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Income Tax Appellate Tribunal, KOLKATA BENCH “A”, KOLKATA
Before: SHRI MANISH BORAD, HON’BLE & SHRI SONJOY SARMA, HON’BLE
IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCH “A”, KOLKATA BEFORE SHRI MANISH BORAD, HON’BLE ACCOUNTANT MEMBER AND SHRI SONJOY SARMA, HON’BLE JUDICIAL MEMBER ITA No.398/Kol/2021 Assessment Year: 2018-19 Indian Ex-Services ITO (Exemption), Ward- League, (W.B.) 1(1), Kolkata. CP/7/3, Block-CP, Vs. Sector-V, Salt Lake City, Kolkata -700 091. PAN: AAATI 3629 R (Appellant) (Respondent) Present for: Appellant by : Shri Amiya Kumar Sahu, Advocate Respondent by : Shri Biswanath Das, ACIT Date of Hearing : 07.09.2022 Date of Pronouncement : 24.11.2022 O R D E R PER SONJOY SARMA, JM: This is an appeal preferred by the assessee for A.Y. 2018-19 is directed against the order of ld. CIT(A), National Faceless Appeal Centre dated 17.09.2021 u/s 143(1) of the Income-tax Act, 1961. The assessee has taken the following grounds of appeal: “i. For that the CIT(A) fails to understand that the tax is payable on income not on Gross Receipts thus disallowance of revenue expenditures pent is unlawful, whimsical based on surmises and thus order passed by the CIT(A) confirming the assessment order is liable to be set aside.
ii. For that the audit report 10B can be submitted at the time of assessment therefore, the order passed by CIT(A) without considering the revenue expenses spent by the society is whimsical, illegal, unlawful and liable to be set aside.
iii. For CIT(A) fails to consider that in the intimation Order under section 143(1) the Audit Report 10B is not mentioned therefore, no scope is given to the assessee for submitting audit report at the time of the assessment therefore, the assessment as well as the Order of CIT(A) is unlawful and liable to be set aside.
2 ITA No.398/KOL/2021 Indian Ex-Services League (W.B.) A.Y. 2018-19 iv. For that CIT(A) fails to understand that no scope has been given to the assessee to submit the audit report to rectify the defect lying in the return therefore, the Order of the CIT(A) is based on surmises and conjecture and liable to be set aside.
v. For that the CIT(A) fails to understand that society is charitable one that has been decided by the Hon'ble Tribunal in the case being No.1078/Kol/2018 and totally exempted from tax liability by virtue of the CBDT Circular No. 7/2015 dated April,23,2015 therefore, order passed by the CIT(A) is liable to be set aside.
vi. For that the CIT(A) passed the order without giving any scope to submit additional documents at the time of hearing.”
Brief facts of the case are that the appellant filed its return of income for A.Y. 2018-19 on 30.10.2018 declaring total income at Nil after showing total receipt of Rs. 3,15,60,828/- and total expenditure of Rs. 3,07,97,324/- and accumulation of Rs. 47,34,124/- @ 15% of total receipts u/s 11 and 12 derived during the previous year under consideration and deduction u/s 11(1)(a) of the Act. The return was processed u/s 143(1) on 17.03.2021 wherein the exemption u/s 11 of the Act has been denied to the assessee.
Aggrieved by the action of CPC, Bengaluru, the assessee preferred an appeal before the ld. CIT(A) who after considering the submission and dismissed the appeal.
Aggrieved by the order of ld. CIT(A), the assessee is in appeal before this Tribunal.
