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Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI PRABHASH SHANKAR
Date of Hearing 21.08.2025 Date of Pronouncement 06.10.2025 आदेश / O R D E R PER PRABHASH SHANKAR [A.M.] :- The present appeal arising from the Rectification order passed u/s 154 r.w.s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] 23.01.2025 by the Commissioner of Income-tax (Appeals)/ National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] pertaining to appellate order passed u/s. 250 of the Act dated 18.01.2024 for the Assessment Year [A.Y.] 2018-19.
A.Y. 2018-19 B Y L Nair Charitable Hospital Poor Patients Fund 2. The grounds of appeal are as under:-
1. That the Learned Commissioner of Income Tax (Appeals) erred in law and on facts in rejecting the Rectification Application filed under Section 154 of the Income Tax Act, 1961, without properly appreciating the legal provisions and the merits of the case.
2. That the Learned CIT(A) failed to acknowledge that the issue raised in the rectification application pertains to an apparent mistake on record, which could have been rectified under the scope of Section 154 of the Act.
3. That the rejection of the rectification application solely on the ground that CIT(A) does not have the authority to review an appellate order is erroneous, as the rectification sought was within the permissible limits of Section 154 and did not amount to a review.
4. That the Learned CIT(A) has failed to appreciate the provisions of CBDT Circular No. 6/2020 dated 19th February 2020, which explicitly allows the condonation of delay in filing Form 9A and Form 10 under Section 119(2)(b) of the Act, subject to conditions that were met in the present case.
5. That the Learned CIT(A) has ignored the fact that non-condonation of delay in filing the Return of Income, despite fulfilling the conditions set forth in the aforementioned CBDT circulars, results in undue hardship to the Appellant, which goes against the intent of the circular.
6. That the Learned CIT(A) has misinterpreted judicial precedents by equating rectification under Section 154 with a review of an appellate order, which are distinct legal concepts.
7. That in view of the above, the Appellant Trust prays that the Hon'ble Tribunal may kindly direct the rectification of the appellate order by granting relief under the provisions of CBDT Circular No. 6/2020 and allow the claim accordingly.
3. At the outset, it is noticed that the appeal in this case has been filed belatedly by 377 days as the impugned order of the CIT(A) was passed on 18.01.2024 and the appeal should have been filed by 18.3.2024.It is submitted through an application made for condonation that the delay is attributable to seeking alternative remedy by making an application before the ld.CIT(A) which was ultimately dismissed by him vide order dated 23.1.2025.Therefore the delay was due to unavoidable A.Y. 2018-19 B Y L Nair Charitable Hospital Poor Patients Fund and uncontrollable circumstances and with no intention to jeopardize the interest of the Revenue. After considering the above stated facts we are inclined to condone the delay which is unintentional with sufficient causes. Delay is condoned and we proceed to adjudicate the appeal on merits.
Facts of the case is that the assessee Trust is a Public Charitable Trust established and administered by the Municipal Corporation of Greater Mumbai (MCGM), pursuant to Standing Committee Resolution No. 1813 dated 7thJanuary 1948.It is engaged in providing Medical Relief to Poor and Needy Patients of B.Y.L. Nair Hospital, Mumbai, a Public Hospital maintained by MCGM. The Trust is duly registered under Section 12AA of the Act and has been consistently complying with its obligations under the Act.
4.1 In this case, during scrutiny proceedings u/s 143(3), the AO disallowed the exemption on the ground of delayed e-filing of Return of Income, raising impugned Tax demand of Rs. 7,67,39,390/- which was upheld by the ld.CIT(A) in the subsequent appeal on the ground that the return was not filed by the due date u/s 139(1) of the Act, although the assessee contented before him that it had submitted that the original return of income for the year was uploaded under section 139(1) of the A.Y. 2018-19 B Y L Nair Charitable Hospital Poor Patients Fund Act on 31.10.2018 as could be seen from the Verification Part of Return of Income in Form No ITR 7 which shows date of ‘Verification’ as 31.10. 2018 though the Acknowledgement of the said Return of Income however, as per E-filing Acknowledgment, it was electronically uploaded on 01.11.2018 at 00:04:55 hours. It was also submitted that the Revised Return of Income for A.Y. 2018-19 was e-filed under Section 139(5) of the Act on 14.03. 2019. Furthermore, it is also showed as Return filed u/s 139(1) of the Act. The delay in generation of acknowledgement could be attributed to heavy load of data traffic on the last due date for all cases covered by Tax Audit viz. 31.1o.2018 which might have led to delayed generation of Acknowledgement of Return of Income by about 4 minutes 55 seconds after processing of Return uploaded on due date i.e. 31st Oct 2018 under Section 139(1) of the Act and same date is also shown on the Verification Part of Original Return of Income. According to the assessee, the difference of time gap 4 minutes 55 seconds between the actual uploading of Return of Income and generation of Acknowledgement of Return of Income prima facie seemed to be on account of reduced speed due to heavy load for the generation of acknowledgement of Returns of Income filed on the last due date and other technical problems associated with massive data processing on the last due date.
