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Facts
The assessee trust filed its return declaring NIL income. The CPC disallowed exemption under Section 11 due to the late filing of the audit report in Form 10B. The assessee filed the report on the same date as the return filing, which was before the extended due date, but after the specified due date for the audit report. The CIT(A) upheld the disallowance.
Held
The Tribunal held that the filing of Form 10B is a procedural requirement and not a substantive condition for claiming exemption under Section 11. Since the audit report was available before the assessment was completed and filed before the extended due date, the disallowance of exemption was incorrect.
Key Issues
Whether the disallowance of exemption under Section 11 for delayed filing of Form 10B, when filed before the extended due date for return filing, is justified?
Sections Cited
11, 143(1), 154, 12A(1)(b)(ii), 139(1), 44AB, 11(1), 11(2), 119(2)(b), 119
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: HON’BLE SHRI MANU KUMAR GIRI & HON’BLE SHRI JAGADISH
आदेश / O R D E R
PER MANU KUMAR GIRI (Judicial Member): This is an appeal preferred by the assessee Trust against the order of the Learned Commissioner of Income Tax (Appeal)/Addl/JCIT(A)-5, Kolkata dated 05.11.2024, (hereinafter in short "the Ld.CIT(A)”), for the Assessment Year (hereinafter in short "AY”) 2022-23.
The main grievance of the assessee is against the action of the Ld.CIT(A) upholding the action of the CPC denying exemption claimed u/s.11 of the Income Tax Act, 1961 (hereinafter in short "the Act").
The brief facts are that the assessee :
The assessee is a trust filed its return of income for the AY-2022-23 on 05.11.2022 declaring total income of NIL. The CPC, Bangalore passed the intimation u/s 143(1) dated 18.05.2023, making certain adjustments / raising tax payable over and above the returned income / tax payable. In the intimation u/s. 143(1) dated 04.04.2023, AO, CPC disallowed the exemption claimed by the assessee u/s 11 of the Act due to the reason that audit report in Form 10B was not filed within due date as required as per section 12A(1)(b)(ii) of the Act. Consequently the entire receipts of Rs.3,08,44,889/- was taxed at maximum marginal rate. The assessee had filed a rectification request before CPC, to rectify the mistake u/s 154. But CPC passed order u/s 154 dated 18.05.2023 rejecting asessee’s claim and upholding the adjustment made as per intimation u/s 143(1) dated 04.04.2023. Aggrieved, the assessee preferred appeal before Ld.CIT(A).
Before the ld. CIT(A), assessee has raised 18 argumentative grounds as mentioned at para 3 of the order of ld.CIT(A). However, the ld. CIT(A) has dismissed the appeal by holding as under:
I have carefully gone through the intimation u/s 143(1), order u/s 154, the grounds of appeal and submission made by the appellant in this regard. Briefly stating facts of the case is that the appellant filed return of income which was processed u/s 143(1) by CPC making certain adjustments over and above the returned income. Appellant prayed for rectification u/s. 154 but CPC rejected such claim and upheld the adjustment made in intimation u/s 143(1). In its lengthy grounds of appeal, the appellant has disputed only the rejecting of claim of exemption u/s 11 for non-filing of Form 10B within specified date. As per the provisions of sec. 12A(1)(b)(ii) of the Act, any trust claiming exemption u/s 11 of the Act is required to elecgtronically file audit report in Form 10B within specified date [specified date is explained as per Explanation(ii) below section 44AB of the Act which is the date one month prior to the due date for furnishing the return of income u/s 139(1)]. In the appellant’s case, extended due date for filing return of income was 07.11.2022. Therefore extended due date for filing Form 10B was 07.11.2022. However, it filed the said Form on the date of filing return itself i.e. 05.11.2022. In view of the same, AO, CPC had disallowed the claim of exemption u/s 11. In this regard, it is to be stated that the appellant has quoted several Court judgements wherein it has been held that filing of such form is only a procedural requirement and for any delay in fulfilling such requirement the appellant should not be penalized. With due respect to such judgements, I am of the opinion that the statute has mandated some requirement for availing of the benefit of section 11. If an assessee violates such statutory requirement, it cannot be allowed the benefit of such exemption. Moreover, appellant itself in its ground of appeal no.13 has stated that CBDT vide its Circular No.16/2022 dated 19.07.2022 has directed the jurisdictional Commissioners to admit petitions praying for condonation of delay in filing of Form 10B if the delay is less than 365 days and decide on merit the reasons for such delay. In this case, the appellant did not pray for any such condonation before the jurisdictional Commissioner. I therefore uphold AO, CPC’s action in disallowing the exemption claimed u/s 11 of the Act.”
5. Aggrieved by the order of CIT(A), Now assessee is in further appeal before us challenging the order of the ld. CIT(A).
