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Income Tax Appellate Tribunal, MUMBAI BENCH “J(SMC
Before: SHRI NARENDRA KUMAR BILLAIYA & SHRI RAJ KUMAR CHAUHAN
O R D E R PER RAJ KUMAR CHAUHAN (J.M.): 1. This appeal is filed by the appellant/assessee against the order dated 27.02.2024 of Learned Commissioner of Income Tax (Appeals) / Addl/JCIT (A)-2, Siliguri [hereinafter referred to as the “CIT(A)”],passed under section 250 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] for the A.Y. 2020-21, wherein the appeal of the assessee was dismissed as not maintainable.
The brief facts of the case are that the assessee company is incorporated u/s 12 of the Companies Act which is formed for the betterment of blind people. All the staff employed is blinds and they are providing body massage, head massage and foot massage. The amount received and spent for charitable purpose is exempt for tax. The AO while processing the return of income for AY 2020-21 has considered the entire receipt of Rs. 13,06,058/- as income. Despite the fact that a sum of Rs. 12,33,052 has been spend for charitable purpose. It further alleged that during the F.Y. 2019-20 due to outbreak of Corona, the audit work could not be completed on time till extended period for filing the ITR for AY 2020-21 u/s 139(1) of the Act on 15.02.2021. As the gross receipts of the Trust exceed the limit of Rs. 2,50,000/- and the auditor is located at Pune and the Trust is located in Mumbai and due to inconvenience faced by the auditor on account of Covid Pandemic, the books of account and the record could not be made available and that is the reasons the audit report u/s 10B was uploaded on 17.02.2021 and ITR was filed on 18.02.2021 u/s 139(4) i.e. before 31.03.2021. The delay is only 3 days Page | 2 which is beyond the control of assessee due to outbreak of covid pandemic. Therefore, the lower appellate authority has declined to condone the delay and dismissed appeal and upheld the order of AO.
3. Aggrieved by the order of lower appellate authority, the assessee preferred the appeal before us on the following grounds:-
1. The National Faceless Appeal Centre [hereinafter referred to as 'the NFAC'] has erred in confirming the Intimation order passed U/s 143(1) on 30-11-2021 determining the total income at Rs.13,06,058/-as against returned income of Rs.NIL declared by the Appellant without appreciating the facts and circumstance of the case. This action of the NFAC is unjustified and the same may be set aside.
Disallowance of an Expenses incurred towards Objects of the Foundation is Unjustified:
2. The NFAC has erred in confirming the action of the Assessing Officer (AO) in denying the deduction claimed towards expenses incurred towards objects of the Foundation at Rs. 13,06,058/- merely on account of non-furnishing of audit report in prescribed Form No.10B on time, though Filed on 17-02-2021, (the Due Date being 15-01-2021) i.e before the completion of Assessment, without appreciating that, it was only due to prevailing lock down situation, which was beyond the control of Your Appellant, that caused the delay in furnishing the audit report in time. Thus, the disallowance of the claim made for deduction of expenditure incurred towards objects of the Foundation is unjustified and the same may be deleted.
The Delay in filing prescribed Audit Report in Form No.10B be Condoned.
Interest levied u/s 234A, 234B, 234C and Fee u/s 234F is unjustified
4. The Appellant denies any liability towards interest charged U/s 234A, 234B and 234C, and Fee U/s.234F and other applicable Provisions of the Act.
The Appellant craves leave to add, amend, vary, modify or alter, the aforesaid grounds and/or adduce further evidence, before or at the time of Hearing.
We have heard Ld. AR and Ld. DR on behalf of the parties and perused the material placed on record. On the basis of summarized ground, the question for determination before us is whether in the given facts and circumstances, for the relevant period delay having occurred during the covid pandemic, the assessee is entitled to condonation of delay in filing the ITR alongwith audit report in Form 10B. Page | 4
Ld. AR on behalf of the assessee submitted that it was beyond the control of assessee because due to lockdown period of Covid pandemic and the auditor was located in Pune and the trust is situated in Mumbai, therefore relevant documents could not reach to the Auditor. Ld. AR relied on the judgment of Hon’ble Supreme Court in Suo Moto Writ Petition (Civil) No. 3 of 2020 where vide order dated 10.01.2022, the Hon’ble Apex Court was pleased to direct the condonation of delay on account of covid pandemic and extended limitation period for judicial and quasi judicial proceedings from March 15, 2020 to February 28, 2022. The Hon’ble Supreme Court has further allowed the filing of the proceedings whatever it may be within the limitation period starting the limitation from 01.03.2022. Therefore, Ld. AR submitted that assessee be given the benefit of condonation of delay in the interest of justice and AO be directed to delete the addition while giving benefit of section 11(1) of the Act to the charitable Trust.
