COMMISSIONER OF INCOME TAX Vs. ZIARAT MIR SYED ALI HAMDANI

JUDGEMENT

(1.) BY this reference under Section 256(1) of the Income-tax Act, 1961 ("the Act"), at the instance of the Revenue, the Income-tax Appellate Tribunal. Amritsar Bench, Amritsar ("the Tribunal"), has referred the following common question of law, arising out of the consolidated order of the Tribunal dated May 4, 1988, in appeals of two different trusts, to this court for opinion :

(2.) THE two trusts arc Ziarat Mir Syed Ali Hamdani, Srinagar. and Ziarat Syed Hassan Mantaqi, Srinagar. Both these trusts are Muslim religious trusts formed prior to 1947.

(3.) WE have heard learned counsel for the Revenue and perused the order of the Tribunal. The real controversy in this case is whether the requirement of exercising option under Clause (2) of the Explanation to Section 11(1} of the Act before the expiry of the time allowed under Sub-section (1) or Sub-section (2) of Section 139, whether fixed originally or on extension, for furnishing the return of income, is mandatory or directory. The Income-tax Officer did not take cognisance of the option because it was not exercised within the stipulated time. The Appellate Assistant Commissioner agreed with the Income-tax Officer and upheld his order. From the order of the Appellate Assistant Commissioner, it is, however, evident that he appreciated the real controversy and noted and understood the facts of the case correctly. In his appellate order, he noted that the amount in question was not utilised by the assessee in the relevant previous year but utilised in the following previous year and that the option in that behalf had been furnished by the assessee along with the return, which was furnished on June 28, 1983. The Appellate Assistant Commissioner rejected the claim of the assessee for the benefit of Clause (2) of the Explanation to Section 11(1) only on the ground that the option had not been exercised by the assessee before the expiry of the time allowed for submission of the return under Sub-section (1) or Sub-section (2) of section 139. He rightly observed that the assessee did not claim exemption under Section 11(2) of the Act. The Appellate Assistant Commissioner rejected the claim of the assessee on the ground that the option under Clause (2) of the Explanation to Section 11(1) had not been exercised within the stipulated time, which requirement according to him was mandatory. When the assessee went in appeal to the Tribunal, it appears that though the Tribunal noted the facts of the case and the contention of the assessee correctly, it proceeded erroneously to decide the case as if the controversy was not about the claim under Clause (2) of the Explanation to Section 11(1) but under Section 11(2) and on that erroneous assumption referred to Section 11(2) of the Act and Form No. 10 which is required to be filed within the prescribed time under rule 17 of the Rules in order to avail of the benefit of Section 11(2) of the Act and relying upon the circular of the Board in regard to the condonation of delay in filing Form No. 10, under rule 17 condoned the delay in filing Form No. 10, whereas it was never the case of the assessee that it was claiming' the benefit of Section 11(2) or that it had filed Form No. 10. The uncontroverted factual position is that the case of the assessee does not fall under Section 11(2) of the Act, nor the assessee at any point of lime made such a claim. The contention of the assessee right from the beginning was that its case was covered by Clause (2) of the Explanation to Section 11(1) of the Act because the income was utilised in the year immediately following the previous year in which it was derived. This claim was rejected both by the Income-tax Officer and the Appellate Assistant Commissioner on the sole ground that the option required to be exercised in writing in that regard was not exercised before the time allowed for furnishing the return under Sub-section (1) or Sub-section (2) of Section 139. Obviously, the Tribunal committed a patent error in condoning the delay in filing Form No. 10, which, in fact, had never been filed and in allowing deduction to the assessee in respect of the amount in question under Section 11(2), which neither the assessees were entitled to nor they claimed. The question referred to this court also arises out of the above erroneous finding of the Tribunal, which has no bearing in the present case.