Income Tax Appellate Tribunal - Bangalore
The Income Tax Officer (Exemptions) ... vs M/S Catholic Diocese Of Karwar , Karwar on 29 August, 2018
ITA.599/Bang/2018 Page - 1
IN THE INCOME TAX APPELLATE TRIBUNAL
BENGALURU BENCH 'C', BENGALURU
BEFORE SHRI. A. K. GARODIA, ACCOUNTANT MEMBER
AND
SHRI. LALIET KUMAR, JUDICIAL MEMBER
I.T.A No.599/Bang/2018
(Assessment Year : 2014-15)
Income tax Officer (E),
Ward - 1, Mangaluru .. Appellant
v.
M/s. Catholic Diocese of Karwar,
D No.416, Puneeth Sadan,
Shirwad, Karwar - 581 306 .. Respondent
PAN : AAATC1869K
Assessee by : Shri. V. K. Gurunathan, Advocate
Revenue by : Shri. S. T. Seshadri, JCIT
Heard on : 23.08.2018
Pronounced on : 29.08.2018
ORDER
PER LALIET KUMAR, JUDICIAL MEMBER :
The present appeal is filed is filed by the Revenue against the order of the CIT (A), Mangaluru, dt.13.12.2017, for the assessment year 2014-15, on the following grounds :
ITA.599/Bang/2018 Page - 2 ITA.599/Bang/2018 Page - 3
02. With respect to ground no.2, it was submitted that the finding recorded by the AO in paras 9 to 11 is against the provision of law. It was the case of the assessee that the assessee has filed the requisite form no.10 during the assessment proceedings and therefore there is a substantial compliance under the provisions of section 11(2) of the Act. For the purposes of clarity, we may reproduce paras 9 to 11 of the assessment order which is to the following effect :
9. Moreover, the Form No.10 filed by the Assessee Trust at the time of assessment proceedings does not specify the amount of ITA.599/Bang/2018 Page - 4 accumulation and hence the amount of accumulation is to be treated as Nil. Form 10 filed at the time of assessment is reproduced here under for ready reference :
10. The claim of accumulation of Rs.27,50,184/- u/s.11(2) is hereby denied for the following reasons :
a. Form 10 has not been filed before the Assessing Officer on or before the due date i.e. 30.09.2014 b. Form 10 has not been electronically filed, as required by law upto the completion of assessment c. Application for condoning the delay in filing Form 10 has not been made before the Hon'ble Commissioner of Income Tax as per Board's Circular cited above.
11. Form 10 filed at the time of assessment (not electronically) does not specify the amount of accumulation, ITA.599/Bang/2018 Page - 5 hence claim of accumulation U/s.11(2) amounting to Rs.27,50,184/- is disallowed.
The assessee trust has thus made a wrong claim thus resulting in furnishing of inaccurate particulars of income for which penalty proceedings u/s.271(1)(c) is initiated.
03. On the other hand the Ld. DR has submitted that finding recorded by the CIT (A) in para 4.4 to 4.4.8 is against the Income tax Act and Rules. Our attention was drawn to Rule 12, wherein the amendment was incorporated w.e.f. 01.04.2012, to the following effect :
[(2) The return of income required to be furnished in Form SAHAJ (ITR-1) or Form No. ITR-2 or Form No. ITR-3 or 75[Form SUGAM (ITR-4)] or Form No. ITR-5 or Form No. ITR-6 47[or Form No. ITR-7] shall not be accompanied by a statement showing the computation of the tax payable on the basis of the return, or proof of the tax, if any, claimed to have been deducted or collected at source or the advance tax or tax on self-assessment, if any, claimed to have been paid or any document or copy of any account or form or report of audit required to be attached with the return of income under any of the provisions of the Act:] 48 [Provided that where an assessee is required to furnish a report of audit specified under sub-clause (iv), (v), (vi) or (via) of clause (23C) of section 10, section 10A49[, section 10AA], clause (b) of sub-section (1) of section 12A, section 44AB 49[, section 44DA, section 50B], section 80-IA, section 80-IB, section 80-IC, section 80-ID, section 80JJAA, section 80LA, section 92E, 50[section 115JB, 50a[section 115JC] or section 115VW] 51[or to give a notice under clause (a) of sub-section (2) of section 11] of the Act, he shall furnish the same electronically.]