The ld. counsel for the assessee vehemently argued that the authorities below were not correct in passing such order. The ld. counsel submitted that exemption u/s 11 of the Act has been denied on account of non-furnishing of audit report in Form 10B through electronic mode. Ld. counsel submitted that the ld. CIT(A) has noted the fact that return of income was filed on 30.10.2018 and audit report was completed on 18.09.2018, i.e. which is much before the filing of return, further he submitted that no opportunity was given before passing such order by CPC, Bengalure which was sine qua non as per section 143(1) of the Act. Besides that the audit report in form 10B
3 ITA No.398/KOL/2021 Indian Ex-Services League (W.B.) A.Y. 2018-19 assessee could not able to filed in time due to bonafide mistake. However, it was filed on 04.12.2020 even before the order passed by ld. CIT(A). Moreover, assessment has been completed under section 143(1) without giving any opportunity to assessee to file the audit report which was audited on 18.04.2018. Even though the ld. CIT(A) also not considered the plea of the assessee at the time of hearing the matter and dismissed the appeal of the assessee. Therefore, the impugned order required to be quashed. On the contrary, the ld. DR opposed the submission made by AR and supported the order of the authorities below.
We have heard rival submission and perused the material available on record. The ld. CIT(A) dismissed the appeal by observing as under: “4. Decision: I have carefully considered the facts on record, order u/s 143(1) of the Act and the written submissions of the appellant.
4.1. Ground No. 1 to 4 relates to denial of exemption u/s 11 and 12 of the Act:
Perusal of intimation order reveals that the appellant did not furnished the audit report in Form No. 10B as per the requirement of section 12A(b) of the Act and this fact is duly incorporated in the intimation order. It has also been verified that the Form 10B has been digitally submitted on 04.12.2020 i.e. much after the due date for filing of return of income. In this matter, it is an undisputed fact that the appellant failed to furnish the requisite Form No. No. 10B on or before the tiling of income tax return for the present assessment year and non-complied with the provision of 12A(b) of the Act. The appellant’s plea is that the total revenue expenditure Rs. 3,07,97,324/- against the aggregate income earned in reference to sections 11 and 12 of Rs. 3,15,60,828/-, which is also shown in the audit report needs to be duly allowed by the AO and denial of the same is erroneous in nature. In this context, it is pertinent to note that the AO has very limited power for adjustment while processing the return of income u/s 143(1) of the Act. In fact, the CBDT has issued circular/instruction from time-to- time for streamlining the delay in filing of audit report in Form 10B by the trust and examining the reason for non-filing of Form No. 10B in time wherein the CBDT has delegated the power for accepting the belated audit report to the Income Tax Officer after recording reasons for accepting a belated audit report. The latest CBDT’s circular no. 2/2020 dated 03.01.2020 which empowers the CIT to condone the delay in filing Form No. 10B. The latest CBDT's Circular is reproduced herewith:
CIRCULAR NO. 2/2020 [F. NO. 197/55/2018-ITA-l], DATED 3-1-2020
4 ITA No.398/KOL/2021 Indian Ex-Services League (W.B.) A.Y. 2018-19 Under the provision of section 12A of Income-tax Act, 1961 (hereafter Act') where the total income of a trust or institution as computed under the Act without giving effect to the provisions of section 11 and section 12 exceeds the maximum amount which is not chargeable to income tax in any previous year, the accounts of the trust \ or institution for that year have to be audited by any accountant as defined in the Explanation below sub-section (2) of section 288 and the person in receipt of the \income is required to furnish along with the return of income for the relevant assessment year the report of such audit in the prescribed from duly signed and verified by such accountant and setting forth such particulars as may be prescribed.
As per Rule 17B of the Income-tax Rules, 1962 (hereafter 'Rules') the audit report of the accounts of such a trust or institution is to be furnished in Form No. 10B. As per Rule 12(2) of the Rules, such audit report is to be furnished electronically. The failure to furnish such report in the prescribed from along with the return of income results in disentitlement of the trust or institution from claiming exemption under sections 11 and 12 of the Act.
Representations have been received by the Board/field authorities stating that Form No. 10B could not be filed along with the return of income for A.Y. 2016-17 and A.Y. 2017-18. It has been requested that the delay in filing of Form No. 10B may be condoned. Previously, vide instruction in F.No. 267/482/77-IT(part) dated 9-2-1978, the CBDT had authorized the ITO to accept a belated audit report after recording reasons in cases where some delay has occurred for reasons beyond the control of the assessee.
