2009 (5) TMI 625 - AT - Income Tax

Issues Involved:

1. Compliance with the provisions of section 11(2) of the IT Act.
2. Filing of return in response to notice u/s 148 instead of u/s 139.
3. Reliance on the decision of the Supreme Court in CIT v. Nagpur Hotel Owners' Association.
4. Direction to assess income at nil instead of the amounts assessed by the Assessing Officer.

Summary:

Issue 1: Compliance with Section 11(2) of the IT Act

The Department contended that the assessee failed to deliver Form No. 10 before the expiry of the time allowed u/s 139(1) for furnishing the return as per rule 17 of the IT Rules, 1962. The assessee, a religious trust registered u/s 12AA(1)(b), did not apply 85% of its income towards charitable or religious purposes, leading the Assessing Officer to tax the surplus. The assessee argued that the delay in filing Form No. 10 was due to frequent changes in the trust's administration and ignorance of the law. The CIT(A) found substance in the assessee's argument, noting that the assessee had ultimately complied with section 11(2) by filing Form No. 10 before the assessment was completed.

Issue 2: Filing of Return in Response to Notice u/s 148

The Department argued that the assessee filed a return for the first time only in response to notice u/s 148 and not u/s 139. The assessee filed returns declaring total income at nil along with audit reports in Form No. 10B. The CIT(A) held that the return of income filed along with Form No. 10 should be treated as a return filed u/s 139(1) as per section 148(1). The genuineness of the trust's activities and the accumulation of funds for its purposes were not disputed by the Assessing Officer.

Issue 3: Reliance on the Decision of the Supreme Court in CIT v. Nagpur Hotel Owners' Association

The Department contended that the CIT(A) erred in relying on the Supreme Court's decision in CIT v. Nagpur Hotel Owners' Association, arguing that rule 17 had been amended with effect from 1st April 1990. The CIT(A) found that the assessee filed Form No. 10 before the assessment was completed, thus complying with the requirements of section 11(2). The Tribunal noted that the issue was squarely covered in favor of the assessee by the Supreme Court's judgment, which held that the intimation required u/s 11 must be furnished before the assessment is completed.

Issue 4: Direction to Assess Income at Nil

The Department challenged the CIT(A)'s direction to assess the income at nil instead of the amounts assessed by the Assessing Officer. The CIT(A) held that the assessee had complied with section 11(2) by filing Form No. 10 before the assessment was completed. The Tribunal upheld the CIT(A)'s decision, noting that the assessee's claim was rejected merely because Form No. 10 was not filed on time. The Tribunal emphasized that the provisions should be interpreted to advance the cause of charity and not deprive the assessee of statutory benefits due to technicalities.

Conclusion:

The Tribunal dismissed all the appeals of the Revenue, upholding the CIT(A)'s decision that the assessee had complied with the provisions of section 11(2) and was entitled to the benefit of exemption. The Tribunal emphasized the need for a sympathetic and lenient view in matters involving charitable trusts and procedural delays.

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