallowed the benefit of accumulation under section 11 (by treating Rs. 1,68,77,213 as not being properly set apart) are set aside. The Assessing Officer must reconsider the claim in light of the Form No. 10 filed on 24.03.2018 and the factual and legal material on record, and give the Assessee an opportunity to be heard.
Broader precedent: The Tribunal applied existing Supreme Court and High Court authorities and CBDT circulars to reach its decision. The order itself remands for fresh consideration rather than purporting to lay down a new, expansive legal principle; it relies on previously decided authority and administrative guidance to treat belated/formal compliance (where filed before assessment) as capable of satisfying the statutory requirement in the particular factual matrix of A.Y. 2016-17.
Practical note: The decision recognizes administrative relief extended by the CBDT for A.Y. 2016-17 and the peculiarities attendant to the first year of a new e‑filing requirement; the Tribunal treated the lapse as prima facie bona fide and remitted the matter to allow the AO to examine the Form No. 10 and compliance with section 11(5) investments, if applicable.

Order pronounced in open court on 30.06.2022. Members: (Anil Chaturvedi) (Accountant Member) and (N.K. Choudhry) (Judicial Member).

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IN THE INCOME TAX APPELLATE TRIBUNAL

[ DEHRADUNBENCH: DEHRADUN ]

BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER

AND

SHRI N.K. CHOUDHRY, JUDICIAL MEMBER

ITA No.29/DDN/2021

Assessment Year: 2016-17

Uttrakhand Shiksha Bharti Versus Income Tax Officer, Society,01, Peters Field, (Exemption) Balika Vidya Mandir, Dehradun.

Mallital, Nainital,

PAN: AAATU2461K

(Appellant) (Respondent) Assessee by : Shri Pawan Nath, C. A.; Department by : Shri N.C. Upadhyay, Sr. D.R. Date of hearing : 22.06.2022

Date of order : 30.06.2022

ORDER

PER N.K. CHOUDHRY, J.M.

This appeal has been preferred by the Assessee against the order dated 30.07.2021, impugned herein, passed by the ld. Commissioner of Income Tax (Appeals), Haldwani (in short Ld. Commissioner) for the assessment year 2016-17.

2. The Assessee has raised the following grounds of appeal:-

"1. Because, the Ld. CIT Appeal erred in law as well on facts, not appreciating the correct factual and legal position in relation to Form 10 read with Rule 17(2) and section 11(2), 13(9) of the Act.

2. Because, the Ld. CIT Appeal erred in not appreciating the provision

of section 139(9) of the Act, as applicable in the instant case, with reference to Form 10 of the Income Tax Rules.

3. Because, the Ld. CIT Appeal erred in facts in not considering the written submissions and evidence placed on record during Appeal proceeding vis a vis Form 10 and prevailing online technical issues.

4. Because, the Ld. CIT-Appeal erred in holding that the purpose of accumulation as stated i.e., Education, is not a specified purpose for accumulation of Income.

5. The Assessee crave leave to amend or add any other ground of appeal."

3. Brief facts, relevant for adjudication of the instant appeal are that the Assessee, being a registered society u/s. 12AA of the Act had claimed exemption u/s. 11 read with section 12A/12AA and section 13 of the Act. The case of the Assessee was selected for scrutiny through CASS and the Assessing Officer during the assessment proceedings on perusal of income and expenditure account of the Assessee for the year under consideration, found that the gross receipts of the Assessee was Rs.3,42,41,610/- against which the Assessee has applied income to the tune of Rs.1,22,28,155/- making surplus of Rs.2,20,13,455/-. Consequently, there was short fall of Rs.1,68,77,213/- from the threshold limit of 85% of utilization of income by the Assessee. Therefore, considering the shortfall as deemed application, filing of form No. 10 was mandatory condition as per section 11(2) of the Act, which prescribes that the statement of accumulation must be submitted before the due date specified in sub-sec. (1) of section 139 for furnishing the return of income for the previous year whereas in this case the Assessee had filed the same only on 24.03.2018 along with the revised return of income.

3.1 On being asked by the Assessing Officer, the Assessee submitted that because as prescribed under Rule 17 of the Income- tax Rules, 1962 (in short 'the Rules') as amended w.e.f.

01.04.2016, the e-filing of Form No. 10 was introduced first time only. The Assessee was unaware about the exact procedure of e- filing of Form No. 10 and therefore, could not file during the filing of original income tax return. However, the same was filed during the filing of revised Income-tax Return for the year under consideration on dated 24.03.2018.

3.2 It was also claimed by the Assessee that the defect in filing the return - non-submission of Form No. 10 within the stipulated time frame u/s. 139(1) of the Act, being curative in nature, stands cured while filing the same with the revised return u/s. 139(4) of the Act. The Assessee, in support of its contentions, also relied upon various case laws.

