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Facts
The assessee trust filed its return for AY 2021-22 declaring NIL income and claimed a refund. The CPC initially processed this but later rectified the order, disallowing exemption u/s 11 on the ground of not filing the audit report (Form 10B) in time. The CIT(A) dismissed the appeal, holding the delay in filing the audit report was not sufficiently explained.
Held
The Tribunal held that the delay in filing the appeal before it was condoned. Regarding the substantive issue, it found that the audit report was uploaded before the extended due date, and the delay in acceptance by the assessee was a procedural omission, not a deliberate act. The Tribunal emphasized substantial justice over technicalities.
Key Issues
1. Whether the delay in filing the appeal before the Tribunal can be condoned based on sufficient cause. 2. Whether the disallowance of exemption u/s 11 due to delayed filing of the audit report (Form 10B) is justified when the report was substantially filed within the due date and the delay was a procedural omission.
Sections Cited
143(1), 250, 253(5), 154, 11, 12A, 12AA, 12AB, 139(1), 244A, 11(1)(d)
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Income Tax Appellate Tribunal, ‘B’ BENCH : BANGALORE
Before: SHRI LAXMI PRASAD SAHU & SHRI KESHAV DUBEY
PER KESHAV DUBEY, JUDICIAL MEMBER
This appeal at the instance of the assessee is directed against the order of Ld.CIT(A)/NFAC dated 24/08/2024 vide DIN & Order No. ITBA/NFAC/S/250/2024-25/1067952022(1) passed u/s. 250 of the Income Tax Act,1961( in short “the Act”) for the Assessment Year (A.Y.) 2021-22.
2. The assessee has raised the following grounds of appeal: “1.0 On the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals), Income Tax Department has erred in dismissing the appeal by not considering the facts and evidences furnished regarding
1. accepting the report of auditor with slight delay of 7 days, and not directing the learned AO to consider the income of the appellant Trust as exempt.”
3. At the outset, there is a delay of 110 days in filing the appeal before this Tribunal. The assessee has filed application for condonation of delay along with an affidavit in original which is reproduced below for ease of reference and convenience- 3.1 On going through the above, we take a note of the fact that the assessee had neither received the physical copy of the order of Ld.CIT(A)/NFAC nor received any intimation or email with regard to passing of the order by the Ld.CIT(A)/NFAC. Further, the assessee consultant when trying to find the status of the appeal on 16/01/2025 in the income tax portal, noticed that the appellate order had already been passed on 24/08/2024 itself. After knowing such fact, the assessee thereafter filed this appeal with a delay of 110 days and accordingly prayed that the delay in filing the appeal is neither intentional nor wilful but due to the sufficient cause hereinabove.
3.2 Before us, the Ld. AR of the assessee further submitted that if the delay is not condoned, the assessee would be put to a great hardship and irreparable injury and on the other hand, no hardship or injury would be caused to the revenue if the delay is condoned.
3.3 The Ld. DR on the other hand, submitted that the appeal may be dismissed in limine without adjudicating the same on merits as the assessee failed to demonstrate the sufficient cause in filing the appeal belatedly before this Tribunal.
3.4 We have heard the rival submissions and perused the materials available on record.
3.5 It is worthwhile to mention that u/s. 253(5) of the Act, the Tribunal may admit the appeal filed beyond the period of limitation where it is established that there exist a sufficient cause on the part of the assessee for not presenting the appeals within the prescribed time. The explanation therefore becomes relevant to determine whether the same reflects sufficient cause on the part of the assessee in not filing the appeal within the prescribed time.
3.6 In our opinion, there exists a sufficient cause on the part of the assessee for not filing the appeal within the prescribed time. At this juncture, while considering a similar issue, the Hon’ble Apex Court in the case of Collector, Land Acquisition vs. Mst. Katiji & Ors. (167 ITR 471), laid down six principles. For the purpose of convenience, the principles laid down by the Hon’ble Apex Court are reproduced hereunder. “1. Ordinarily a litigant does not stand to benefit by lodging an appeal late.
Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this when delay is con- doned the highest that can happen is that a cause would be decided on merits after hearing the parties. 3. "Every day's delay must be explained" does not mean that a pedantic approach should be made. Why not every hour's delay, every second's delay? The doctrine must be applied in a rational common sense pragmatic manner.
4. When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non- deliberate delay.
There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact he runs a serious risk.
It must be grasped that judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so. 3.7 When substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right for injustice being done because of non-deliberate delay. Moreover, no counter-affidavit was filed by the Revenue denying the allegation made by the assessee. It is not the case of the Revenue that the appeal was not filed deliberately. Therefore, we have to prefer substantial justice rather than technicality in deciding the issue. Therefore, in our opinion, by preferring the substantial justice, the delay of 41 days has to be condoned.
