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Facts
The assessee-Trust filed its return of income declaring NIL income and claiming exemption u/s 11. The CPC denied the exemption for failure to file the Audit Report in Form 10B on time. The CIT(A) initially allowed the appeal, but later rectified the order to disallow the exemption, stating the assessee misled him.
Held
The Tribunal held that the assessee should not be denied legitimate deductions and exemptions. While the exemption under Section 11 might not be available due to registration issues, other deductions should have been considered. The case was restored to the AO to tax only the net income.
Key Issues
Whether the assessee is entitled to exemption u/s 11 and other deductions when the audit report was filed belatedly, and if the CIT(A) can rectify his order based on a perceived misrepresentation.
Sections Cited
11, 154, 250, 143(1), 139(1), 12A(1)(b), 119(2), 12A, 12AA, 139(4), 143(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘C’ 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 (Appeals)/Addl./JCIT(A)-5, Mumbai, (hereinafter referred to as “the Ld.CIT(A)”), dated 07.11.2024 for the Assessment Year (hereinafter referred to as "AY”) 2021-22, wherein a rectification order was passed u/s.154 of the Income Tax Act, 1961 (hereinafter referred to as "the Act”) rectifying the order passed u/s.250 of the Act dated 30.11.2023.
The brief facts are that the assessee-Trust had filed its return of income (RoI) on 12.01.2022 declaring total income at Rs.NIL, by claiming exemption u/s 11 of the Act, which was later processed by CPC u/s.143(1) of the Act wherein claim u/s 11 was denied for the reason that the assessee has failed to file the Audit Report in Form 10B at least one month prior to furnishing of return u/s.139(1) of the Act. In this regard, it was brought to our notice by the Ld.AR that extended due date for filing of RoI for AY 2021-22 was 15.03.2022 and therefore, Audit Report ought to have been filed by 14.02.2022.
Aggrieved by the aforesaid action of the CPC, the assessee preferred an appeal before the Ld.CIT(A) who allowed the appeal of the assessee by order dated 30.11.2023 and directed the CPC to allow the claim of exemption u/s.11 of the Act by noticing that extended due date for filing of RoI for AY 2021-22 was 15.03.2022 and therefore, the assessee was required to file Audit Report in Form 10AB on or before 14.02.2022. The Ld.CIT(A) is noted to have observed from perusal of the CPC 2.0 module, after downloading Form 10B and noted that the assessee had filed Form 10B vide acknowledgment No.234068600190222 on 12.01.2022 which is one month prior to the due date of filing of RoI for AY 2021-22 i.e. 15.03.2022 and thereafter, reproduced a scanned copy of Form 10AB as available on the CPC 2.0 portal [refer Page Nos.3-6 of the order] found that the assessee had filed Form 10B one month prior to due date of filing of RoI. Therefore, the Ld.CIT(A) is noted to have directed the AO to allow the claim of exemption u/s.11 of the Act.
However, later the Ld.CIT(A) is noted to have passed the impugned order u/s.154 of the Act rectifying his own order passed on 30.11.2023 (supra), wherein, he observed that the JAO (of assessee) had brought to his notice that even though the Audit Report was dated 11.02.2022, it was actually e-filed only on 19.02.2022 as evidenced from the acknowledgment receipt of the Income Tax Forms, wherein, it shows that e-filing acknowledgment number is shown as 234068600190222 [which is the same acknowledgment number as noted by the Ld.CIT(A) in the original appellate order dated 30.11.2023 wherein the Ld CIT(A) has reproduced downloaded copy of the same as noted from Page Nos.3 to 6 of that order]. At this stage, it would be gainful to refer to the findings of the Ld.CIT(A) in the original appellate order dated 30.11.2023, wherein he noted that the Audit Report u/s.12A(1)(b) of the Act was filed by the assessee on 11.01.2022 and the assessee-Trust has digitally signed on 12.01.2022 at 12:17:05 PM [by Kondareddy Rajaram] along with RoI which was filed on 12.01.2022 and has observed at Page No.6 as under:
Place: 122.161.24.101 Date: 11-Jan-2022 Acknowledgment Number: 234068600190222 This form has been digitally signed by Kondareddy Rajaram having PAN AAEPR2414h from IP Address 122.161.24.101 on 12-Jan2022 12:17:05 PM. DSC Sl.No. and issue C=N. O Capricom Identity Services Pvt. Ltd_OU : Certifying Authority
The Ld.CIT(A) while passing the order on 30.11.2023 is noted to have downloaded from the CPC 2.0 module the Form 10B filed by the assessee and after taking note of the acknowledgment No. 234068600190222 dated 12.01.2022 after having reproduced the same i.e, Form 10AB as available in CPC 2.0 portal has found that assessee has complied with the requirement of law to claim exemption u/s.11 of the Act, has directed the CPC to allow the exemption u/s.11 of the Act.
Thereafter, the JAO is noted to have brought to the notice of the Ld.CIT(A) that though Form 10B was digitally signed on 12.01.2022, it was uploaded only on the e-filing system on 19.02.2022. Therefore, the CIT(A) gave notice to assessee conveying his desire to pass rectification order u/s.154 of the Act, and pursuant to it, the assessee is noted to have objected to such an action and asserted that it has filed Form 10B on 11.01.2022 and the RoI on 12.01.2022 and reiterated that there was no mistake apparent on record and prayed for dropping the proposed 154 proceedings; and simultaneously filed petition for condonation of delay u/s.119(2) of the Act before the Ld.CIT(E), Chennai dated 26.10.2024 [a copy of which has been reproduced by the Ld.CIT(A) in the impugned order at Page No.4]. Having taken note of the aforesaid facts, the Ld.CIT(A) was of the view that since the assessee has requested for condonation of delay of five (5) days in uploading Form 10B, he was of the view that assessee has misled him on the earlier occasion; and therefore, he passed the rectification order and directed the AO to disallow the exemption claimed u/s.11 of the Act.