6. The ld. counsel for the assessee reiterated the arguments which were take before the ld. CIT(A) and filed the order of the co-ordinate bench in the case of Rajiv College of Excellence Educational Trust Vs Assistant Commissioner of Income Tax (Exemptions)
Assessment Year 2022-23 order dated 04.09.2024 and also contended that the delayed filing of the Form 10B may be condoned as it is not mandatory but directory to file in time.
7. The ld. DR relied upon the orders of the lower authorities and submitted that the assessee could have preferred petition for condonation of delay in filing Form 10B before the ld.PCIT.
We have heard the rival submissions, perused the record and case laws cited at bar. Recently the Hon’ble Delhi High Court in the case of Associated Chambers of Commerce and Industry of India Vs Deputy Commissioner of Income-tax [2024] 165 taxmann.com 510 (Delhi)/[2024] 300 Taxman 410 (Delhi) held as under: “30. Of equal significance is the judgment rendered by a Division Bench of our Court in Commissioner of Income-tax v. Contimeters Electricals (P.) Ltd. 2008 SCC Online Delhi 1458/[2009] 178 Taxman 422/317 ITR 249 (Delhi) and where the Court had observed:- "8. In view of this long line of decisions of various High Courts in considering the provisions of section 80J(6A) which are similar to the provisions of section 80-IA(7), we feel that the Tribunal has arrived at the correct conclusion that the requirement of filing the audit report along with the return is not mandatory but directory and that if the audit report is filed at any time before the framing of the assessment, the requirement of section 80-IA(7) would be met." 31. While we are conscious that the judgments in Nagpur Hotel Owners' Assn. as well as Contimeters Electricals P. Ltd. were rendered prior to the promulgation of the 2015 Act and the 2016 Amendment Rules, the said decisions clearly underline the importance of due disclosure as opposed to adherence to the mere procedural requirements of the digital filing of a form.
We further note that a Division Bench of the Gujarat High Court has in its decision rendered after the insertion of the 2015 Act and the 2016 Amendment Rules in Association of Indian Panelboard Manufacturer v. Deputy Commissioner of Income-tax 2023 : GUJHC : 27028-DB/[2023] 157 taxmann.com 550 clearly held that the electronic submission of Form 10B is essentially a matter of procedure as opposed to being a mandatory condition which may be recognized to form part of substantive law. We deem it apposite to extract the following passages from that decision:- "5.4 Recollecting the relevant dates, the income was filed on 31.8.2018. On 15.3.2019 Form 10B was filed electronically. On 7.12.2019 intimation under Section 143(1) of the Act was given to the appellant that the exemptions were denied, while processing the return of income on the ground that alongwith the return of income Form 10B was not filed. 5.5 It is to be observed in the present case that the Form D- the audit report, though was not filed with the return of income, the same was available with the Assessing Officer when he processed the return of income under Section 143(1) of the Act. The conditions for claiming exemption under Section 11 was satisfied. Although the requirement of furnishing report was mandatory, filing thereof is a procedural aspect. Even though the Form 10B was filed at a later stage, when it was part of the record of the Assessing Officer in course of the processing of the return of income, the Assessing Officer could not have denied the exemption claimed by the assessee under Sections 11(1) and 11(2) on the ground that the audit report was not filed. 5.6 The tribunal further committed an error in appreciating the import of Section 119 2(b) of the Act inasmuch as the application contemplated thereunder is only additional remedy for the assessee which could not be said to be compulsorily resorted to by the assessee. The circular No.7/18 dated 20.12.2018 issued under Section 119 of the Act could not be, therefore said to have taken away the appellate remedy.
5.7 The tribunal misdirected itself in yet another way when it observed that The Finance Act, 2015 with effect from 1.4.2016, that is from assessment year 2016-17 changed the legal position. There is no such change which could be said to have altered the legal position. The only change is with regard to compulsory filing of audit report in Form 10B in electronically form which is made mandatory under Rule 12 (2) of the Income Tax Rules, 1962 but there is no change with regard to the substantive law about filing of audit report as stated above.
The moot aspect thus centres around to the requirement of the availability of the audit report when the assessment was undertaken by the Assessing Officer even though the same may not have been filed along with the return of income. Filing of audit report is held to be substantive requirement but not the mode and stage of filing, which is procedural. Once the audit report in Form 12B is filed to be available with the Assessing Officer, before assessment proceedings take place, the requirement of law is satisfied. In that view, the Income Tax Tribunal was not justified in dismissing the appeal of the assessee. 6.1 The appellant assessee has to be held to be eligible and entitled to exemptions under Section 11(1) and 11(2) of the Act and the alleged ground of non-filing of audit report alongwith return of income which was at the best procedural omission, could never to an impediment in law in claiming the exemption. 6.2 Accordingly the substantial questions of law have to be decided in favor of the appellant.
