Failure to E-File Form 10 Results in Denial of Income Accumulation Claim: ITAT Restores Matter to Seek Condonation [Read Order]

The Income Tax Appellate Tribunal ( ITAT ) Chandigarh Bench in its recent order has restored the case and enabled the assessee to seek condonation of delay in electronically filing Form 10 to claim accumulation of income under the Income Tax Act, 1961.

The Tribunal held that in accordance with the rules it is mandatory to electronically file Form 10 to claim the benefit of accumulation of income under the Income Tax Act. Since the assessee did not follow the proper procedure it was not possible to grant permission for claiming it automatically.

However, since it is possible to claim it under the law, the Tribunal has restored the case to enable the assessee to seek it from the proper authority

In the assessment proceeding for the Assessment Year 2016-17, the Assessing Officer found that the assessee had accumulated income in excess of the limit of 15%. Moreover, the assessee had failed to e-file Form 10 which is mandatory for availing the accumulation benefit.

The assessee Punjab Municipal Infrastructure claimed before the AO that they had filed Form 10 manually on the 17th of October 2016 before the completion of the assessment proceeding.

However, the AO denied the accumulation benefit as the assessee failed to file the form electronically as required under the rules. The Commissioner of Income Tax (Appeals) also upheld the decision taken by the AO and denied the accumulation benefit as the assessee failed to apply for the condonation of the delay as prescribed by theCBDT.

The assessee claimed before the Tribunal that the failure to file the form electronically was only a procedural failure as the form was filed before the completion of the assessment proceeding. Moreover, the requirement for filing the form electronically was recently introduced.

The Tribunal held that it is mandatory to follow the prescribed electronic filing procedure, and if the claim is allowed without such compliance, it would render the provisions of law ineffective. At the same time, it was also held by the bench that there is a provision for condoning such delays in Circular No. 06/2020 issued by CBDT.

Therefore, the Tribunal bench comprising Lalit Kumar [Judicial Member], and Manoj Kumar Aggarwal [Accountant Member] that the matter be restored to the Commissioner of Appeals for consideration after the outcome of the condoning of delay, if any, is decided by the assessee.

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