Disallowance made by denying accumulation u/s.11(2) of the Act

St. Anthony’s Institute (Formerly known as St. Anthony’s School Trust)

TPS-III, Pali, 33rd /21st Road Corner, Bandra (W)

Mumbai – 400 050

PAN/GIR No.AABTS8069G

VS

ITO (IT)3(1), Centralized Processing Centre

Bengaluru Karnataka - 560500

O R D E R

PER M. BALAGANESH (A.M):

This appeal in ITA No.4612/Mum/2019 for A.Y.2014-15 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-1, Mumbai in appeal No.CIT(A)-1/143/DCIT(CPC)/2018-19 dated 16/05/2019 (ld. CIT(A) in short) against the order of assessment passed u/s.154 of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 17/11/2017 by the ld. Income Tax Officer (E)2(3), Mumbai (hereinafter referred to as ld. AO).

2. The only issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in upholding the disallowance made by the ld. AO by denying accumulation u/s.11(2) of the Act in the facts and circumstances of the instant case.

3. We have heard rival submissions and perused the materials available on record. We find that assessee is a public charitable trust running a school and had filed its return of income for the A.Y.2014-15 on 29/09/2014 declaring total income of Rs.Nil. We find that assessee trust is duly registered u/s.12A of the Act. The assessee had claimed deduction u/s.11 of the Act while filing return of income. The return of income was duly processed u/s.143(1) of the Act on 28/02/2016 by ld. AO (CPC) wherein the benefit of accumulation claimed by the assessee u/s.11(2) of the Act was denied and accordingly, the total income was determined at Rs.35,90,518/-. The assessee filed a rectification application u/s.154 of the Act which was rejected by the ld. AO (CPC) on the ground that the assessee had not filed Form No.10 electronically on or before the due date of filing of return. We find that assessee had indeed filed Form No.10 on 26/06/2014 before the ld. AO in physical form by hand delivery for which receipt was issued by the ld. AO. The assessee pleaded that for the A.Y.2014-15, there was no system of online filing of Form No.10 and hence, assessee trust could not have filed the same electronically. It was also pointed out that online filing of Form No.10 was introduced only w.e.f. 01/04/2016 i.e. relevant to A.Y.2016-17. It was also stated that the Auditor of the assessee trust had uploaded the audit report in Form No.10B electronically wherein it was clearly indicated that assessee trust had accumulated Rs.24,20,610/- u/s.11(2) of the Act. Moreover, before processing the return of income u/s.143(1) of the Act, CPC (Benguluru) had issued notice of defect in the return of income which was duly corrected by the assessee. There is no mention in the said defect notice regarding non-filing of Form No.10 in electronic form. If CPC had intimated the assessee trust, then it would have informed CPC regarding the filing of Form No.10 in physical mode before the ld. AO on 26/06/2014 and could have furnished scanned copy of the same. Accordingly, it was pleaded that the CPC while processing the return of income u/s.143(1) of the Act had erred in not granting the benefit of accumulation of income u/s.11(2) of the Act for want of electronic filing of Form No.10 and also by ignoring the audit report in Form No.10B wherein the figure of accumulation has been duly mentioned by the Auditor. Thereafter, the assessee preferred a rectification petition u/s.154 of the Act before the CPC which was rejected by the CPC on the ground that assessee did not file Form No.10 electronically. This fact was not appreciated even by the ld. CIT(A) while upholding the action of the CPC. Aggrieved, assessee is in appeal before us.

3.1. It is not in dispute that Form No.10, being the statutory form for accumulation of income in terms of Section 11(2) of the Act has been filed physically by the assessee before the ld. AO on 26/06/2014, which has been duly acknowledged by the ld. AO. We find that the statute mandated online filing of Form No.10 only w.e.f. 01/04/2016 i.e. relevant to A.Y.2016-17. Hence, we find considerable force in the argument advanced by the ld. AR that for the year under consideration, the assessee could not have electronically filed Form No.10 in terms of Section 11(2) of the Act. We find that assessee had filed Form No.10 in physical form before the ld. AO on 26/06/2014 which is much prior to the date of filing of return of income on 29/09/2014. In the said return of income filed on 29/09/2014, the assessee trust had claimed accumulation of 15% of income u/s.11(1) (a) of the Act at Rs.11,69,907/- and balance amount of Rs.24,20,611/- was claimed as accumulation u/s.11(2) of the Act for which Form No.10 was filed in physical form in time. The assessee has also 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 of Rs.35,90,518/- 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. Moreover, we find the very same issue had been the subject matter of adjudication by this Tribunal in the case of Parle Hindu Devalaya Mandir vs. DCIT (CPC) Bangalore, in ITA No. 766/Mum/2019 dated 04/03/2020 for A.Y.2015-16 wherein this issue has been decided in favour of the assessee.

3.2. In view of our aforesaid observations and respectfully following the aforesaid judicial precedent, 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.

4. In the result, appeal of the assessee is allowed for statistical purposes.

Please find attached the enclosed file for the full judgement