Accordingly, the CBDT issued Circular No. 10/2019 circulated through F.No. 197/55/2018-ITA-l in supersession of earlier circular/lnstruction issued in this regard, and with a view to expedite the disposal of applications filed by such trust or institution for condoning the delay in filing Form No. 10B-and in the exercise of the powers conferred under section 119(2) of the Act, the Central Board of Direct Taxes vide Circular No. 10/2019 dated 23rd May, 2019 and Circular No. 28/2019 dated 27th September, 2019 both issued vide F.No. 197/55/2018-ITA-l has directed that:— (i) The delay in filing of Form No. 10B for A.Y. 2016-17 and A.Y. 2017-18, in all such cases where the Audit Report for the previous year has been obtained before the filing of return of income and has been furnished subsequent to the filing of the return of income but before the date specified under section 139 of the Act is condoned.
(ii) In all other cases of belated applications in filing Form No. 10B for years prior to AY. 2018-19, The commissioner of Income-tax are authorized to admit and dispose off by 31-3-2020 such applications for condonation of delay u/s 119(2)(b) of the Act. The Commissioner will while entertaining such belated
5 ITA No.398/KOL/2021 Indian Ex-Services League (W.B.) A.Y. 2018-19 applications in filing Form No. 10B shall satisfy themselves that the assessee was prevented by reasonable cause from filing such application within the stipulated time.
In addition to the above, it has also been decided by the CBDT that where there is delay of upto 365 days in filing Form No. 10B for Assessment Year 2018-19 or for any subsequent Assessment Years, the Commissioners of Income-tax are hereby authorized to admit such belated applications of condonation of delay under section 119(2) of the IT Act and decide on merits.
The Commissioners of Income-tax shall, while entertaining such belated applications in filing Form No. 10B satisfy themselves that the assessee was prevented by reasonable cause from filing such application within the stipulated time.
So there was no blanket condonation of delay in filing tax audit in form No. 10B for claim of exemption u/s 11 and 12 of the Act and the appellant case is covered under clause 5 of the CBDT’s Circular No. 2/2020. In the present case, the appellant did not furnish any document to show that it had filed condonation petition u/s 119(2)(b) of the Act before the concerned Commissioner of Income Tax and the same has been admitted. Also, the appellant failed to prove that the delay was occurred for the reasons beyond the control of the appellant especially in a situation when audit was claimed to be completed on 18.09.2018 i.e. much before the filing of return.
In the light of the above factual and legal position, the denial of exemption u/s 11 of the Act is hereby confirmed and thus, the ground of appeal is dismissed.”
We note that the facts from the case that the assessee is the Society of Ex Servicemen and registered under West Bengal Societies Registration Act, 1961 which is carrying charitable activities and registered u/s 12A of the Act. Assessee filed its return of income for A.Y. 2018-19 on 30.10.2018 and due to bonafide mistake on the part of the assessee Form No. 10B along with audit report could not able to file on or before filing of Income Tax return and it is not a willful or intentional delay on the part of assessee. We note that after the due date of filing of return, the assessee has been digitally submitted Form No. 10B on 04.12.2020. However, the ld. CIT(A) did not consider the same with a view to CBDT’s Circular No. 2/2020 and stated that assessee’s case is covered under Clause 5 of the said circular.
6 ITA No.398/KOL/2021 Indian Ex-Services League (W.B.) A.Y. 2018-19 8. We also note that this issue has been clarified by Board vide CBDT Circular No. 2/2020 as under: “Under the provision of section 12A of Income-tax Act. 1961 (hereafter 'Act') where the total income of a trust or institution as computed under the Act without giving effect to the provisions of section 11 and section 12 exceeds the maximum amount which is not chargeable to income tax in any previous year, the accounts of the trust or institution for that year have to be audited by any accountant as defined in the Explanation below sub-section (2) of section 288 and the person in receipt of the income is required to furnish along with the return of income for the relevant assessment year the report of such audit in the prescribed from duly signed and verified by such accountant and setting forth such particulars as may be prescribed.
