Facts of the Case

The assessee, a registered educational society, reported gross receipts of ₹4,12,26,286 during the relevant assessment year. Out of this, it spent ₹3,30,91,277 on revenue expenditure, ₹19,303 on fixed assets, and accumulated ₹19,31,763 for specified purposes under section 11(2) of the Income Tax Act, 1961.

The Assessing Officer observed that the assessee had not filed Form No. 10 for accumulation of income and had also failed to establish that the accumulated amount was invested in modes specified under section 11(5). Since no proof of filing Form 10 or investment compliance was produced, the accumulated amount was added to income.

The CIT(A) dismissed the appeal ex parte due to non-compliance. Before the Tribunal, the assessee submitted that it had subsequently been granted exemption under section 10(23C)(VI) and sought reconsideration.

 Issues Involved

  1. Whether accumulation of income under section 11(2) is allowable without furnishing Form No. 10.
  2. Whether exemption can be denied solely due to non-production of documentation when compliance may otherwise exist.
  3. Whether the matter required fresh verification of investment of accumulated funds under section 11(5).

 Petitioner’s Arguments

The assessee contended that it was an educational society whose income had historically been treated as exempt. It stated that Form No. 10 had been filed within time but documents were not traceable due to retirement of the accountant who maintained records.

It was further submitted that exemption under section 10(23C)(VI) had been granted in later proceedings, and therefore the issue should be reconsidered in light of the society’s exempt status and past treatment.

 Respondent’s Arguments

The Revenue argued that the issue was not the eligibility of the society for exemption but compliance with statutory conditions for accumulation of income. Since the assessee failed to furnish evidence of filing Form No. 10 or of investing accumulated funds in prescribed modes, the addition was justified.

 Court Order / Findings (ITAT Allahabad)

The Tribunal observed that the central issue was compliance with sections 11(2) and 11(5), not the general exempt status of the society. Even if Form No. 10 was unavailable, compliance could still be verified by examining how the accumulated funds were invested and utilized.

Accordingly, the Tribunal restored the matter to the file of the Assessing Officer with directions to examine whether the accumulated surplus of ₹19,31,763 was invested in any of the specified modes under section 11(5). The assessee was directed to furnish necessary evidence to substantiate compliance.

 Important Clarification

The Tribunal did not grant exemption outright but emphasized that denial of exemption must be based on verified non-compliance with statutory conditions. Proper examination of investment and utilization of accumulated income is essential before making additions.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1771061641_HINDISAHITYASAMMELANALLAHABADVS.INCOMETAXOFFICEREXEMPTIONALLAHABAD.pdf

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