Food Safety And Standards Authority Of India vs ACIT, Circle Exemption-1(1), New Delhi

“06.

Findings and Decision: T he appellant c ontest ed t he impugned additions mad e by the AO o n the following grounds:

1.

The assessi ng officer has absolutel y erred i n maki ng a dditi on of Rs 229726067.00 bei ng s urpl us to be used in subsequent years despite the facts tha t appl ication of the assessee for co ndonati on of dela y is pendi ng wi th CIT(E), New D el hi for disposal.

2.

That the appellant rese rves t he ri ght to add, amend or del et e any ground of appeal before t he he ari ng.

6.1

I hav e gone t hrough the facts of the cas e, findi ngs of the AO, a nd have considered t he argume nts p ut forth by t he appellant in the grounds of appeal and stateme nt of facts. The appeal i s being adj udic ated as under:

6.2

Addition of Rs.22,97,26,067/- on account of disal lowance as application of i ncome : The gr ounds of appeal primarily pertai n to the addition of Rs.22,97,26,067/- on account of disal lowance as applicatio n of income. D uring t he assessme nt proc eedi ngs, suffi cient opportuni ty to submit the reply was give n to the ass essee. The assessee submitted r eply to the notice iss ued by the AO wherei n it submitted that the applicati on for condonation of delay was pending before C IT(Exe mptions). H owever , AO held t hat the fac t remai ns that assessee had failed to file stat ement i n form 10 by d ue date and als o asse ssee had failed to get any c ondonati on for delay by due date as mentioned in show-cause notice. Henc e, benefit of accumula tion was not available t o t he asses see as per the provisions o f the Act and acc ordingly computation of income was done without givi ng benefit of accumul ation u/s 11 (2 ) of the Act. In view of the abov e, the amount of Rs.22,97,26,067/- was disallowe d as applicati on of income and added to the i ncome of the ass essee.

6.2.1

During appellate proceedi ngs, many oppor tuni ties hav e be en given to the appella nt to pursue its case. In its submission, t he app ellant has submitted that , the Ld.AO has de ni ed the statut or y benefit of am ount of accumul ati on under secti on 11(2) only on the conte nti on tha t the form 10 whic h has been presc ribed for claiming the subj ec t benefit could not be fil ed within the tim eline prescribed. The appellant s ubmits tha t application for condonati on filed by the Appell ant was dismissed vide order dated January 30, 2019 by i ncorrectly holdi ng that the Appel lant was no t pr event ed by any reasonable caus e from filing t he F orm 10 withi n the st ipulated time peri od. Aggriev ed by the same, the Appellant fi led a writ peti tion before t he Hon’bl e Del hi Hi gh Cour t (‘HC ’) in WP (C) No. 4091/2019 wherein t he Hon’ble High C ourt has r eserved the j udgment and listed the mat ter on August 18, 2025.

6.2.2

The appel lant has taken r ecourse of appeal before hi gher appellat e aut horities agai ns t the rej ection of condonati on application but has failed to provide a ny doc ument i n respect of any relief regardi ng t he condonati on of del ay despite the fact that s ufficient time has elapsed. Thus, t he appellant has failed to adduce any doc ument ary evidence to c ontr overt the fi ndi ngs of the AO. Accordi ngly , the Gr ound no. 01 of t he ap peal filed by the appellant is dismissed.

6.2.3

Furthe rmore, in t he Ground of Appeal no. 01, t he appellant has pl eaded that the assessi ng officer has abs ol utely err ed i n maki ng additio n of Rs. 229726067.00 bei ng surpl us to be used i n s ubs equent year s despite the fact t hat application of the asse ss ee for c ondonati on of dela y is pendi ng with C IT(E), New Del hi for disposal . B ut it i s a matter of fact tha t the appel lant’s application for condonati on of delay has already be en dismissed by CIT(E), New Del hi. Thi s is as good as c onfirmation of additi on ma de by the AO . O n this very basis als o, this Gro und of appeal at this stage is no n-mai ntai nable.

6.2.4

In view of t he facts and circumstances, I fi nd no reason to i nterfere wi t h the fi ndi ngs of the AO. Accordi ngly, the additi on of Rs.22,97,26,067/- is confirmed and t he grounds rai sed in this regard are dismissed.

07.

In t he result, the appeal of the appell ant is dismissed. ”

Grounds relating to validity o f proceedings

“1 . That on fa cts and circums tances of the case and i n law, the Ld. Com missioner of Income Tax (Appeals) at Na tional Fac eless Appeal Centre, Del hi [CIT (A)] has erred in passing the order dated S eptem ber 25, 2025, under section 250 of the I ncom e Tax Act, 1961 (‘t he A ct’) [‘impugned order’] i n violation of the pri nciples of nat ural j ustic e by ac ti ng i n undue has te and de nying adequate oppor tunity of being heard.

