Case Law Details
Siddhanath Mahadev Temple Trust Vs CIT(Exemption) (ITAT Surat)
Conclusion: Clause (ba) of sub-section (1) of section 12A was applicable for AY.2018-19 onwards and not for AY.2017-18, assessee-temple trust was entitled to tax exemptions under Sections 11 and 12 . Hence, the order of AO was not erroneous and prejudicial to the interests of revenue and therefore, it was not amenable to revision u/s 263.
Held: Assessee had not filed its return of income u/s 139. It filed the return of income, declaring total income of Rs.10,27,436/-only after receiving notice u/s 148. AO had passed the order accepting the returned income of Rs.10,27,436/- after considering explanation and details filed by assessee. CIT(E) referred to provisions of section 139(4A), 12A(1)(b) and stated that assessee was liable to file return of income for AY.2017-18 and also to file audit report in the prescribed proforma. Therefore, assessee was not eligible for exemption u/s 11. However, AO had accepted the returned income shown in the return u/s 148. Therefore, the order was erroneous and prejudicial to the interests of revenue u/s 263. CIT(E) issued show cause notice requesting to assessee to submit explanation and clarification. In reply to the above notice, assessee filed written submission and relied upon decision of ITAT, Delhi in case of United Educational Society vs. JCIT, 107 taxmann.com 127 wherein it was held that return filed u/s 148 had to be treated as return u/s 139 which would include section 139(4A) and once such return was treated as return filed u/s 139, then all provisions of the Act would apply including section 11 of the Act. Tribunal also held that new clause (ba) of section 12A(1) had been inserted by Finance Act, 2017 w.e.f. 01.04.2018, so that furnishing of return within the time u/s 139(4A) had been made applicable from AY.2018-19. CIT(E) also held that the amendment was clarificatory in nature and the decision of the Delhi Tribunal was not binding in this case. Hence, CIT(E) held that the order passed by AO was erroneous and prejudicial to the interests of revenue u/s 263. He set aside the order of AO and directed him to decide issue of allowability of exemption u/s 11 of the Act afresh. It was held that AO had rightly accepted the return of the assessee field u/s 148. Clause (ba) to sub-section (1) of section 12A was inserted by Finance Act, 2017 w.e.f. 01.04.2018. The said clause provided that w.e.f. 01.04.2018, and applicable for AY.2018-19 and subsequent years, that the person in receipt of income should furnish the return of income referred to in sub-section (4A) of section 139 within the time allowed under that section. The assessment year involved in this appeal was AY.2017-18 which was prior to insertion of clause (ba) of section 12A(1) by Finance Act, 2017. When the provisions were not in the statute, AO could not have invoked the provision and asked assessee to fulfil the conditions included therein. Therefore, AO had taken the correct view while passing the order and he had adopted one of the courses permissible in law. Moreover, clause (ba) of sub-section (1) of section 12A was applicable for AY.2018-19 onwards and not for AY.2017-18 with which we are concerned. Hence, the order of AO was not erroneous and prejudicial to the interests of revenue and therefore, it was not amenable to revision u/s 263. ITAT had, accordingly, held that AO was not justified in denying the benefit of exemption u/s 11 of the Act and it directed to AO to compute income in accordance with provisions of section 11 of the Act.
FULL TEXT OF THE ORDER OF ITAT SURAT
This appeal by the assessee emanates from the order passed under section 263 of the Income-tax Act, 1961 (in short, ‘the Act’) dated 28.03.2024 by the Learned Commissioner of Income Tax (Exemption), Ahmedabad [in short, ‘CIT(E)’] for the assessment year (AY) 2017-18.
2. The grounds of appeal raised by the assessee are as under:
“1. The Ld. CIT(E) has erred and was not just and proper on the facts of the case and in law in considering the Assessment Order dated 09/03/2022 passed u/s 147 r.w.s. 144B as erroneous and prejudicial to the interests of revenue and passing order u/s 263 for considering the issue of allowance of Exempt afresh.
