Shrimat Maharaja Jagdevrao Pawar Smriti Shiksh Sanstha vs. Commissioner Of Income Tax Exemption Bhopal At Jabalpur

IN THE HIGH COURT OF MADHYA PRADESH AT INDORE BEFORE HON'BLE SHRI JUSTICE SUSHRUT ARVIND DHARMADHIKARI & HON'BLE SHRI JUSTICE GAJENDRA SINGH ON THE 30th OF APRIL, 2024 WRIT PETITION No. 3814 of 2023 BETWEEN:- SHRIMAT MAHARAJA JAGDEVRAO PAWAR SMRITI SHIKSH SANSTHA KASHI BAGH, COURT ROAD, DHAR (MADHYA PRADESH) .....PETITIONER (SHRI VASHISTHA NARAYAN DUBEY, LEARNED COUNSEL FOR THE PETITIONER) AND COMMISSIONER OF INCOME TAX, EXEMPTION BHOPAL AT JABALPUR AAYKAR BHAVAN, 48, ARERA HILLS, BHOPAL (MADHYA PRADESH) .....RESPONDENT (MS. VEENA MANDLIK, LEARNED COUNSEL FOR THE RESPONDENT) This petition coming on for admission this day, Justice Sushrut Arvind Dharmadhikari passed the following: ORDER Heard finally with the consent of both the parties. In this petition under Article 226 of the Constitution of India a challenge has been made to the order dated 25.03.2021, passed by the Commissioner of Income Tax(CIT)(Exemption), Bhopal under Section 119(2)(b) of the Income Tax Act, 1961(hereinafter referred to as ...."the Act"). 2. The grievance of the petitioner was that the trust was formed under the name of Shrimat Maharaja Jagdevrao Pawar, Smriti Shiksha Sanstha. The trust 1 Signed by: PREETHA HARI NAIR Signing time: 10-05-2024 18:39:02 Signature Not Verified was duly registered under the Madhya Pradesh Societies Registration Act, 1959 on 03.05.1963. The main object of the trust is to impart education. In view of the aforesaid, one education institution namely Dhar Public School was formed. Since the petitioner institution is a trust imparting education, is charitable within the meaning of Section 2(15) of the Act. Therefore, the petitioner moved Form- 10BB of the Income Tax Rules, 1962 seeking exemption alongwith application for condonation of delay. Accordingly, for the impugned year i.e. Assessment Year 2017-2018, the due date for filing of return of income and the audit report i.e. Form 10BB was 07.11.2017. The Form 10BB could not be filed by the concerned auditor with the aforesaid due date due to some technical error in uploading the Form 10BB/other reasons, which were beyond the control of the petitioner and, as such, the petitioner was able to get the same filled up through its auditor on 19.01.2021. Thus, there was a delay of 1168 days in filing of Form-10BB of the Income Tax Rules, 1962. 3. The petitioner was under the bona fide mistake on the part of the trustees who believed that it was uploaded did not take any follow-up action on their part, which resulted in the dismissal of the delay application. 4. In the meanwhile, the Central Board of Direct Taxes (CBDT) vide Circular No.19/2020 dated 03.11.2020 was issued directing that in all cases of belated filing of Form-10BB for years prior to Assessment Year 2018-19, Commissioner of Income Tax to admit the applications for condonation of delay in filing of Form 10BB. Prior to Assessment Year 2018-2019, the Commissioner of Income Tax are required to admit the application for condonation of delay in filing the Form- 10BB. Since it came late to the knowledge of the petitioner that Form-10BB for the year 2017-2018 has not 2 Signed by: PREETHA HARI NAIR Signing time: 10-05-2024 18:39:02 Signature Not Verified been uploaded in accordance with law, he immediately approached the concerned auditor, who in-turn submitted the application for condonation of delay. 5. The respondents vide order dated 25.03.2021 arbitrarily rejected the application for condonation of delay in filing of Form-10BB for Assessment Year 2017-18, ignoring the facts of the case and evading the condition of the aforesaid circular issued by the CBDT, merely stating that the delay was without reasonable cause and the conditions of CBDT circular no.19/2020 dated 03.11.2020 were not fulfilled. 6. Learned counsel for the petitioner submitted that the respondent ought to have adopted a liberal approach for the purpose of condonation of delay rather than adopting very strict view. Learned counsel further submits that this conclusion arose only because of technical glitch on the portal which was beyond the control of the petitioner. He further submitted that filing of Form is merely a procedural requirement. The delay in complying with such procedural requirement ought not to have taken away the statutory benefits which are available to the petitioner. The filing of Form 10-BB is recommendatory in nature and not mandatory. Therefore, this writ petition may be allowed and the order impugned dated 25.03.2021 be set aside and application seeking condonation may be allowed. 7. On the other hand, learned counsel for the respondents opposed the prayer and submitted that though the respondent has thought fit, in exercise of his discretion, not to condone the delay and such discretion cannot be said to have been exercised arbitrarily or unjudiciously. In the case on hand, the Commissioner has recorded cogent reasons while declining the delay. Learned counsel further submits that no error, not to speak of any error of law, could be 3 Signed by: PREETHA HARI NAIR Signing time: 10-05-2024 18:39:02 Signature Not Verified said to have been committed by the respondent in passing the impugned orders. In such a situation, the writ petition is liable to be dismissed. 8. Heard the learned counsel for the parties and perused the record. 9. In the case of CIT vs. Rai Bahadur Bissesswarlal Motilal Malwasie Trust (1992) 195 ITR 825, the Calcutta High Court has affirmed that that the requirement of filing the audit report with the return is merely a procedural requirement, and that exemption cannot be denied so long as the report is available to the assessing officer before the completion of assessment. 