Conference of Religious India Vs Ward Exemption 1(3) (ITAT Delhi)
Summary: The Income Tax Appellate Tribunal, Delhi Bench ‘SMC’, in Conference of Religious India Vs Ward Exemption 1(3), New Delhi, ITA No. 2161/Del/2022, decided on 13 October 2022, considered whether a charitable institution registered under Section 12A of the Income-tax Act, 1961 could be denied exemption under Section 11 merely because its income-tax return was filed seven days after the extended due date under Section 139(1), although it was filed within the period permitted for a belated return under Section 139(4). The Tribunal held that the CBDT clarification dated 23 April 2019 supported the assessee’s claim and that the short delay deserved condonation in view of the COVID-19 pandemic and the Supreme Court’s orders extending limitation.
The assessee filed its return for assessment year 2020-21 on 23 February 2021, whereas the extended due date was 15 February 2021. It claimed exemption under Section 11 and accumulation of ₹34 lakh under Section 11(2). The audit report in Form 10B and the accumulation statement in Form 10 had been furnished before the due date. However, while processing the return under Section 143(1), the Department denied the Section 11 exemption and brought gross receipts of ₹85,59,512 to tax. The assessee challenged the adjustment, contending that its return had been filed before 31 March 2021 and that the denial of exemption was contrary to the CBDT’s clarification regarding Section 12A(1)(ba).
The Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, dismissed the appeal on 17 August 2022, holding that the return was filed beyond the due date under Section 139(1). Before the Tribunal, the assessee relied on CBDT communication F. No. 173/193/2019-ITA-I dated 23 April 2019, which clarified the time allowed for filing returns after insertion of Section 12A(1)(ba). The Tribunal observed that Section 139 contains several subsections and held that a return furnished within the specified time under the relevant subsection could qualify for the benefit explained in the CBDT clarification. Consequently, the CIT(A)’s restrictive interpretation was found erroneous.
The Tribunal separately considered the seven-day delay and CBDT Circular No. 06/2020 dated 19 February 2020 concerning condonation of delay for charitable institutions. It observed that the return had been filed during the pandemic, when the Supreme Court had extended limitation periods, and held that the short delay deserved condonation. The Tribunal directed the CIT(A) (Exemption) to consider the assessee’s return and allow the benefit in accordance with law. The appeal was allowed in part for statistical purposes. The order did not itself quantify the final exemption or conclusively allow the entire ₹34 lakh accumulation claim; those matters remained subject to consideration under the applicable statutory provisions.
FULL TEXT OF THE ORIGINAL JUDGMENT/ORDER
This appeal by the assessee is preferred against the order of the CIT(A), National Faceless Centre, (NFAC) dated 17.08.2022 pertaining to A.Y. 2020-21.
2. The grievance of the assessee read as under :-
1. The ld. AO as well as CIT(A) has erred in law and on facts in upholding the adjustment made in the intimation u/s 143(1) not allowing the benefit of accumulation u/s 11(2) of the Income Tax Act, 1961. The intimation issued u/s 143(1) (rectified u/s154) raising a demand of Rs.9,53,780/- is wrong and bad in law in so far as it is beyond the jurisdiction of adjustment u/s 143(1) of the Act.
2. The CIT(A) has erred in law and on facts in not applying the circular of CBDT instructing the department to allow the benefit u/s 11 if return is filed within the time allowed u/s 139 of the Act. The assessee has filed ITR on 23.02.2021 before 31.03.2021 within the time allowed u/s 139 of the Act. The assessee contends that the circular are binding on the department and should have been followed.
3. The assessee contends that the powers of CIT(A) are co-terminus with that of the AO, he can do what the AO has not done or could not do. Thus the CIT(A) should have granted relief u/s 11 by following the beneficial circular of the CBDT.
4. The CIT(A) has erred in not condoning the delay in filing of return of income, by 7 days, following the Hon’ble Supreme Court decision on limitation, issued from time to time for taking lenient view during Covid 19 pandemic. The appellants pray that the delay may kindly be condoned and the benefit of sec. 11 may kindly be allowed.
5. The CIT(A) as well as AO has erred in law and on facts in not allowing accumulation of income amounting to Rs.34,00,000/- made under section 11(2) of the Act without considering the fact that Form No.10 as well as Form 10B was filed on 22.12.2020 before the due date of filing of return of income u/s 139(1) and return was filed u/s 139 i.e. before 31.03.2021, thus fulfilling the conditions for allowing the accumulation u/s 11(2) of the Act.
6. The total income computed is wrong and bad in law. The interest levied u/s 234A, 234B and 234C should be deleted.
7. The appellant prays that till the appeal is decided an interim relief may be provided by staying the demand.
8. The above grounds are without prejudice to one another.
9. The appellant may be allowed to add, amend, forgo or alter any of the above ground at the time of hearing.
3. Briefly stated the facts of the case are that the assessee is a charitable institution registered u/s. 12A of the Act and is claiming exemption u/s. 11 of the Act. The assessee filed its return of income for the year under consideration on 23.02.2021 claiming the benefits u/s 11 of the Act. The return was accompanied with the audit report in form No.10B. Form No.10 was also filed before the due date of filing of return of income showing accumulation of income of Rs.34 lacs.
4. The return was processed u/s. 143 (1) of the Act but the benefit of section 11 was not allowed and gross receipts of Rs.8559512/- has been taxed.
5. The assessee challenged the order before the CIT(A). It was brought to the notice of the CIT(A) that the return of income was filed on 23.02.2021 and the due date as extended was 15.02.2021.
6. The assessee claimed that the return was filed before 31.03.2021 which is the time allowed u/s. 139 of the Act. It was also brought to the notice of the CIT(A) that the assessee has filed audit report in Form No.10B on 19.12.2020 and form No. 10 on 22.12.2020.
