AI Structured Summary
Not yet generated for this judgment
Judgment
K.M. Joesph, J.—The petitioner is a welfare society registered under the Travancore-Cochin Literary, Scientific and Charitable Societies Registration Act, 1955, hereinafter referred to as the Act. The membership of the society consists of panchayats in the State of Kerala and the society itself is a Government of Kerala undertaking. It is registered u/s 12A of the Income Tax Act, 1961. It is entitled to exemption from Income Tax under Sections 11 and 13 of the Income Tax Act. The last date for filing the return for the assessment year 2000-01 was October 31, 2000. It is the case of the petitioner that on account of the delay on the part of the chartered accountant to finalise the accounts and file the return, the return was filed only on January 22, 2001. The petitioner also submitted Form No, 10 for accumulation along with the return. Rule 17 of the Income Tax Rules, 1962, reads as follows:
Notice for accumulation of income by charitable or religious trust or institution or association referred to in clauses (21) and (23) of Section 10.-The notice to be given to the Assessing Officer or the prescribed authority under Sub-section (2) of Section 11 or under the said provision as applicable under Clause (21) or Clause (23) of Section 10 shall be in Form No. 10 and shall be delivered before the expiry of the time allowed under Sub-section (1) of Section 139, for furnishing the return of income.
The assessment for the year was completed. However, the petitioner was not given the benefit of accumulation of income and it has been reckoned as the income of the year and the petitioner was called upon to pay tax on the said basis. The petitioner filed an application before the Commissioner of Income Tax invoking the benefit of exhibit P4 circular and exhibit P5 is the order passed by the Commissioner rejecting the application for condonation of delay in giving Form 10 under Rule 17. The petitioner challenges exhibit P5 and seeks a direction to the second respondent to condone the delay in filing Form No. 10. A declaration is sought that conditions in exhibit P4 Circular are complied with and a direction sought to grant exemption u/s 11 with respect to the income accumulated for the year 2000-01 in accordance with Section 11 of the Income Tax Act.
I heard Sri Joseph Markose, learned senior counsel appearing for the petitioner and also the learned standing counsel Sri Jose Joseph appearing on behalf of the Income Tax Department.
Two contentions are urged before me by the learned Counsel appearing on behalf of the petitioner. Firstly, he contends that under Rule 17 of the Income Tax Rules, 1962, the petitioner must be treated as having filed Form 10 within the time. In this context, he drew support of Sub-section (4) of Section 139. He contends that the petitioner has filed the return on January 22, 2001, which is well within the period stipulated under Sub-section (4) of Section 139. Further contention raised by the petitioner is that at any rate the petitioner must be treated as having fulfilled all the conditions in exhibit P4 circular and being a Government organisation the view taken in exhibit P5 for rejecting the application for condonation of delay cannot be sustained.
Per contra, Sri Jose Joseph, learned standing counsel would point out that Rule 17 of the Income Tax Rules specifically mandates that notice must be given within the time fixed for filing the return in Sub-section (1) of Section 139 of the Income Tax Act and there is no scope elongating the period with the support of Section 139(4). He also supported the order of the Commissioner rejecting the application for condonation of delay.
In order to appreciate the contentions raised by the parties, it is necessary to refer to Section 139(1) as also Section 139(4) of the Income Tax Act. Section 139(1) and (4) reads as follows:
Return of income.-(1) Every person,:
(a) being a company or a firm ; or
(b) being a person other than a company or a firm, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to Income Tax,
shall, on or before the due date, furnish a return of his income or the income of such other person during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed :....
(4) Any person who has not furnished a return within the time allowed to him under Sub-section (1), or within the time allowed under a notice issued under Sub-section (1) of Section 142, may furnish the return for any previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.
I have already referred to Rule 17. Rule 17 is unambiguously specific in so far as it mandates that the notice shall be delivered before the expiry of the time allowed u/s 139(1) for furnishing the return of income. In the first place, in my view, the words used are clear and leave no room for any ambiguity that the notice must be given within the time provided in Section 139(1). The rule-making authority was aware of the provisions contained in Section 139(4). The opening words of Section 139(4) itself are "Any person who has not furnished a return within the time allowed to him under Sub-section (1)". If it were the intention of the rule-making authority that time for giving notice can be extended till the date of passing the order of assessment or the expiry of one year from the end of the relevant assessment year, whichever is earlier, nothing prevented the rule-making authority from employing the words to indicate such an intention. By no stretch of imagination can the extended period which is given u/s 139(4) be made available for giving the notice for accumulation of income by charitable trust or institution beyond the period mentioned in Section 139(1). There can be no doubt that on the one hand the period u/s 139(1) is specified in the Act for various categories of assessees. In fact Section 139(4) extends the period of time for filing the return in a case where the assessment is not completed or the period of one year has not run out from the date of expiry of the assessment year for a person, inter alia, who has not filed return within the time allowed under Sub-section (1). I, therefore, reject the contention of the learned senior counsel for the petitioner.
As far as the second point is concerned, learned senior counsel would point out that the only reason forthcoming in exhibit P5 is that the explanation offered is not acceptable and being a Government organization it has the responsibility to comply with the provisions of the Act and make suitable arrangements. It is stated that the records clearly show that the society has not taken any steps to file the return along with Form No. 10 within the extended time allowed.
The period fixed for filing the return for the year in question ended on October 31, 2000. The time was extended generally for all the assessees till November 30, 2000. No doubt the petitioner did not file either the return or the notice in Form No. 10 before the said date. But the petitioner did have an explanation. I cannot also overlook the fact that petitioner is essentially a Government of Kerala undertaking. Further, it is also pointed out that the petitioner has been registered since for quite sometime. The bone of contention apparently centered around a proper interpretation to be given to the word "oversight". The circular reads as follows:
In exercise of the powers conferred u/s 119(2)(b) of the Income Tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby authorises the Commissioners of Income Tax to admit applications u/s 11(2) read with Rule 17 of the Income Tax Rules, 1962, from persons deriving income from property held under the trust wholly for charitable or religious purposes for accumulation of such income to be applied for such purposes stipulated. Commissioners of Income Tax will, while entertaining such applications, satisfy themselves that the following conditions are fulfilled:
(a) that the genuineness of the trust is not in doubt ;
(b) that the failure to give notice to the Income Tax Officer u/s 11(2) of the Act and investment of the money in the prescribed securities was due to only oversight ;
(c) that the trustees or the settlor have not been benefited by such failure directly or indirectly ;
(d) that the trust agrees to deposit its funds in the prescribed securities prior to the issue of the Government sanction extending the time u/s 11(2);
(e) that the accumulation or setting apart of income was necessary for carrying out the objects of the trust.
It is Clause (b) which is sought to be invoked against the petitioner. "Oversight" means, according to Oxford Advanced Learner''s Dictionary, the fact of making a mistake because you forget to do or you do not notice. It cannot be said that there is no explanation at all forthcoming from the petitioner. Apparently, according to the petitioner, there was delay of chartered accountant to finalize the accounts and it was accordingly that the notice in Form No. 10 for accumulation was not filed within the time indicated in Rule 17. I would think that having regard to the totality of the facts, exhibit P5 ought to be interfered with and I quash exhibit P5 and the second respondent will pass appropriate orders in the light of this judgment within a period of two months from the date of receipt of a copy of this judgment.