2013 (12) TMI 609 - HC - Income Tax

Intimation of accumulation of income - Held that - The application under Section 11 (2) was not filed with the return by the assessee - The information was given during the process of the assessment, before the assessment was completed - There was sufficient material before the Assessing Officer both in the shape of the information furnished within the prescribed period and the proof of not only setting apart 85% of the amount to be spent in next year but also the expenditure of that amount in the next year - The insistence of furnishing of information on Form 10 as a condition precedent, is insistence on the form and not the substance of the provisions of the Act - The Tribunal was justified in remanding the matter back to examine the books of account of the assessee for assessment year 2009-10 to find out whether the amount was spent in the next year and if the investment exceeds unspent amount within the prescribed period, the Assessing Officer will condone the delay and irregularity in filing Form 10 - Decided in favour of assessee.

Summary

Issues:
1. Delay and irregularity in filing Form No.10 for exemption condonation.
2. Exemption claimed by the assessee ignoring Supreme Court judgment.

Delay and irregularity in filing Form No.10 for exemption condonation:
The case involves an appeal under Section 260A of the Income Tax Act, 1961 arising from an order passed by the Income Tax Appellate Tribunal related to the assessment year 2008-09. The primary issue revolves around the delay and irregularity in filing Form No.10 for exemption condonation. The Assessing Officer disallowed the exemption under Section 11 of the Income Tax Act, 1961, as the application of funds was less than 85%, and no application under Section 11(2) was submitted along with the return. The Assessing Officer highlighted various deficiencies in the notice filed by the assessee, such as non-compliance with specified form requirements, lack of stated purpose for fund accumulation, and signing by an unauthorized individual. Despite the contentions raised by the assessee, the Assessing Officer upheld the disallowance.

Exemption claimed by the assessee ignoring Supreme Court judgment:
The second issue pertains to the exemption claimed by the assessee, disregarding the judgment of the Supreme Court in the case of Commissioner of Income Tax v. Nagpur Hotel Owners' Association (247 ITR 201). The Assessing Officer did not consider the contentions of the assessee, leading to the appeal before the CIT (A). The CIT (A) allowed the benefit of capital expenditure and reduced the taxable income based on the material on record. The Income Tax Appellate Tribunal, relying on relevant case laws, held that the Assessing Officer had the power to condone the delay in filing Form No.10, especially considering the subsequent investment made by the assessee in the next year. The Tribunal emphasized that the requirement of exercising the option within a specified time is directory, not mandatory.

In conclusion, the Tribunal remanded the matter to examine the books of account for the assessment year 2009-10 to verify the expenditure of the unspent amount in the next year. The Tribunal's decision favored the assessee, emphasizing that the substance of compliance with the Act's provisions outweighs the formality of filing information on a prescribed form. The Tribunal's order was upheld, dismissing the income tax appeal and deciding both issues in favor of the assessee against the department.