A.Y. 2018-19 B Y L Nair Charitable Hospital Poor Patients Fund 4.2 It was also submitted that in so far as online submission of the Tax Audit Report in Form No. 10B & Returns of Income Original and Revised and Form No 10 for A.Y.2018-19 are concerned, Form 10 (Notice under Section 11(2)) was e-filed on 31 October 2018 at 23:49 hours and Form 10B (Audit Report) was uploaded on 31 October 2018 at 23:56 hours. Further, the Revised Return of Income was e-filed u/s 139(5) on 14.09.2019by the assessee-Trust, to claim TDS as per the corrected 26AS Tax Credit Statement for the year. The said Return is validated, accepted and processed by CPC which also confirmed the fact that the Original Return of Income was filed under Section 139(1) before the end of the due date of 31st October 2018. The revised return e-filed u/s 139(5) was accepted and processed by CPC and the intimation u/s 143(1) was issued granting full exemption under Sections 11 and 12.The application for the condonation of delay was submitted u/s 119(2)(b) to the CIT (Exemptions), Mumbai, which was allowed vide order dated 24.03.2021.Pursuant to this, the AO passed Order of rectification u/s 154 r.w.s. 143(3) dated 29.06. 2021, reducing the demand to NIL.
Before us, the ld.AR argued that despite the application for condonation of delay was allowed by CIT Exemptions, Mumbai and the AO giving effect to the same, the CIT(A), NFAC passed an order on 18.01. 2024 dismissing the appeal, citing that the delay in filing the A.Y. 2018-19 B Y L Nair Charitable Hospital Poor Patients Fund return beyond 31.10.2018 rendered the exemption claim invalid. The CBDT Circular No. 6/2020 does not condone delay in filing the return, only in filing Form 9A and 10.”The ld.AR has further stated that the observations are not only incorrect and improper but also unlawful, unsustainable and uncalled for. The circular explicitly states that delay in filing the return for A.Ys. 2016-17,2017-18 and 2018-19 could be condoned provided the Return was filed before 31st March of the relevant assessment year. In this case, the Return was uploaded on 01 Nov 2018 and Revised Return was also filed on 14th March 2019, both within the permissible condonation window.
5.1 It is further contented that the assessee filed a rectification application u/s 154 r.w.s. 250, requesting correction of the apparent legal mistake in the CIT(A)’s order. The CIT(A)/NFAC rejected the application on 23rdJan 2025, stating that it cannot review an earlier order passed by another CIT(A). It was wrongly held that rectification amounts to review, whereas Rectification under section 154 of the Act is permissible where a legal error apparent from record exists. It is claimed that the rejection thus violates the principles of natural justice, and undermines the binding nature of the condonation order passed by a competent authority. The ld. CIT(A) has failed to appreciate the provisions of CBDT Circular No. 6/2020 dated 19th February A.Y. 2018-19 B Y L Nair Charitable Hospital Poor Patients Fund 2020 which explicitly allows the condonation of delay in filing Form 9A and Form 10 under Section 119(2)(b) of the Act, subject to conditions that were met in the present case.
5.2 It is also contented that the Trust is rendering essential public services in the medical field and has been a COVID-19 frontline facility designated by the MCGM. Denial of exemption on hyper-technical grounds of a 4-minute odd sec. delay, despite condonation, is harsh, disproportionate, and against the spirit of beneficial legislation.