2. PRAYER
2.1 The order u/s 263 passed by the Ld. CIT(E) may be kindly set aside.
2.2 Personal hearing may be granted.
2.3 Any other relief that your honours may deed fit may be granted.
3. the assessee craves leave to add, amend, modify, alter or delete any of the grounds at the time of hearing.”
3. Brief facts of the case are that the assessee trust had not filed its return of income for AY.2017-18 as per provisions of section 139(4A) of the Act. The case was reopened and notice u/s 148 of the Act was issued on 24.03.2021. In response thereto, assessee filed its return of income, declaring total income at Rs. Nil. The AO called for details from the assessee and based on the explanation of assessee on the reopening issue and the materials on record, he passed the order u/s 147 r.w.s. 144B of the Act, accepting the returned income. Subsequently, the CIT(E) examined the records and observed that as per provisions of section 139(4A) of the Act, in case of trusts which derived income from voluntary contributions, before giving the effect of provisions of sections 11 and 12 of the Act, that exceeds maximum amount which is not chargeable to tax are required to furnish a return of such income. Further, as per sections 12A(1)(b), if the total income exceeds the basic exemption limit, then the books of account of such trust are required to be audited and the said audit report is required to filed along with the return of income for relevant assessment year. The CIT(E) observed that the assessee filed return only in response to notice u/s 148 of the Act. The assessment order passed by AO u/s 147 r.w.s. 144B of the Act is erroneous and prejudicial to the interests of revenue u/s 263 of the Act because assessee had not filed the original return of income u/s 139 within the due date and also the audit report (Form 10B) within the due date specified for filing the audit report. Hence, assessee was not eligible for any claim of exemption u/s 11 and 12 of the Act. The CIT(E) issued show cause notice on 19.09.2023, requesting to assessee to submit explanation and clarification. In reply to the above notice, the assessee filed written submission and relied upon decision of ITAT, Delhi in case of United Educational Society vs. JCIT, 107 taxmann.com 127 wherein it was held that return filed u/s 148 has to be treated as return u/s 139 which will include section 139(4A) and once such return is treated as return filed u/s 139, then all provisions of the Act will apply including section 11 of the Act. The Tribunal also held that new clause (ba) of section 12A(1) has been inserted by Finance Act, 2017 w.e.f. 01.04.2018, so that furnishing of return within the time u/s 139(4A) has been made applicable from AY.2018-19. The CIT(E) also held that the amendment is clarificatory in nature and the decision of the Delhi Tribunal is not binding in this case. Hence, CIT(E) held that the order passed by AO is erroneous and prejudicial to the interests of revenue u/s 263 of the Act. He set aside the order of AO and directed him to decide issue of allowability of exemption u/s 11 of the Act afresh.
4. Aggrieved by the order of CIT(E), the assessee filed this appeal before the Tribunal. The Learned Authorized Representative (Ld. AR) of the assessee submitted that no return of income was originally filed by assessee. The AO has not made any addition to the income declared in the return filed u/s 148. He submitted that clause (ba) of section 12A was inserted by Finance Act, 2017 and is applicable from AY.2018-19. Hence, return u/s 139(4A) was not mandatory. He also relied on the decision in case of United Educational Society (supra) and submitted that the order passed by the AO is neither erroneous nor prejudicial to the interests of revenue.
5. On the other hand, Learned Senior Departmental Representative (Ld. Sr. DR) of the revenue supported the order of CIT(E).