On the other hand, Ld. DR opposed the submission of Ld. AR stating that assessee should not be given the benefit of condonation of delay and requested to dismiss the appeal of the assessee.
We have considered the rival submissions made by Ld. AR as well as Ld. DR. On perusal of the order of Ld. CIT(A), we noticed that the observation of the Ld. CIT(A) shows that he has adopted a hyper- technical approach while considering the grounds of condonation of delay in the case of the appellant. The relevant portion of the order of Ld. CIT(A) as enumerated in para no. 5 is extracted below:-
5.0 Decision The appellant is a trust registered u/s 12A of the Act. It is also registered u/s 80G of the Act. During the year, ITR was e-filed on 18.02.2021 u/s 139(4) and vide intimation u/s 143(1) dated 30.11.2021, entire amount admittedly applied for charitable purposes was disallowed and demand was raised against the assessee. There is a delay of 3 days in filing the ITR and assessee has requested to condone the delay. The assesee has claimed in its written submission that it had obtained audit report in form No.10B and compulsory e-filing of such reports commenced only w.e.f A.Y.2017-18. According to the appellant, late filing of Form 10B is solely attributable to the fact that its auditor is located in Pune whereas the appellant is based in Mumbai. According to the appellant, the delay in filing ITR is only of three days which was beyond its control due to outbreak of COVID pandemic. The appellant has requested to condone the delay for completion of appellate proceedings. The submission of the assessee has been carefully considered in the light of the conditions for applicability of sections 11 and 12 as enumerated in section 12(A)(1)(b):- The provisions of Section 11 and 12 shall not apply in relation to income of any trust or institution unless the following conditions are fulfilled, namely:- (b) Where the total income of the trust or institution as computed under this Act without giving effect to the provision of Section 11 and Section 12 exceeds the maximum amount which is not chargeable to income tax, the accounts of the trust or institution for that year have been audited by an accountant as defined in the Explanation below subsection (2) of Section 288 before the specified date referred to in Section 44 AB and the person in receipt of the income furnishes by that date the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed. It is also necessary to refer to Rule 17B, according to which the report of such audit is required to be furnished under clause (b) of the Section 12A. It is also necessary to refer to the proviso given below Rule 12(2) according to which if any assessee is required to furnish report of audit specified under clause (b) of subsection (1) of section 12(a), he shall furnish the same Page | 7 electronically. From the perusal of the above tenets of law and applicable rules, the appellant's claim that it could not file it electronically within the due date doesnot hold ground because the proviso given below Rule 12(2) is applicable w.e.f 01.04.2014. Moreover, the requirement of furnishing the audit report on or before the specified date has been made mandatory w.e.f AY 2020-21. Undisputedly, there has been delay in submitting the ITR and the audit report. Moreover, appellate authorities are not empowered under the Act to condone the delay in filing Form 10B. There is also no evidence whether the appellant has sought any application for condonation of delay in filing Form 10B in accordance with the procedure as described in CBDT Circular No. 02/2020 dated 03.01.2020. According to para 5 of the aforesaid circular, it has been held that where there is delay of upto 365 days in filing Form no. 10B for AY 2018-19 or for any subsequent AYs, the Commissioners of Income Tax are authorized to admit such belated applications of condonation of delay u/s 119(2) of the IT Act and decide on merits. A careful perusal of the provisions of the IT Act as applicable for the year under the appeal, the audit report has to be filed before the specified date along with the return of the income. In addition, there has been delay in furnishing ITR as well in accordance with the provisions of Section 139(4A). Clearly, Section 12A (1)(ba) clearly specifies that the person in receipt of income is required to furnish the ITR u/s 139(4A) within the time Page | 8 allowed under that Section. Thus, the appeal application suffers from twin defaults on the counts of furnishing of ITR as well as the audit report. In the light of the above discussion, since no application for condonation for delay was furnished before the prescribed authority, there is no reason to interfere with the disallowances made u/s 143(1). The appellant has also not furnished any documentary evidence whether the delay in furnishing ITR and audit report has been condoned by the competent authority. As stated earlier, appellate authorities are not empowered to entertain assessee's application for condonation of delay in filing ITR/Audit report. Therefore, the addition in the form of disallowance of expenditure u/s 11/12 is hereby confirmed. In the result, the present appeal filed by the assessee is dismissed.
It is evident from the extracts of the impugned order that the Ld. CIT(A) has not extended the benefit of CBDT Circular No. 02/2020 dated 03.01.2020 on the ground that no application for condonation of delay was furnished before the lower authorities, hence there was no reason for deletion of disallowances made u/s 143(1) of the Act and the appeal of the assessee was dismissed.
