2023 (8) TMI 1108 - AT - Income Tax

Rectification u/s. 154 - Assessment of income after denial of exemption u/s 11 - assessee had failed to file Form No.10A and Form No.10B within the stipulated period as per the mandate of the Income Tax Act - as argued both the lower authorities had erred in assessing the gross receipts of the assessee society as its income - claim of the Ld. AR that the A.O., after treating the assessee as an unregistered society, was obligated to have considered its claim for deduction of expenses raised in the income and expenditure account while deducing its taxable income - HELD THAT - As where the assessee s claim for exemption u/s. 11 12 of the Act is declined, it is incumbent for the A.O. to deduce its total income in line with commercial principles. Accordingly, assessing the gross receipt of the assessee society by the A.O. suffers from a mistake which being glaring, patent, evident, and apparent from the record, had rendered the same amenable for rectification u/s. 154 of the Act. Before proceeding any further, we may herein observe that the declining of the assessee s claim for exemption u/s. 11 12 of the Act, perse would not justify assessing its gross receipt as its income for the year under consideration. Even though the assessee society may not be entitled to exemption u/s. 11 12 of the Act, its income under any circumstance must be deduced per commercial principles, i.e., after considering its claim of expenses per extant law. Our view above is fortified by the order passed in the case of Jain Shwetamber Murtipujak Sangh 2023 (5) TMI 960 - ITAT RAIPUR wherein involving identical facts, though declining of the assessee s claim for exemption u/s. 11 12 for delayed filing of Form 10 was upheld by the Tribunal but its alternative claim that the A.O was obligated to have considered its claim for deduction of expenses raised in the income and expenditure account was accepted. The matter was restored to the file of the A.O. to consider the assessee s claim for deduction of expenses as debited in the income and expenditure account under the provisions of the Act. As restore the case of the assessee appellant to the file of the A.O with a direction to consider its claim for deduction of expenses as debited in the income and expenditure account, i.e., to the extent the same was allowable under the Act.

Summary

Issues Involved:
The issues involved in the judgment are the denial of exemptions under sections 11 and 12 of the Income-tax Act, 1961, due to delayed filing of Form No. 10 and Form No. 10B by the assessee society, leading to a consequential demand raised by the Assessing Officer (AO) and the rejection of the application seeking condonation of delay in filing the forms by the Commissioner of Income-Tax (Exemption), National Faceless Appeal Center (NFAC), Delhi.

Summary of Judgment:
1. The appeal was filed by the assessee society against the order passed by the Commissioner of Income-Tax (Exemption), NFAC, Delhi, which arose from the order passed by the AO under Sec. 154 of the Income-tax Act, 1961, for the assessment year 2016-17. The assessee challenged the denial of exemptions under sections 11 and 12 of the Act.

2. The assessee society filed its return of income for A.Y. 2016-17, followed by a revised return declaring income in the status of AOP/BOI. Forms 10 and 10B were filed after the return of income, leading to the denial of exemptions by the AO and a consequential demand raised.

3. The application for condonation of delay in filing Form No. 10 was rejected by the CIT(Exemption), Bhopal, and the claim for exemption was declined due to failure to file forms within the stipulated period.

4. The matter was appealed by the assessee society before the ITAT Raipur, where arguments were presented regarding the deduction of expenses incurred by the society, despite the denial of exemptions under sections 11 and 12.

5. The ITAT held that assessing the gross receipts of the assessee society as its income was a mistake apparent from the record, and directed the AO to consider the claim for deduction of expenses as debited in the income and expenditure account, to the extent allowable under the Act.

6. The judgment referred to a similar case decided by the ITAT, Raipur, where the claim for exemption was declined but the claim for deduction of expenses was accepted, leading to the restoration of the matter to the AO for consideration.

7. Consequently, the appeal of the assessee society was allowed for statistical purposes, and the case was remanded to the AO to reevaluate the claim for deduction of expenses as per commercial principles.

Order pronounced in open court on 21st day of August, 2023.