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Facts
The assessee, a Trust, filed its Return of Income claiming exemption u/s.11, but without furnishing an Audit Report in Form 10B within the prescribed time. The CPC denied the exemption and computed total income, which was upheld by the Ld.CIT(A).
Held
The Tribunal held that filing of Form 10B Audit Report is procedural and not mandatory, and that the assessee's contention regarding the timing of filing and the nature of registration (old vs. new regime) was valid. The Tribunal set aside the order of the Ld.CIT(A) and directed granting the exemption.
Key Issues
Whether the denial of exemption u/s.11 for non-filing of Form 10B within the due date is justified, despite the report being filed before assessment completion.
Sections Cited
11, 12, 12A, 12AA, 12AB, 139(1), 143(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: SHRI ABY T. VARKEY & SHRI JAGADISH
आदेश / O R D E R
PER ABY T. VARKEY, JM:
1. This is an appeal preferred by the assessee Trust against the order of the Learned Commissioner of Income Tax (Appeal)/Addl/JCIT(A)-3, Mumbai, (hereinafter referred to as “the Ld.CIT(A)”), dated 31.12.2024 for the Assessment Year (hereinafter referred to as "AY”) 2020-21.
At the outset, the Ld.AR of the assessee brought to our notice that there is a delay of ‘48’ days in filing of the appeal and filed application for condonation of delay along with the affidavit. A perusal of the contents of it, we are convinced that there was sufficient cause for condonation of delay and therefore, we condone the delay and proceed to hear the appeal on its merits.
The Ld.AR also brought to our notice that the assessee Trust is registered u/s.12A of the Income Tax Act, 1961 (hereinafter referred to as "the Act”) and filed its Return of Income (RoI) claiming exemption u/s.12 of the Act, but without furnishing Audit report in Form 10B within the time prescribed u/s.139(1) of the Act. The CPC after processing the RoI, passed the intimation u/s.143(1) of the Act by dated 24.12.2021 wherein the exemption u/s.12 of the Act was denied and total income was computed at Rs.5,97,83,365/- on the ground that the assessee didn’t file Form 10B (Audit Report) u/s.139(1) of the Act.
Aggrieved, the assessee preferred an appeal before the Ld.CIT(A) who confirmed the action of the CPC.
Aggrieved, the assessee is in appeal before this Tribunal by citing the decision of this Tribunal in the case of Sri Vetri Vinayagar Educational for AY 2016-17 dated 13.12.2023, and brought to our notice that in the instant case, the Audit Report was filed on 29.12.2020 well before the CPC had passed the intimation on 24.12.2021. Therefore, according to the Ld.AR, the exemption u/s.11 of the Act ought not to have been denied.
6. Per contra, the Ld.DR supported the action of the CPC/Ld.CIT(A) and doesn’t want us to interfere with the action of the Ld.CIT(A).
Having heard both the parties and after perusal of the records, it is noted that the exemption claimed u/s.11 of the Act was not allowed by the CPC u/s.143(1) of the Act due to the fact that the Audit Report in Form 10B was not filed by the assessee within the time period prescribed u/s.139(1) of the Act. Consequently, the gross-receipts as declared by the assessee were treated as taxable income. According to the assessee, exemption u/s.11 of the Act couldn’t be denied even if the Audit Report was filed within the due date u/s.139(1) of the Act and relied on the CBDT Circular No.10/2019 dated 22.05.2019 and drew our attention to the fact that the Audit Report was in fact filed on 29.12.2020 which was much before the intimation was issued by the CPC on 24.12.2021. On appeal, the Ld.CIT(A) concurred with the view of the CPC. We don’t countenance the impugned action of the Ld.CIT(A) and note that this issue is no longer res-integra. In this regard, we are of the view that filing of Form 10B Audit Report is procedural in nature and it is not a mandatory requirement of law. This view we have taken in for AY 2021-22 order dated 207.09.2024, wherein we have held as under:
We have heard both the parties and perused the material available on record. We note that assessee Trust (old Trust) has been granted registration u/s.12AA of the Act on 21.10.1994 (refer Page No.1 of the paper book). The assessee is noted to be a Trust which provides relief to the poor, runs homes for destitute people and orphan children. For AY 2021-22, the assessee has filed its RoI on 15.03.2022 within the extended time line given by the CBDT vide its Circular No.01/2022 dated 11.01.2022 and filed Form 10B (Audit Report on 15.03.2022, whereas, extended timeline to file the same was on 15.02.2022), the assessee filed RoI showing gross receipts of ₹1,36,36,658/- and declared NIL income after claiming exemption u/s.11 of the Act. The RoI was processed by the CPC and since, the assessee didn’t provide the details of