3.8 Further, in the case of People Education & Economic Development Society Vs/ ITO reported in 100 ITD 87 (TM) (Chen), wherein held that “when substantial justice and technical consultation are pitted against each other, the cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of non- deliberate delay”.
3.9 The next question may arise whether delay was excessive or inordinate. There is no question of any excessive or inordinate when the reason stated by the assessee was a sufficient cause for not filing the appeal within time. When there is a sufficient cause, the period of delay may not be relevant factor. In fact, the Madras High Court in the case of CIT vs. K.S.P. Shanmugavel Nadai and Ors. (153 ITR 596) considered the condonation of delay and held that there was sufficient and reasonable cause on the part of the assessee for not filing the appeal within the period of limitation. Furthermore, the Chennai Tribunal by majority opinion in the case of People Education and Economic Development Society (PEEDS) v. ITO (100 ITD 87) (Chennai) (TM) condoned more than six hundred days delay.”
3.10 In view of the above, we are condoning the delay of 110 days in filing the appeal before this Tribunal and admit the same for adjudication.
The brief facts of the case are that the assessee trust filed its return of income for the A.Y. 2021-22 on 07/02/2022 declaring net taxable income at Rs. Nil and accordingly claimed refund of Rs. 11,350/- along with interest u/s. 244A thereon. Thereafter, the said return was processed and accordingly, intimation u/s. 143(1) of the Act was passed on 10/08/2022 by accepting the returned income as Nil and granted refund of Rs. 11,350/- as claimed in the return along with the interest u/s. 244A amounting to Rs. 961/- thereon although on page no.15 of the intimation passed u/s. 143(1) of the Act, the CPC had stated the incorrect claim made by the assessee u/s. 143(1)(a)(ii) of the Act as under: “The trust or institution registered u/s. 12A / 12AA / 12AB has not E-filed the audit report in form 10B at least
one month prior to the due date for furnishing return u/s. 139(1). Hence the exemption claimed in Sr.no. 2 [exemption claimed u/s. 11(1)(d)] and Sr.no. 4i to 4viii of Part B-TI is not allowable in accordance with the provisions of section 12A(1)(b) of the Income Tax Act.”
5. Thereafter, the ld. Deputy Director of Income Tax, CPC, Bengaluru passed a suomoto rectification order as per the provisions contained u/s. 154 of the Act on 08/03/2023 and disallowed the claim of exemption under section 11 of the Act amounting to Rs. 89,57,776/- and the entire gross receipts amounting to Rs. 89,57,776/- was treated as income of the assessee and accordingly, total demand of Rs. 34,88,840/- was raised u/s. 154 of the Act for the Asst. Year 2021-22.
6. Aggrieved by the rectification order passed u/s. 154 of the Act dated 08/03/2023, the assessee preferred an appeal before the Ld.CIT(A)/NFAC.
The Ld.CIT(A)/NFAC dismissed the appeal of the assessee on the ground that the due date for verification and submission of the tax audit report for the year under consideration was 15/02/2022. The Accountant has E-verified on 07/02/2022 and the assessee had more than a week’s time, to complete the submission process, all the assessee has to do was to accept / reject the form and e-verify the same and complete the submission which is an activity that can be done with any electronic means in hand with an internet connection. Further, the Ld.CIT(A)/NFAC held that the reasons mentioned for the delay also do not substantiate the claim made by the assessee and accordingly, the grounds of appeal was dismissed by the Ld.CIT(A)/NFAC.
8. Aggrieved by the order of the Ld.CIT(A)/NFAC, the assessee has filed the present appeal before this Tribunal. The assessee has also filed a paper book comprising 38 pages enclosing therein the copies of the acknowledgement for submission of return, acknowledgement for submission of audit report in form 10B, copy of form 10B uploaded by auditor on 07/02/2022, copy of intimation u/s. 143(1), Order u/s. 154, Order of Ld.CIT(A)/NFAC, Copy of the Order of the ITAT, Bangalore Bench in Gowda Saraswati Samaj vs. ITO(E)-486/Bang/2021 relied upon by the assessee.
9. Before us, the Ld.AR of the assessee vehemently submitted that the due date to furnish the audit report for the year under consideration was extended to 15/02/2022. The Chartered Accountant of the assessee trust uploaded the tax audit report on 07/02/2022 and e-verified the same. Further, the ld. AR of the assessee submitted that the assessee was under a honest and bonafide belief that there is no stipulation u/s. 12A(1)(b) or 12AB of the Act that acceptance of audit report by the assessee is a condition precedent to consider it as a valid submission and accordingly, prayed that the assessee should not be denied the benefit of exemption claimed based on the fact that assessee did not accept it before submission of the ITR.
