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Facts
The assessee, a non-private limited company registered under Section 8 of the Companies Act, 2013, was granted registration u/s 12AA of the Income Tax Act for AY 2020-21. The assessee filed its return of income declaring Nil income and was processed u/s 143(1). The benefit of exemption u/s 11 and 12 was denied by the AO/CPC because Form 10B was filed belatedly, resulting in an addition of Rs. 14,35,023/-.
Held
The Tribunal observed that delay in filing Form 10B is a procedural lapse and that grant of exemption cannot be denied solely on this ground if other procedural requirements are met. The Tribunal directed the AO to condone the delay and grant the benefit of exemption on merits.
Key Issues
Whether denial of exemption under Section 11/12 is justified solely due to the delayed filing of Form 10B, and whether such delay can be condoned by the Tribunal.
Sections Cited
11, 12, 12A, 12AA, 143(1), 119(2)(b), 139(4), 250, 154, 44AB, 17B
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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
(Assessment Year: 2020-21) We Can We Will Foundation ITO 13(1)(1) N-301, Ashok Nagar, Wing N, Bldg. 4, Aaykar Bhavan, Mumbai – 400020. Vazira Naka, Opposite Takvalkar Gym, Vs. Borivali (W), Mumbai – 400091. PAN/GIR No. AARCA5873F (Assessee) : (Respondent) Assessee by : Shri. Bhupendra Karkhanis Respondent by : Shri. P. D. Chougule, SR. DR Date of Hearing : 18.02.2025 Date of Pronouncement : 24.02.2025 O R D E R Per Kavitha Rajagopal, J M: This appeal has been filed by the assessee, challenging the order of the learned Commissioner of Income Tax, (Appeals) ADDL/JCIT (A) Prayagraj (‘ld. CIT(A)’ for short), passed u/s.250 of the Income Tax Act, 1961 (‘the Act'), pertaining to the Assessment Year (‘A.Y.’ for short) 2020-21.
The assessee has raised the following grounds of appeal: 1. “Non-granting of Benefit under Section 11/12 On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not allowing the benefit of Section 11/12 of the Income Tax Act, 1961, to the Appellant despite the Trust being duly registered under Section 12A/12AA of the Act, which is wrong and contrary to the facts and circumstances of the case and the reasons assigned for doing so are contrary to the provisions of the Income Tax Act, 1961 and the Rules made thereunder.
2. Misinterpretation of Filing Requirement under Section 12A(1)(b) On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in holding that the (A.Y. 2020-21) We Can We Will Foundation Appellant was required to file Form 10B before the due date specified under Section 44AB read with Rule 17B, without appreciating that the total income of the Appellant, even without giving effect to Section 11/12, was below the taxable limit of Rs. 2,50,000, and hence, the procedural lapse should not lead to denial of the substantive benefit under Section 11/12.
3. Procedural Requirement versus Substantive Compliance On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not appreciating that the filing of Form 10B is a procedural requirement and that substantive compliance with the provisions of Section 11/12 was achieved by the timely completion of the audit and submission of the audit report.
4. Failure to Consider Relevant Judicial Precedents On the facts and in the circumstances of the case and in law, the learned CIT(A) failed to consider binding judicial precedents, including: • Commissioner of Income Tax vs. Sakal Relief Fund • Shakuntalam Bal Vikas Society vs. ITO which firmly establish that the delay in filing Form 10B is directory in nature and not mandatory and the benefit of Section 11/12 cannot be denied merely due to procedural lapses.
5. Extension of Time for Filing under Section 139(4) On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not appreciating that as per Rule 17 of the Income Tax Rules, the time allowed for furnishing Form 10B is extended to the period allowed for filing a return of income under Section 139(4), as held in multiple judicial pronouncements.
6. Condonation of Delay in Filing Form 10B On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not condoning the delay in e-filing Form 10B, even though the audit of accounts was completed on 31/12/2020 and the audit report was e-filed on 15/02/2021. The delay was attributable to operational disruptions during the pandemic and lack of familiarity with compliance requirements, which constitutes a reasonable cause for condonation as per CBDT Circular No. 16/2024 and judicial precedents.
