Trust wins exemption under Section 11 despite late filing within Section 139(4) extended period

The ITAT Chennai-AT allowed the appeal filed by a trust seeking exemption under Section 11. The trust's return was filed beyond the time limit prescribed under Section 139(1), but within the extended period allowed under Section 139(4). The tribunal held that CBDT's clarification dated 23.04.2019 enlarged the scope of Section 139 to include all its provisions, including Section 139(4). A belated return filed under Section 139(4) before the end of the relevant financial year or completion of assessment qualifies as a valid return of income, entitling the trust to exemption benefits under Section 11.

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Issues Involved:

1. Disallowance of exemption claim under Section 11 of the Income Tax Act due to late filing of the return of income beyond the time limit prescribed under Section 139(1).

Issue-wise Detailed Analysis:

1. Disallowance of exemption claim under Section 11 of the Income Tax Act due to late filing of the return of income beyond the time limit prescribed under Section 139(1):

The central issue in this appeal was the disallowance of the exemption claim under Section 11 of the Income Tax Act by the Assessing Officer (AO) and confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)], due to the return of income being filed beyond the time limit prescribed under Section 139(1). The assessee filed the e-return of income on 09.02.2019 for the assessment year 2018-19, which was beyond the due date under Section 139(1). The AO disallowed the exemption claim under Section 11, reasoning that the return was not filed within the stipulated time, and added back the income of Rs. 79,92,658 to the total income. The AO also considered this a fit case for imposition of penalty under Section 270A for under-reporting of income.

The assessee argued that the return was filed within the time allowed under Section 139(4) and submitted all necessary details for the exemption claim under Section 11. The CIT(A) upheld the AO's decision, relying on the Finance Act, 2017, which amended Section 12A to include the condition that the return must be filed within the time allowed under Section 139.

The Tribunal examined the provisions and noted that the Finance Act, 2017, indeed amended Section 12A to mandate the filing of returns within the time allowed under Section 139. However, the Tribunal also considered Circular No. 2/2018 issued by the CBDT, which provided clarity on the amendments, stating that the return of income must be filed within the time allowed under Section 139, without limiting it to Section 139(1).

Further, the Tribunal referred to a subsequent clarification issued by the CBDT (F.No.173/193/2019-ITA-I dated 23.04.2019), which stated that the return filed under Section 139(4) should also be considered for exemption under Section 11. The Tribunal concluded that the return filed by the assessee on 09.02.2019 was within the time allowed under Section 139(4) and should be treated as a valid return for claiming exemption under Section 11.

Based on the above clarifications and the provisions of Section 139(4), the Tribunal allowed the appeal of the assessee and directed the AO to grant the exemption under Section 11.

Conclusion:

The Tribunal allowed the appeal, ruling that the return filed within the time allowed under Section 139(4) should be considered valid for claiming exemption under Section 11, and directed the AO to allow the exemption. The judgment emphasized the importance of considering the broader provisions of Section 139 and the clarifications issued by the CBDT.

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