PALAM RURAL CENTRE,TIRUPPUR vs. ACIT, EXEMPTIONS,, COIMBATORE

It is submitted that, the above case is clearly mentioned that eventhough there is an absence of registration under section 12AA at the time of filing of return, the Tribunal held that, the entire Gross receipts cannot be taken for calculation of tax only after allowing the expenditure for earning the income of the assesse.

Ground 3 It is submitted that the delay in filing the appeal was due to the extraneous circumstances of the case. It is submitted that the Chartered Accountant who was handling the case of the Appellant underwent an open-heart surgery in May 2022 and was advised continuous bed rest for several months. At the same time, the Appellant Trust was also awaiting response from the Jurisdictional Assessing Officer with respect of Income dated 23/09/2020. It is submitted that the delay was occurred on extraneous reasons and the delay is not wanton or willful.

Ground 4 It is submitted that filing of Form 10B under the Income Tax Act is different and filing of annual Balance Sheet is different. It is submitted that the filing of the Income Tax Return has been complied with, which is main statutory responsibility. In the case of Sree Venkateswara Education Trust Vs Income Tax Officer(Exemptions Ward, Salem (TCA Nos 168 and 169 of 2020 and C.M.P.No.5380 and 5387 of 2022 dated 02.09.2024 the Madras High Court observed as follows.

:-3-: ITA No.:1560/Chny/2025 & S.A.No.51Chny/2025 "25. 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, the 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."

It is submitted that in view of the above decision of the High Court of Madras, the assessing officer ought to have assessed the appellants on the basis of the report submitted as per Sec. 139 of the Income Tax Act.

Ground 5 It is submitted that the conditions for claiming exemption under Section 11 have been complied with by way producing the accounts and returns under the income Tax Act. It is submitted that in the case of Appellants case (Palam Rural Centre Vs The Assistant Commissioner of Income Tax (Exemptions)the Honourable Income Tax Appellate Tribunal "B" Bench Chennai (ITA.872/Chny/2025 directed the Assessing Officer to compute the total income afresh after allowing the admissible expenditure.

Ground 6 It is respectfully submitted that simply because the Form 10B was not filed would not render the Assessing Authority to resort to best judgment assessment to the Trust which has been legally formed as per the provisions of Income Tax Act. The exemption has to be given in all the amount of Rs.1,90,74,483-00 on the basis of the Returns filed by the Trust Appellants. In the case of H.M.V. Educational Cultural & Social Trust Vs ITO (E), Ward -1 Bangalore in Asst. Year 2018-19 held as follows: "The section 139(4A) of the Act prescribes that all other provisions of the Act shall apply as if it were a return required to be furnished under sub-section (1) of section 139 of the Act. The income is arrived after deducting the allowable expenditures as per the I.T. Act. 1961. In the impugned case on hand, the total receipts declared by the assessee, which is placed at Paper Book page No.6, we observe that there is excess expenditure over income of Rs.6,62,324/-, which is loss suffered by the assessee during the year. Therefore, in this case, the claim of deduction from income under section 11 and 12(1) (ba) of the Act does not arise. No doubt that the assessee has filed his return of income belatedly but he was required to compute his income and the income is below the threshold limit and in this case no tax shall be charged on the entire receipts. We also make it

:-4-: ITA No.:1560/Chny/2025 & S.A.No.51Chny/2025 clear that the assessee will not get the benefit of carry forward & setting off of loss for the subsequent year as prescribed under section 139(3)of the Act. Considering the facts of the case, we set aside the order of the CIT(A). Accordingly, appeal of the assessee is partly allowed.

"10. In the result, appeal of the assessee is partly allowed"

Ground 7 It is submitted that the Learned Joint Commissioner (Appeals) in his order observed as follows.

2.5 The appellant society's request for condonation lacks merit as the due date for filing had expired long before the COVID-19 period of limitation. Accordingly, the appeal is disposed of as time-barred and not admitted for adjudication.

2.6 In the result, the appeal filed by the appellant society is treated as DISMISSED in-limine.

It is submitted a Full bench of the Hon'ble Supreme Court of India (SC), comprising of Mr. Chief Justice N.V. Ramana, Mr. Justice L. Nageswara Rao and Mr. Justice Surya Kant, in their order dated 10.01.2022 in Re: Cognizance for Extension of Limitation (MA No. 21 of 2022 in MA No. 665 of 2021 in SMW(C) No. 3 of 2020), restored the SC order dated 23.03.2020 and directed for the exclusion of period from 15.03.2020 till 28.02.2022 in computing the period of limitation for any suit, appeal, application or proceeding; the balance period of limitation remaining as on 03.10.2021, if any, shall become available with effect from 01.03.2022.

