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Income Tax Appellate Tribunal, “C’’ BENCH: BANGALORE
Before: SHRI CHANDRA POOJARI & SMT. BEENA PILLAI
PER CHANDRA POOJARI, ACCOUNTANT MEMBER:
This appeal by the assessee is directed against order of NFAC, Delhi dated 24.11.2022 for the assessment year 2017-18. The assessee has raised following grounds:-
1. “The Learned AO erred in summarily dismissing the appeal without providing an effective opportunity of hearing to the Appellant. The order of the Learned CIT(A) is against the law equity and Natural Justice.
2. The learned CIT(A) and learned AO has erred in not considering the submissions/ documentary evidence furnished before them from time to time.
PCA Charitable Trust, Bangalore
3. The Learned CIT(A) while issuing the order under section 250 of the Income Tax Act, 1961, has not considered the CBDT circular issued vide Circular No.10/2019 dated May 22nd, 2019. which has condoned the delay in furnishing of Audit Report in Form 10B for the Assessment Years 2016-17 and 2017-18. The subject matter of this appeal comes well within the scope of the aforementioned CBDT Circular.
4. The learned CIT(A) has erred in not considering the additional grounds given by the appellant for delay in filing the appeal. The additional grounds were given in response to the notice dated 10th June 2022, bearing the DIN- ITBA/NFAC/F/APLJ/2022-23/1043395198(1).
5. The order dated 24th November 2022 passed by the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre is bad and erroneous and against the facts and circumstances of the case in so far as it is against the Appellant and the learned CIT(A) erred in dismissing the appeal on technical grounds, by citing the period of limitation.
6. The learned CIT(A) has failed to consider and take on account JJie inaction on the part of the professional duly entrusted with the entire compliance issues in respect of all issues relating to the Income Tax Act, 1961 , and the fact that the contact details for receiving the intimation from the Income Tax Department was populated with email ID of the professional entrusted with the entire compliance issues in respect of all issues relating to the Income Tax Act, 1 961 .
The learned CIT(A) in his order under section 250 of Income Tax Act, 1961, has cited the Supreme Court case in Office of the Chief Postmaster General & Ors. Vs Living Media India Ltd.& Anr. Which is not applicable as per the facts and circumstances of this appeal.
No prejudice will be caused to the revenue as the assessee is eligible for exemption u/s 11 of the IT. Act, 1961. Even if the exemption under Section 11 of the Income Tax Act, 1961 is not allowed the resultant income over expenditure as per the audited statement of accounts for the year ended March 31st 2017 is Rs.24231/- , which does not exceed the maximum amount (Rs.250000/-), which is not chargeable to Income Tax for the AY 2017-2018.
The Appellant craves to leave/ to add to / to alter/ to amend/ to rescind/ to modify the grounds herein above or produce further documents, facts and evidence before or at the time of hearing this appeal.”
Facts of the case are that assessee has filed return of income for the assessment year 2017-18 on 10.1.2018 and claimed
PCA Charitable Trust, Bangalore
Page 3 of 8 exemption u/s 11 of the Income-tax Act,1961 ['the Act' for short] at Rs.24,231/-. This income has been arrived as follows:
Gross income - Rs.8,17,650/- Gross expenditure - Rs.7,93,419/- Surplus (Net income) - Rs. 24,231/- 2.1 The AO denied the exemption u/s 11 of the Act while processing return u/s 143(1) of the Act on the reason that assessee has not filed the audit report in form No.10B along with return of income. Against this, assessee carried the appeal before ld. CIT(A). There was a delay of 94 days in filing appeal before the ld. CIT(A) with regard to non-filing of audit report in Form No.10B. The assessee stated before NFAC that the requirement of filing audit report in form 10B along with return of income is only directory in nature and not mandatory. In other words, it was stated that it is a curable defect and the AO should have accepted the belated filing of audit report in form No.10B on 27.7.2019 with short delay and he relied on Circular of CBDT in No.10/2019 dated 22.5.2019, wherein observed as under:
“3. Representations have been received by the Board/field authorities stating that Form no. 10B could not be filed along with the return of income for AY 2016-17 and AY 2017-18. It has been requested that the delay in filing of Form no.10B may be condoned. Previously, vide instruction in F.No. 267/182/77-IT(part) dated 09.02.1978, the CBDT had authorized the 1TO to accept a belated audit report after recording reasons in cases where some delay has occurred for reasons beyond the control of the assessee.
4. Accordingly, in supersession of earlier Circular/Instruction issued in this regard, and with a view to expedite the disposal of applications filed by such trusts or institutions for condoning the delay in filing Form no. 10B and in exercise of the powers conferred under section 119(2) of the Act, the Central Board of Direct Taxes hereby directs that:
PCA Charitable Trust, Bangalore
Page 4 of 8 (i) The delay in filing of Form no. 10B for AY 2016 17 and AY 2017-18, in all such cases where the Audit Report for the previous year has been obtained before the filing of return of income and has been furnished subsequent to the filing of the return of income but before the date specified under section 139 of the Act is condoned. (ii) In all other cases of belated applications in filing Form no. 10B for years prior to AY 2018-19, the Commissioners of Income tax are authorised to admit such applications for condonation of delay u/s 119{2){b) of the Act. The Commissioners will while entertaining such belated applications in filing Form no.10B shall satisfy themselves that the assessee was prevented by reasonable cause from filing such application within the stipulated time. Further, all such applications shall be disposed off by 30.09.2019.”
