2021 (7) TMI 952 - AT - Income Tax

Disallowance by denying accumulation u/s.11(2) - assessee had not filed Form No.10 electronically on or before the due date of filing of return - HELD THAT - The assessee has filed audit report in Form No.10B clearly reflecting the accumulations u/s.11(1)(a) and 11(2) of the Act. Merely because Form No.10 was not filed electronically by the assessee, more so when it was also not even mandated by the statute for the relevant year under consideration, the ld. AO (CPC) ought not to have disallowed the accumulation while processing the return vide intimation u/s.143(1) of the Act. Pursuant to section 154 application preferred by the assessee before the ld. AO (CPC), the regular accumulation u/s.11(1)(a) of the Act was duly allowed but the accumulation u/s. 11(2) was denied for want of Form No.10 in electronic mode. We find that both the lower authorities have grossly erred in not appreciating the facts of the case and by denying the benefit of accumulation on a mere technical inability on the part of the assessee.We find the very same issue had been the subject matter of adjudication by this Tribunal in the case of Parle Hindu Devalaya Mandir 2020 (3) TMI 1353 - ITAT MUMBAI wherein this issue has been decided in favour of the assessee - We deem it fit to restore this issue to the file of the ld. AO with a direction to verify Form No.10 filed by the assessee manually and allow assessee s claim of exemption u/s.11(2) of the Act in accordance with law. Accordingly, the grounds raised by the assessee are allowed for statistical purposes.

Summary

Issues:
- Disallowance of accumulation u/s.11(2) of the Income Tax Act for A.Y. 2014-15.

Analysis:
1. The appeal concerns the disallowance of accumulation u/s.11(2) of the Act for the A.Y. 2014-15. The assessee, a public charitable trust running a school, filed its return of income declaring total income of Rs. Nil. The issue revolves around the denial of accumulation u/s.11(2) by the ld. CIT(A) upholding the action of the ld. AO. The assessee had claimed deduction u/s.11 while filing the return, but the benefit of accumulation was denied during processing u/s.143(1) by the ld. AO. The denial was based on the non-electronic filing of Form No.10, despite the physical submission of the form before the ld. AO on 26/06/2014.

2. The Tribunal found merit in the argument that online filing of Form No.10 was mandated only from 01/04/2016, not applicable for the A.Y. 2014-15. The physical filing of Form No.10 before the ld. AO on 26/06/2014 was acknowledged. The return of income filed on 29/09/2014 claimed accumulation u/s.11(1)(a) and u/s.11(2) of the Act. The audit report in Form No.10B also reflected the accumulations. The Tribunal held that the denial of accumulation by the ld. AO was unjustified, considering the technicality of electronic filing not being mandatory for that year. The Tribunal referred to a similar case where the issue was decided in favor of the assessee, emphasizing the physical filing of Form No.10 within the due date.

3. Citing the judicial precedent, the Tribunal directed the ld. AO to verify the manually filed Form No.10 and allow the assessee's claim of exemption u/s.11(2) in accordance with the law. Consequently, the appeal of the assessee was allowed for statistical purposes. The judgment highlights the importance of adhering to statutory requirements while considering claims for exemptions under the Income Tax Act, ensuring fair treatment to taxpayers based on the prevailing legal provisions and precedents.