registration u/s.12AB of the Act (in the column provided in RoI), the CPC denied the benefit of exemption u/s.11 of the Act and added ₹1,36,36,658/-. On appeal, the Ld.CIT(A) has noted that assessee has obtained provisional registration in Form 10AC dated 18.10.2022 from AYs 2023-24 to 2025-26 (i.e three years); and that the assessee contended before him that for AY 2022-23 onwards only the new/amended provisions of Sec.12 was applicable and thus, claimed that for AY 2021-22, it was eligible to claim exemption on the strength of the old registration granted on 21.10.1994. However, the Ld.CIT(A)/Addl.JCIT-A, Panchakula, ignored such contention of the assessee (which was the ground on which CPC denied exemption to assessee) but took note that of another issue i.e. Form 10B (Audit Form) was filed belatedly on 15.03.2022 (with a delay of one month) and was of the opinion that he doesn’t have the power to condone the delay and also brushed aside the assessee’s contention on this issue that filing of Form 10B was directory in nature. The Ld.CIT(A)/Addl.CIT(A) was of the opinion that the same was mandatory and since, he doesn’t have power to condone the delay in filing of the Audit Report has dismissed the appeal and advised the assessee to approach the jurisdictional Ld. Commissioner or other authorities for condonation of delay in filing of Form 10B.
7. The assessee has assailed the impugned action of the Ld.CIT(A)/Addl.JCIT-A, Panchakula on the ground that the CPC has made the addition/disallowed exemption only on the ground that the assessee failed to fill up columns to show that assessee Trust was enjoying registration granted u/s.12AB of the Act i.e, new regime. The assessee has brought to our notice that the Competent Authority has granted provisional registration u/s.12AB of the Act on 18.10.2022. And despite knowing that assessee was enjoying registration u/s.12AA of the Act on 21.10.1994 and recently on 18.10.2022 under the new regime, nevertheless, the Ld.CIT(A) misdirected himself on another issue, which has not been flagged by CPC viz belated filing of Audit Report and by expressing his inability to condone the delay in filing of the Audit Report (Form 10AB), which impugned action of the First Appellate Authority can’t be countenanced.
8. And we do find force submissions of the Ld.AR and note that the CPC has denied the claim of the assessee only on the ground that the assessee failed to fill the columns in the RoI showing the details of status of registration granted to the assessee after the amendments has been brought in sec.12A and 12AB of the Act [i.e. the assessee has applied for fresh registration u/s.12AB of the Act on or before 30.06.2021 to enjoy the benefit of exemption u/s.11 of the Act]. It is noted that due date for filing such an application was extended from 30.06.2021 time to time by various Circulars of the CBDT and the assessee being an old Trust (enjoying sec.12A registration from year 1994) ought to have applied for registration u/s.12A(1)(ac)(i) of the Act and then, in such an event, the assessee would have been automatically granted registration from AY 2021-22 onwards for ‘five years’. However, due to bona fide mistake, assessee had inadvertently applied for registration u/s.12A(1)(ac)(vi) of the Act, [which is meant for new Trust] and in such cases, CPC grants provisional registration for ‘three years’ and in this case, since assessee has filed for registration on 09.10.2022, CPC granted provisional registration to assessee by order dated 18.10.2022 for AYs 2023-24 to 2025-26. Thus, it is noted that due to bona fide mistake in filing of Form under the incorrect provision i.e. when assessee ought to have filed u/s.12A(1)(ac)(i) of the Act, and instead applied under clause (vi) of sec.12A(1)(ac) of the Act, the CPC while processing the same gave provisional approval for three years rather than five years. Since we have noted that the assessee has been granted registration u/s.12AA (supra) from 1994, it ought to have been granted registration automatically by CPC from AY 2021-22 onwards provided it applied for registration u/s.12A(1)(ac)(i) of the Act. In this context, we also take note of the fact that the assessee had challenged the action of the Ld.CIT(E), order dated 18.10.2022, granting provisional registration for ‘three years’ instead of ‘five years’ and the Tribunal vide order dated 31.05.2024 [in had set aside the order of the Ld.CIT(E) and restored the application filed by the assessee on 09/18.10.2022 in Form 10 to be treated as u/s.12A(1)(ac)(i) of the Act and to decide granting registration u/s.12AB(1)(a) of the Act for ‘five years’ from AY 2022-23 onwards by observing as under:
We have heard both the parties and perused the material available on record. The facts afore-stated being not disputed, it is not repeated for sake of brevity. The assessee being an old Trust which enjoyed registration u/s.12AA of the Act, from year 1994 onwards, after the Parliament passed TOLA 2020 w.e.f.01.04.2021, had to apply for re-registration under sub-clause (i) of Clause (1) of Sec.12A of the Act, whereas, it inadvertently applied under sub-clause (vi) of this provision and because of which, it was granted provisional registration u/s.12AB(1)(c) for three (3) years from AY 2023-24 onwards; and because of this action, the assessee lost its registration u/s.12AB of the Act for AY 2022-23 and was denied exemption u/s.11 of the Act, for that year. We find that assessee Trust was legally entitled for registration u/s.12AB(1)(a) for five (5) years; and because
of inadvertent mistake of filling up sub-clause (vi) instead of sub clause (i), the assessee’s right for re-registration u/s.12AB of the Act for AY 2022-23 cannot be denied. We are of the considered opinion that the inadvertent mistake of the assessee clicking online for fresh registration under clause (vi) of sec.12(1)(ac) needs to be intervened and rectified; therefore, the assessee’s application for registration under sub-clause (vi) to be treated as if assessee has applied under clause (i) of sec.12A(1)(ac) and granted registration u/s.12AB(a) of the Act for five assessment years from AY 2022-23 onwards. Considering the purpose for issuing Circular by CBDT was for mitigating the hardships faced by assessee, we set aside the impugned order of the Ld.PCIT(E) dated 18.10.2022 and restore the assessee’s application for registration back to the file of the Ld.PCIT(E)/CIT(E)and direct him to process the application filed by assessee on 9/18-10-2022 in Form 10 as u/s.12A(1)(ac)(i); and the competent authority is at liberty to call for any documents including asking assessee to file hard copy of Form 10 u/s.12A(1)(ac)(i); and thereafter, decide granting registration u/s.12AB(1)(a) of the Act for five (5) years from AY 2022-23 onwards. Needless to say, assessee be given opportunity of hearing if the authority desires to hear it and to pass orders in the light of discussion (supra) and in accordance to law.
9. In the result, appeal filed by the assessee is allowed for statistical purposes.
9. In such a scenario and also taking note of the CPC’s objection for denying exemption u/s.11 of the Act i.e. for the failure on the part of the assessee in not filling up column showing details of application filled for registration u/s.12AB of the Act at the time of filing of RoI, we find that such an objection need to be overruled in the light of the discussion (supra) and we do so and consequently, the relief flowing from the same has to be granted to the assessee. Therefore, we set aside the impugned order of the Ld.CIT(A) and direct granting exemption claimed by the assessee u/s.11 of the Act.
For completeness, we make it clear that the Ld.CIT(A) erred in rejecting the appeal preferred by the assessee on a ground which was not raised/flagged by the CPC i.e. delay of less than one month in filing / uploading of Audit Report. In this context, it is noted that such an issue is no longer res integra i.e. filing of Form 10AB (Audit Report) would be directory in nature and as such if the assessee files the Audit Report before completion of assessment, then, the same should be considered by the Income Tax Authorities for processing of the assessment/appellate order (refer the Hon’ble Gujarat High Court decision in the case of Indian Panel Board Manufacturer v. DICT (ITA No.655 of 2022 dated 21.03.2022) and also the decision of the Hon’ble Madras High Court in the case of Chandraprabhuji Maharaj Jain v. DCIT reported in 110 Taxmann.com 11; and also the decision of the Hon’ble jurisdictional High Court in the case of CIT v. SPIC Educational Foundation (TCA No.1593 of 2008 dated 12.12.2018), wherein the Hon’ble High Court has held that filing of Form 10 for accumulation of income u/s.11(2) of the Act which was filed beyond due date couldn’t disentitle the trust from exemption claimed u/s.11 of the Act. The Hon’ble Court directed the AO to examine the benefit of admissibility rather than to foreclose the claim of assessee on technicalities. Therefore, respectfully taking note of the binding decision of the Hon’ble High Court (supra), we hold that the Ld.CIT(A) erred by misdirecting on an issue which wasn’t raised by CPC; and since the TAR had been filed while the CPC was processing the RoI, it rightly didn’t raise any objection on belated filing of TAR, and therefore the First Appellate Authority erred in passing the impugned order, which we set aside and direct granting exemption claimed by the assessee u/s.11 of the Act.
8. In the light of the aforesaid decision of this Tribunal on this issue, we direct the jurisdictional AO to verify Form No.10B and allow the claim of exemption u/s.11 of the Act.
In the result, appeal filed by the assessee is allowed.
Order pronounced on the 04th day of July, 2025, in Chennai.