Facts of the Case

The case pertains to Assessment Year 2008–09, where the respondent-assessee, a charitable society registered under Section 12A of the Income-tax Act, 1961, filed its return declaring nil income.

In the previous assessment year (AY 2007–08), the assessee had advanced ₹5.85 crores for the purchase of immovable property and treated the same as application of income under Section 11. However, the amount was returned in AY 2008–09 but was not disclosed in the original return of income.

Subsequently, the Assessing Officer initiated reassessment proceedings under Section 148 due to non-disclosure of the returned amount. During reassessment, the assessee filed a revised return and submitted Form No. 10 claiming accumulation of income under Section 11(2).

Issues Involved

  1. Whether the assessee can file or revise Form No. 10 during reassessment proceedings under Section 147/148.
  2. Whether benefit under Section 11(2) can be allowed when Form No. 10 was not filed during the original assessment.
  3. Whether rejection of revised return and Form No. 10 by the Assessing Officer was justified.

Petitioner’s (Revenue’s) Arguments

    • Filing of Form No. 10 is mandatory and must be done before completion of original assessment.
    • The assessee failed to disclose the returned advance amount in the original return.
    • The revised Form No. 10 filed during reassessment should not be entertained.
    • Reliance was placed on judicial precedents emphasizing timely compliance for claiming exemption under Section 11(2).

 

Respondent’s (Assessee’s) Arguments

  • The assessee submitted that:
    • The omission to disclose the returned amount was inadvertent.
    • The amount was duly invested in modes specified under Section 11(5).
    • Revised return and Form No. 10 were filed during reassessment proceedings.
    • There was no violation of conditions under Section 11(2).
    • The law permits filing of Form No. 10 during reassessment when proceedings are reopened by the Revenue.

Court’s Findings / Order

  • It was observed that:
    • There was no adverse finding regarding violation of conditions under Section 11(2).
    • Filing of Form No. 10 during reassessment proceedings is permissible.
    • The issue is covered by precedent in Association of Corporation & Apex Societies of Handlooms v. ADIT.
  • The Court clarified:
    • While Form No. 10 must ordinarily be filed before completion of assessment,
    • When reassessment is initiated by the Revenue, the assessee cannot be barred from complying during such proceedings.
  • The Court concluded that:
    • No substantial question of law arises.
    • Appeal of the Revenue was dismissed.

Important Clarification

  • Filing of Form No. 10:
    • Mandatory for claiming benefit under Section 11(2).
    • However, can be validly submitted during reassessment proceedings initiated under Section 147.
  • Distinction clarified:
    • Assessee cannot seek reopening merely to file Form No. 10.
    • But if Revenue reopens the case, assessee can avail opportunity to comply.

Sections Involved

  • Section 11(1) – Income from property held for charitable purposes
  • Section 11(2) – Accumulation of income
  • Section 11(5) – Permissible investment modes
  • Section 12A – Registration of charitable trust
  • Section 143(1) – Processing of return
  • Section 147 – Income escaping assessment
  • Section 148 – Issue of notice for reassessment
  • Rule 17 – Filing of Form No. 10

 

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/RAS07122023ITA7122023_171727.pdf

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