6. We have heard both the parties and perused the materials available on record. We have also carefully gone through the relevant portion of the AO. We have also deliberated on the decision relied upon by the Ld. AR. There is no dispute regarding the fact that assessee had not filed its return of income u/s 139 of the Act. It filed the return of income, declaring total income of Rs.10,27,436/-only after receiving notice u/s 148 of the Act. The AO has passed the order accepting the returned income of Rs.10,27,436/- after considering explanation and details filed by assessee. The CIT(E) referred to provisions of section 139(4A), 12A(1)(b) of the Act and stated that assessee was liable to file return of income for AY.2017-18 and also to file audit report in the prescribed proforma. Therefore, the assessee was not eligible for exemption u/s 11 of the Act. However, AO has accepted the returned income shown in the return u/s 148 of the Act. Therefore, the order was erroneous and prejudicial to the interests of revenue u/s 263 of the Act. The Ld. AR relied on the decision in case of United Educational Society (supra) and submitted that filing of income u/s 139(4A) of the Act was not statutorily compulsory in AY.2017-18. Hence, the AO has rightly accepted the return of the assessee field u/s 148 of the Act. We find that clause (ba) to sub-section (1) of section 12A was inserted by Finance Act, 2017 w.e.f. 01.04.2018. The said clause provides w.e.f. 01.04.2018, and applicable for AY.2018-19 and subsequent years, that the person in receipt of income shall furnish the return of income referred to in sub-section (4A) of section 139 within the time allowed under that section. The assessment year involved in this appeal is AY.2017-18 which is prior to insertion of clause (ba) of section 12A(1) by Finance Act, 2017. When the provisions were not in the statute, the AO could not have invoked the provision and asked the assessee to fulfil the conditions included therein. Therefore, the AO has taken the correct view while passing the order and he has adopted one of the courses permissible in law. The CIT(E) has stated that the amendment is only clarificatory and the decision of ITAT is not mandatory. In the memorandum explaining the above provisions of the Finance Bill, it was explained that the amendment will take effect from 1st April, 2018 and will, accordingly, apply in relation to AY.2018-19 and subsequent years. The clause will not be applicable to the subject AY.2017-18. The ITAT, Delhi in case of United Educational Society (supra), under similar facts, has decided the issue in favour of assessee. At para 25, it was held as under:
“…The amendment made by the Finance Act, 2017 inserted clause (ba) imposing a further condition that such return of income is to be furnished in terms of section 139(4A), within the time allowed under that section. Firstly, this requirement was not there before this amendment; and secondly, this insertion of additional clause clearly shows that such condition was not there in existing clause (b) of section 12A. Had such condition being there in clause (b) itself, then there was no need to insert a further clause (ba) by the Legislature for denying benefit of sections 11 & 12 in case return is not filed in time as per provision of section 139 (4A). It is relevant to note that clause (b) has not been amended, but a new clause (ba) has been inserted by the Finance Act, 2017 to put a further condition with effect from 1-4-2018, which was not there for the assessment years under consideration. It is also important to note that this condition of furnishing the return within the time allowed under section 139(4A) has been made applicable from assessment year 2018-19 as has been specifically stated in the Finance Act, 2017 and not for the assessment year under consideration. One does not agree with the contention of the department that this amendment is clarificatory in nature. As rightly pointed out by the assessee that this amendment has been made by the Finance Act, 2017 effective from assessment year 2018-19, meaning thereby that this clause has not been made applicable even for the assessment year 2017-18, the return of which were still to be filed. Thus, the Legislature has thought fit to make this amendment applicable from next assessment years onwards and not even to the current assessment year 2017-18.”
6.1 The ITAT has, accordingly, held that AO was not justified in denying the benefit of exemption u/s 11 of the Act and it directed to AO to compute income in accordance with provisions of section 11 of the Act.
7. The facts of the present case are similar. We do not find any reason to differ with the decision of the ITAT, Delhi. Moreover, clause (ba) of sub-section (1) of section 12A is applicable for AY.2018-19 onwards and not for AY.2017-18 with which we are concerned. Hence, we hold that the order of AO was not erroneous and prejudicial to the interests of revenue and therefore, it was not amenable to revision u/s 263 of the Act. Accordingly, the order of CIT(E) is set aside and ground of appeal is allowed.
8. In the result, the appeal of the assessee is allowed.
Order is pronounced in the open court on 27/11/2024.
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