ITAT allows set apart fund exemption despite ITR verification delay due to COVID hardships

The ITAT Jaipur allowed the assessee's appeal against disallowance of set apart fund under sections 11(2) and 11(5). The assessee filed original ITR, Form 10, and Form 10B within the due date of 31-10-2019 claiming exemption. However, the ITR lacked digital signature and manual verification copy could not be sent to CPC Bangalore within 120 days due to oversight and unavoidable circumstances. The assessee filed revised return on 05-06-2020 after COVID restrictions lifted. The ITAT held that CPC erred in disallowing benefits without considering genuine hardship and noted CBDT Circular 3/2020 dated 13-7-2020 provided relaxations for unverified ITRs for assessment years 2015-16 to 2019-20, which covered the assessee's case.

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Issues:
1. Disallowance of set apart fund under section 11(2) and 11(5) of the Act due to delay in filing income tax return.
2. Validity of original return filed on 31-10-2019.
3. Benefit of late filing of Acknowledgement under relaxation scheme.

Detailed Analysis:

Issue 1: The primary issue in the appeal was the disallowance of the set apart fund under section 11(2) and 11(5) of the Act due to a delay in filing the income tax return. The appellant argued that the original return and relevant forms were filed within the due date, but the Central Processing Centre (CPC) disallowed the claim based on the revised return filed after the due date. The appellant contended that the delay was due to genuine hardship and oversight. The Tribunal noted that the appellant had submitted the necessary documents before the due date and that the CPC erred in not considering the genuine hardship faced by the assessee. Additionally, the Tribunal referred to a CBDT circular providing relief to assesses unable to verify their ITR, which covered the appellant's assessment year. Consequently, the Tribunal allowed the appeal, disagreeing with the lower authorities' decision to disallow the claim.

Issue 2: The appellant also challenged the validity of the original return filed on 31-10-2019, arguing that it should be considered a valid return. The appellant's counsel submitted evidence showing the timely submission of forms and returns, albeit without digital signatures. The Tribunal considered this argument and noted that the original return, along with the necessary forms, was filed within the due date. The Tribunal found that the subsequent filing of a revised return, after the due date, did not render the original return invalid. Therefore, the Tribunal concluded that the original return should be considered valid.

Issue 3: The appellant sought the benefit of late filing of Acknowledgement under a relaxation scheme due to unavoidable circumstances. The appellant's counsel provided explanations for the delay, including health issues in the family. The Tribunal, after considering the submissions and evidence presented, condoned the delay in filing the appeal. The Tribunal referred to a decision of the Hon'ble Apex Court to support the decision to condone the delay. Ultimately, the Tribunal allowed the appeal, granting the benefit of the relaxation scheme for the delay in verifying the return.

In conclusion, the Tribunal allowed the appeal, overturning the disallowance of the set apart fund and recognizing the validity of the original return filed within the due date. The Tribunal emphasized the genuine hardship faced by the assessee and the relevance of the CBDT circular providing relief to assesses in similar situations.

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