As per Rule 17B of the Income-tax Rules, 1962 (hereafter 'Rules') the audit report of the accounts of such a trust or institution is to be furnished in Form No. 10B. As per Rule 12(2) of the Rules, such audit report is to be furnished electronically. The failure to furnish such report in the prescribed from along with the return of income results in disentitlement of the trust or institution from claiming exemption under sections 11 and 12 of the Act.
Representations have been received by the Board/field authorities stating that Form No. 10B could not be filed along with the return of income for A.Y. 2016-17 and A.Y. 2017-18. It has been requested that the delay in filing of Form No. 10B may be condoned. Previously, vide instruction in F. No. 267/482/77-IT(part) dated 9-2-1978, the CBDT had authorized the 1TO to accept a belated audit report after recording reasons in cases where some delay has occurred for reasons beyond the control of the assessee.
Accordingly, the CBDT issued Circular No. 10/2019 circulated through F.No. 197/55/2018-ITA-I in supersession of earlier circular/Instruction issued in this regard, and with a view to expedite the disposal ol applications filed by such trust or institution for condoning the delay in filing Form No. 10B and in the exercise of the powers conferred under section 119(2) of the Act, the Central Board of Direct Taxes vide Circular No. 10/2019 dated 23rd May. 2019 and Circular No. 28/2019 dated 27th September, 2019 both issued vide F.No. 197/55/2018-ITA-I has directed that:- i. The delay in filing of Form No. 10B for A.Y. 2016-17 and A.Y. 2017- 18. in all such cases where the Audit Report for the previous year has been obtained before the filing of return of income and has been furnished subsequent to the filing of the return of income but before the date specified under section 139 of the Act is condoned.
7 ITA No.398/KOL/2021 Indian Ex-Services League (W.B.) A.Y. 2018-19 ii. In all other cases of belated applications in filing Form No. 10B for years prior to AY. 2018-19. The commissioner of Income-tax are authorized to admit and dispose off by 31-3-2020 such applications for condonation of delay u/s 119(2)(b) of the Act. The Commissioner will while entertaining such belated applications in filing Form No. 10B shall satisfy themselves that the assessee was prevented by reasonable cause from filing such application within the stipulated time.
In addition to the above, it has also been decided by the CBDT that where there is delay of upto 365 days in filing Form No. 10B for Assessment Year 2018-19 or for any subsequent Assessment Years, the Commissioners of Income-tax are hereby authorized to admit such belated applications of condonation of delay under section 119(2) of the IT Act and decide on merits.
The Commissioners of Income-tax shall, while entertaining such belated applications in filing Form No. 10B, satisfy themselves that the assessee i was prevented by reasonable cause from filing such application within the stipulated time.”
The above circular stated that CIT(A) has power for condoning belated application in filing Form No. 10B wherever the assessee was prevented by reasonable cause for filing of such applications within the stipulated time. In the present case before us, the delay is due to bonafide mistake on the part of the assessee which could be condoned as there is a strong reason on the part of assessee. Since the assessee is neither negligent nor willful defaulter in filing Form No. 10B within stipulated time prescribed under law and it was happened due to bonafide mistake on the part of the assessee. Hence, we reverse the orders of lower authorities, condone the delay in filing Form No. 10B and direct the AO to accept the audit report in form No. 10B.
In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 24.11.2022.
Sd/- Sd/- (MANISH BORAD) (SONJOY SARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Kolkata, Dated: 24.11.2022. Biswajit, Sr. P.S.
8 ITA No.398/KOL/2021 Indian Ex-Services League (W.B.) A.Y. 2018-19 Copy to: 1. The Appellant: Indian Ex-Services League (W.B.) 2. The Respondent: ITO (Exemption), Ward-1(1), Kolkata. 3. The CIT, Concerned, Kolkata 4. The CIT (A) Concerned, Kolkata 5. The DR Concerned Bench
//True Copy// [ By Order
Assistant Registrar ITAT, Kolkata Benches, Kolkata