The Lucknow bench of the Income Tax Appellate Tribunal (ITAT) has held that accumulation of surplus amount must be invested in modes specified under subsection 5 of section 11 of the Income Tax Act,1961 and held the disallowance of exemption u/s 11(2) as invalid.
The appellant preferred rectification application u/s 154 of the Income Tax Act against the order passed by CIT (Exemptions) u/s 119(2)(b) of the Act. The appellant contended against the order of CIT(A) which confirmed the addition by disallowing the exemption claimed u/s 11(2) of the Act for accumulation of surplus by holding that the benefit of accumulation shall not be allowed unless Form No. 10 is filed before the due date of filing the return of income specified u/s 139(1) of the Act.
The respondent contended that the CIT (Exemptions) has found that the delay in filing the return of income was not due to genuine reason and held that the delay cannot be condoned as per the circular of CBDT as the assessee had not fulfilled the twin conditions of being prevented by reasonable cause for filing Form 10 within the stipulated time.
As per the Circular, the commissioners shall satisfy themselves that the amount accumulated or set apart has been invested or deposited in any one or more of the forms or modes specified in sub-section (5) of section 11 of the Act. The order of CIT (Exemptions) states that the reason cited by the assessee for not filing Form 10 and income tax return within the due date cannot be accepted in the absence of any supporting evidence.
The appellant had filed a comparative chart of investment in a savings account and fixed deposits on 31/03/2015 and 31/03/2016 wherein it has been claimed to have invested in specified assets an amount exceeding the required amount as required by the provisions of the relevant section of the accumulated amount in the specified assets.
The Coram consists of Shri A D Jain, vice president and Shri T S Kapoor, AM held that CIT(Exemption) should examine the investment of the accumulated fund in the specified assets and pass a fresh order after providing sufficient and reasonable opportunity of being heard to the appellant. The appeal filed by the assessee was partly allowed. Shri Shyam Lall and Shri Harish Gidwani appeared on behalf of the appellant and the respondent respectively.
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