2024 (6) TMI 235 - AT - Income Tax

Denial of exemption u/s 11 where return of income is not furnished within time - return of income within the time limit of section 139(4) - contention of the department is that in order to claim exemption u/s. 11 or 12 of the Act, the return of income has to be filed within the time limit as per Section 139(1) of the Act - provision of Section 12A(1)(ba) of the Act was amended w.e.f. 01.04.2023 and the time allowed for the filing of return was prescribed as within the time allowed under sub-section (1) of sub-section (4) of that section - contention of the ld. AR is that the above amendment was only clarificatory in nature and that the return for the earlier years filed within the time limit u/s. 139(4) of the Act also gets this benefit HELD THAT - The amendment was introduced to exclude the category of updated returns of income u/s. 139(8) of the Act . The requirement of Section 12A(1)(ba) of the Act for this year was that the return should be filed within the time allowed under that section (i.e. u/s. 139 of the Act). Section 139 provides time limit for filing of original return, belated return, revised return as well as updated return. Thus, all these category of returns were eligible for consideration under the general time line of section 139 of the Act.There is no dispute to the fact that the assessee has filed its return of income for this year within the time limit of section 139(4) of the Act. Therefore, the department was not correct in denying the exemption u/s. 11 of the Act while processing the return. The Circular F No. 173/193/2019 ITA-1, dated 23.04.2019 issued by the CBDT and relied upon by the assessee refers to Memorandum to the Finance Bill, 2017 and gives clarification in respect of amendment to section 12A of the Act, that a person in receipt of the income chargeable to income tax shall furnish the return of income within the time allowed u/s. 139 of the Act. As per this clarification, the return of income was required to be filed within the time allowed u/s. 139 of the Act Exemption u/s. 11 of the Act was available in respect of the return of income filed u/s. 139 of the Act. This Circular does not mandate that the return has to be filed only within the time limit available u/s. 139(1) of the Act and rather directs to rectify the unjust demand raised u/s. 143(1)(a) of the Act. As the assessee had filed its return of income within the time limit of section 139(4) of the Act, it was eligible for benefit of exemption u/s. 11 of the Act. It has been held by the Ld. ITAT, Rajkot Bench in the case of Shri Rajkot Vishashrimali Jain Samaj, 2023 (3) TMI 765 - ITAT RAJKOT which has been relied upon by the assessee, that if the assessee had filed return of income after due date of filing of return u/s. 139(1) of the Act but before due date prescribed u/s. 139(4) of the Act, benefit of exemption u/s. 11 of the Act can t be denied to the assessee by invoking the provisions of Section 12A(1)(ba) of the Act. Thus the clarificatory Circular of the CBDT as well as the judicial pronouncement, we are of the considered opinion that the department was not correct in disallowing exemption u/s. 11 of the Act while processing the return, as the return of income was filed by the assessee within the due date as per the provisions of the Act. Accordingly, findings of the Ld. JCIT(A) is reversed and the department is directed to allow the exemption u/s. 11 of the Act as claimed by the assessee. Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the order passed by the CIT(A) u/s. 250 of the Income-tax Act.
2. Non-provision of "Video hearing" in Faceless Appeal Procedure.
3. Denial of exemption u/s. 11 for revenue expenditure and accumulated amount.
4. Requirement of filing return within the time limit for claiming exemption u/s. 11 and 12.

Summary:

Issue 1: Validity of the Order u/s. 250
The appellant contended that the order passed by the CIT(A) u/s. 250 of the Income-tax Act is ab initio void and bad in law. The Tribunal did not specifically address this issue in isolation but focused on the substantive issues related to the denial of exemption.

Issue 2: Non-provision of "Video hearing"
The appellant argued that the CIT(A) erred in passing the appellate order without providing a "Video hearing" as envisaged in the Faceless Appeal Procedure. The Tribunal did not directly address this procedural issue but focused on the merits of the case.

Issue 3: Denial of Exemption u/s. 11
The CIT(A) upheld the adjustments made by the CPC, Bengaluru, which disallowed the exemption of Rs. 4,28,49,304/- and Rs. 59,61,768/- u/s. 11 of the Act due to late filing of the return and Form 10B. The appellant argued that the delay in filing Form 10B was condoned by the CIT(E), Ahmedabad, and the return was filed within the extended time limit u/s. 139(4) of the Act. The Tribunal examined the provisions of Section 12A(1)(ba) and Section 139(4A) and concluded that the return filed within the time limit u/s. 139(4) was eligible for exemption u/s. 11. The Tribunal referred to the Memorandum of the Finance Bill, 2023, and Circular F No. 173/193/2019 -ITA-1, dated 23.04.2019, which clarified that the return of income filed u/s. 139 of the Act, including belated returns, was eligible for exemption.

Issue 4: Requirement of Filing Return within Time Limit
The Tribunal noted that the amendment to Section 12A(1)(ba) effective from 01.04.2023 clarified that the return should be filed within the time allowed u/s. 139(1) or 139(4) of the Act. The Tribunal held that this amendment was clarificatory and applicable to earlier years as well. The Tribunal cited the case of Shri Rajkot Vishashrimali Jain Samaj, [2023] 150 taxmann.com 361 (Rajkot-Tri), which supported the view that exemption u/s. 11 could not be denied if the return was filed within the time limit u/s. 139(4).

Conclusion:
The Tribunal reversed the findings of the CIT(A) and directed the department to allow the exemption u/s. 11 of the Act as claimed by the assessee. The appeal preferred by the assessee was allowed.

Order Pronounced on 04/06/2024