Case Law Details
Sarla Singhvi Charitable Society Vs ITO (ITAT Jodhpur)
Introduction: The Sarla Singhvi Charitable Society found itself in a situation where it had to appeal against the order of the National Faceless Appeal Centre, Delhi (NFAC), for the assessment year 2019-20. The primary issue revolved around the condonation of delay in filing Form No. 10 within the due date of the Income Tax Return (ITR) under Section 139 of the Income Tax Act. The Income Tax Appellate Tribunal (ITAT) Jodhpur was tasked with examining whether the delay was rightfully condoned by the Commissioner of Income Tax (Exemption), Jaipur (CIT(E)), and whether the addition made should be sustained. In this article, we provide a comprehensive analysis of the case and the ITAT’s final ruling.
Detailed Analysis: The Sarla Singhvi Charitable Society, a trust registered under Section 12AA and 80G of the Income Tax Act, 1961, was engaged in charitable activities, including operating a blood bank. For the assessment year in question, the society declared a total income of NIL, taking into account Sections 11 and 12 of the IT Act. It showed an application of ₹77,89,989 for charitable purposes during the year, while ₹26,23,593 was set aside for specified purposes and invested in accordance with Section 11(5) of the Act. Form 10, as required by Section 11(2), was filed on 13/02/2020.
However, a delay occurred in filing Form No. 10, which should have been submitted before the due date of filing the ITR under Section 139(1). Consequently, the Centralized Processing Centre (CPC) added ₹26,23,593 while processing the ITR. The CPC’s reason for the addition was the non-submission of Form 10 within the due date, which led to the rejection of the exemption under Section 11(2) of the Act.
To address the delay, the society filed a request for the condonation of delay before the CIT(E) on 21/05/2020. Along with this request, the society submitted evidence of investments made in the modes prescribed under Section 11(5) of the Act. The CIT(E) condoned the delay in filing Form 10 through an order under Section 119(2)(b) of the Act, dated 29.05.2020, after a thorough verification.
Despite the condonation of delay by the CIT(E), the Commissioner of Income Tax (Appeals) or CIT(A) rejected the society’s appeal, stating that the lump sum amount mentioned in Form 10 did not meet the conditions outlined in Section 11(2) and that a declaration of specific investments was not provided.
Conclusion: The case of the Sarla Singhvi Charitable Society highlights the critical issue of the condonation of delay in filing Form No. 10 for trusts and entities seeking exemptions under Section 11 of the Income Tax Act. In this instance, the delay was rightfully condoned by the CIT(E) after thorough verification, but the CIT(A) did not acknowledge this condonation.
The ITAT’s final ruling, however, recognized the legitimacy of the CIT(E)’s condonation of delay and concluded that the appeal of the society should be allowed. This decision reinforces the importance of verifying and adhering to the regulatory procedures in such cases and highlights the significance of the CIT(E)’s role in the process.
In conclusion, the ITAT’s judgment serves as a reminder that when statutory authorities have condoned a delay, the process should be respected, and the taxpayer should not be unfairly penalized. This case underscores the need for a comprehensive understanding of the legal and procedural aspects of tax exemptions for charitable organizations and trusts under the Income Tax Act.
FULL TEXT OF THE ORDER OF ITAT JODHPUR
The assessee has filed an appeal against the order of the National Faceless Appeal Centre, Delhi [herein after “NFAC/Ld. CIT(A)”] dated 19.01.2023 for the assessment year 2019-20.
2. The assessee has raised the following grounds of appeal:-
“1. The Ld. CIT(Appeals) has grossly erred on facts and in law while making addition of Rs. 26,23,593/- without considering the condonation of delay order u/s 119(2)(b) passed by Ld. CIT(Exemption), Jaipur.
2. The ld. CIT (Appeals) has grossly erred on facts and in law while charging interest u/s 234A/B/C of Rs. 117392/-.
3. The appellant reserves rights to add/alter/amend/withdrawn any/all ground of the appeal.”
3. Brief facts of the case are that the assessee is a trust registered under sec. 12AA and 80G of Income Tax Act, 1961 with its object to serve the down trodden of the society including running of blood bank in the name Sarala Blood Bank at 30, Near Math Park, Bhupalpura, Udaipur. During the year the assessee declared total income NIL subject to the provision of section 11 & 12 of the IT Act wherein out of aggregate receipts of Rs.1,22,51,272/-, Rs.77,89,989/- applied for the charitable purpose during the year and Rs.26,23,593/- have been set apart for the specified purposes and in consequence invested in the specified investments as per section 11(5) of the Act. It has been intimated the department in Form 10 as provided u/s 11 (2) of the Act on 13/02/2020. Despite filing of the reply with respect to grant of the condonation of delay in filing of the Form 10 vide order no. ITBA/COM/F/1 7/2020-21/1027179655(1) dated 29.05.2020 by Ld CIT (Exemption), Jaipur, the Ld. AO processed the return u/s 143(1) of the IT Act without considering the order of ld. CIT (Exemption) for condonation of delay in filing Form 10 and created a demand of Rs.7,40,952/- on the ground of non-submission of Form 10 within due date rejecting the exemption u/s 11(2) of the Act.
