2013 (1) TMI 317 - HC - Income Tax

Assessment of trust - exemption u/s 11 - Claim for accumulation of income rejected - Form-10 had not been furnished along with the return but was filed during the course of the assessment proceedings - whether Form-10 could be furnished for the purposes of Section 11 of the said Act during the re-assessment proceedings? - Held that - As decided in CIT Vs. Nagpur Hotel Owners Association 2000 (12) TMI 99 - SUPREME COURT it was necessary that the assessing authority must have the information under Form-10 at the time he completes the assessment and in its absence it is not possible for the assessing authority to give benefit of such exclusion. Furthermore, once the assessment is so completed it would be futile to find fault with the assessing authority for having included such income in the assessable income of the assessee. Thus without the particulars of this income as given in Form-10, the assessing authority cannot entertain the claim of the assessee under section 11 and therefore, compliance with the requirement of the Act will have to be at any time before the assessment proceedings are completed. Any claim for giving the benefit of section 11 on the basis of information supplied subsequent to the completion of assessment would mean that the assessment order will have to be reopened. The Supreme Court noticed that the Act did not contemplate such re-opening of the assessment. The revenue relied on this portion of the finding of the Supreme Court to contend that during re-assessment proceedings, the said Form-10 could not be furnished by an assessee.However, the fact has to be kept in mind that while reopening of an assessment cannot be asked for by the assessee on the ground that he had not furnished the Form-10 during the original assessment proceedings, this does not mean that when the revenue re-opens the assessment by invoking Section 147 the assessee would be remediless and would be barred from furnishing Form-10 during those assessment proceedings - question answered in favour of the assessee in appeal No.s 524/2012, 525/2012 and 526/2012. With regard to the ITA No.523/2012 because the Form-10 was filed only before the Tribunal, the question has to be decided against the assessee and in favour of the revenue.

Summary

Issues Involved:
- Interpretation of the requirement to furnish Form-10 under Section 11 of the Income Tax Act, 1961 during re-assessment proceedings.
- Whether the assessing authority must have the information under Form-10 at the time of completing the assessment.
- The impact of not furnishing Form-10 on the exclusion of income from assessment.
- The consequences of claiming the benefit of Section 11 based on information supplied after the completion of assessment.

Analysis:

Issue 1: Interpretation of Form-10 Requirement
The case involved a dispute regarding the filing of Form-10 under Rule 17 of the Income Tax Rules, 1962 during re-assessment proceedings. The appellant argued that the Form-10 was filed during the re-assessment proceedings initiated under Section 147 of the Income Tax Act for certain assessment years. The revenue contended that the Form-10 could only be produced until the completion of the original assessment proceedings under Section 143(3) and not during re-assessment. The key question was whether the filing of Form-10 during re-assessment proceedings was permissible under the law.

Issue 2: Timing of Form-10 Submission
The Supreme Court's decision in CIT Vs. Nagpur Hotel Owners Association was cited, emphasizing the mandatory nature of providing information under Form-10 to the assessing authority before completing the assessment. The Court highlighted that without the necessary information in Form-10, the assessing authority could not exclude income from taxation under Section 11. It was noted that any claim for the benefit of Section 11 based on post-assessment information would require reopening of the assessment, which the Act did not allow. The Court clarified that compliance with the Form-10 requirement had to be before the completion of assessment proceedings.

Issue 3: Impact on Assessment
The Court reiterated that once the assessment was completed without the required information in Form-10, fault could not be found with the assessing authority for including the income in the assessable amount. It was emphasized that the Act did not permit reopening of assessments for claims based on information provided after the assessment was finalized.

Issue 4: Decision on Form-10 Filing During Re-Assessment
The Court concluded that while an assessee could not request assessment reopening for failing to furnish Form-10 during the original assessment, during re-assessment proceedings initiated by the revenue, the assessee could still provide Form-10. The judgment favored the appellant for appeals related to re-assessment years, allowing the filing of Form-10 during those proceedings. However, for the appeal where Form-10 was submitted only before the Tribunal, the decision went against the appellant.

In summary, the judgment clarified the timing and significance of filing Form-10 under Section 11 of the Income Tax Act, emphasizing the necessity of providing the required information before the completion of assessment proceedings. It highlighted the implications of not furnishing Form-10 on income exclusion and the limitations on claiming benefits post-assessment. The decision differentiated between original assessment and re-assessment scenarios, allowing the filing of Form-10 during re-assessment proceedings initiated by the revenue.