Form 10 under Income Tax Rules Supplied After Limitation But before Completion of Assessment has to be Considered: Allahabad HC [Read Order]

The Allahabad High Court has held that Form 10 under Income Tax Rules, 1961 supplied after limitation but before completion of assessment has to be considered.

M/S Maa Bhagwati Shiksha Samiti, the petitioner is a society and got itself registered with the Registrar of Society, Uttar Pradesh under the Societies Registration Act, 1860 bearing registration no. 1398/2005-06 for carrying out charitable work by imparting education through its institutions run by it. It had also the registered under section 12A of the Act on 25.09.2008 by the CIT-1, Kanpur, vide certificate.

The petitioner society was maintaining regular books of account and other records which were subjected to audit under section 12-A(b) of the Income Tax Act, 1961 (‘the Act’). For the year under consideration, that is, A.Y. 2013-14 it had filed its return on 31.03.2014 disclosing nil income after claiming exemption under section 11 of the Act. As the overall utilization during the year fell short by 17.02% (Rs.1,58,56,689/-) from the prescribed limit of 85% it had issued Form – 10 as per Rule 17 of Income Tax Rules, 1961 (‘the Rules’) which was filed before the Income Tax Department on 31.03.2014.

Return filed by the petitioner society was selected for scrutiny and notice under section 143(2) dated 22.09.2014 was issued, followed by notices, under section 142(1) of the Act, query letter and order sheet entries. In response to the notices/ queries raised by the Assessing Officer, books of account, audited balance sheets, Form – 10 and further information were placed on record. After verifying the same, an assessment order was passed by Respondent No.2 under section 143(3) of the Act accepting the NIL income disclosed by the petitioner after taking due cognizance of Form 10 filed by the petitioner.

Since there was an unapplied surplus income of Rs.1,58,86,689/for which the assessee has submitted form 10 on 31.03.2014 belatedly for accumulation of the aforesaid amount of surplus income. It was found that there was an unapplied surplus income of Rs.1,58,86,689/- for which the assessee submitted form 10 on 31.03.2014 for accumulation of the aforesaid amount of surplus income. Under the provision of section 11(2), the assessee had to submit form 10 for accumulation of income up to the date of filing its return provided u/s 139(1) i.e. 30.09.2013 but it was submitted after the due date as prescribed under section 139(1) of the Act

A division bench comprising Justice Siddhartha Varma and Justice Shekhar B. Saraf observed that Form-10 under Rule 17 of the Rules is required to be filed before the Assessing Officer before he completes the assessment. In a case, where Form-10 is filed late but is filed before the Assessing Officer completes the assessment, the benefit of Section 11(2) of the Act shall be available to the assessee.

The Court held that the entire process of reassessment that has been initiated by the Department holds no water and is without any legal basis whatsoever. The court quashed the notice issued under Section 148 of the Act, the order passed rejecting the objection of the petitioner dated March 3, 2022, and the reassessment order passed by the Assessing Officer on March 19, 2022.

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