The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that a procedural lapse committed by a legal consultant in filing statutory forms cannot permanently deprive an eligible assessee of exemption under Section 11 of the Income-tax Act, 1961.
The bench of Sudhir Kumar (Judicial Member) and Manish Agarwal (Accountant Member) has allowed the appeal and directed the Assessing Officer to recompute its income after granting the benefit of exemption, subject to verification of the relevant facts.
The dispute pertained to Assessment Year 2018-19, where the Assessing Officer denied FSSAI’s claim for exemption of ₹11.63 crore under Section 11 on the ground that Form 10 and Form 10B, required for accumulation of income under Section 11(2), had not been furnished within the prescribed time. The Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC) affirmed the assessment, holding that no condonation of delay had been obtained from the jurisdictional Commissioner of Income Tax (Exemptions).
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During the appellate proceedings, FSSAI explained that the statutory forms could not be furnished before the Assessing Officer because of the negligence of the legal consultant handling the assessment proceedings. The Authority subsequently filed the corrected Form 10 and revised Form 10B during the appellate stage and sought admission of these documents as additional evidence.
The assessee argued that the procedural lapse was not deliberate and should not result in denial of a substantive exemption otherwise available under the Act.
The Tribunal noted that an identical issue had already been decided in favour of FSSAI for Assessment Year 2017-18. Following that precedent, it reiterated that CBDT Circulars provide a mechanism for condonation of delay in filing Forms 10 and 10B, and procedural requirements relating to such filings should not be interpreted so rigidly as to defeat a legitimate exemption claim.
The Bench further observed that the Gujarat High Court in CIT v. Xavier Kelavani Mandal (P.) Ltd. had held that filing such forms is directory in nature and not mandatory, provided the substantive conditions for exemption are fulfilled.
Accepting the assessee’s contention, the Tribunal held that the benefit of exemption under Section 11 could not be denied merely because the prescribed forms were not filed within time due to the legal consultant’s lapse. It accepted FSSAI’s claim in principle and directed the Assessing Officer to undertake a fresh computation after verifying the necessary records in accordance with law.
Consequently, the appeal filed by FSSAI was allowed.
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