They are accordingly decided. The appeal is allowed."
Though rendered in the context of Form 10B, in our considered opinion, the legal position as enunciated in the aforesaid judgment would equally apply to the submission of Form 10.
The co-ordinate bench in the case of Rajiv College of Excellence Educational Trust Vs Assistant Commissioner of Income Tax (Exemptions)
Assessment Year 2022-23 dated 04.09.2024 held as under:
8. We have heard the rival contentions and gone through the intimation U/s.143(1) and order of the Ld.Addl. CIT(A). It is noted that, the Ld.CIT(A) has dismissed the appeal without condoning the delay in filing the Audit report in Form 10B and confirmed the determination of total Income at Rs.93,96,981/-. On perusal it is also noted that, the both the intimation from CPC, Bengaluru and the order of the Ld.CIT(A) have not allowed any of the expenditure claimed by the assessee in the return of income and computed the total income considering the entire receipts of the trust as Income i.e. Rs.93,96,981/-. We note that the assessee had obtained audit report in Form 10B on 30/09/2022 itself and the same was digitally signed. The assessee was under the bonafide impression that the audit report was already uploaded on 30/09/2022 and therefore it need not again submit the same. But while filing return of Income, it was found that the audit report though obtained on 30/09/2022 was not uploaded in the income tax portal. And hence the same was uploaded on 05/11/2022, which is much before the end of the actual due date prescribed i.e. 07/11/2022 for the A.Y. 2022-23. Considering the reliance placed by the assessee on this Tribunal decision in Sri Vetri Vinayagar Educational Trust Vs.ITO(Supra), where the delay in filing the audit report was condoned by holding as under: “5. The undisputed fact that emerges is that the assessee has filed Audit Report much before the processing of return of income by CPC u/s 143(1). The Audit Report was very much available at the time of processing of return of income. The CPC have not taken the same into account while processing return of income u/s 143(1) as well as while dealing with 154 rectification application filed by the assessee. The Ld. CIT(A) merely upheld the rectification intimation on the ground the rectification application filed by the assessee would not fall within the ambit of Sec.154 of the Act overlooking the fact that the grievance of the assessee was not even looked into by CPC in the rectification application. Apparently, the applicable exemption has been denied due to the fact that the assessee did not furnish details of audit in the return of income and Form No.10B was uploaded after filing of return of income. The facts of the present case are covered by the decision of Ahmadabad Tribunal in the case of Shree Charitable Trusts vs. ITO (ITA No.172/Ahd/2022 dated 05.07.2023). The co-ordinate bench, considering the decision of Hon’ble High Court of Gujarat in the case of Indian Panel Board Manufacturer vs. DCIT (ITA No.655 of 2022 dated 21.03.2022), held that filing of Form No.10B would be directory in nature, as such the Assessing Officer are not powerless to allow an assessee to file Audit Report, it not filed along with return, at any time before completion of assessment. Similar is the decision of Jaipur Tribunal in the case of DCIT vs. State Institute of Health & Family Welfare (153 Taxmann.com 740). The ratio of case law of Hon’ble High Court of Madras in the case of Chandraprabhuji Maharaj Jain vs DCIT (110 Taxmann.com 11) also supports the above conclusion. In this decision, Hon’ble Court has held that filing of Form No.10 for accumulation of income u/s 11(2) which was filed beyond due date could not disentitle the trust from exemption claimed u/s 11. The Hon’ble Court directed Ld. AO to examine the admissibility of benefit rather than to foreclose Assessee on technicalities. This principle was followed by the Hon'ble Jurisdictional HC in CIT Vs Spic Educational Foundation (TCA No.1593 of 2008 dated 12.12.2018). Respectfully following the same, we direct jurisdictional AO to verify the Form 10B filed by the assessee and allow the claim of exemption uls.11 of the Act.”
9. Considering the facts and circumstances of the case and respectfully following the decision of the Tribunal (Supra), we are inclined to set aside the impugned order of the Ld.Addl. CIT(A) and we direct jurisdictional AO to verify the Form 10B filed by the assessee and allow the claim of exemption uls.11 of the Act.
In the assessee’s case, the extended due date for filing the return of income was 07.11.2022 and assesse has filed the Form 10B on the same date of filing the return itself on 05.11.2022. Therefore, considering the above factual matrix, case law citations and respectfully following the decision of the Tribunal (Supra), we are inclined to set aside the impugned order of the Ld.CIT(A) and we direct jurisdictional AO to verify the Form 10B filed by the assessee and allow the claim of exemption uls.11 of the Act.
In the result, appeal filed by the assessee is allowed for the statistical purposes.
Order pronounced on the 24th day of March, 2025.