Income accumulation application allowed under rectification u/s 154 as assessment was not completed and there was only intimation u/s 143(1)
ABCAUS Case Law Citation:
ABCAUS 2470 (2018) 08 ITAT
Important Case Laws Cited/relied upon by the parties:
Bagalkot Town Development Authority v. CIT
CIT Vs. Nagpur Hotel Owner’s Association
In this appeal, the assessee had challenged the order of the Commissioner of Income Tax-Appeals in upholding the rejection of income accumulation application in Form 10 u/s 154 of the Income-tax Act, 1961 (the Act).
The assessee was a charitable trust registered u/s 12AA of the Act. The assessee was required to apply 85% of the income for charitable purposes and to the extent it was not so applied, assessee was entitled to accumulate income for application for charitable purposes in future. For this purpose, the assessee had to give a notice in Form 10 to the AO stating the purpose for which the income is accumulated, period for which the assessee sought to accumulate, etc.
For the AY 2014-15, the assessee filed a NIL return of income. The retirn was processed and an intimation u/s 143(1) of the Act was issued. However, while processing the return u/s 143(1) of the act, the AO disallowed the claim of assessee for exemption u/s 11(2) of the Act for the reason of non-filing of Form 10 u/s 11(2) of the Act. Since Form 10 was not filed, the AO brought to tax income to the extent assessee was not entitled to accumulate.
The assessee filed a rectification application u/s 154 of the Act seeking to rectify the intimation u/s. 143(1). The assessee, in the application u/s 154 contended that in the original return filed, the fact of accumulation of income u/s 11(2) was mentioned. The appellant had already prepared an application for accumulation in Form 10. However, the same was not submitted at the time of filing return since the return ought to be filed online without annexure.
The Assessee pointed out that the governing body of the trust at its meeting had resolved to accumulate pursuant to section 11(2) of the Income Tax Act, 1961 and a resolution to this effect was passed. In the usual course, online filing of return can be uploaded without any required attachments being attached or entered. Also the Departmental earlier circulars stated that documents need not be attached while filing e-return and only when the annexure/documents are sought by the Assessing Officer, the same should be produced. Since, there was a demand, the appellant filed E-copy of Form 10 later.
On the question whether accumulation can be denied on the ground of non furnishing of Form No. 10 along with the return of income, the assessee pointed out that a reading of Form No. 10 r.w. rule 17 as it existed at the relevant time would that that for claiming of the benefit of sec 11, it was necessary to intimate to the Assessing Authority, the particulars required, at any time during the assessment proceedings.
The Assessee pointed out that the Hon’ble Gujarat High Court had taken the view that application for accumulation of Income is entertained even during the course of appeal because the proceedings are meant to correctly assess the tax liability of an assessee. In the instant case, there is no assessment proceedings pending for the aforesaid AY and only an intimation u/s 143(1) was served on the assessee which had to be rectified u/s 154 of the Act.
The AO observed that for accumulation purpose u/s 11(2), Form 10 was not uploaded electronically before the due date and it was uploaded only after receipt of intimation u/s 143(1). He stated that the application for rectification u/s 154 could not be considered for the reasons that as per rule 17 r.w.s 11(2), Form 10 was required to be filed on or before the due date of filing of return of income for corresponding AY but it was filed belatedly, secondly, for the AY 2014-15, it was mandatory to upload Form No. 10 to avail the benefit of accumulation u/s 11(2).
Accordingly, the AO rejected the request for rectification u/s 154.
Aggrieved by the order of AO, assessee preferred an appeal before the CIT(Appeals), who confirmed the order of the AO observing that the filing of Form 10 before the expiry of time for furnishing the return was mandatory for claiming the benefit of section 11(2) of the Act.
The Tribunal noted that a similar issue was decided by it earlier wherein the view taken by the Tribunal following the decision of Hon’ble Supreme Court was that intimation required under section 11 had to be furnished before the assessing authority completes the concerned assessment.
The Tribunal observed that in the present case, there was no assessment proceeding and there was only intimation u/s 143(1) of the Act. The ITAT opined that an intimation u/s. 143(1) is not an assessment as laid down by the Hon’ble Supreme Court.
In view of the above, the Tribunal directed the AO to allow application u/s. 154 of the Act and rectify the intimation.
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