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Facts
The assessee, a trust registered u/s.12A, filed its ROI for AY 2018-19 claiming NIL income. It initially filed Form 10BB and later a revised ROI. The AO proposed disallowance of exemption due to technical reasons. The assessee filed Form 10B late, and condonation petitions were rejected by the CIT(E) and pending with CBDT.
Held
The Tribunal held that the CIT(A) was not right in dismissing the claim for exemption u/s.11 without considering the pending condonation petition with the CBDT. The Tribunal remanded the case to the AO to examine the exemption claim u/s.11 after the CBDT's decision and also to examine alternative claims u/s.10(23C) if necessary.
Key Issues
Whether the CIT(A) was justified in dismissing the exemption claim based on technicalities when condonation for late filing of audit report was pending? Whether alternative exemption claims under Section 10(23C) should be examined by the AO?
Sections Cited
12A, 11, 10(23C), 143(1)
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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI MANU KUMAR GIRI & SHRI S.R. RAGHUNATHA
आदेश /O R D E R
PER S. R. RAGHUNATHA, AM :
This appeal by the assessee is filed against the order of the learned Commissioner of Income Tax (Appeal), Addl./JCIT (A), Jodhpur, (in short Ld.CIT(A)) for the assessment year 2018-19, vide order dated 26.12.2024.
The grounds raised by the assessee are as follows: 1.1) The order of the CIT(A) is bad law as the same has been passed in violation of principles of natural justice by not at all considering the submissions fled by the Appellant and as such the order is perverse. 2.1) The CIT(A) erred in upholding the denial of exemption claimed by the appellant u/s.11 of the Act as the Appellant is eligible for it. 2.2) The Appellant having inadvertently filed Form 10BB within the due date, the CIT(A) ought to have considered the Form 10B filed thereafter and allowed exemption claimed u/s. 11 of the Act.
:-2-: ITA. No: 3393/Chny/2024
2.3) The Appellant having filed its financials for the year before the CIT(A), the CIT(A) erred in failing to consider the same and allow exemption u/s.11 3.1) Without prejudice to the Appellant’s eligibility for exemption u/s.11 of the Act, the CIT(A) erred in failing to allow exemption u/s. 10(23C)(iiiab) of the Act. 3.2) Without prejudice to the Appellant’s eligibility for exemption u/s.11 and/oru/s.10(23C)(iiiad) of the Act, the CIT(A) erred in failing to allow exemption u/s. 10(23C)(iiiad) of the Act. 4) In any event, the CIT(A) erred upholding the taxation of the entire gros receipts of the Trust, as it is only the new income if any, that can be brought to tax. 5) The Appellant seeks leave to add, amend or delete any ground at the time of the hearing.
The facts in brief are that the assessee, is a trust, registered u/s.12A of the Act. For the A.Y.2018-19, the assessee filed its Return of Income (ROI) on 27.08.2018 claiming NIL income. It also filed its audit report on the same day in Form 10BB, which is applicable to section 10(23C)(vi) of the Act. The assessee filed a revised ROI on 04.03.2019, again declaring NIL income. The AO, CPC issued a communication dated 04.12.2019 proposing disallowance of exemption of Rs.68,06,464/- for 3 reasons;
a. The assessee failed to specify the clause of section 10 under which exemption is claimed, b. The exemption claimed is more than the aggregate of receipts declared in the ROI, and c. The trust being registered u/s.12A/12AA, it cannot claim exemption under any clause of section 10 except for (1) and (23C). 4. The AO, CPC then passed the order u/s.143(1) dated 04.03.2020, by denying the exemption claimed and assessing the income at Rs.68,06,464/- for the above-mentioned reasons.
Later the assessee filed its audit report in Form 10B (applicable for claiming exemption u/s.11 of the Act) on 28.11.2022. The assessee also filed a condonation petition with the ld.CIT(E) to condone the delay in filing the audit report, which ultimately the ld.CIT(E) rejected as the delay was more than 365 days. The assessee then filed a condonation petition with the CBDT on 11.03.2023, which the Ld. AR submitted that it is pending for disposal.
:-3-: ITA. No: 3393/Chny/2024 6. Challenging the order u/s.143(1) dated 04.03.2020, the assessee filed an appeal with the ld.CIT(A) on 09.12.2024. It filed detailed submissions, which has been extracted by the ld.CIT(A) in his order dated 26.12.2024. The ld.CIT(A) dismissed the appeal by observing that the ld.CIT(E) had already refused to condone the delay in filing the audit report and thus he dismissed all the grounds raised by the assessee. Aggrieved by the order of the ld.CIT(A) the assessee is in appeal before us.
The Ld. AR for the assessee submitted that the assessee is having registration u/s.12A and is thus entitled to exemption u/s.11 of the Act. According to him, the reasons for which the AO has disallowed the exemption are all technical reasons, arising due to clerical errors. He submits that the assessee is eligible for exemption u/s.11 of the Act and the only default is that the audit report was filed beyond the specified due date and even the filing of the audit report before the due date was only directory and not mandatory. He submitted that the audit report was filed on 28.11.2022 and so the assessee was to be given the benefit of exemption u/s.11 of the Act.
The Ld. AR alternatively argued that, if at all the exemption u/s.11 is not available, the assessee is eligible for exemption u/s.10(23C)(iiab) and also 10(23C)(iiiad) of the Act. He further submitted that he had filed detailed submissions on his alternative claims of exemption/s u/s.10(23C)(iiiab) and also 10(23C)(iiiad), but the ld.CIT(A) had not adjudicated the same. Finally, he argued that if none of the exemptions are available at all, it is only the net income of the assessee that can be taxed against the gross receipts taxed.
The Ld. DR on the other hand supported the orders of the lower authorities and prayed for upholding the same.
We have considered the rival arguments and perused the materials available on record and gone through the orders of the authorities. The assessee is a trust registered u/s.12A of the Act. The claim of exemption of the assessee was denied for the 3 reasons as reproduced above in our order. As rightly submitted by the Ld.AR, the exemption has been disallowed for incorrectly
:-4-: ITA. No: 3393/Chny/2024 entering certain figures and sections in the ROI. The assessee has made clear before the ld.CIT(A) that it was claiming exemption u/s.11 and that it had also filed an audit report in Form 10B on 28.11.2022, and that the condonation petition was pending before the CBDT. Hence, the ld.CIT(A) was not right in dismissing the ground for claim of exemption u/s.11 of the Act.
In light of the above discussion, we find it fit to remand the case back to the file of the AO to examine the claim of exemption u/s.11 of the Act after the order of the CBDT in the condonation petition. In case the assessee's claim u/s.11 fails, the AO shall examine the validity of the assessee's alternative claims u/s.10(23C)(iiab) and 10(23C)(iiiad), as the assessee has demonstrated before us from the financials that it is involved in education of orphans and socially backward children and is also funded by the government. This fresh claim was made before the appellate authorities, (i.e.) the ld.CIT(A) and this tribunal, which is valid as per the ratio of the Hon'ble Supreme Court in the case of Goetze (India Ltd v. CIT [2006] 284 ITR 232(SC). Hence, we direct the AO to examine these alternative claims in case the exemption u/s.11 of the Act fails on account of CBDT refusing to condone the delay in filing the Audit Report in Form 10B. In the event that none of the exemptions claimed are available to the assessee, it is directed the AO to tax the net income of the assessee after allowing admissible deductions/expenses, in accordance with law.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the court on 21st August, 2025 at Chennai.