2021 (10) TMI 509 - AT - Income Tax

Benefit of accumulation of income u/s.11(2) - denial of claim on non-submission of Form No.10 along with return of income - whether intimation issued u/s.143(1) is an assessment and the Assessing Officer can make adjustment towards rejection of accumulation of income u/s.11(2) ? - HELD THAT - Except as provided under Explanation to section 143(1), no adjustments can be made to total income. In this case, the Assessing Officer has made adjustment to total income by rejecting accumulation of income u/s.11(2) and said adjustment is not in accordance with law. It is also an admitted fact that an appeal being continuation of original proceedings, appellate authority has co-terminus and co-extensive powers that of the Assessing Officer. Therefore, when the assessee has filed Form No.10 before the CIT(A),NFAC, he ought to have admitted Form No.10 filed by the assessee to consider accumulation of income u/s.11(2). See HARDEODAS AGARWALLA TRUST 1991 (7) TMI 22 - CALCUTTA HIGH COURT In this case, the assessee claims that requisite Form No.10 was ready while filing return of income, but same could not be uploaded along with return of income due to technical glitches in web portal provided for filing return of income . The assessee has also filed copies of Form No.10 along with copy of resolution before us, as per which income has been accumulated for specified purposes vide Board resolution and further said sum was also invested in specified investments referred to u/s.11(5) of the Act. Therefore, we are of the considered view that the assessee is entitled for accumulation of income u/s.11(2) of the Income Tax Act, 1961. CIT(A) has erred in not considering claim of the assessee for accumulation of income u/s.11(2) of the Income Tax Act, 1961, even though the assessee made available such Form No.10 before the CIT(A) at the time of appellate proceedings. Hence, we set aside order passed by CIT(A) and restore the issue to the file of the Assessing Officer and direct the AO to allow benefit of accumulation of income u/s.11(2) of the Income Tax Act, 1961 by considering Form No.10 filed by the assessee along with other evidences. - Decided in favour of assessee.

Issues Involved:
1. Adjustment of Capital Gain on Sale of Property.
2. Disallowance of Accumulation of Income under Section 11(2) due to Non-filing of Form 10.
3. Procedural Lapses and Technical Glitches in Filing Form 10.
4. Legality of Adjustments under Section 143(1) Intimation.

Issue-wise Detailed Analysis:

1. Adjustment of Capital Gain on Sale of Property:
The assessee challenged the addition of ?21,48,579/- as capital gain by the Assessing Officer (AO) while processing the return under Section 143(1) of the Income Tax Act, 1961. The assessee claimed exemption under Section 11(1A) by reinvesting the sale consideration in acquiring another capital asset for charitable purposes. The Tribunal noted that the AO, without examining the details, made adjustments towards capital gains. The Tribunal held that once the assessee reinvested the sale consideration for acquiring another capital asset, the entire capital gain is exempt under Section 11(1A). Therefore, the AO and the CIT(A) erred in not considering the detailed reasons provided by the assessee for claiming exemption from capital gain. The Tribunal directed the AO to allow the exemption claimed under Section 11(1A).

2. Disallowance of Accumulation of Income under Section 11(2) due to Non-filing of Form 10:
The AO denied the accumulation of income under Section 11(2) amounting to ?6,39,878/- due to the non-filing of Form 10 within the stipulated time. The assessee argued that although the income was accumulated and invested as per the provisions, Form 10 could not be uploaded due to technical glitches. The CIT(A) rejected this explanation, stating that without Form 10, the AO could not grant the benefit of accumulation under Section 11(2). The Tribunal, however, noted that the CIT(A) should have admitted Form 10 filed during the appellate proceedings since the appeal is a continuation of the original proceedings. The Tribunal emphasized that the CIT(A) should have considered the issue without focusing on procedural lapses, given that the assessee had complied with the substantive requirements of Section 11(2).

3. Procedural Lapses and Technical Glitches in Filing Form 10:
The Tribunal acknowledged the assessee's claim that Form 10 could not be uploaded due to technical glitches in the web portal. The assessee provided evidence of the resolution and investment in specified assets. The Tribunal held that the CIT(A) should have considered these factors and allowed the accumulation of income under Section 11(2). The Tribunal referred to the decision of the Hon'ble Madras High Court in Chandraprabhuji Maharaj Jain Vs. DCIT, which emphasized examining the admissibility of statutory benefits rather than focusing on technicalities.

4. Legality of Adjustments under Section 143(1) Intimation:
The Tribunal reiterated that an intimation under Section 143(1) is not a regular assessment. Adjustments under Section 143(1) are limited to prima-facie adjustments based on the return filed by the assessee. The Tribunal noted that no intimation was given to the assessee before making adjustments towards capital gains and accumulation of income under Section 11(2). Therefore, the adjustments made by the AO were not in accordance with the law. The Tribunal emphasized that the appellate authority has co-terminus and co-extensive powers with the AO and should have admitted Form 10 filed by the assessee during the appellate proceedings.

Conclusion:
The Tribunal set aside the order passed by the CIT(A) and restored the issue to the file of the AO. The AO was directed to allow the benefit of accumulation of income under Section 11(2) by considering Form 10 filed by the assessee along with other evidences. The appeal filed by the assessee was allowed, and the stay petition was dismissed as infructuous.

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