3.3 The Assessing Officer, though considered the claim of the Assessee and the submissions made, but did not get impressed and rejected the claim of the Assessee and added the amount of Rs.1,68,77,213/- as shortfall, in the income of the Assessee on the ground that there is no mention in section 13(9) of the Act about the revised return filing u/s. 139(4) of the Act, regarding which the Assessee has contended in his submissions. The Assessee has failed to file the declaration in Form No. 10 in time and as per section 13(9) of the Act, the accumulation of Rs.1,68,77,213/- is not being treated as deemed application for the A.Y. under consideration.

4. The Assessee being aggrieved with the assessment order dated 27.11.2018 passed u/s. 143(3) of the Act by the Assessing Officer, preferred first appeal before the ld. Commissioner, who vide impugned order affirmed the assessment order and dismissed the appeal of the Assessee by concluding as under :

"4.8 In this case the assessment order u/s 143(3) was passed on 27-11-2018. On 20-12-2018 the CBDT issued Circular No.- 7/2018 delegating power to the Commissioner of Income Tax to condone the delay in filing Form-10 and Form 9A for AY:2016-17. Accordingly the appellant had filed application on 28-12-2018 to the Principal Commissioner of Income Tax for condoning of delay in submitting Form-10. The Pr CIT vide order dated 10-07-2019 rejected the appellant application of condonation of delay in filing the Form-10.

4.9 Considering the above facts and discussion it is held that the Assessing Officer has rightly disallowed the amount of Rs. 1,68,77,213/- being set apart for specified purpose in terms of provision of section 11(2) and 11(5) of the Act, as the appellant failed to comply the conditions prescribed in the Act i.e. failed to submit Form 10 within stipulated time and no specific purpose has been mentioned. This ground of appeal is dismissed.

In effect, the appeal is dismissed."

5. The Assessee being aggrieved with the impugned order is in appeal before us. At the outset, it was submitted by the Assessee that vide Finance Act, 2015, the amendment has been made in section 11 & 13 of the Actw.e.f. 01.04.2016 applicable from A.Y. 2016-17 onwards. As per the amended provisions of the Act read with Rule 17 of the Rules, 15% of the income can be accumulated indefinitely by the trust and 85% of the income can be accumulated for not exceeding five years subject to the condition inter-alia that such persons submits prescribed Form No. 10 electronically to the Assessing Officer within the due date specified u/s. 139(1) of the Act.

5.1 The CBDT vide its circular No. 7/2018 issued on dated 20.12.2018 authorised the Commissioners of Income Tax to admit belated applications in Form No. 9A and Form No. 10 in respect of A.Y. 2016-17 where such Form No. 9A and Form No. 10 are filed after the expiry of time allowed under the relevant provisions of the Act. It was further instructed that the Commissioners will, while entertaining such belated applications in Form No. 9A and Form No.

10 satisfy themselves that the Assessee was prevented by reasonable cause from filing application in Form No. 9A and Form No. 10 within the stipulated time. Further, in respect of Form No. 10, the Commissioners shall also satisfy themselves that the amount accumulated or set apart has been invested or deposited in any one or more of the form or modes specified in subsection (5) of section 11 of the Act.

5.2 In the instant case, the Assessee before the authorities below claimed that the provisions for filing of Form No. 10 electronically have been inserted first time only and made applicable from A.Y. 2016-17 onwards and the Assessee being ignorant qua the insertion of the latest provisions, could not file Form No. 10 along with return filed u/s. 139(1) of the Act, however, subsequently filed the same along with revised return u/s. 139(4) of the Act, i.e., before due date of filing of revised return and even before the date of assessment order dated 27.11.2018.

5.3 The Assessee further claimed as per verdict of Hon'ble Apex Court in the case of CIT vs. Nagpur Hotel Owners Association (2001) 247 ITR 201 (SC), Form No. 10 can be furnished by the Assessee upto the stage of completion of assessment u/s. 143(3) of the Act. Further, in the case of CIT vs. G.M. Knitting Industries Pvt. Ltd. (2015) 376 ITR 456 (SC), it has been held that the report can be filed at any stage upto the assessment even though certificate in Form 10CCB along with return of income has not been filed but the same was filed before the order of assessment was made.

5.4 The CBDT, in order to give relief to the Assessees who have suffered genuine hardships, by issuing Circular No. 7/18 dated 20.12.2018 authorised the Commissioners of Income-tax to pass an appropriate order for condonation of delay upon receiving

application. It is a fact that many persons did not file Form No. 10 electronically and therefore, the CBDT in order to redress the difficulties of the stakeholders was constrained to issue various Circularsi.e. 7/2018 , 30/2019, 03/2020 and 06/2020, which goes to show the CBDT has considered the non-filing of Form No. 10 electronically as a general genuine cause and therefore, tried to support the Assessees who have made default in one or the other way.