Further, in cases where the limitation would have expired between 15.03.2020 and 28.02.2022, irrespective of the actual balance period of limitation remaining, all parties shall have a limitation period of 90 days available to them from 01.03.2022. In the event the actual balance period of limitation remaining, with effect from 01.03.2022, is greater than 90 days, that longer period shall apply. The period from 15.03.2020 till 28.02.2022 shall also stand excluded in computing the periods prescribed under Sections 23(4) and 29A of the Arbitration and Conciliation Act, 1996, Section 12A of the Commercial Courts Act, 2015 and provisos (b) and (c) of Section 138 of the Negotiable Instruments Act, 1881 and any other laws, which prescribe limitation period for instituting proceedings, outer limits (within which the court or tribunal can condone delay) and termination of proceedings.

During the COVID-19 period (specifically between March 15, 2020, and February 28, 2022), the limitation period for legal actions was extended. Regardless of the :-5-: ITA No.:1560/Chny/2025 & S.A.No.51Chny/2025 original limitation period, all persons were given a new 90-day period from March 1, 2022, to file their cases. The Indian government extended the limitation period for various legal actions to address the challenges caused by the COVID-19 pandemic. The extension applied to the period between March 15, 2020, and February 28, 2022, according to the Supreme Court of India ruling.

It is submitted that in his The ADDL/JCIT(A)-2 VISAKHAPAATNAM observed as follows. "The appeal if any, was required to be filed against such order, on or before 30.10.2019 whereas the impugned appeal was filed on 29.1.2024 resulting in delay of 1551 days."

The delay is as follows only.

From November 2019 to March 497 2020 344 April 2021 to February 2022 31 March 2022 365 April 22 to 31.3.2023 306 April 2023 to 29.01.2024 Total 1543 1543 Less period during Pandamic 746 746 Covid 19 as per Supreme Court Decision, Upto February 2022 From March 15, 2020 to 16 31.03.2020 April 2020 to 31.03.2021 365 April 2021 to 28.02.2022 306 Correct number of delay is 797 It is submitted the ADDL/JCIT(A)-2, Visakhapaatnam, is not correct in arriving at the number of days as 1551.It is prayed that this point may be considered in favor of the appellants and the matter may be decided on merit as this is a Trust for social cause.

Ground 8 It is submitted that the appellants is a charitable trust is a registered as Trust with effect from 11-01-1982 Registration No. 1419(66)/81-82 dated 11.01.1982 filed report Audit Report along With Income Tax Returns. It is submitted that once the audit report is filed to be available with the Assessing Officer, the requirement of law is satisfied. In that view it is submitted that the Learned Additional/Joint Commissioner of Income (Appeals) was not justified in dismissing the appeal on the ground of limitation. The appellants pray that they are eligible and entitled to exemptions under Section 11(1) and 11(2) of the Act and the alleged ground of :-6-: ITA No.:1560/Chny/2025 & S.A.No.51Chny/2025 non-filing of audit report could never to an impediment in law in claiming the exemption.

Ground 9 It is submitted that as the entire income of Rs.1,92,15,510/- of the appellant(Trust) is exempted as per the Income Tax Act, the question of levy of interest under Sec. 234 C of the Income Tax Act does not arise.

Ground 10 In a similar matter in Shree Jain Swetamber Murtipujak Tapagachha Sangh v. Commissioner of Income Tax (Exemptions) and Anr (Writ Petition (L) No.1321 of 2024 decided on 27.3.2024) was also a case where auditor had due to oversight not filed Form 10B. The Court held that the error on the part of auditor cannot be rejected but should be accepted as a reasonable cause shown by the trust management. In that case also, Petitioner did not suo moto realize its mistake and filed a condonation request only after Centralised Processing Centre ("CPC") sent an intimation about non-filing of Form 10B."

9. Having considered the matter in its entirety, we are satisfied that the delay was not intentional or 2024:KER:59378 WP(C) 17059/2024 and Conn.Cases deliberate. Petitioner cannot be prejudiced on account of an ignorance or error committed by professional engaged by Petitioner. In our view, Respondent No.1 ought to have exercised the powers conferred In the circumstances, it is prayed that the order of the Assessing authority may kindly be set aside and the books of accounts of the Trust may be accepted and render justice.

The appellant craves the permission before this Honorable Tribunal raise additional grounds if any to be raised in support of the above submission at the time of hearing.