The Ld.DR on the other hand, vehemently supported the order of the authorities below.
We have heard the rival submissions and perused the materials available on record. The only issue raised and contested by the assessee is about the rejection of exemption u/s 11 of the Act for non filing of the Audit report in form 10B within the due date.
12. On going through the rectification order passed u/s. 154 of the Act dated 08/03/2023, we take a note of the fact that the CPC has suomoto disallowed the application of income claimed u/s. 11 / 12 of the Act amounting to Rs. 89,57,776/- on the sole ground that the assessee has not e-filed the audit report in form 10B at least one month prior to the date of furnishing return u/s. 139(1) of the Act whereas the same was allowed while passing the intimation u/s 143(1) of the Act. Further, on going through the Page 5-8 of the paper book submitted before us, we take a note of the fact that the form 10B dated 02/11/2021 had been digitally signed by the Chartered Accountant on 07/02/2022 and was uploaded on the same day. Further, on going through the acknowledgment receipt of filing form 10B (placed at page no. 3 of the paper book), we also take a note of the fact that the acknowledgement of filing form 10B has been generated on 22/02/2022 vide e-filing acknowledgement no. 244578590220222 i.e. with a delay of just 7 days. Thus, it is an undisputed fact that although the Chartered Accountant had prepared the audit report way back on 02/11/2021 but uploaded the audit report on 07/02/2022 well before the extended due date of furnishing the audit report. Therefore, we are of the opinion that it is not a case that no Audit report had been filed on or before the due date of the furnishing the same. In fact, the audit report filed by the Chartered Accountant could not be accepted electronically by the assessee on or before the due date of furnishing the audit report. The assessee before the ld. CIT(A)/NFAC contended that the assessee was under a honest and bonafide belief that there is no stipulation u/s. 12A(1)(b) of the Act that acceptance of audit report by the assessee is a condition precedent to consider it as a valid submission.
In our considered opinion, the moot aspect thus centres around to the requirement of the availability of the audit report when the processing/intimation/rectification was undertaken by the CPC even though the same may not be accepted by the assessee on or before the due date but accepted just seven days after the due date. The form no. 10B as uploaded by the Chartered Accountant on 07/02/2022 and accepted by the assessee on 22/02/2022 was available before the CPC while passing the intimation u/s. 143(1) of the Act on 10/08/2022 and therefore the CPC initially had rightly not disallowed the claim of exemption u/s. 11 / 12 of the Act while passing intimation u/s. 143(1) of the Act. In plethora of cases, the filing of audit report is held to be substantive requirement but not the mode and stage of filing, which is procedural. Once the audit report filed in form 10B was available with the CPC before the processing the return/passing of intimation u/s. 143(1) of the Act, the requirement of law is satisfied. Admittedly, in the present case, the return of income as well as the audit report was available before the CPC well before the passing of intimation u/s. 143(1) of the Act and the CPC after bearing in mind the return of income as well as the audit report had passed the intimation u/s. 143(1) of the Act but while passing the suo moto rectification Order u/s 154 of the Act denied the claim of the exemption u/s 11 of the Act on the ground that the assessee has not e-filed audit report in Form 10B at least one month prior to the due date for furnishing return u/s 139(1) of the Act which in our opinion was only a procedural omission due to the honest & bonafide belief of the assessee.
The Hon’ble Supreme Court in the case of Mangalore Chemicals & Fertilisers Limited vs. Deputy Commissioner of Commercial Taxes and Ors. vide judgement dated 02/08/1991 reported in 1992 AIR 152, (1991) 55 ELT 437 observed as follows- “The mere fact that it is statutory does not matter one way or the other. There are conditions and conditions. Some may be substantive, mandatory and based on considerations of policy and some others may merely belong to the area of procedure. It will be erroneous to attach equal importance to the non-observance of all conditions irrespective of the purposes they were intended to serve.”
Further, the Hon’ble Supreme Court in the case of Sambhaji & Ors vs Gangabai & Ors dated 20 November, 2008 reported in 2008 (17) SCC 117 , AIR 2008 SC (SUPP) 767 held as under: - “11. The processual law so dominates in certain systems as to overpower substantive rights and substantial justice. The humanist rule that procedure should be the handmaid, not the mistress, of legal justice compels consideration of vesting a residuary power in Judges to act ex debito justitiae where the tragic sequel otherwise would be wholly inequitable. Justice is the goal of jurisprudence, processual, as much as substantive. No person has a vested right in any course of procedure. He has only the right of prosecution or defence in the manner for the time being by or for the court in which the case is pending, and if, by an Act of Parliament the mode of procedure is altered, he has no other right than to proceed according to the altered mode. A procedural law should not ordinarily be construed as mandatory; the procedural law is always subservient to and is in aid to justice. Any interpretation which eludes or frustrates the recipient of justice is not to be followed.