04. In rebuttal it was the contention of the assessee that though it is undisputed that there is a provision under Rule as mentioned herein above, but none-the-less, the assessee has made sufficient compliance by referring the amount of the accumulated fund under Part-B-TI, column vi-9vi of the IT return, filed for AY 2014-15.
ITA.599/Bang/2018 Page - 6 For this purpose, our attention was drawn to page 8 of CIT (E) order, as under :
05. It was the further contention of the assessee before us that section 11(2)(c) was brought into the statute book by the amendment w.e.f. 01.04.2015, to the following effect :
(c) the statement referred to in clause (a) is 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:
Provided that in computing the period of five years referred to in clause (a), the period during which the income could not be applied for the purpose for which it is so accumulated or set apart, due to an order or injunction of any court, shall be excluded.
ITA.599/Bang/2018 Page - 7 However during the assessment year 2014-15, section 11(2) provides as under :
[(2) 40[Where 41[eighty-five] per cent of the income referred to in clause (a) or clause
(b) of sub-section (1) read with the Explanation to that sub-section is not applied, or is not deemed to have been applied, to charitable or religious purposes in India during the previous year but is accumulated or set apart, either in whole or in part, for application to such purposes in India, such income so accumulated or set apart shall not be included in the total income of the previous year of the person in receipt of the income, provided the following conditions are complied with, namely:--]
(a) such person specifies, by notice in writing given to the 42[Assessing] Officer in the prescribed 43 manner 44, the purpose for which the income is being accumulated or set apart and the period for which the income is to be accumulated or set apart, which shall in no case exceed ten years;45
[(b) the money so accumulated 46 or set apart is invested or deposited in the forms or modes specified in sub-section (5)]:] 47 [Provided that in computing the period of ten years referred to in clause (a), the period during which the income could not be applied for the purpose for which it is so accumulated or set apart, due to an order or injunction of any court, shall be excluded:] 48 [Provided further that in respect of any income accumulated or set apart on or after the 1st day of April, 2001, the provisions of this sub-section shall have effect as if for the words "ten years" at both the places where they occur, the words "five years" had been substituted.]
06. On the basis of the above, it was submitted that there was no mandatory provision of filing the form under the Act and this provision only became part of the above rules and therefore on the basis of the rules, the disallowance cannot be made.
07. We have heard the rival submissions and perused the record. Before we decide the issue on merit, it is necessary to reproduce the rules and form prevalent during the A. Y 2014-15, as under :
ITA.599/Bang/2018 Page - 8 Under Rule 17, this form was required to be filled before the AO before expiry of the time allowed for filing the return of income, under sub section (1) of section 139.
08. Relevant portion of Rule 17 provides as under :
17. NOTICE FOR ACCUMULATION OF INCOME BY CHARITABLE OR RELIGIOUS TRUST OR INSTITUTION OR ASSOCIATION REFERRED TO IN CLAUSES (21) AND (23) OF SECTION 10 The notice to be given to the Assessing Officer or the prescribed authority under sub-section (2) of section 11 or under the said provision as applicable under clause (21) or clause (23) of section 10 shall be in Form No.10 and shall be delivered before the expiry of the time allowed under sub-section (1) of section 139, for furnishing the return of income.
ITA.599/Bang/2018 Page - 9
09. The law has brought in the amendment in Rule 12(2) the proviso to the following effect :
Provided that where an assessee is required to furnish a report of audit specified under sub-clause (iv), (v), (vi) or (via) of clause (23C) of section 10, section 10A, clause (b) of sub-section (1) of section 12A, section 44AB, section 80-IA, section 80-IB, section 80-IC, section 80-ID, section 80JJAA, section 80LA, section 92E Section 115JB or to give a notice under clause (a) of sub-section (2) of section 11 of the Act, he shall furnish the same electronically.]
10. In view of the amendment brought in Rule12 (2) of rules and under clause (c) to section 11( 2) , law has mandatory to file Form 10 electronically. However prior thereto under Rule 17, notice was required to be given and delivered before the expiry of the time allowed under sub-section (1) of section 139 for furnishing the return of income and there was no requirement of filling the form electronically.
