Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2025 Supreme(Online)(ITAT) 21778

INCOME TAX APPELLATE TRIBUNAL (CHANDIGARH BENCH)
Laliet Kumar, Judicial Member, Krinwant Sahay, Accountant Member
Haryana Building and Other Construction Workers Welfare Board – Appellant
Versus
DCIT, Circle 2, Exemption, Chandigarh – Respondent
ITA No. 237/CHD/2020 | ITA Nos. 337 to 339/CHD/2023 | ITA No. 63/CHD/2021

Advocates:
For the Appellants/Petitioners: Nikhil Goyal, Ashok Goyal, Sifatfreet Singh
For the Respondents: Manav Bansal

A statutory body must utilize at least 85% of its receipts for charitable purposes to claim income tax exemption. Failure to meet this threshold or satisfy specific accumulation conditions renders an assessment order erroneous and prejudicial, justifying intervention through revisionary powers under section 263 of the Income Tax Act.

Headnote:(A) Income Tax Act, 1961 - Sections 11, 12, 12AA, 13, 139(4C), 263 - Building and Other Construction Workers’ Welfare Cess Act, 1996 - Sections 3, 22, 24 - General Public Utility - Charitable purpose - Exemption of welfare board - Accumulation of income - Requirement to spend 85% of receipts - Failure to meet expenditure threshold. (Paras 10, 16)

(B) Revisional Jurisdiction - Section 263 of Income Tax Act - Power of Commissioner to revise assessment - Where Assessing Officer fails to apply law despite verification, order is erroneous and prejudicial to interest of revenue. (Paras 17)

Facts of the case:
The assessee is a statutory body constituted for the welfare of workers engaged in construction activities. The assessee sought exemption for income comprising cess, interest, and registration fees. The authorities observed that the assessee utilized a very small percentage of total receipts for welfare activities, failing to meet the mandatory 85% expenditure requirement to qualify for exemption. The assessment was revised under section 263 due to non-fulfillment of statutory conditions and failure to correctly apply provisions of section 11.

Findings of Court:
The court observed a significant disparity between the receipts and the actual application of funds for welfare. The assessee failed to demonstrate compliance with the mandatory requirement to utilize 85% of its income for charitable purposes. The court maintained that provisions for accumulation under section 11(2) are not a shelter for non-performance, and where conditions for accumulation are not met, the benefit cannot be granted. (Paras 10, 17)

Issues: Whether the assessee is entitled to tax exemption despite failing to fulfill the 85% expenditure threshold and whether the revision of assessment under section 263 was legally sustainable.

Ratio Decidendi: An assessee claiming charitable status and exemptions under sections 11 and 12 must strictly comply with the utilization of funds mandate. Failure to spend the statutory minimum of 85% of receipts for the intended welfare purposes renders the assessment order erroneous and prejudicial to the revenue, justifying the invocation of revisionary powers under section 263. (Paras 10, 17)

Result: Appeals of the assessee dismissed.

Table of Content
1. condonation of procedural delays in filing appeals. (Para 1 , 2 , 3 , 4 , 5)
2. requirement to utilize 85% of receipts for charitable activities under section 11. (Para 6 , 7 , 8)
3. criteria for invoking revisionary power under section 263 of the income tax act. (Para 9)
4. non-compliance with capital application mandates renders exemptions under section 11/12 invalid. (Para 10 , 11 , 12 , 13 , 14 , 15 , 16 , 17 , 18)

( PHYSICAL HEARING )

नधारती क ओर से/Assessee by : Sh. Nikhil Goyal, Advocate, Sh. Ashok Goyal, CA and Sh. Sifatfreet Singh, CA

राजव क ओर से/ Revenue by : Sh. Manav Bansal, CIT DR

सुनवाई क तारख/Date of Hearing : 08.12.2025

उदघोषणा क तारख/Date of Pronouncement : 10.12.2025

आदे श/Order

Per Bench:

The captioned appeals preferred by the assessee are directed against the separate orders of the Ld. Commissioner of Income tax (Appeals) for different assessment years, as per the details given below:

S.No.	ITA No.	Order	Dated	Delayed By
1	237/Chd/2020	CIT(A)-1, Chandigarh	31.01.2020	-
2	337/Chd/2023	CIT(A), NFAC Delhi	28..5.2023	01 day
3	338/Chd/2023 2017-18	CIT(A), NFAC Delhi	23.03.2023	01 day
4	339/Chd/2023 2018-19	CIT(A), NFAC, Delhi	23.03.2023	01 day
5	63/Chd/2021 2015-16	CIT Exemptions, Chandigarh	05.03.2021	-

2. From the records, it is noticed that the appeals in ITA Nos. 337 to 339/Chd/2023 are filed belatedly by one day in each case. The Ld. Counsel for the assessee has submitted an application praying for condonation of delay giving identical reasons in each case which is reproduced as under:

The Assistant Registrar,

Hon’ble Income Tax Appellate Tribunal,

Chandigarh Bench,

Chandigarh.

Sub: Request for condonation of delay (Delay of one day) in filing the Appeal No. ITA/337/CHANDI/2023, Assessment Year 2016-17, Haryana Building and Other Construction Workers Welfare Board, Panchkula Vs. DCIT, Exemption, Chandigarh

Madam,

Most humbly the following prayer is made before this Hon’ble Bench with a request to consider the same positively and grant relief as prayed for hereunder:

1. That the order passed by the Ld. CIT(Appeals), NFAC, Delhi on 23.03.2023 was serviced upon the appellant on 24.03.2023 electronically.

2. That the appellant is a Government Board, functioning of which is controlled by various Governmental Functionaries viz. The Labour Commissioner-cum-Secretary of the Board, Additional Chief Secretary to the Government of Haryana and the concerned Minister.

3. That the order being voluminous and involving huge tax affect required detailed examination and discussions at various levels.

4. That the matter also required approval at the higher level i.e. Worthy Minister, Labour and Employment, which was made as per the process and rule of law prevailing in the Government.

5. That the delay of one day in filing the appeal has been on account of bonafide reasons. Submitted that the filing fees was duly deposited within the limitation period prescribed under the law i.e. on 23.05.2023.

Prayer:

Considering the facts and circumstances of the case especially that the appellant is a Board engaged in welfare of the poor segment of the society i.e. poor building workers, the delay of filing the appeal of one day which occurred on account of bonafide reasons and reasons beyond the control of the appellant, it is humbly prayed that the delay of one day in filing the appeal may kindly be condoned and the appeal may be taken up for hearing on the basis of merits.

Thanking you,

Yours faithfully,

For: Haryana Building and Other Construction

3. We have considered the contents of application and submission made for condonation of delay and we feel it appropriate to condone the delay in the appeals in question.

4. The ld. DR had no objection for condonation of delay.

5. Since the issue involved in all the appeals are identical, (except in ITA No. 673/Chd/2021 for AY 2015-16) wherein, the order had been passed u/s 263 of the I.T. Act by CIT Exemptions, Chandigarh, therefore, these appeals were heard together and are

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