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Facts
The assessee, a charitable trust, received a donation of Rs. 26,35,000. Their tax audit report was filed one day late, leading the CPC to disallow the exemption and create a tax demand. The assessee's appeal to the CIT(A) was dismissed, upholding the disallowance.
Held
The Tribunal held that the condition of filing Form 10B is directory and not mandatory. A mere delay in filing does not bar an assessee from claiming lawful exemption, especially when prior decisions and CBDT circulars have relaxed such conditions. The Tribunal directed the Assessing Officer to allow the claim.
Key Issues
Whether a delay of one day in filing Form 10B can lead to the disallowance of exemption under Section 11 of the Income Tax Act, and if the conditions for filing are mandatory or directory.
Sections Cited
11, 12A, 12A(1)(b), 139, 250, 10B, 11, 12
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘SMC’: NEW DELHI
Before: SHRIS.RIFAUR RAHMAN
(Assessment Year: 2022-23) Sampoorna Seva Charitable Trust, vs. ITO, Ward Exempt 2(1), A – 23, Alaknanda, South Delhi, Delhi. New Delhi – 110 019. (PAN : AAXTS8701R) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Shivam Malik, Advocate REVENUE BY : Shri Sanjay Kumar, Sr. DR Date of Hearing : 13.03.2025 Date of Order : 04.06.2025 O R D E R
PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER :
The assessee has filed appeal against the orders of the Learned Addl/JCIT (Appeals), Indore [“Ld. CIT(A)”, for short] dated 08.10.2024 for the Assessment Years 2022-23 raising following grounds of appeal :-
1. That the denial of exemption of Rs.26,35,000/- under section 11 of the Income Tax Act by the CPC merely due to delay in filing of Form 10B is bad in law.
2. That pursuant to the Faceless Appeal Scheme, the ld. Add.CIT/JCIT had no jurisdiction to pass the order under section 250 of the Act and, therefore, the impugned order, being without jurisdiction, is bad in law.
3. That the addition of Rs.26,35,000/- to the total income of the appellant trust and consequent tax demand created at Rs.7,40,310/- is arbitrary and unjust.
2. At the time of hearing, ld. AR of the assessee submitted that the assessee is an AOP (Trust) duly registered under section 12A of the Income Tax Act, 1961 on 08.03.2021. He submitted that the assessee is engaged in the activity of promoting and creating awareness for healthy living and to bring together all persons who subscribe to this common cause and promotion, administration, facilitation and making contribution to the development of orphan and poor children. For the period under consideration, the assessee filed its return of income on 22.10.2022 declaring total income at NIL. He further submitted that during the period under consideration, the assessee received a donation of Rs.26,35,000/-, in the form of exempt income. He submitted that the books of the accounts of the assessee were audited on 10.09.2022 and the Tax Audit Report was filed on 08.10.2022. He submitted that it is an admitted fact that the tax audit report was filed with a delay of one day, as the due date for filing such report was extended till 07.10.2022 vide CBDT Circular No. 19/2022 dated 30.09.2022. He submitted that the CPC, on the basis of alleged non-availability of the Tax Audit Report, disallowed the entire sum of Rs.26,35,000/- received as donation and created a tax demand of Rs.7,40,310/-.
2.1 Ld. AR submitted that aggrieved against the above order, the assessee filed an appeal before the ld. CIT(Appeals), who upheld the said disallowance on the ground that he was not competent to condone the delay and accept the belated Form 10B. 2.2 Further, ld. AR submitted that mere delay in filing Form 10B cannot act as an impediment in the assessee seeking its lawfully entitled exemption and the assessee filed the same Form 10B before the appellate authority as well and the same is a matter of record. Furthermore, he submitted that it is not the case of the Revenue that the Form 10B was filed after the filing of return. In fact, the said Form was filed way before filing the return albeit with a delay of one day and that too solely because of the technical slags that frequently occur on the last dates of furnishing such particulars. In this regard, he relied on the following decision of ITAT wherein it was consistently held that conditions of filing Form 10B for availing benefit under section 11 are directory in nature and not mandatory, and that a mere delay in filing cannot be a bar to an assessee claiming lawful exemption :- (a) B. R. Hospital Research Institute v. ITO [2024] 167 taxmann.com 389 (Delhi - Trib.) (b) Bhagwant Kishore Memorial Educational Society v. ITO [2024] 209 ITD 179 (Delhi - Trib.)
2.3 Ld. AR submitted that the ld. CIT(A) while dismissing the appeal of the assessee has relied upon the judgment of the Hon'ble Supreme Court in CIT V. Wipro Ltd. [2022] 140 taxmann.com 223 (SC) and observed that time limit for filing Form 10B is mandatory. He submitted that ld. CIT (A) has observed this despite noting the difference in facts in the current instance vis-a-vis the factual scenario encountered by the Hon'ble Supreme Court. He further submitted that Hon'ble Gujarat High Court in CIT v. Laxmanarayan Dev Shrishan Seva Khendra [[2024] 167 taxmann.com 548 (Gujarat)], in a similar factual scenario where the Revenue relied upon the judgment in Wipro Ltd. (supra) to contend the mandatory nature of the timeline, held as under: “5. Reliance placed by the learned Senior Standing Counsel Ms. Maiihili Mehta for the appellant on the decision of the Hon'ble Supreme Court in case of Wipro Ltd. (supra) would not be applicable in the facts of the case, as in the facts of the present case, the assessee has claimed the exemption under Section 11 read with Section 12A(1)(b) of the Act which required the assessee to file Audit Report in Form of 10B of the Act which has nothing to do with claiming 100% exemption of total income in respect of newly established 100% Export Oriented Undertakings under Section 10B of the Act. Section 10B(8) of the Act requires the assessee to file an undertaking before the due date of furnishing of return of income under sub-section (1) of Section 139 of the Act before the Assessing Officer in writing that the provision of Section 10B of the Act may not be made applicable to him, otherwise the provision of this Section shall not apply to him for any of the relevant assessment year. …..
