Delay in filing Form 10 – ITAT orders CIT(E) to investigate the reasons for failure
Facts and issues of the case
These appeals have been filed by the assessee against separate order of learned CIT(A) dated 20/02/2019, 10/01/2018 and 27/03/2019.Learned counsel for the assessee, at the outset, submitted that the main issue arising in these appeals is same which is the denial of exemption u/s 11 of the Act by holding that there was a delay in filing of Form 10 u/s 119(2)(b) of the Act. Learned counsel for the assessee in this respect invited our attention to appeal in I.T.A. No.191 where the order u/s 119(2)(b) has been passed by learned CIT (Exemptions) vide order dated 20/02/2019.
Learned counsel for the assessee submitted that the assessee is a charitable organization which is enjoying exemption u/s 12A of the Act and during the year under consideration the assessee had shown an amount of Rs.92,05,719/- under amount accumulated or set apart for specified purposes but the assessee had not filed Form 10 electronically as per Rule 17(2) of the I.T. Rules which requires that Form 10 shall be furnished before the expiry of time allowed under sub section (1) of section 139 for furnishing the return of income for relevant year. Learned counsel for the assessee submitted that in view of the order passed by learned CIT (Exemptions) u/s 119(2)(b) of the Act, the assessee preferred rectification application u/s 154 of the Act which was also rejected by learned CIT (Exemptions) and which is the subject matter of appeal in I.T.A. No.230. Inviting our attention to the appeal in I.T.A. No.197, Learned counsel for the assessee submitted that this appeal has been filed against the order of learned CIT(A) by which he has confirmed the addition made by the Assessing Officer by disallowing the exemption claimed u/s 11(2) of the Act for accumulation of surplus by holding that the benefit of accumulation shall not be allowed u/s 11(2) of the Act unless Form No. 10 is filed before the due date of filing the return of income specified u/s 139(1) of the Act. Learned counsel for the assessee in this respect invited our attention to Board’s Circular No. 07/2018 dated 20/12/2018 wherein the CBDT had directed its officers to condone the delay in filing of Form 10.
Learned counsel for the assessee submitted that if the delay in filing of Form 10 is condoned in view of Circular No. 7/2018 then the other two appeals representing I.T.A. No.197 and 230 will become infructuous and can be dismissed as such.Learned D. R., on the other hand, submitted that the Circular No.7/2018 has been considered by learned CIT (Exemptions) and he has held that the delay in filing the return of income was not due to genuine reason and therefore, has rightly held that the delay cannot be condoned as per this circular as the assessee had not fulfilled the twin conditions of being prevented by reasonable cause for filing Form 10 within the stipulated time and also had failed to justify the reasons for not filing the return of income within stipulated time.
Learned counsel for the assessee, in his rejoinder, submitted that the assessee had stated before learned CIT (Exemptions) through an affidavit that assessee was prevented by reasonable cause for not filing the return of income within the prescribed period u/s 139(1) of the Act and therefore, the learned CIT (Exemptions) should have condoned the delay. On a query from the Bench regarding the investment in the specified asset, Learned counsel for the assessee filed a comparative chart of cash and bank balances and fixed deposit as on 31/03/2015 and 31/03/2016 wherein there was incremental investment of Rs.1,06,06,727/- in the specified assets against the required sum of Rs.92,07,591/- during the period ended 31/03/2016. Therefore, in view of the facts and circumstances, it was prayed that the delay in I.T.A. No.191 be allowed and the other appeals may be dismissed as infructuous.
Observation by the court
Court had heard the rival parties and have gone through the material placed on record. We find that assessee is a trust registered u/s 12A of the Act and had filed an application on 26/12/2018 u/s 119(2)(b) of the Act for condonation of delay in submission of Form 10. Form 10 represents notice for accumulation of income which the assessee is unable to spend during the assessment year and which is accumulated to be spent in the succeeding years. The assessee was required to file Form 10 along with return of income in assessment year 2016-17 within the stipulated time i.e. on 17/10/2016 where as these were filed electronically on 06/01/2017 and 07/01/2017 respectively.
The analysis of directions of CBDT vide this circular reveals that since assessment year 2016-17 was the first year where the Form 10 was to be filed electronically and there was genuine hardship and therefore, vide this circular the CBDT directed the authorities for condonation of delay in filing Form 10. However, it has been stated in the said Circular that Commissioners while entertaining such belated applications shall satisfy themselves that the assessee was prevented by reasonable cause from filing of application in Form 10 within the stipulated time. The circular further states that Commissioners shall also satisfy themselves that theamount accumulated or set apart has been invested or deposited in any one or more of the forms or modes specified in sub-section (5) of section 11 of the Act.
The order of learned CIT (Exemptions) states that the reason cited by the assessee society for not filing the Form 10 and income tax return within the due date cannot be accepted in the absence of any supporting evidence and also the assessee did not furnish any evidence regarding the investment of accumulated amount in specified modes/manner as per section 11(5) of the Act. Learned counsel for the assessee had invited our attention to an affidavit filed before learned CIT (Exemptions) wherein the reason for not filing the return of income and Form 10 were explained to be the illness of child of accountant and also due to crash of hard disk of computer. Learned counsel for the assessee had argued that these reasons were quite genuine and learned CIT (Exemptions) should have accepted these reasons and should have condoned the delay.
As regards the investment in the prescribed assets, Learned counsel for the assessee had filed before us a comparative chart of investment in savings account and fixed deposits as on 31/03/2015 and 31/03/2016 wherein it has been claimed to have invested in specified assets an amount exceeding the required amount as required by the provisions of relevant section whereas the learned CIT (Exemptions) has stated that no evidence was filed before him regarding investment of accumulated amount in the specified assets. In view of these facts and circumstances, we are of the opinion that the matter requires reconsideration at the end of learned CIT (Exemptions) who should re- examine the reasons for failure on the part of the assessee to file Form 10 and return of income within the prescribed period of time and should also examine the investment of accumulated fund in the specified assets and then pass a fresh order. Needless to say, the assessee will be provided sufficient and reasonable opportunity of being heard.
Conclusion
In the result, the appeal in I.T.A. No.191 is allowed for statistical purposes. Whereas appeal in I.T.A. No.197 and 230 are dismissed as having become infructuous.
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