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Facts
The assessee, a charitable trust, filed its return of income for AY 2022-23 claiming exemption under Sections 11 & 12 of the Income Tax Act. The CPC denied this exemption because the audit report in Form 10B was not filed by the due date. The assessee's appeal to the CIT(A) was also dismissed.
Held
The Tribunal noted that the assessee had submitted Form-3CD along with the return and a subsequent condonation petition for the delayed Form-10B filing. Considering the principle of natural justice, the Tribunal set aside the orders of the CPC and CIT(A) and directed the AO to recompute the total income after allowing admissible expenditures, pending the decision on the condonation petition.
Key Issues
Whether the denial of exemption under Sections 11 & 12 of the Income Tax Act for non-filing of Form 10B within the due date is justified, or if a condonation petition for the delay should be considered.
Sections Cited
11, 12, 143(1), 119(2)(b)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: SHRI SS VISWANETHRA RAVI & SHRI JAGADISH
आदेश / O R D E R
PER JAGADISH, A.M : Aforesaid appeal and station application filed by the assessee for Assessment Year (AY) 2022-23 arises out of the order of Learned Commissioner of Income Tax, Appeal, Addl/JCIT(A)-2, Visakhapatnam [hereinafter “ Addl. CIT(A)”] dated 29.01.2025.
The assessee is a public charitable trust and filed its return of income on 07.11.2022 by declaring total income of Rs.90,190/- after claiming exemption of Rs.1,89,93,296/- u/s. 11 & 12 of the Income-tax Act, 1961 (hereinafter “the Act”). The return of income was processed u/s.143(1) of the Act by the CPC, Bengaluru denying the exemption claimed u/s. 11 & 12 of the Act for the reason that the assessee has not filed audit report in Form 10B before the due date i.e, one month prior to the due date of filing return of income. The A.O has subsequently field Form-10B on 04.05.2023. Aggrieved, the assessee has filed appeal before Ld. Addl. CIT(A). However, the Ld. Addl.
CIT(A) dismissed the appeal reiterating the reason that the assessee filed Form-10B on 04.05.2023 though it was required to file on or before 07.12.2022, therefore, the CPC has rightly denied the benefit of Section 11 & 12 of the Act.
The Ld. Authorized Representative (A.R) of the assessee has submitted that the assessee has filed return of income along with the audit report in Form-3CD on 07.11.2022 showing total income of Rs.90,190/-. The assessee in the return of income has claimed exemption of Rs. 1,89,93,296/- from receipt of Rs.1,90,83,483/- as application of income. The Ld AR submitted that assessee could not file Form-10B within the due date as the C.A was handling the case underwent open heart surgery and could not attend the work. The CPC in the intimation u/s. 143(1) of the Act has denied the exemption on the ground that Form-10B was not filed within due date and the same has been confirmed by Ld Addl. CIT(A). The Ld. AR has submitted that the CPC has taxed the gross total receipts of Rs.1,90,83,483/- without allowing the revenue expenditure and taxing the same as per commercial principle even if exemption of Section 11 and 12 of the Act was denied. The Ld. AR has submitted that the assessee has subsequently filed a condonation petition before Ld. CIT(E), which is pending for disposal. The Ld. AR has relied on the order of ITAT, Bangalore in the case of HMV Educational Cultural & Social Trust v. ITO in and the decision of Hon’ble Gujarat High Court in the case of Association of Indian Panelboard Manufacturer in Tax Appeal No.655/2022 (Guj.).
On the other hand, the Ld. Departmental Representative (DR), has supported the order of CPC and Ld. Addl. CIT(A) and submitted that the requirement of filing Form-10B is a mandatory requirements u/s 12 of the Act, which is unambiguous. The Ld. DR further submitted that there is no provision for condonation of delay in filing Form-10B and the assessee has not furnished any evidence of such an application being filed or accepted by the competent authority for A.Y 2022-23. The Ld. DR also argued that principles relating to the taxation of gross receipts versus net income are applicable only when the audit report is available before the completion of assessment.
We have heard the rival submissions, and perused the materials available on record. The assessee is a charitable trust registered u/s. 12A of the Act. The assessee has filed its return of income along with audit report in Form-3CD on 07.11.2022, showing total income of Rs.90,190/- after claiming refund of Rs.32,000/-. The assessee however has not filed Form-10B by 07.10.2022 i.e., one month prior to due date of filing return of income in order to claim exemption u/s. 11 & 12 of the Act. Accordingly, the CPC in intimation u/s 143(1) of the Act denied the benefit of Section 11 & 12 of the Act and computed the total income at the gross receipts shown in the return of income not allowing even revenue expenditure claimed as application of fund. We find that the assessee in the return of income has shown gross receipts of Rs.1,90,83,483/- and also claimed expenditure such as rents, repair and maintenance of Rs.3,08,764/-, compensation to employees of Rs. 49,74,193/-, insurance of Rs. 4,79,769/-, workmen and staff welfare expenses of Rs. 23,52,563/-, conveyance and travelling expenses of Rs. 1,08,019/-, rates and taxes of Rs. 2,32,045/.
However, the same have not been considered while computing the total income while denying exemption u/s 11 & 12 of the Act on application of fund. The assessee had enclosed Form 3CD along with the return of income filled, therefore the figure of income over expenditure was available at the time of processing of return u/s 143(1) of the Act . We also note that assessee has filled form 10B on 05.04.2023 and subsequently filed condonation petition u/s. 119(2)(b) of the Act before CIT(E), for condonation of delay in filing Form-10B.
In view of the above facts and considering the principle of natural justice, we set aside the order of CPC and Ld. Addl. CIT(A) and direct the A.O to compute the total income afresh, after allowing the admissible expenditures, on receipt of the order of Ld. CIT(E) on assessee’s application for condonation of delay. In view of the above, the appeal filed by the assessee is allowed for statistical purposes.
S.A No.35/Chny/2025:
The assessee has filed this stay application against the demand of Rs. 77,80,560/- raised by the CPC after denying the exemption u/s. 11 & 12 of the Act. The demand has been raised mainly for the reason that the assessee has not filed Form-10B and taxed the gross receipt. Since we have already set aside the order of CPC, the demand raised no longer exists. Accordingly, the Stay Application filed by the assessee becomes as fructuous and is dismissed.
In the result, the appeal filed by the assessee is allowed for statistical purposes and the Station Application filed by the assessee is dismissed.
Order pronounced on 21st April, 2025.