10. In the case of Calcutta Management Association vs. ITO (1992) 42 ITD 62, the Calcutta bench of the Tribunal held that the Audit Report can even be filed at the time of appeal before the Commissioner (Appeals). 11. A similar view has been taken by the Tribunal, in the case of Swajan Pariwar Trust vs. ADIT(E) (1997) 57 TTJ (Mum)(SMC) 77, that, where the trust filed the audit report along with a rectification application under section 154, it was entitled to the exemption, as the defect had been removed. 12. The Gujarat High Court in CIT v. Gujarat Oil & Allied Industries [1993] 201 ITR 325 (Guj.) held that the provision about furnishing of the auditor's report along with the return has to be treated as procedural provision and, therefore, directory in nature. 13. In the case National Horticulture Board v. CCIT [2009] 176 TAXMAN 167 (PUNJ. & HAR.) the Chief Commissioner dismissed application for approval under section 10(23C)(iv) on ground that audit reports in Form No. 10BB were not filed with returns and same were filed later, but were not dated as required under 10th proviso to said provision. The High Court held that provisions of the law having been substantially complied with, 4 Signed by: PREETHA HARI NAIR Signing time: 10-05-2024 18:39:02 Signature Not Verified audit report should have been taken into account even if, strictly speaking, it was not filed with return and not in Form No. 10BB but in Form No. 10B as stated in impugned order. 14. The High Court of Calcutta CIT vs. Hardeodas Agarwala Trust (1992) 198 ITR 511 (Cal) held that whether a provision is directory or mandatory has to be considered in the context in which the conditions are imposed. Whether a statute is mandatory or directory depends on the intent of legislature and upon the language in which the intent is clothed. The meaning and intention of Legislature must govern and these are to be ascertained not only from the phraseology of the provision but also by considering its nature, its design, and the consequences which would follow from construing it one way or the other. 15. The High Court of Punjab and Haryana in the case of Commissioner of Income Tax vs. Sankalp Welfare Society [2008] 303 ITR 64 (Punjab & Haryana) held that Provisions of section 32AB(5) are not mandatory and the Assessing Officer has discretion to entertain the audit report, even though the same was not filed along with the return, for grant of benefit of deduction to the assessee in terms of section 32AB(1). It may be noted that the provisions of section 32AB(5) are exactly similar to the provisions of section 12A(1)(b) but there is requirement of filing the Audit Report along with the return of income. In this case the Punjab High Court relied on the cases CIT v. Punjab Financial Corpn. [2002] 254 ITR 6 (Punj. & Har.) and CIT v. Print Systems & Products [2006] 285 ITR 260 (Mad.). 16. In the case CIT vs. Shahzedanand Charity Trust – (1997) 228 ITR 292 (PH), it has been clarified that the exemption available to the trust under section 11 may not be denied merely on account of delay in furnishing the 5 Signed by: PREETHA HARI NAIR Signing time: 10-05-2024 18:39:02 Signature Not Verified auditor's report. The word 'shall' occurring in section 12A cannot, under the circumstances, be read as a 'must' making it mandatory for the trust to furnish the auditor's report along with the return. If for certain unavoidable circumstances, the assessee is unable to furnish the auditor's report along with the return, then the same can be furnished at a later date with the permission of the Assessing Officer, who may permit the assessee to do so after recording the reasons for so doing. 17. There was no merit in the submission of the revenue that, as per that circular, the auditor's report could only be furnished up to the stage of framing of the assessment as the power to condone the delay for accepting the auditor's report at a later date has only been given to the ITO and not thereafter, i.e., at the appellate stage. The CBDT, by issuing the above circular, has treated the provisions regarding furnishing of auditor's report along with the return to be procedural and, therefore, directory in nature. By showing sufficient cause, the auditor's report can be produced at any later stage either before the ITO or before the appellate authority. 18. To sum up, in our opinion if the Form 10B is not uploaded along with the return, such defect itself cannot result in denial of exemptions under section 11. Therefore, where return has been processed u/s. 143(1) denying the exemption u/s. 11 mainly on the ground that Form 10B was not uploaded with the return but filed subsequently, the concerned NGO should submit application to the assessing officer for condonation of delay for late submission of Form 10B along with the return of income and also the petition u/s 154 of the Income Tax Act,1961 for revising the intimation by allowing the benefit of section 11 of the Income Tax Act,1961. 6 Signed by: PREETHA HARI NAIR Signing time: 10-05-2024 18:39:02 Signature Not Verified (S. A. DHARMADHIKARI) JUDGE (GAJENDRA SINGH) JUDGE 19. In view of the aforesaid, the order dated 25.03.2021(Annexure-P/1) passed by the Commissioner of Income Tax(CIT)(Exemption), Bhopal seeking condonation of delay is hereby set-aside/quashed. The matter is remanded back to the respondent -Commissioner of Income Tax(CIT)(Exemption), Bhopal. The petitioner is directed to file a fresh application giving proper reasons for the delay alongwith necessary documents and citations. The respondent is directed to re-decide the application for condonation of delay and pass a reasoned and speaking order in accordance with law as expeditiously as possible, preferably within a period of 30 days from the date of receipt of certified copy of the order. 20. With the aforesaid, the writ petition stands disposed of accordingly.

pn 7 Signed by: PREETHA HARI NAIR Signing time: 10-05-2024 18:39:02 Signature Not Verified