2.

That on the facts and in the circumstanc es of t he case, and in law, t he Ld. CIT (A) has gr ossly erred in passi ng t he impugned order uphol ding the disallowances made by the Ld. AO without considering t he fact t hat the subject iss ue, in the Appellant’s own case, is pending before Ho n’bl e D el hi Hi gh Court i n W.P.(C ) No. 4091 of 2019, wher ei n the Hon’bl e D el hi Hi gh Court has reserved its judgment for pro nounce ment.

Wi thout prejudice to above . Grounds re lating to application o f income a s per section 11 of the Act

3.

That on the facts and in the circumstanc es of t he case, and i n law, the Ld. CIT(A) has erred i n upholdi ng the disallowance of INR 22,97,067 under S ecti on 11(2 ) of the Act i n r espec t of the am ount ac cumulated/set apart, sol ely on the gr ound t hat Form 10 was no t filed withi n the timelines stipulat ed under t he Act. Further, the Ld. CIT(A) has grossl y failed to ta ke cogni zanc e of the fact tha t there i s not even a whisper on the merits of t he benefit claimed i n the assessment order , l et alone any allegati on by t he Ld. AO. Thus , the impugned or der pass ed by the Ld. C IT(A), uphol ding the disal lowance sol ely on the ground of delay i n filing Fo rm 10, is bad in law and liable to be quashed/set aside.

4.

That on the facts and in the circumstanc es of t he case, and i n law, the Ld. CIT(A) has erred i n upholdi ng the disallowance in co mpl ete disregard of CBDT Circ ular No . 07/2018 dated D ecember 20, 2018, which dir ected Commissi o ners t o admi t belat ed applications i n Form 10 for AY 2016-17, consideri ng that the requirement of e-filing Form 10 was introduc ed for the first time from A pril 01, 2016. This proposition has be en af fi rmed by the jurisdictio nal Del hi High C ourt i n B ar Council of India v. CIT (Exemption) [TS-07-HC-2024(DEL)].

5.

That on the facts and in the circumstanc es of t he case, and i n law, the Ld. CIT(A) erred in not appr eciati ng tha t the Appellant has com plied with the substantive provisions of Se ction 11 of the Act . Theref ore , t he benefit of non-i nclusi on of t he am ount accumulat ed/set apa rt cannot be deni ed mer el y on account of a del ay in filing Form 10. The Ld . C1 T(A) f urther fai led to consider tha t technical lapses sho uld not defea t the cause of subst antial justic e, parti cularly when the provision in questi on is an i nc entive-granting provisi on, whic h must be i nterpreted liberally i n favor of the Assessee.

6.

That on the facts and in the circumstanc es of t he case, and i n law, the Ld . C IT(A ) erred i n passing the impugned ord er wit hout appreciati ng that t he requirement under Secti on 13(9) of the Act for filing Form 10 is direct ory and not mandatory. The denial of exemption s ol ely on t ec hnical non-complianc e def eats t he pur pose of the i ncentive-granting provisi on under S ection 11, which must be i nter preted liberally to advanc e the cause of substa nti al justic e.

7.

That on the facts and in the circumstanc es of t he case, and i n law, the Ld. CIT(A ) has erred i n passi ng t he impugned order w ithout adj udicati ng or c onsideri ng the reasonable c aus e that prev ented the Appellant fr om filing Form 10 wi thi n the stipulat ed timeline.

8.

That on the facts and in the circumstanc es of t he case, and i n law, the Ld. CIT(A) erred in not appr eciati ng the directive contained i n CBDT Circular N o. 14 (XL-35) dat ed April 11, 1955, which m andates that Income Tax aut horities s houl d not tak e adv antage of an assess ee’s ignora nce of his rights a nd should allow all legitimat e claims. The impugned or der, by upholdi ng t he disal lowance solel y on tec hni cal gro unds, is c ontr ary to the spirit and intent of t he said ci rc ular and defeats t he pri nciple of subst antial j ustice.

Ground relating to levy of interes t as per sect ion 234B of the A ct

9.

That on the facts and circumstanc es of t he cas e and in la w, the L earned AO erred in levyi ng interest amo unti ng to INR 2,39,68,131 under sectio n 234B of t he Act.

The grounds of appeal herei n above are i nde pendent and without prejudice to each other.

The Appellant craves le ave to al ter, amend and/ or withdraw the Ground(s) of Appeal herei n or add any further grounds as may be considered necessary and to submit suc h s tat ements, doc uments and papers as m ay be c onsider ed necessary either before or duri ng t he appeal heari ng. ”