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TMI Blog2025 (3) TMI 445X X X X Extracts X X X X X X X X Extracts X X X X ..... ith return of income which was at best procedural omission, could never lead to an impediment in law in claiming the exemption. Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... rn is not filed within the due time u/s 139(1) of the Act, the same can be filed within the time limit u/s 139(4) of the Act. Moreover, filing of form no.10 is procedural lapse on the part of the assessee which was duly filed during the course of assessment proceedings itself. The ld. AR therefore, submitted that mere filing of form no.10 during the assessment proceeding cannot be a ground for denying the legitimate exemption u/s 11(2) of the Act, when all the conditions precedent for allowing such exemption have been fulfilled by the assessee. The ld. AR submitted that the activities of the trust are not in doubt and therefore, the exemption u/s 11(2) of the Act could not be denied on technicalities. The ld. AR in defense of his arguments relied on a series of decisions in case of M/s Susila Educational Trust Vs. ITO in ITA No. 1095/Chny/2024 order dated 30.08.2024 for A.Y. 2018-19, Shri MahudiMadhupuri Jain Vs. ITO in ITA No. 184/AHD/2024 order dated 04.06.2024, CIT (Exemption) Vs. M/s Indian Sugar Mills Association in ITAT No. 270 of 2023, I.A. No. GA/1/2023 & GA/2/2023 order dated 10.01.2024, Association of Indian Panelboard manufacturer Vs. DCIT in R/Tax Appeal no.655 of 2022 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Memorandum of the Finance Bill, 2023 which is found to be as under: 9. Denial of exemption where return of income is not furnished within time 9.1 As per the provisions of twentieth proviso to clause (23C) of section 10 of the Act, if the return of income is not furnished by a trust or institution under first regime within the time under section 139 of the Act, exemption under subclause (iv)/(v)/(vi)/(via) of clause (23C) of section 10 of the Act shall not be available to such trust or institution. a. Similarly, as per the provisions of clause (ba) of sub-section (1) of section 12A of theAct, if the return of income is not furnished by a trust or institution under the secondregime within the time under section 139 of the Act, exemption under section 11, 12 of theAct shall not be available to such trust or institution. b. Section 139 of the Act was amended by the Finance Act, 2022 providing for an option to the taxpayers to furnish updated return of income up to 2 years from the end of assessment year. c. This resulted in unintended consequences of allowing exemption under section 11, 12 of the Act and sub-clause (iv)/(v)/(vi)/(via) of clause (23C) of section 10 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well which was continued and made specific vide this amendment. 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/s11 of the Act while processing the return. 11. 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 section12A 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 and the relevant portion of the Circular is reproduced below: "2. In the matter, the memorandum explaining the relevant provisions of the Finance Bill, 2017 reads as under: "as per the existing provisions of said section, the entities registered under section 12AA are required to file return of income under subsection (4A) of section 139, if the total income without giving e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n held by the Ld. ITAT, Rajkot Bench in the case of Shri Rajkot Vishashrimali Jain Samaj, [2023] 150 taxmann.com 361 (Rajkot-Tri), 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. 13. In view of the above provisions of law, 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. 14. In the result, appeal preferred by the assessee is allowed." 09. Similarly, the co-ordinate Bench in the case of M/s Susila Educational Trust Vs. ITO (supra) has decided the issue in favour of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DGIT (Systems), New Delhi. Subject : Clarification with regard to the time allowed for filing of return of income subsequent to the insertion of Clause (ba) in sub-section 1 of section 12A of the income -tax Act, 1961. Sir, Undersigned is directed to refer to the representation(s) received on above mentioned subject stating that while processing of ITR-7 for the A.Y. 2018-19, in respect of the belated returns filed u/ s 139(4) of the Income Tax Act, 1961 (Act), the following is being communicated u/s 143(1)(a) of the Act:- "As per section 12A(1)(ba) of the Income -tax Act, 1961 the person in receipt of the income has furnished the return of income for the previous year in accordance with the provisions of sub-section (4A) of section 139, within the time allowed under that section. Otherwise, the exemption u/s-11 i.e. sr. no 4(i) and 4 viii in schedule Part BTI is not allowed." Based on this, exemption u/s 11 of the Act has been denied to otherwise eligible trust, thereby creating huge demand. 2. In the matter, the memorandum explaining the relevant provisions of the Finance Bill, 2017 reads as under: "as per the existing provisions of said section, the entities regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return of income within the time allowed u/s. 139(1) of the Act. The CBDT has categorically directed the Assessing Officers and this clarification was issued to the Pr.DGIT(Systems), New Delhi that the orders issued u/s. 143(1A) of the Act in the case where already disallowance were carried out, those may be rectified. Hence, the CBDT itself accepted the position that even returns filed u/s. 139 is to be accepted. It means that it has enlarged its scope of section 139 of the Act, which includes provisions of section 139(4) also. Here provision of section 139(4) w.e.f. 01.04.2017 lays down that any person who has not furnished return of income within the time allowed u/s. 139(1) of the Act, may furnish the return for any previous year at any time before the end of the relevant financial year or before the completion of assessment whichever is earlier. Here, in the present case, the assessee has filed return of income for the relevant assessment year 2018-19 on 09.02.2019 and here assessment year ends on 31.03.2019. It means, this return is filed within the provision of section 139(4) of the Act. In term of section 139(4) of the Act, a return filed at a belated stage but upon comply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n u/s 11 of the Act and the deduction of Rs. 1,35,87,109/- claimed by the assessee denied on the ground that the assessee failed to file the return before the due date and secondly audit report in Form-10B was not filed before the due date prescribed in this Act. The Hon'ble Member has after going over the Circular of CBDT and after discussing several judgments of the hon ITAT has passed the order in favour of the assessee. The operative portion of the aforesaid decision is as thus: "12. Now, the second reason for which lower authorities have denied the deduction u/s 11 of the Act is of filing the belated audit report on form 10B of the Act. Now, clause (b) of section 12A(1) of the Act provides for a condition that if the income of a trust exceeds a maximum amount which is not chargeable to tax in the previous year the account have to be audited and the person in receipt of such income furnishes the audit report before the specified date. In the case of the assessee, Form No.10B was to be filed and the relevant rule is rule 17B of the Income Tax Rules which provides that the report of audit of the accounts of a trust or institution which is required to be furnished under Clau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e copy of this report is placed at 40- 41 of paper book and the date of audit report is prior to the filing of the return of income, therefore, it is presumed that conducting of audit for preparation of audit report is before e-filing of the return of income but as claimed by the assessee due to technical glitches, the report was uploaded after filing the return of income. 15. Though the Hon'ble Court holds that the report should be considered even filed in the course of assessment proceedings, or before in appellate authority, however, we notice that in the instant case, the case of the assessee was not selected for scrutiny assessment and it was mere processing of return by the computer with the set program. Had it been the case of scrutiny proceeding u/s 143(3) of the Act, the case could have been different. The ld. A.O may had an opportunity to go through the audit report. But still when the issue came before ld. CIT(A) who also possesses coterminus power with that of A.O and as per section 251(1)(a) of the Act, the ld. CIT(A) in disposing the appeal against order of assessment has the power to confirm, reduce, enhance or annul the assessment, therefore, though, it was no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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