9. It is evident that there was a delay of 3 days in filing the ITR alongwith audit report in Form 10B by the assessee and due to outbreak of corona, the audit work could not be completed on time till the extended period for filing the ITR for AY 2020-21 u/s 139(1) of the Act by 15.02.2021. The auditor is located at Pune and the Trust is located in Mumbai and due to inconvenience faced by the auditor on account of Covid Pandemic, the books of account and the report could not be made available and that is the reasons the audit report u/s 10B was uploaded on 17.02.2021 and ITR was filed on 18.02.2021 u/s 139(4) i.e. before 31.03.2021.
10. The similar question arose before us in for AY 2018-19 decided on 22.10.2024 in the case of Shri Veraimata Charitable Trust. The said question has been decided by us and the findings of the Coordinate Bench from para 9 to 14 is extracted below:-
In the case in hand, the assessee has filed the income tax return on 21.07.2018 and form no. 10B has been filed on 22.07.2018.For the A.Y. 2018- 19 as per Section 12A(1)(b) and Rule 17B of the Act, the formno. 10B was required to be filed on or before the due date of submitting the income tax returns u/s. 139(1) of the Act. The requirement of filing the form no. 10B one month before the filing of the income tax return became applicable w.e.f. 01.04.2023 by Finance Act of 2022.
The question for consideration before the Ld. coordinate bench and before us is almost similar i.e., whether the requirement of filing form no. 10B on or before the date of filing of the return is a mandatory requirement or directory in nature?
As is evident from the findings of the Ld.coordinate bench, various judicial pronouncements have been relied as under: a. Honourable Gujarat High court in case of Association of Indian Panelboard Manufacturer [2023] 157 taxmann.com 550 (Gujarat)[21-03-2023] b. CIT Vs. Gujarat Oil & Allied Industries Ltd. [(1993) 201 ITR 325 (Guj.)]. c. Punjab and Haryana High Court in CIT v. Shahzadanand Charity Trust [(1997) 228 ITR 292] d. Honourable Delhi High court in Associated Chambers of Commerce and Industry of India 2024] 165 taxmann.com 510 (Delhi)[05-08-2024]”
On the basis of the above judicial pronouncements and the settled precedents including the decision of various Ld. coordinate benches, the Ld. coordinate bench was of the opinion that the timeline of filing form no. 10B is directory in nature. In the case in hand, as per the relevant provisions of law applicable for the relevant A.Y. 2018-19, the formno. 10B was required to be filed on or before 21.07.2018; the same has been filed on 22.07.2018 i.e., one day after filing of the return. Thus, the formno. 10B was available with the Ld. AO before the completion of the assessment u/s. 143(1) of the Act. Since the requirement of filing the formno. 10B is directory, therefore the denying the benefit of Section 11 and 12 of the Act for just one day delay in filing the form no. 10B which otherwise was available before the Ld. AO at the time of processing the assessment u/s. 143(1) of the Act, was not legally justified and the same is arbitrary and unjustified.
For the above reasons, the impugned order is liable to be set aside. Accordingly, we respectfully agree with the Ld.coordinate bench and also following the various judicial precedents mentioned in the order of the Ld. coordinate bench, we direct the Ld. AO to grant benefit of form no. 10B filed by the assessee for extending benefit of Section11 and 12 of the Act.
The grounds of appeal are accordingly allowed in favour of the assessee.
11. Thus it is evident that the facts and circumstances are similar to the above referred case and in this case additionally the assessee is also entitled to the benefit of condonation of delay due to the judgment of Hon’ble Supreme Court in Suo Moto Writ Petition (Civil) No. 3 of 2020 vide order dated 10.01.2022 wherein limitation period for judicial and quasi judicial proceedings was extended due to covid pandemic and it is not in dispute that the limitation for filing appeal before Ld. CIT(A) expired during the covid pandemic prevailing all over India. For the above discussions, both the questions raised before us are accordingly decided in favour of the assessee.
12. Since the requirement of filing Form 10B is directory, therefore the denying the benefit of Section 11 and 12 of the Act for just 3 days delay in filing the form no. 10B which otherwise was available before the Ld. AO at the time of processing the assessment u/s. 143(1) of the Act, was not legally justified and the same is arbitrary and unjustified.
13. For these reasons, the impugned order is set aside and we accordingly direct the AO to grant benefit of form no. 10B filed by the assessee for extending benefit of Section11 and 12 of the Act. Resultantly, the grounds raised
by the assessee are allowed in favour of the assessee.
14. In the result, appeal filed by the assessee is allowed for statistical purposes in above terms.