In the light of the above and the conjoint reading of Rule 17, Rule 12( 2 ) and form 10, it is abundantly clear that if the assessee wishes to take the benefit of section 11(2), it is essential for the assessee to furnish and deliver the notice in the requisite form 10 to the AO before the expiry of the period provided u/s.139(1) of the Act. However by virtue of amendment to Rule 12(2), it was only provided that the assessee is required to submit electronically the form 10 to the AO.
11. In the present case, the form 10 has not been filed before the AO on or before the due date for filing the return u/s.139(1) as on ITA.599/Bang/2018 Page - 10 30.09.2014, Further the assessee has not filed the form electronically. Lastly the form submitted by the assessee was inchoate as it is lacking the necessary particulars in respect of income for which the benefit was sought u/s.11(2) of the Act. Under the relevant form 10 (supra), it was necessary for the assessee to give the specific details of the amount for which the assessee was seeking the benefit u/s.11(2) of the Act. However the needful has not been done and the CIT (A) based on the judgment of the Hon'ble Supreme Court in the matter of CIT v. Nagpur Hotel Owners' Assn [(2001) 247 ITR 201] and more particularly in view of the entry made in the concerned column of the IT return, had allowed the benefit u/s.11(2) of the Act.
12 . In our considered opinion, there is no challenge to the rule before any court of law, more particularly Rule 17 and form 10 as existing on 01.04.2014. In the present case assessee has not been able to establish the reasonable cause for not filling the Form 10 and delivering the notice as per Rule 17 before the AO before the date of filing of the return of income. Further the notice produced by the assessee during the assessment proceedings was lacking essential particulars as the income for which the assessee has sought the benefit had not been disclosed. However considering that the assessee being a charitable organisation and had disclosed the accumulated funds in Part VI of column.9 of the IT return, we deem it appropriate to remand the matter to the file of the AO with a direction to the assessee to file the correct form 10 giving the entire details as required in form 10 to the AO. It is directed that the AO ITA.599/Bang/2018 Page - 11 on furnishing the form 10 by the assessee, AO may decide the matter afresh without being influenced by the order earlier passed by the AO.
13. The next ground in the Revenue's appeal is on account of deletion of the addition made on specific fund made by the CIT (A). In this regard, the Ld. DR has submitted that the documents furnished by the assessee before the CIT (A) were not available to the AO and therefore the AO had no occasion to examine the specific purpose for which the donations were received by the assessee and therefore the AO was right in his finding and had rightly treated the donation as income of the assessee.
14. Per contra, the Ld. AR has submitted that the CIT (A) had examined the entire after going through the documents filed by the assessee.
15. We have heard the rival submissions and perused the record. The CIT (A) had merely followed the order passed in the case of the assessee for AY 2012-13. However the CIT (A) has not examined any of the document mentioned in the paper book before us running pages 56 to 81. In the light of the above, as the CIT (A) has not examined any of the documents filed by the assessee and had wrongly come to the conclusion relying upon the decision passed in the case of the assessee for AY 2012-13, his order cannot be sustained. Therefore, we restore this issue of foreign contribution and specific fund donation issues to the file of the AO to examine ITA.599/Bang/2018 Page - 12 afresh after giving opportunity to the assessee of being heard. The AO is directed to scrutinise the purpose of foreign contribution received by the assessee and further to examine whether such foreign contribution was used for the purpose for which it was received by the assessee. Needless to say the specific purpose for which contribution was received by the assessee should be in accordance with the aims and object of the assessee and should not in any case violate any provision of law.
16. In the result, both the grounds raised in appeal of the Revenue are allowed for statistical purpose.
Order pronounced in the open court on 29th day of August, 2018.
Sd/- Sd/-
(A. K. GARODIA) (LALIET KUMAR)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Bengaluru
Dated : 29.08.2018
MCN*
Copy to:
1. The assessee
2. The Assessing Officer
3. The Commissioner of Income-tax
4. Commissioner of Income-tax(A)
5. DR
6. GF, ITAT, Bangalore
By order
Senior Private Secretary,
Income Tax Appellate Tribunal,
Bangalore