2009 (1) TMI 127 - HC - Income Tax

Delay in filing the notice (in Form. No. 10) for accumulation of income by assessee-charitable trust on account of delay of Chartered accountant to finalize the accounts time limit prescribed u/s 139(4) for giving notice petitioner had invoked clause of the CBDT Circular which stated that the failure to give notice to ITO u/s 11(2) and investment of the money in prescribed securities was due to oversight therefore it could not be said that there was no explanation given by petitioner order of commissioner rejecting the application for condonation of delay is quashed

Summary

Issues:
1. Delay in filing Form No. 10 for accumulation under Rule 17 of the Income-tax Rules, 1962.
2. Rejection of application for condonation of delay by the Commissioner of Income-tax.
3. Interpretation of provisions under Section 139(1) and Section 139(4) of the Income-tax Act.
4. Compliance with conditions for exemption under Section 11 of the Income-tax Act.

Analysis:

Issue 1: Delay in filing Form No. 10
The petitioner, a welfare society registered under the Act, filed its return for the assessment year 2000-01 on January 22, 2001, due to a delay by the chartered accountant. Rule 17 mandates that the notice for accumulation of income must be given before the expiry of the time allowed under Section 139(1) for filing the return. The petitioner argued that the return was filed within the period stipulated under Section 139(4), but the respondent contended that the time for giving notice cannot be extended beyond the period mentioned in Section 139(1). The court held that the notice must be given within the time provided in Section 139(1), rejecting the petitioner's contention.

Issue 2: Rejection of condonation of delay
The petitioner sought condonation of delay in filing Form No. 10, invoking exhibit P4 circular's conditions. The Commissioner rejected the application citing non-compliance and the responsibility of the petitioner as a Government organization to make suitable arrangements. The court noted that the petitioner's explanation for the delay was due to oversight, as defined in the circular. The court quashed the rejection order and directed the respondent to pass appropriate orders within two months.

Issue 3: Interpretation of Section 139(1) and Section 139(4)
The court analyzed Section 139(1) and Section 139(4) of the Income-tax Act, emphasizing that the notice for accumulation of income must be given within the time allowed for filing the return under Section 139(1). The court rejected the petitioner's argument that the extended period under Section 139(4) could apply to giving the notice beyond the period specified in Section 139(1).

Issue 4: Compliance with conditions for exemption
The petitioner contended that it fulfilled all conditions in exhibit P4 circular and being a Government organization, the rejection of the application for condonation of delay was unjustified. The court agreed that the delay was due to oversight and directed the respondent to reconsider the application in light of the judgment.

In conclusion, the court ruled in favor of the petitioner, quashing the rejection order and directing the respondent to reevaluate the application for condonation of delay within a specified timeframe.