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2022 (4) TMI 635 - AT - Income TaxExemption u/s 11 - denial of exemption as Form No.10 was not filed within the stipulated time - HELD THAT - Intimation required under section 11 has to be furnished before the assessing authority completes the concerned assessment because such requirement is mandatory and without the particulars of this income the assessing authority cannot entertain the claim of the assessee under section 11, therefore, compliance of the requirements of the Act will have to be any time before the assessment proceedings. Further, any claim for giving the benefit of section 11 on the basis of information supplied subsequent to the completion of assessment would mean that the assessment order will have to be reopened. We find that the Assessing Officer did not consider this part of the judgement hence, the order of the assessing authority is erroneous. It is also noticed that Ld.CIT(A) on this issue has merely affirmed the view of the AO without adverting to the submissions of the assessee. This approach of the authorities below is contrary to the binding precedents. Undisputedly, the assessee had filed Form No.10 before the completion of assessment. Setting off of the earlier year excess utilization of funds - As per Assessing Officer, accumulation of income in excess of 15% of the income is allowed subject to certain conditions noticed and AO noticed that the application of income fall short of benchmark of 85% - As in RAGHUVANSHI CHARITABLE TRUST AND OTHERS 2010 (7) TMI 158 - DELHI HIGH COURT answered the question in favour of the assessee that whether a trust can be allowed to carry forward the deficit of current year and to set off of same against the income of subsequent years; in favour of the assessee and further question whether adjustment of deficit of current year against the income of subsequent year would amount to application of income of the trust for charitable purposes in the subsequent year within the meaning of section 11(1)(a) of the Act in favour of the assessee. Thus we direct the AO to allow the claim of the assessee regarding set off of excess utilization of funds and accumulation of income. Thus, Ground raised by the assessee are allowed.
Issues Involved:
1. Validity of the CIT(A)'s order. 2. Adjustment of earlier year excess utilization/deficit from current year surplus under Section 11 of the Income Tax Act. 3. Accumulation of income under Section 11(2) despite late filing of Form 10. 4. Acceptance of Form 10 filed during assessment proceedings. 5. Jurisdiction of CIT to consider delay in filing Form 10. 6. Relevance of case laws cited by the assessee. Detailed Analysis: 1. Validity of the CIT(A)'s Order: The appellant contended that the CIT(A)'s order was "bad in law and against the facts of the case." However, this issue was deemed general in nature and did not require separate adjudication. 2. Adjustment of Earlier Year Excess Utilization/Deficit from Current Year Surplus: The assessee argued that the authorities erred in not adjusting the earlier year excess utilization of ?19,55,651/- from the current year surplus. The AO and CIT(A) did not accept the assessee's contention that the excess utilization from previous years should be set off against the current year's surplus. The Tribunal referred to the judgment of the Delhi High Court in the case of Director of Income Tax vs. Raghuvanshi Charitable Trust, which allowed such adjustments, interpreting that excess expenditure of earlier years can be set off against the income of subsequent years and should be treated as application of income for charitable purposes. The Tribunal directed the AO to allow the claim of the assessee regarding the set-off of excess utilization of funds. 3. Accumulation of Income under Section 11(2) Despite Late Filing of Form 10: The assessee claimed accumulation of income of ?1,67,721/- under Section 11(2) despite filing Form 10 electronically beyond the prescribed time but before the finalization of the assessment. The AO and CIT(A) disallowed the claim based on the late filing of Form 10. The Tribunal referred to the Supreme Court's judgment in CIT vs. Nagpur Hotel Owner’s Association, which emphasized that the necessary information must be available to the AO at the time of assessment. Since the assessee had filed Form 10 before the completion of the assessment, the Tribunal found the AO's order erroneous and directed the AO to allow the accumulation of income. 4. Acceptance of Form 10 Filed During Assessment Proceedings: The assessee contended that Form 10, filed during the assessment proceedings, should be accepted. The Tribunal noted that the AO did not consider the timely filing of Form 10 before the completion of the assessment and found the AO's and CIT(A)'s approach contrary to binding precedents. The Tribunal directed the AO to accept Form 10 filed during the assessment proceedings. 5. Jurisdiction of CIT to Consider Delay in Filing Form 10: The CIT(A) held that only the CIT could consider the delay in filing Form 10 and that no application was made by the assessee. The Tribunal found this approach contrary to binding precedents and directed the AO to accept the Form 10 filed before the completion of the assessment. 6. Relevance of Case Laws Cited by the Assessee: The CIT(A) held that the case laws filed by the assessee were not linked to the findings in this case. The Tribunal found that the authorities below failed to appreciate the binding precedents cited by the assessee, such as the Delhi High Court's judgment in the case of Director of Income Tax vs. Raghuvanshi Charitable Trust, which supported the assessee's claims regarding the set-off of excess utilization and accumulation of income. Conclusion: The Tribunal allowed the appeal partly, directing the AO to allow the claim of the assessee regarding the set-off of excess utilization of funds and accumulation of income, in line with the binding precedents. The Tribunal found the orders of the AO and CIT(A) erroneous and contrary to the settled law. The appeal was partly allowed, and the order was pronounced in the open court on 12th April 2022.
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