MADRESSA MOHMEDIA PIPARDIWALA CHARITABLE TRUST,SURAT vs. THE ACIT/DCIT(EXEMPTION), CIRCLE-2, AHMEDABAD

In both the years, the assessee’s Return of Income has been processed u/s. 143(1) and the claim for exemption u/s. 11 of the Act has been denied by the CPC on the ground that the Tax Audit Report in Form 10B was filed late. The CPC had also disallowed the entire amount spent during the year as revenue expenditure despite accepting the revenue expenditure as computed by the assessee.

The assessee challenged these intimations in separate appeals before the Ld. CIT(A), NFAC. The appeal for Asst. Year 2020-21 which was to be filed on or before 24-01-2021 was filed on 28- 06-2024 and the appeal for Asst. Year 2021-22 which was to be filed on or before 22-09-2022 was filed on 26-06-2024.

The Ld. CIT(A) after examining the delay was not satisfied and did not condone the same. The assessee had made a reference to CBDT Circular No. 2 of 2020 dated 03-01-2020 wherein the Board had directed that where there is delay of up to 365 days in filing Form 10B for the Asst. Year 2018-19 or for any subsequent assessment year, the Commissioners of Income Tax were authorized to admit belated applications for condonation of delay u/s 119(2) of the Act and decide the case on merits. The Ld. CIT(A) held that the proper course for the assessee would have been to approach the CIT(E) with an application u/s. 119(2) seeking condonation of delay in filing of the Audit Report in Form 10B, and on that ground the assessee’s claim for condonation was rejected by the Ld. CIT(A). The Ld. CIT(A) also proceeded to examine the case on merits but held that the appeal was not maintainable on merits as well since the assessee did not pursue the remedy of seeking condonation from the CIT(E) in accordance with the CBDT Circular.

Aggrieved by the orders of the Ld. CIT(A), the assessee is in appeal before us. Both the appeals involved are identical facts and circumstances and therefore they have been taken disposed of together. The assessee has filed appeal before the Tribunal late by 339 days for both the years.

Subsequent to filing of the appeal, the assessee filed an application for condonation of delay supported with an Affidavit of Ahmed Ajam Esmail the Managing Trustee. The contents of the said Affidavit are quoted below: AFFIDAVIT “I, Ahmed Ajam Esmail, aged about 77 years, Indian inhabitant, Managing Trustee of Madressa Mohmedia Pipardiwala Charitable Trust, having its address at M.M.P. School, Botawala Marg, Raider, Surat-395005, do hereby solemnly affirm and declare on oath as under:

From the circumstances stated in the Affidavit, we are inclined to accept that the delay in filing of appeal both before the Ld. CIT(A) and before us was not intentional or mala fide but caused by unfamiliarity with the electronic process of return filing/submission of responses etc., on the part of the managing trustee who is a person of advanced age. We are, therefore, inclined to condone the delay in filing of appeal at this stages.

On merits, we note that in the Asst. Year 2020-21, the Tax Audit Report was obtained on 16-03-2021 and uploaded along with the Return of Income on the same date. There was a delay of 21 days in uploading in Form 10B for which the extended due date was 15-02-2021. For the Asst. Year 2021-22, the Tax Audit Report was uploaded by the Chartered Accountant on 30-03-2022 but the same was accepted by the managing trustee only on 27- 06-2022. While uploading itself was delayed by about 45 days from the extended due date of 15-02-2022. The total delay, up to the date of acceptance of the form by the trustee on 27-06-2022, was 132 days. In both the cases, however, the Tax Return and Form 10B were available with the CPC before the return was processed u/s. 143(1).

In the intimations u/s. 143(1) for both the years, the CPC has denied exemption u/s. 11 of the Act only for the reason that the Tax Audit Report was not uploaded on the prescribed date. While processing the return during after denying exemption u/s. 11, CPC has failed to allow revenue expenditure incurred by the assessee in both the Asst. Years 2020-21 & 2021-22 even while accepting the expenditure, as computed by the assessee, in Annexure – Schedule ER attached to the intimation u/s. 143(1). The Ld. CIT(A) in the impugned orders did not direct the CPC to allow the revenue expenditure incurred by the assessee in both the years. Consequently, the assessee, a recognized charitable trust engaged in running a school has been taxed with reference to the gross receipts in both these years.

The issue, whether exemption claimed u/s. 11 & 12 could be denied solely on the ground that Form 10B had not been furnished within due date, has been considered in several cases. It would suffice at this stage for us to quote the relevant portion of the decision of ITAT Ahmedabad Bench “D” in the case of Vishva Kalyan Foundation vs. ITO(Exemption) [2026] 183 taxmann.com 130 (Ahmedabad-Trib.) “9. The central grievance of the assessee before us is that exemption under sections 11 and 12 of the Act was denied at the processing stage under section 143(1) of the Act even though Form No. 10B had already been filed and was available with CPC and that the learned CIT(A) erred in dismissing the appeal on grounds of limitation without appreciating that the demand itself arose from a purely technical and unsustainable adjustment. The learned counsel relied on a series of decisions of the Ahmedabad Benches of the Tribunal and the Hon’ble Gujarat High Court, including Electronics & Quality Development Centre v. DCIT (Exemption) [2026] 182 taxmann.com 118 (Ahmedabad-Trib.), Shree Vardhman Stanakvasi Jain Shravak Trust v. ITO [2025] 172 taxmann.com 165 (Ahmedabad-Trib.), Shree Bhakt Samaj Vikas Education Trust v. ACIT (Exemption) [2025] 175 taxmann.com 1076 (Ahmedabad-Trib.), Barwala Panjrapole v. ITO [2025] 175 taxmann.com 895 (Ahmedabad-Trib.) and the binding judgments of the Hon’ble Gujarat High Court in Laxmanarayan Dev Shrishan Seva Khendra [2024] 167 taxmann.com 548, Parul Mahila Pragati Mandal [2025] 175 taxmann.com 922, Babubhai C. Jariwala Charitable Trust [2025] 180 taxmann.com 8 and Sarvodaya Charitable Trust [2021] 125 taxmann.com 75.

In our considered view, following the aforesaid decision of the Co-ordinate Bench and the decision of the Hon’ble Gujarat High Court referred therein, the Ld. CIT(A) erred in declining to condone the delay and also in dismissing the appeal on merits on the same ground. The Tax Audit Report in Form 10B was filed in both the Asst. years before the CPC processed the return u/s. 143(1). Further, in this case, the assessee had incurred significant revenue expenditure which ought to have been allowed to determine the income of the assessee even if exemption u/s. 11 was not considered. Despite accepting the revenue expenditure as computed by the assessee, the CPC has refused to allow the entire revenue expenditure. On these facts, since Form 10B had already been furnished and was available with the CPC when the return was processed, we direct that the exemption claimed u/s. 11 of the Act be allowed to the assessee.

In the result, both the appeals of the assessee are allowed.

Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,