4. Aggrieved, from the said order of assessment the assessee has filed an appeal before the ld. CIT(A). The ld. CIT(A) after hearing the contention of the assessee dismissed the appeal of the assessee by giving following findings on the issue:-
“4.6 The assessee has not complied with the basic conditions of investing the unapplied money into specified modes mentioned in section 11(5) and mentioning that in the form 10. A lump sum amount shown in the form 10 would not satisfied the conditions mentioned in section 11(2) not disclosing the specific investment in form 10 amounts to no investment for income tax purpose. In view of the above, the action of CPC is confirmed and appeal of the assessee is dismissed.”
5. As the assessee did not receive any favor from the appeal filed before NFAC/ CIT(E). The present appeal is filed against the said order of the ld. NFAC/CIT(A) dated 19.01.2023 before this tribunal on the grounds as reiterated in para 2 above. To support the grounds so raised the ld. AR appearing on behalf of the assessee has placed their written submission which is extracted in below:-
“ The Appellant is a trust registered under sec. 1 2AA and 80G of Income Tax Act, 1961 with its object to serve the down trodden of the society including running of blood bank. During the year, the Appellant declared total income at RS NIL on 12/09/20 19 subject to the provision of section 11, 12 of the IT Act. Copy of ITR filed along with Balance sheet and profit and loss account enclosed at pg no. 16-33 of PB.
Out of aggregate receipts of Rs.1,22,51,272/-, Rs.77,89,989/- has been applied for charitable purpose during the year and Rs.26,23,593/- have been set apart for the specified purposes. In result, Rs.26,23,593/- has been invested in the specified investments as per section 11 (5) of the act and Form 10 has been filed as provided u/s 11 (2) of the act on 13/02/2020. Copy of form no 10 enclosed at pg no. 39-41 of PB.
There has caused delay in filing form No 10, as the form no 10 was required to be filed before the due date of filing the ITR u/s 139 (1) and in result CPC has made addition of Rs 2623593/ while processing of the ITR. Copy of order of CPC attached at Pg No. 1-13 of PB read with Pg No. 8 giving reason for addition.
In consequence, a prayer for the condonation of delay in filing form 10 was filed before Ld CIT (Exemption) on 21/05/2020 along with filing of proof on investments made in the mode prescribed u/s 115) of the act. Copy of prayer filed before Ld. CIT (Exemptions) along with evidences for condonation of delay is enclosed at pg. no. 14-4 1 of PB.
On verification of the itemised detail of investments made in the mode given u/s 11 (5), the Ld CIT (Exemptions) condoned the delay in filing of the Form 10 vide order no. ITBA/COM/F/17/2020-21/1027179655(1) dated 29.05.2020 thru his order u/s 1 19(2)(b) of the act. Copy of order enclosed at pg no. 42-43 of PB.
Yet, the CIT (Appeals) rejected the appeal for want of itemised detail of investments made in the mode specified u/s 11/5) in the form no 10, without appreciating the following facts:
1. A declaration at column no 2 in form no 10 that “the amount so accumulated or set apart has been invested in any one or more forms or modes specified in section 11 (5) of the act. (Pg No. 40 of PB)
2. These investments made in the mode specified in section 11 (5) of the act has been furnished with proof has been submitted before Ld CIT (Exemptions) and the delay has been condoned on verification. (Pg No. 34-3 8 of PB)
3. Moreover, the form no 10 does not contain any such column to provide itemised detail of investments made u/s 11(5). In evidence, copy of form 10 downloaded from Income Tax Portal enclosed at pg no. 39-4 1 of PB.
Firstly: The very basic ground for addition of Rs. 2623593/- caused due to the failure in filing Form No 10 within the due date of ITR u/s 139 has been condoned by Ld CIT (Exemptions).
Secondly, a declaration has been provided at column no 2 in form no 10 that “the amount so accumulated or set apart has been invested in any one or more forms or modes specified in section 11 (5) of the act.
Thirdly; there is no column provided in form no 10 to give itemized detail of investments made u/s 11 (5) as stated above.
The appeal may very kindly be allowed, deleting the addition made with direction for the consequential relief deleting interest charged.”
6. Per contra, the ld. DR relied upon the orders of the ld. CIT(A).
7. We have heard rival contentions and perused the materials available on On verification of the case record and the details filed by the assessee we note that there is delay in filing Form No. 10. But the said delay in filling the form has been condoned by the Ld. CIT(E). In that process of condonation of delay matter the ld. CIT(E) has already verified evidences and also called for itemized details of investments and passed a detailed order dated 29.05.2020 u/s 11 9(2)(b) of the Income Tax Act, 1961. In light of this fact of the case we do not find any reason to confirm the finding of the ld. CIT(A). Therefore, ground No. 1 raised by the assessee is allowed and ground No. 2 being consequential in nature same is not adjudicated in ground No. 3 being general in nature the same is also not adjudicated. In the light of the discussion appeal of the assessee is allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 by placing the details on the notice board.