5.5 The Assessee further claimed for legal compliance, the Assessee has to depend upon the legal advice of the Chartered Accountants or Advocates for filing of ITR and related forms. The assessment year 2016-17 being the first year of insertion of new provision for filing of Form No. 10 electronically, some of the stake holders including the Assessee herein due to unawareness escaped to file Form No. 10 electronically within the stipulated time and therefore, cannot be penalised for the inadvertent mistake on the part of its advisors.

5.6 Even otherwise, no direct or indirect benefit has been taken by the Assessee or direct or indirect losses has been occurred to the Revenue and there is no concealment of income or furnishing of inaccurate particulars of income, therefore, the Assesseedeserves lenient treatment as the filing of Form No. 10 within the time is directory but not mandatory.

6. On the contrary, the ld. DR vehemently supported the orders passed by the authorities below and submitted that filing of Form No.10 from 01.04.2016 onwards is mandatory in nature and in the absence of Form No. 10 filed electronically, the Assessee is not entitled for any benefit u/s. 11 of the Act.

7. Heard the parties and perused the material available on record. We have given our thoughtful consideration to the rival claims. It is not in controversy that an amendment in section 11 and 13 of the Act was made vide Finance Act, 2015 applicable from 01.04.2016 (A.Y. 2016-17 onwards), whereby filing of Form No. 10 electronically to the Assessing Officer within the due date specified u/s. 139(1) of the Act, has been made as a condition for accumulation of income u/s. 11 and 13 of the Act.

7.1 The CBDT while considering the representations received by the Board/Field Authorities qua delay in filing of Form No. 9A and Form No. 10 for A.Y. 2016-17, issued a Circular No. 7/2018 dated 20.12.2018 and empowered the Commissioners of Income Tax to admit belated applications in Form No. 9A and Form No. 10 qua A.Y. 2016-17 where the same are filed after the expiry of time allowed under the relevant provisions of the Act. It was further instructed to the Commissioners of Income Tax, to satisfythemselves that the Assessee was prevented by reasonable cause from filing an application in Form No. 9A and Form No. 10 within the stipulated time.

7.2 The Hon'ble Apex Court in the case of CIT vs. Nagpur Hotel Owners Association (supra) allowed the filing of Form No. 10 upto the stage of completion of assessment u/s. 143(3) of the Act and the Hon'ble Allahabad HighCourt in the case of CIT vs. Panama Chemical Works (2000) 113 taxman 717 also held that filing of the audit report during the assessment proceedings by the Assessee amounts to substantial compliance with the statutory requirement.

7.3 The Hon'ble Gujarat High Court in the case of Nimittaben and Bhatt vs. CIT(Exemption) Ahmedabad { R/Special Civil Application No. 8977 of 2022 decided on 22.12.2020} while considering the decision of the same high Court in the case of CIT vs. Gujarat Oil and Allied Industries Ltd., (1993) 201 ITR 325 (Guj)wherein it

washeld"that the provision regarding furnishing of audit report with the return has to be treated as procedural proviso. It is directory in nature and its substantial compliance would suffice. The benefit of exemption should not be denied merely on account of delay in furnishing the same and it is permissible for the Assessee to produce the audit report during the assessment proceedings by assigning sufficient cause.' condoned the delay and quashed the impugned orders wherein exemption u/s. 12 was denied on non-filing of Form No. 10 within time prescribed or filing of Form No. 10 belatedly.

7.4 No doubt, lack of knowledge of law is not an excuse, however, respectfully following the dictums of the Hon'ble Higher Courts and considering the peculiar facts that the provision for filing of the Form No. 10 was inserted newly and made applicable from A.Y. 2016-17 onwards, which in the instant case is under consideration and therefore the Assessee committed error which prima facie seems to be bonafide and unintentional. Even otherwise the Assessee rectified its mistake by filing form No. 10 electronically along with revised return of income u/s. 139(4) of the Act, which goes to show that the Assessee has used its due diligenceand made available the form No. 10 to the Assessing Officer during the assessment proceedings itselfand therefore the Assessee can not be penalized. On the aforesaid analyzations, we are of the view that the Assessing Officer should have taken into consideration the form No. 10 filed on dated 24.03.2018. Consequently, the assessment order along with impugned order is set aside and the case is remanded to the file of the Assessing officer for decision afresh by taking into consideration the FORM 10 filed along with the revised return of income, suffice to say while affording proper and reasonable opportunity of being heard to the Assessee.

8. In the result appeal filed by the Assessee stands allowed for statistical purposes.

Order pronounced in open Court on 30/06/2022. Sd/- Sd/-

(ANIL CHATURVEDI) (N.K. CHOUDHRY)

ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated :.30.06.2022. *MEHTA*