In the circumstances it is prayed that the order of the Assessing authority and learned Addl/Joint Commissioner of Income (Appeals) may kindly be set aside and the books of accounts of the Trust may be accepted and render justice.

:-8-: ITA No.:1560/Chny/2025 & S.A.No.51Chny/2025 6. Being aggrieved, the assessee filed a Return of Income u/s.119(2)(b) of the Act on 16/09/2020 vide Ack. No.554486931160920. The Return of Income was transferred to the jurisdictional Assessing Officer, that is, ACIT, (Exemptions), Coimbatore, on 18/09/2020. However, there was no response from the side of the JAO over the said return. Under these Circumstances, the Appellant also filed another Return of Income under section 139(5) on 23/09/2020 vide Ack. No.576055421230920. The said return of income also remains unanswered from the side of the Income Tax Department.

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10. The ld.AR for the assessee submitted that the exemption u/s.11 and 12 to the trust cannot be denied merely on the ground that Form No.10B was not filed. On this issue, the appellant submitted that filing of audit report in Form No.10B is directory in nature and the same cannot be the sole ground for denying the exemption claimed under the Act. Further, the ld.AR stated that the entire receipts cannot be considered

:-10-: ITA No.:1560/Chny/2025 & S.A.No.51Chny/2025 as income and the expenses incurred during the year for the purpose of earning such income must be allowed and net income alone can be taxed. The appellant also relied on certain case laws in support of his claim.

25. 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, the 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.

It is submitted that in view of the above decision of the High Court of Madras, the assessing officer ought to have assessed the appellants on the basis of the report submitted as per Sec. 139 of the Income Tax Act and assesse Trust is eligible for deductions and applicable exemptions and allowed the applicable expenditures. So, the Assessee Trust has to be taxed on the Net Income only and not for the Gross Receipts.

:-11-: ITA No.:1560/Chny/2025 & S.A.No.51Chny/2025 Bank Interest 24,94,862.00 Receipts 23,042.00 Activity Service/Incomes 1,42,51,999.00 Application & Admission 4,90,600.00 Fees 7,17,92,051.00 Tuition & Annual Fees 5,95,206.00 Other Fees 1,04,27,081.00 Transport Fees 64,000.00 Events & Projects Fees 4,31,000.00 Miscellaneous Income 17,24,235.00 OCEP fee 8. From the above, it is clear that the above receipts includes bank interest of Rs.24,94,862/- and we noted that in over all, the Trust is in loss for the year of Rs.6,62,323.82/- The income tax is levied on the income of the assesee during the impugned assessment year. However, in this case, the CPC has charged the income tax on the entire gross receipts without giving effect of the expenditures incurred by the assessee towards earning of the income. The income has been defined in section 2(24) of the Act., the income should be construed in its general meaning but not to the entire receipts, if the assessee has incurred any expenditure towards earning the income, in such case, the assessee is entitled for deduction of expenditure incurred as prescribed in the Income Tax Act. There may be disallowances of the expenditures, which are not in conformity within the provisions of the Income Tax Act. In this case, the assessee filed return of income belatedly as per section139(4) of the Act. The section 139(4A) of the Act prescribes that all other provisions of the Act shall apply as if it were a return required to be furnished under sub-section (1) of section 139 of the Act. The income is arrived after deducting the allowable expenditures as per the I.T. Act. 1961. In the impugned case on hand, the total receipts declared by the assessee, which is placed at Paper Book page No.6, we observe that there is excess expenditure over income of Rs.6,62,324/-, which is loss suffered by the assessee during the year. Therefore, in this case, the claim of deduction from income under section 11 and 12(1) (ba) of the Act does not arise. No doubt that the assessee has filed his return of income belatedly but he was required to compute his income and the income is below the threshold limit and in this case no tax shall be charged on the entire receipts. We also make it clear that the assessee will not get the benefit of carry forward & setting off of loss for the subsequent year as prescribed under section 139(3) of the Act. Considering the facts of the case, we set aside the order of the CIT(A). Accordingly, appeal of the assessee is partly allowed.

:-12-: ITA No.:1560/Chny/2025 & S.A.No.51Chny/2025

:-13-: ITA No.:1560/Chny/2025 & S.A.No.51Chny/2025

:-14-: ITA No.:1560/Chny/2025 & S.A.No.51Chny/2025 and hence we direct the JAO to compute the net income after allowing the expenditure as per the audited financials of the assessee and tax it in accordance with law. Thus, all the related grounds raised by the assessee are allowed.

Order pronounced in the court on 01st July, 2025 at Chennai.