2023 (6) TMI 172 - AT - Income Tax

Addition u/s 11(3) - sale transaction of trust property - assessee claimed capital gain and the duly reflected in the return of income at Column No.4(vi) as a part of accumulation set apart for the year under consideration out of income earned on account of capital gain during the year - HELD THAT - In the present case, where the impugned addition was made on the basis that the assessee failed to file requisite report as required in Form No.10B.Appeal of the assessee is allowed for statistical purposes. Assessee has himself accepted that mistake was committed while filing statutory return of income by admitting that the same capital gain as income u/s 11(3) when the same is indeed set apart for a specified purpose Setting up free coaching cum Study Centre for BPL Card Holders and Other admitted in Form 10B, thereby, the amount set apart is not to be treated as income, though, the same was mistakenly admitted as income of the appellant s trust under Section 11(3) of the Act in the return of income. Assessee has himself accepted that mistake was committed while filing statutory return of income by admitting that the same capital gain as income under Section 11(3) of the Act, when the same is indeed set apart for a specified purpose Setting up free coaching cum Study Centre for BPL Card Holders and Other admitted in Form 10B, thereby, the amount set apart is not to be treated as income, though, the same was mistakenly admitted as income of the appellant s trust under Section 11(3) of the Act in the return of income. The learned authorities below ought to have considered and verify the facts as well as the bona fide mistakes - set aside the orders of the authorities below and restore the issue to the file of the AO to verify the grievance of the assessee. If, it is found correct, the issue may be decided in accordance with law.

Summary

Issues involved:
The issues involved in the judgment are:
1. Determination of taxable income under Section 11(3) of the Income Tax Act.
2. Addition of income under Section 11(3) of the Act.
3. Charging tax and levying interest under Sections 234B and 234C of the Act.

Issue 1: Determination of taxable income under Section 11(3) of the Income Tax Act:
The assessee, a trust, filed its return of income for the assessment year 2020-21, claiming capital gain of Rs.8.86 lacs. The ADIT, Centralized Processing Centre (CPC) processed the return and treated the income as chargeable under Section 11(3) of the Act. However, the appellant contended that the income was set apart under Section 11(2) of the Act and not chargeable under Section 11(3). Despite submissions, the ADIT, CPC, Bangaluru treated it as an addition under Section 11(3) of the Act.

Issue 2: Addition of income under Section 11(3) of the Act:
The appellant, an educational society, earned long-term capital gain on the sale of a plot during the year under consideration. The gain was accumulated under Section 11(2) of the Act, but inadvertently appeared as an addition under Section 11(3) due to a mistake in filing the return. The appellant argued that the mistake was wrongly repeated by the CPC, despite submitting an audit report in Form 10B reflecting the correct position.

Issue 3: Charging tax and levying interest under Sections 234B and 234C of the Act:
During the assessment proceedings, it was noted that the appellant admitted a sale transaction, resulting in a gain set apart for specified purposes as per Form 10. The ADIT pointed out that the appellant had the opportunity to file a revised return but failed to do so within the due date. The ADIT rejected the appellant's plea, stating that the claim under Section 154 of the Act and the grounds raised were not justified. The learned Commissioner of Income-Tax(Appeals) dismissed the appeal, emphasizing the legal responsibility of the assessee to make proper claims under relevant provisions of the Act.

Separate Judgement:
The appeal was allowed by the Judicial Member, who set aside the orders of the authorities below and restored the issue to the file of the Assessing Officer to verify the grievance of the assessee. If found correct, the issue was to be decided in accordance with the law, resulting in the appeal of the assessee being allowed for statistical purposes.