2.2 Firstly, it was submitted before us that the appeal was filed belatedly by 94 days before NFAC due to trustee’s medical emergency and the assessee was unable to file audit report in form no.10B along with return of income on the same reason was filed on 27.7.2019 and the delay was not intentional. He drew our attention to the affidavit filed by trustee one Mr. C.M. Simon, S/o Late Chinnappa, wherein sworn and affirmed as follows: “1. That I have been undergoing treatment for a psychiatric condition at St. John’s Medical College and hospital and I am also being treated by Dr. S.R. Krishna Thalagavara, Consultant Psychiatrist, KMC Number 57763 and Dr. Chandra Mohan G. (MD), Consulting Physician, KMC Number 89008. I am not able to place my condition in the public domain in order to maintain my privacy.
2. I will place the relevant medical records in a sealed cover for the consideration of the Tribunal if the same required.”
2.3 Thus, it was submitted before ld. CIT(A) that there was no deliberate intention to file audit report in form no.10B belatedly and same to be accepted. However, the NFAC observed that the appeal filed by the assessee itself delayed by 94 days. As such, the appeal
PCA Charitable Trust, Bangalore was not at all admitted and the same was dismissed in limine on the reason of delay in filing the appeal belatedly by 94 days before NFAC was not properly explained. Against this, the assessee is in appeal before us and thus, it was prayed by the ld. A.R. that the short delay of 94 days in filing the appeal before NFAC be condoned, appeal be admitted and to be decided on merits.
The ld. D.R. strongly opposed the admission of appeal.
We have carefully gone through the affidavit filed by the assessee in the form of affidavit, explaining the above delay, which is placed on record in page no.116 to 118 in the paper book filed by the assessee. The Managing trustee of assessee by name Shri C.M.Simon S/o Late Chinnappa was suffering from psychological problem and he was under treatment at St. John’s Medical College, Bengaluru and in our opinion, the facts narrated by assessee are to be considered as true and correct as there was no counter affidavit filed by the department opposing the above facts sworn in by assessee’s managing trustee Shri C.M. Simon in his affidavit. Hence, we condone the delay of 94 days in filing the appeal before NFAC and appeal is admitted for adjudication.
4.1 In this case, admittedly there was delay in filing the audit report in form no.10B along with return of income. Hence, the exemption claimed by assessee u/s 11 of the Act has been denied. The assessee has taken the support of CBDT circular no.10/2019 stating that the delay has to be condoned as per this circular. In our opinion, the assessee has to explain the delay with reasonable causes for this assessment year and there was no automatic condonation of delay as stated in this circular. The assessee stated before us that PCA Charitable Trust, Bangalore the medical emergency of the trustee is a reason for delay in filing the audit report in form no.10B along with return of income. Admittedly, the assessee filed the return of income on 10.1.2018, wherein assessee enclosed the income and expenditure account and balance sheet and statement of income which are dated 1.1.2018. When the assessee was in a position to get audited its books of accounts and filed the audited income and expenditure account and balance sheet along with statement of income, how it was not able to file the audit report in form no.10B is not explained. The assessee has taken the support of petition filed for condonation of delay in filing the appeal before this Tribunal dated 18.1.2023 so as to explain the delay in filing audit report in form no.10B along with return of income. In our opinion, the assessee has not separately explained this delay in filing the audit report in form no.10B along with return of income with any reasonable causes. Having said this, we are of the opinion that there is no good and sufficient reason to condone the delay in filing the audit report in form no.10B along with return of income. Accordingly, we are of the opinion that the lower authorities are justified in denying the exemption u/s 11 of the Act to the assessee in view of the non-filing of audit report in form no.10B along with return of income. This action of the lower authorities is confirmed and exemption u/s 11 of the Act is denied. In view of this, we reject the ground nos.1 to 7 raised by the assessee in its appeal memorandum.
Now we will take up ground No.8 raised by the assessee, which is as follows: “8. No prejudice will be caused to the revenue as the assessee is eligible for exemption u/s 11 of the IT. Act, 1961. Even if the exemption under Section 11 of the Income Tax Act, 1961 is not allowed the resultant income over expenditure as per the audited statement of accounts for the year ended March 31st 2017 is PCA Charitable Trust, Bangalore
Page 7 of 8 Rs.24231/-, which does not exceed the maximum amount (Rs.250000/-), which is not chargeable to Income Tax for the AY 2017-2018.”
5.1 The ld. A.R. submitted that if the exemption u/s 11 of the Act is denied for non-filing of audit report in form no.10B, the assessee’s income is to be computed in accordance with law as “business income” and gross income of the assessee cannot be taxed by the AO. We find merit in this argument of assessee’s counsel. In the present case, the exemption u/s 11 of the Act is denied on the reason of non- filing of audit report in form no.10B along with return of income. Once the exemption claimed by the assessee u/s 11 of the Act has been denied, the income of the assessee has to be assessed as “business income” and assessee is entitled for all usual deductions under the provisions of the Act while computing the income of the assessee under the head “business”, more so, deduction u/s 30 to 38 of the Act it has to be allowed. In view of this, we direct the AO to tax only the net income of the assessee after granting all usual expenditure u/s 30 to 38 of the Act and not gross income of the assessee. Ordered accordingly.
In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 6th Mar, 2023