7. Reference to the aforesaid decision has no connection whatsoever remotely to the facts of the present case and therefore, in the facts of the present case, the Tribunal has rightly followed Court in case of Sarvodaya Charitable Trust v. !TO (Exemption) in Application No.6097 of 2020 decided on 09th December, 2020/[2021J 125 taxmann.com 75/278 Taxman 148 (Gujarat) as well as the decision in case of Social Security Scheme of GICEA (supra) to uphold the decision of the CIT (Appeals), wherein this Court has held that the approach of the authority in such type of cases should be equitable, balancing and judicious. In the facts of the case, when the assessee has already filed the audit report in Form 10B electronically on 27.02.2021 during pendency of appellate proceedings along with copy of audited financial statements, delay in filing the said form is rightly condoned by CIT(A) and the Tribunal.” 2.4 Ld. AR of the assessee, in the light of his above submissions and coupled with the legal precedents, prayed that the delay in filing Form 10B be condoned and the assessee is entitled to claim the sum of Rs.26,35,000/- in the form of exempt income, accordingly, the grounds of appeal
may be allowed.
3. On the other hand, ld. DR of the Revenue did not produce any contrary view to the judgments relied upon by the ld. AR of the assessee.
4. Considered the rival submissions and material placed on record. I observed that the assessee is a charitable institution and was claiming deduction u/s 11 of the Act. However, as per the provisions of section 10B, the assessee has to comply certain conditions failing which the assessee will loose the benefit the decision of Hon’ble Supreme Court in Wipro Limited was based on such strict interpretation of section 10B. In the present case, the assessee has to file the audit report in Form 10B before the due date as per Rule 12A(1)(b) of the Rules. I observed that Form 10B was relaxed by the CBDT in the earlier assessment years, therefore, it clearly shows that it is only directory in nature and not mandatory, since, it is in compliance with Rules framed for availing the benefit under the provisions of Section 11 and it is held that to be directory in nature. I find support from the decision of Hon’ble Madras High Court in the case of Shri Chandraprabhuji Maharaj Jain Juna Mandir Trust (supra), wherein it is held as under: “8. As noted by us earlier, the assessee filed the return of income for the assessment year under consideration on 02.04.2009, which was processed and intimation under Section 143(1) of the Act was issued on 21.01.2011. Thus, there was no assessment under Section 143(3) of the Act. The assessee, while filing the petition under Section 154 of the Act, on 22.03.2011, pointed out that the assessee filed the Form No.10 along with the Board Resolution along with the covering letter dated 01.04.2019. However, the mistake done by the assessee was to file hard copies before the Assessing Officer, and not filing the same along with the return of income, which they filed on 02.04.2019. Thus, on the date when the return was taken up for assessment, there was record to show that the assessee had intimated the department about the resolution passed by the Board of the assessee Trust and the statutory Form No.
Admittedly, the assessment was not completed under Section 143(3) of the Act and therefore, there would have been no error had the assessing officer taken up the copy of the Board Resolution and Form No.10. Thus, on the date when the return was filed, the assessee had separately filed Form No. 10 along with the Board Resolution along with a covering letter dated 01.04.2009. Thus, in our considered opinion, when the assessee was entitled to a statutory benefit, it would be incumbent upon the concerned authority to examine the admissibility of the benefit than to foreclose the assessee on technicalities.”
Further, I observed that Hon’ble Gujarat High Court in the case of CIT vs. Xavier Kelavani Mandal (P) Ltd. 221 taxman 43 (Guj-HC) held as under: “4. The question whether it is permissible to the assessee to produce the audit report at the appellate stage, has already been answered by this court in CIT v. Gujarat Oil & Allied Industries Ltd. [1993] 201 ITR 325 (Guj.), wherein it is held that the provision regarding furnishing of audit report along with the return has to be treated as a procedural provision, It is directory in nature and its substantial compliance would suffice. In that case, the assessee had not produced the audit report along with the return of income, but produced before completion of the assessment. The Punjab and Haryana High Court in CIT v. Shahzadanand Charity Trust [1997] 228 ITR 292 has reiterated the same principle holding that the benefit of exemption should not be denied merely on account of delay in furnishing the same, and it is permissible for the assessee to produce the audit report at a later stage either before the Income Tax Officer or before the appellate authority by showing a sufficient cause. This decision of Punjab & Haryana High Court has been relied on by the Tribunal.
5. In the above view, the Tribunal is eminently justified both in law and on facts in observing and holding as under.- "In this case, it is not in dispute that the audit report in prescribed form was obtained prior to filling of the return on 20/12/2006; therefore, there was no reason for the assessee to keep the audit report with it in order to loose the exemption. The assessee in the earlier as well as in the subsequent assessment years filed the audit report and got the exemption. The conduct of the assessee in earlier year and subsequent years would prove that due to the facts stated above there was delay in filing the audit report and the contention of the assessee was supported by the affidavit of Mohmad Iqbal Vohra (PB-4). The learned CIT(A) on proper appreciation of the facts and material on record in the light of the decisions of the Hon'ble Punjab & Haryana High Court and the Hon'ble Calcutta High Court rightly directed the AO to accept the audit report of the assessee and grant exemption u/s. 11 of the IT Act."
Respectfully following the aforesaid decisions, I am inclined to allow the claim made by the assessee and, accordingly, I direct the Assessing Officer to allow the claim of the assessee u/s 11 and 12 of the Act.
In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on this 4th day of June, 2025.