We have carefully perused the records as also taken due note of the written submission made by the ld.AR before the Bench and the annexures filed in support of the contentions. It is not disputed that the ld.CIT(E) following the CBDT Circular has condoned the delay in submission of application in Form no.10B.However,the ld.CIT(A) has taken an adverse view without taking note of such condonation and without taking due consideration of the submissions of the assessee in respect of the return of income. The replies before us reveal that there is sufficient basis for concluding that the impugned return was filed in time on 31.10.2018 itself though the acknowledgement thereof issued by CPC showed a delay of 4.55 mt. only. As pleaded by the assessee the return was not delayed and subsequent orders of CPC itself reveals that the return was indeed filed on the due date. We find sufficient merits in A.Y. 2018-19 B Y L Nair Charitable Hospital Poor Patients Fund the contention of the ld.AR that the difference of time gap 4 minutes 55 seconds between the actual uploading of return and generation of acknowledgement of the return, prima facie seems to be on account of reduced speed due to heavy load for the generation of acknowledgement of returns filed on the last due date and other technical problems associated with massive data processing on the last due date.
6.1 Evidently, the ld.CIT(A) has taken a hyper-technical view of the entire matter and that too without rebutting the contentions of the assessee regarding delay due to slowness of the CPC Portal on account of heavy rush on the system leading to such minor delay in readying the acknowledgment for which the assessee cannot be faulted. It has indeed tried its best to stick to the time limitation and filed the return on the last date for filing of the return.
6.2 We have also perused the copies of documents related to the relevant return of income .It is noticed from the acknowledgement on page 10.1 of the Paper book submitted by the ld.AR that the same is stated to be uploaded on 01.11.2018 but perusal of the ITA as per page- 10.3 thereof, the verification part clearly shows that the same was done on 31.10.2018.Apparently, there is a difference of 4.55 mt in generation of acknowledgement which was not in the control of the assessee.
A.Y. 2018-19 B Y L Nair Charitable Hospital Poor Patients Fund Moreover, as per acknowledgements of From No. 10 and 10B they were uploaded at 23.49 hr. and 23.56 hr. which also go to show the bonafides of the intention of the assessee to abide by the timeline and further clarifies absence of any laxity on its part to file the return after a delay of 4-5 minutes as the assessee did verify the return within the due date. Moreover, subsequent revised return filed u/s 139(5) has been duly processed by CPC implying thereby that the original was filed in time and therefore considered by CPC as well within the due date i.e. u/s 139(1) of the Act.
6.3 In this regard, it may be relevant to refer to the Hon'ble Supreme Court, in the case of Dilip Kumar (2018) 9 SCC , wherein while deciding the Doctrine of Substantial Compliance held as under: “33. A fiscal statute generally seeks to preserve the need to comply strictly with regulatory requirements that are important, especially when a party seeks the benefits of an exemption clause that are important. Substantial compliance with an enactment is insisted, where mandatory and directory requirements are lumped together, for in such a case, if mandatory requirements are complied with, it will be proper to say that the enactment has been substantially complied with notwithstanding the non- compliance of directory requirements. In cases where substantial compliance has been found, there has been actual compliance with the statute, albeit procedurally faulty. The doctrine of substantial compliance seeks to preserve the need to comply strictly with the conditions or requirements that are important to invoke a tax or duty exemption and to forgive non-compliance for either unimportant and tangential requirements or requirements that are so confusingly or incorrectly written that an earnest effort at compliance should be accepted.”
A.Y. 2018-19 B Y L Nair Charitable Hospital Poor Patients Fund 6.4 We are of the considered view that denying a just claim would cause genuine hardship to the assessee and this is not the intention of the legislature. Moreover, denying the benefit based solely on this lapse which itself is not conclusively proved against the assessee as per discussions above, would be against the principles of equity and justice, especially when there is no dispute regarding the assessee's eligibility u/s 11 and 12 of the Act and also the ld.CIT(E) taking a lenient view of the matter ignoring the delay for the purposes of registration of the Trust which has not been denied by him. Considering the principles of beneficial interpretation, the procedural requirements should not override substantive benefits. The Courts have taken a lenient view on procedural lapses when substantive benefits are involved.
6.5 Considering the totality of the facts and the circumstances of the case, we conclude from all the evidences as submitted before us that the ld.CIT(A) without taking consideration thereof dismissed the appeal of the assessee denying the eligibility of the assessee to sections 11 and 12 of the Act. Accordingly, the appellate order is set aside allowing the grounds of appeal. The AO is directed to allow the claim of the assessee subject to the satisfaction of the provisions of the Act in this regard.
Order pronounced in the open court on 06/10/2025.