Processual law is not to be a tyrant but a servant, not an obstruction but an aid to justice. A Procedural prescription is the handmaid and not the mistress, a lubricant, not a resistant in the administration of justice.”
The Apex Court in the case of CIT v. G.M. Knitting Industries (P.) Ltd. Reported in (2015) 376 ITR 456 also observed as under- “In so far as it relates to the substantial question of law (1) is concerned, namely, whether the filing of audit report in Form 10CCB is mandatory, it is well settled by a number of judicial precedents that before the assessment is completed, the declaration could be filed. In fact, the said issue came to be decided by the Karnataka High Court in the case in CIT v. Ace Multitaxes Systems (P.) Ltd. (2009) 317 ITR 207 (Karn), wherein it was held that when a relief is sought for under section 80-IB of the Act, there is no obligation on the part of the assessee to file the return accompanied by the audit report, thereby, holding that the same is not mandatory. Therefore, it is clear that before the assessment is completed if such report is filed, no fault could be found against the assessee. That was also the view of the Delhi High Court in the case in CIT v. Contimeters Electricals (P.) Ltd. (2009) 317 ITR 249 (Delhi), wherein the Delhi High Court, by following the judgments of the Madras High Court in CIT v. A. N. Arunachalam (1994) 208 ITR 481 (Mad) and in CIT v. Jayant Patel (2001) 248 ITR 199 (Mad), held that the filing of audit report along with the return was not mandatory)-* but directory and that if the audit report was filed at any time before the framing of the assessment, the requirement of the provisions of the Act should be held to have been met. That is also the consistent view of the other High Courts, including the High Court of Bombay in CIT v. Shivanand Electronics (1994) 209 ITR 63 (Bom), apart from the Gujarat High Court in Zenith Processing Mills v. CIT (1996) 219 ITR 721 (Guj) and the Punjab and Haryana High Court in CIT v. Mahalaxmi Rice Factory (2007) 294 ITR 631 (P&H). The Calcutta High Court in the case in CIT v. Berger Paints (India) Ltd. (No. 2) has also concurred with the said view which was followed by the Tribunal in this case. Mr. T. Ravikumar, the learned counsel for the appellant, is not able to produce any other judgment contrary to the above said views consistently taken. In the light of the above, by virtue of hierarchy of judgments which are against the Revenue, the substantial question of law (1) would not arise at all for consideration.”
Further, the Hon’ble High Court of Gujarat in the case of Commissioner of Income-tax – IV v. Xavier Kelavani Mandal (P.) Ltd. reported in (Guj-HC) [2014] 221 Taxman 43 held as under- “4. The question whether it is permissible to the assessee to produce the audit report at the appellate stage, has already been answered by this court in CITv. Gujarat Oil & Allied Industries Ltd. [1993] 201 ITR 325 (Guj.), wherein it is held that the provision regarding furnishing of audit report along with the return has to be treated as a procedural provision. It is directory in nature and its substantial compliance would suffice. In that case, the assessee had not produced the audit report along with the return of income, but produced before completion of the assessment. The Punjab and Haryana High Court in CITv. Shahzadanand Charity Trust [1997] 228 ITR 292/[1998] 96 Taxman 494 has reiterated the same principle holding that the benefit of exemption should not be denied merely on account of delay in furnishing the same, and it is permissible for the assessee to produce the audit report at a later stage either before the Income Tax Officer or before the appellate authority by showing a sufficient cause. This decision of Punjab & Haryana High Court has been relied on by the Tribunal.
5. In the above view, the Tribunal is eminently justified both in law and on facts in observing and holding as under:— "In this case, it is not in dispute that the audit report in prescribed form was obtained prior to filing of the return on 20/12/2006; therefore, there was no reason for the assessee to keep the audit report with it in order to loose the exemption. The assessee in the earlier as well as in the subsequent assessment years filed the audit report and got the exemption. The conduct of the assessee in earlier year and subsequent years would prove that due to the facts stated above there was delay in filing the audit report and the contention of the assessee was supported by the affidavit of Mohmad Iqbal Vohra (PB-4). The learned CIT(A) on proper appreciation of the facts and material on record in the light of the decisions of the Hon'ble Punjab & Haryana High Court and the Hon'ble Calcutta High Court rightly directed the AO to accept the audit report of the assessee and grant exemption u/s. 11 of the IT Act."
In view of the above, respectfully following the aforesaid decision, we remit the issue to the file of the AO with a direction to grant the exemption u/s. 11 as claimed by the assessee after due verification of Audit Report in Form 10B since the assessee is registered u/s 12AB of the Act. It is ordered accordingly.
In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 9th July, 2025.