Before us, the Ld.AR has first of all assailed the impugned action of the CPC/CIT(A) taxing the gross receipts without allowing the corresponding expenses which according to him is per-se erroneous; and according to him, even if the assessee is treated as an AOP, still only the net income ought to have been brought to tax rather than taxing the whole gross receipts which action of the CPC/CIT(A) is arbitrary, whimsical and unjust. In other words, according to Ld AR, even if assessee is treated as an AoP, or not granted benefit under Chapter-III of the Act, for any reason viz due to belated filing of RoI or for non-filing of the condonation of delay in respect of belated filing of Audit Report, etc, still the assessee’s gross receipts could not have been brought to tax, because the corresponding expenses for earning income ought to have been allowed. And for such a proposition, he cited the decision of the Hon’ble Madras High Court in the case of Sree Venkateswara Educational Trust v. ITO order dated 02.09.2024 in a similar factual scenario, wherein the CPC had passed intimation u/s.143(1) of the Act denying not only the exemption u/s.11 of the Act but also made addition of gross receipts, which impugned action was interfered by the Hon’ble High Court by holding that the AO couldn’t have taxed the entire gross receipts but should have only taxed the net income. In other words, assessee can’t be denied the legitimate deduction that would be available to it, even if it is treated as an AOP. The Hon’ble High Court in Sree Venkateswara Educational Trust supra held as under:
The facts of this case are not in dispute. The appellant/assessee had claimed exemption-cum-payment under the Act without actually filing application under Section 12A(a) of the Act as it stood then during the period in dispute.
The appellant/assessee obtained registration under Section 12AA of the Act only on 02.03.2016. The case pertains to the Assessment Year 2013- 2014. Therefore, in terms of the decision of the Division Bench of this Court in M/s.Soundaram Chokkanathan Educational and Charitable Trust case (cited supra), the benefit of registration would not enure in favour of the appellant/assessee before registration.
At the same time, the appellant/assessee cannot be denied all the legitimate deductions that would have been available, if the returns were filed either as a “Regular Assessee” or as an “Association of Person”.
The purpose of assessment is to recover just tax and not subject an assessee to unjust tax by holding that no return was filed either as a “Regular Assessee” or as an “Association of Person” merely because revised return was not filed under Section 139(4) of the Act, within a time specified under Section 139 of the Act.
The last date for filing the returns under Section 139(4) of the Act would have expired on 31.03.2015 which was just few days before the return was processed on 12.03.2015 under Section 143(1) of the Act.
The Hon'ble Supreme Court in Formica India Division, Bombay, Burma Trading Corporation Limited Vs. Collector of Central Excise and others, 1995 Supp (3) SCC 552/1995 (77) ELT 511, had held as under:-
“When it was found that they were liable to pay duty on the intermediary product and had not paid the same, but had paid the duty on the end product, they could not ordinarily have complied with the requirements of Rule 56A. Once the Tribunal took the view that they were liable to pay duty on the intermediary product and they would have been entitled to the benefit of the notification had they met with the requirement of Rule 56A, the proper course was to permit them to do so rather than denying to them the benefit on the technical ground that the point of time when they could have done so had elapsed and they could not be permitted to comply with Rule 56A after that stage had passed. We are, therefore, of the opinion that the appellants should be permitted to avail of the benefit of the notification by complying at this stage with Rule 56A to the satisfaction of the Department.”
In our view also, if assessments are to be completed, deductions and applicable exemptions that are otherwise available to an assessee ought to have been extended by the Assessing Officer to an assessee before finalizing the assessment. Since the appellant/assessee was not entitled to exemption as a Trust under Sections 11, 12 and 12A of the Act in absence of registration under the Act as it stood Section 12AA of the Act, benefit of other deductions under the Act ought to have been given. The Assessing Officer is not expected to act mechanically to confirm the liability to fasten an unjust tax liability on an assessee.
Therefore, we are inclined to set aside the Impugned Common Order dated 30.12.2019 and remit the case back to the Assessing Officer to pass a fresh order deleted under Section 143(1) of the Act.
These appeals stand disposed of with the above observations. The substantial questions of law are partly answered in favour of the appellant/assessee. No costs. Connected Civil Miscellaneous Petitions are closed.
In the light of the aforesaid decision of the Hon’ble Madras High Court (supra), we set aside the impugned order of the First Appellate Authority and restore the assessment back to the file of the CPC/AO with a direction to tax only the net income of the assessee for AY 2021-22 as
per the respective income & expenditure account filed by the assessee.
Having said so, we further note that the assessee’s application for condonation of delay in filing belatedly [‘5’ days] the Audit Report in Form 10B is awaiting consideration of the Ld.CIT(E), which we expect the Ld. CIT(E) to pass order after duly considering the fact that the assessee had digitally signed the Audit Report in Form 10B on 12th January 2022, as evident from Page No.6 (supra). In the light of the discussion, the CPC/AO to await the decision of the Ld CIT(E) on the condonation of delay
In the result, appeal filed by the assessee is allowed for statistical purposes.