7. Violation of Principles of Natural Justice On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in violating the principles of natural justice by not disclosing/communicating during the appellate proceedings that the denial of exemption under Section 11/12 was on account of the delay in filing Form 10B, rendering the order arbitrary, unjust and unsustainable in law and no reason is assigned for doing so which is contrary to the provisions of the Income Tax Act, 1961 and the Rules made thereunder. The Appellant respectfully prays that the Hon’ble ITAT be pleased to:
1. 1. Allow the benefit of Section 11/12 of the Income Tax Act, 1961, to the Appellant.
2. Condone the delay in filing Form 10B and treat the filing as valid compliance.
3. Grant such other relief as may be deemed just and proper in the facts and circumstances of the case.”
(A.Y. 2020-21) We Can We Will Foundation 3. Briefly stated, the assessee is a non-private limited company by shares incorporated under the provisions of Section 8 of the Companies Act, 2013 engaged in undertaking Social, Economic, Environmental and Educational upliftment of the backward classes and/or underprivileged. The assessee was granted registration u/s 12AA of the Act, dated 25.10.2019, from A.Y. 2020-21 onwards and the assessee changed its name from ‘Abhinavan Foundation’ to ‘We Can We Will Foundation’ with effect from 08.07.2021. The assessee filed its return of income dated 15.02.2021, declaring total income at Rs. Nil, and the same was processed u/s. 143(1) of the Act. The learned Assessing Officer ('ld. A.O.' for short)/CPC vide intimation dated 30.11.2021, u/s. 143(1) of the Act, determined the total income of the assessee u/s. 11 of the Act. Subsequent to this, the assessee filed rectification application u/s. 154 of the Act, dated 13.12.2021. Parallelly, the assessee preferred the appeal before the ld. CIT(A), who vide order dated 21.10.2024, dismissed the appeal filed by the assessee on the ground that the assessee had filed form 10AB with a delay of 30 days from the date of filing of the return of income.
Aggrieved the assessee is in appeal before us, challenging the impugned order of the ld. CIT(A).
We have heard the rival submissions and perused the materials available on record. It is observed that the assessee was denied the benefit of exemption u/s. 11 and 12 of the Act by the ld. AO/CPC for the reason that form 10B was filed belatedly beyond the prescribed period of limitation resulting in addition/disallowance of Rs. 14,35,023/- which was claimed as exempt by the assessee u/s. 11 of the Act. The ld. CIT(A) further (A.Y. 2020-21) We Can We Will Foundation upheld the impugned addition/disallowance on the same reasoning. Further, the ld. CIT(A) has stated that as per Section 119(2)(b) of the Act and the CBDT circular 3/2020, dated 03.01.2020 and circular no. 16/2022, dated 19.07.2022, the ld. CIT(A) did not have the authority to condone the delay in filing the form 10B. The ld. CIT(A) rejected the assessee’s contentions by holding that the only Jurisdictional Commissioner of Income Tax, Chief Commissioner of Income tax or Principal Chief Commissioner of Income Tax can condone the delay in filing the form 10B, failing which the claim of exemption u/s. 11 and 12 has been denied.
The learned Authorised Representative ('ld. AR' for short) for the assessee had relied on the following decisions. a. Smollan India CSR Foundation vs. ITO (Exemption) [ITAT Mumbai] [ITA 3092/Mum/2024] b. Sarvodaya Charitable Trust vs. Income Tax Officer (Exemption) [Gujrat High Court] [278 Taxmann 148] c. ADA Atham Darji Pragati Mandal vs. DDIT CPC, Bengaluru [ITAT Mumbai] [ITA 2684/Mum/2024].
On perusal of the above said decisions, it is observed that it is a settled proposition of law that the delay in filing form 10B could be condoned and grant of exemption cannot be denied merely on this ground when the assessee has satisfied the other procedural requirement for claiming exemption. By respectfully following the above judicial precedents, we hereby direct the ld. AO to condone the delay and to grant the benefit of exemption to the assessee on the merits and in accordance with law, if the assessee (A.Y. 2020-21) We Can We Will Foundation satisfies the condition prescribed for claiming the said exemption. Hence, the grounds raised
by the assessee are hereby allowed.