2018 (9) TMI 1974 - AT - Income Tax

Assessment of trust - assessee has not spent 85% towards object of the trust as noted by the AO - non filing Form No. 10 along with the return of income specifying that the surplus income was set apart for a particular purpose as prescribed under the object of the Trust - HELD THAT - The assessee filed Form No. 10 along with the Board Resolution but did not specify the object for which particular amount was set apart. The AO accordingly did not consider Form No. 10 as it is invalid and made the additions. Assessee preferred an appeal before the CIT(A) but he did not improve his case and CIT(A) has also noted the defect in Form No. 10 as it did not specify the purpose for which surplus income is set apart. The CIT(A) accordingly confirmed the rejection of Form No. 10 and upheld the addition. Though the assessee has filed an appeal before us and filed the written submissions relying upon certain case laws which were dealt with by the CIT(A) but did not appear at the time of hearing. we had no other option but to peruse the written submissions filed by the assessee. Along with the written submissions copy of Form No. 10 was not filed therefore bound to accept the observations of the CIT(A) made with reference to Form No. 10. In Form No. 10 assessee is required to specify the purpose for which surplus income is set apart. If he fails to do so he cannot get the benefit of filing Form No. 10. Under these circumstances I find no infirmity in the order of the CIT(A). - Decided against assessee.

Summary

Issues:
1. Validity of filing Form-10 before completion of assessment
2. Rejection of Form-10 by Assessing Officer
3. Defect in Form-10 specified purpose
4. CIT(A) dismissal based on Form-10 defect
5. Failure to specify purpose in Form-10
6. Appellant's absence during hearing
7. Upholding CIT(A) order in both appeals

Issue 1: Validity of filing Form-10 before completion of assessment

The appellant contended that filing Form-10 before the completion of assessment is valid, citing a Supreme Court decision. It was argued that the trust had filed Form-10 well before the assessment was completed, making it a valid submission. The intention behind the law was highlighted, emphasizing that the surplus of the trust should only be utilized for charitable or religious purposes. The submission of Form-10 was deemed a procedural requirement to inform the Assessing Officer about the accumulation of surplus.

Issue 2: Rejection of Form-10 by Assessing Officer

The Assessing Officer rejected Form-10, stating it did not specify the purpose for which the surplus income was set apart. However, the appellant had submitted the Extract of Board resolution along with Form-10, clearly specifying the purpose. The appellant argued that the rejection of Form-10 on these grounds was not in order.

Issue 3: Defect in Form-10 specified purpose

During the proceedings before the CIT(A), the appellant submitted Form-10 again, clearly stating the purpose for which the trust's surplus was accumulated. Despite this, the CIT(A) dismissed the case, citing the Form No. 10 filed before the Assessing Officer as defective. The appellant maintained that the Form-10 could not be treated as defective as it clearly specified the purpose for setting apart the surplus income.

Issue 4: CIT(A) dismissal based on Form-10 defect

The CIT(A) dismissed the case on the ground that the Form No. 10 filed before the Assessing Officer was defective. The appellant argued that the Extract of Board resolution submitted along with Form-10 clearly specified the purpose for setting apart the surplus income, making the rejection unjustified.

Issue 5: Failure to specify purpose in Form-10

The AO noted that the appellant did not spend 85% towards the trust's object, requiring the filing of Form No. 10 specifying the surplus income set apart for a particular purpose. The appellant initially did not file Form No. 10 along with the return of income, leading to objections from the AO. Subsequently, when Form No. 10 was filed along with the Board Resolution, it did not specify the object for which the amount was set apart, resulting in the AO rejecting the form.

Issue 6: Appellant's absence during hearing

The appellant did not appear during the hearing, submitting written submissions instead. The learned DR was heard in the absence of the appellant, and the Tribunal had to rely on the written submissions provided.

Issue 7: Upholding CIT(A) order in both appeals

The Tribunal upheld the CIT(A) order in both appeals, as the appellant did not appear during the hearing. The failure to specify the purpose in Form-10 was considered a valid ground for rejecting the form, leading to the dismissal of the appeals.

This detailed analysis covers the various issues raised in the judgment, outlining the arguments presented by the appellant, the decisions of the lower authorities, and the final ruling of the Tribunal.