7. Strong reliance was placed on the instruction of CBDT F. No.173/193/2019 –ITA –I dated 23.04.2019 wherein the CBDT has clarified with regard to the time allowed for filing of the return of income subsequent to the insertion of clause (ba) in sub section 1 of section12A of the IT Act which includes the IT return filed within the time allowed u/s. 139 of the Act. The contention of the assessee were dismissed by the CIT(A) who was of the firm belief that return has been filed beyond due date as mandated in section 139 (1) of the Act. The CIT(A) also dismissed the claim of the assessee that it is squarely covered by the CBDT instruction (supra) and the CIT(A) accordingly dismissed the appeal of the assessee.
8. Before me the Counsel reiterated what has been stated before the lower authorities and once again relied upon the CBDT circular (supra). The DR strongly supported the findings of the CIT(A).
9. I have given a thoughtful consideration to the orders of the authorities below. The undisputed facts are that the assessee filed its return of income on 23.02.2021. It is also not in dispute that the due date for this assessment year has been extended till 15.02.021. This means that there was a delay of 7 days but considering the pandemic period and the decision of the Hon’ble Supreme Court by which the Hon’ble Supreme Court has extended the period of limitation across board, I am of the opinion that the delay of 7 days deserves to be condoned. In any case the return was filed before 31.03.2021 which is the last date for filing a belated return of income. It would be pertinent to refer to the above CBDT Circular which is as under :-
F. No. 173/193/2019-ITA-I
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
New Delhi
Dated 23 April, 2019
To
The Pr. DGIT (Systems), New Delhi
Subject: Clarification with regard to the time allowed for filing of return of income subsequent to the insertion of Clause (ba) in sub-Section 1 of section 12A of the Income-tax Act, 1961.
The communication discusses denial of Section 11 exemption during processing of belated ITR-7 returns for AY 2018-19 under Section 143(1)(a), and reproduces the explanatory memorandum to the Finance Bill, 2017 and an excerpt of CBDT Circular No. 02/2018 dated 15.02.2018.
“These amendments are clarificatory in nature.”
“These amendments will take effect from 1st April, 2018 and will, Accordingly, apply in relation to assessment year 2018-19 and Subsequent years.”
“the entities registered under section 12AA are required to file return of income under sub-section (4A) of section 139 of the Income-tax Act, if the total income without giving effect to the provisions of sections 11 and 12 exceeds the maximum amount which is not chargeable to income-tax. Amendment to section 12A of the Income-tax has been made so as to provide for additional condition that the person in receipt of the income chargeable to income-tax shall furnish the return of income Within the time allowed under section 139 of the Income – tax Act.”
10. In my considered opinion the language of the aforementioned Circular is very clear and unambiguous in so far as the return of income filed u/s. 139 of the Act is concerned. Section 139 has several sub sections (1), (2), (3), (4), (4a), (5). I am of the considered view that if the return is filed within the specified time limit of sub section of 139 would be eligible for the benefit given by the above mentioned CBDT circular and should avail the benefit of exemption u/s. 11 of the Act. In my considered opinion the CIT(A) erred in misinterpreting the aforementioned circular and, therefore, to that extent the order of the CIT(A) is erroneous and deserves to be set aside the grievance of the assessee is allowed.
11. The second substantive grievance of the assessee is that the delay has not been condoned inspite of CBDT circular No.06/2020 dated 19.02.2020. The above said circular is as under :-
Circular No. 6/2020
F.No.197/55/2018-ITA-I
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
New Delhi, the 19 February, 2020
Sub: Condonation of delay under section 119(2)(b) of the Income-tax Act, 1961 in filing of Return of Income for A.Y 2016-17, 2017-18, and 2018-19 and Form No 9A and Form No 10 – Reg.
Representations have been received seeking condonation of delay in filing Return of Income by the Charitable Institutions for the Assessment Year 2016-17 onwards on the grounds of hardship. The Board has issued Circulars authorising the Commissioners of Income Tax to admit belated applications of Form 9A and Form 10 and to decide on merit the condonation of delay u/s 119(2)(b) of the Income-tax Act, 1961 (Act). However, in those cases where the Income Tax Returns have also been filed beyond the due date prescribed under section 139(1) of the Act, the condonation of delay in filing of Form 9A & Form 10 by the Commissioners is not of any help to the assessee, as section 13(9) of the Act, inserted w.e.f. 01.04.2016, stipulates twin conditions of filing of Form 9A/Form 10 and also of filing Return of Income before the due date.
2. Accordingly, in continuation of earlier Circulars issued in this regard, with a view to prevent hardship to the assessee and in exercise of powers conferred under section 119(2)(b) of the Act, the CBDT has decided that where the application for condonation of delay in filing Form 9A and Form 10 has been filed, and the Return of Income has been filed on or before 31st March of the respective assessment years i.e. Assessment Years 2016-17, 2017-18 and 2018-19, the Commissioners of Income-tax (Exemptions) are authorised u/s 119(2)(b) of the Act, to admit such belated applications for condonation of delay in filing Return of Income and decide on merit.
3. For all other application for condonation of delay not mentioned above, the power of condonation of delay u/s 119(2)(b) of the Act will continue with the respective authorities as per the extant Rules and Practice.
(Gular Ahmad Wani)
Under Secretary (ITA-I)
12. In the light of the mandate of the CBDT in the aforementioned circular I direct the CIT(A) exemption to consider the return of the assessee and allow the benefit as per the provisions of the law.
13. In the result, the appeal of the assessee is allowed in part for statistical purpose.
Order pronounced in the open court on 13.10.2022.
