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Facts
The assessee, a trust involved in running an orphanage and temple, filed its return declaring nil income. The case was selected for scrutiny due to the late filing of Form 10B. Consequently, the Assessing Officer denied exemption under Section 11 and assessed the total income at Rs. 3,58,34,330/-. The Commissioner (Appeals) also dismissed the assessee's appeal.
Held
The Tribunal held that the delay in filing Form 10B was a procedural delay and not a deliberate omission. Relying on various High Court judgments, the Tribunal condoned the delay and directed the Assessing Officer to allow the exemption as due.
Key Issues
Whether the delay in filing the audit report in Form 10B can be a ground for denying exemption to a charitable trust, and if such delay can be condoned as a procedural lapse.
Sections Cited
12A(1)(b), 11, 143(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH: KOLKATA
Before: Shri Rajesh Kumar&Shri Pradip Kumar Choubey]
ORDER / आदेश Per Pradip Kumar Choubey, JM:
This is the appeal preferred by the assessee against the order of Commissioner of Income Tax (Appeals), NFAC, Delhi (hereinafter referred to as the Ld. CIT(A)] dated 13.02.2025 for AY 2022-23.
Assessment Year: 2022-23 Vivekananda Math 2. Brief facts of the case of the assessee are that the assessee is a trust involved in the activities mainly in the field of poor orphanage for poor boys and girls and temple as public place, charitable Homeo clinic etc. The assessee filed return of income declaring total nil. The case of the assessee was selected on the issue of form 10B filed after due date of filing of the return. Since the assessee failed to file audit report in time as per provision of Section 12A(1)(b) of the Act, the AO denied the exemption u/s 11 and assessed the total income of the assessee at Rs. 3,58,34,330/-.
Aggrieved by the said order, the assessee preferred an appeal before the Ld. CIT(A) wherein the appeal of the assessee has also been dismissed.
Being aggrieved and dissatisfied the assessee preferred an appeal before us.
The Ld. Counsel appeared on behalf of the assessee challenges the very impugned order thereby submitting that the audit report in form no. 10B filed on 19.09.2022 which was well within the due date for furnishing the tax audit report. It has further been submitted that on the same date the assessee has tried to verify the return but was unable to verify the said form 10B due to the technical glitch. The Ld. AR further submits that on receipt of the notice u/s 143(1) the assessee was asked to agree or to disagree to the assessment so made, the staff of the auditor inadvertently marked agree instead of disagreeing as a result of which the order u/s 143(1) was processed by disallowing the expenditure. The Ld. AR further submits that vide rectification request dated 12.04.2023 the assessee stated that there is a mistake which is apparent from the record however, rectification so sought did not consider by CPC. The Ld. AR further submits that the delayed filing of form 10B is merely a procedural delay that can be rectified and exemption cannot be denied only on this ground. He has drawn the attention of the Tribunal on the various judicial pronouncement passed by ITAT to this effect. The prayer of the AR is that the matter should be remitted back to the file of Ld. CIT(A) for fresh consideration to this effect that delayed filing of audit report is merely a procedural delay and it is mandatory in nature that should be condoned.
5. Contrary to that the Ld. D.R supports the impugned order.
Assessment Year: 2022-23 Vivekananda Math 6. We have perused the order of the AO as well as Ld. CIT(A) and find that the assessee is a trust involved in the activities mainly in the field of running orphanage for poor boys and girls etc. The assessee filed return of income on 12.04.2023 and revised return of income on 26.05.2023. Audit report was submitted on 19.09.2023 but as per the submission of the Ld. AR is that they could not be verified till 28.03.2023 due to the local electronic disturbances. We have gone through the judicial pronouncement passed by the Kolkata Tribunal to this effect in the case of Kaydee Foundation vs. ITO in for AY 2022-23. The relevant portion of the order is reproduced herein under:
6. We have gone through the record and find that the assessee is a trust and he filed return of income along with auditor’s report in Form no. 10B. The claim has been rejected on the ground of delayed filing of Form no. 10B which as per the annual mandate provision was required to be filed one month before the due date by filing the return of income though it was filed on 1.11.2022. The extended issue date of filing of return of income for the AY 2022-23 on 07.11.2022, hence there was delay of 24 days in furnishing the report in Form no. 10B. The Ld. A.R has submitted that he was unaware of the new provisions requiring of filing report in form no. 10B one month before the due date of filing the same. In this connection, we have gone through the judgment of Hon’ble Calcutta High Court and find that Hon,ble High Court has held that filing of form No. 10B is a procedural provision and not directory in nature. On perusal of the order of Ld. CIT(A) it appears to us that there was a delay in filing from no. 10B and due to this claim of exemption has been denied. The assessee has submitted that due to the mistake on the end of income tax department initially the assessee was confused and delayed in getting up accounts audited for filing 10B. According to the assessee, the delay in filing 10B was mainly in the technical mistake in certificate itself which has been rectified later. We have gone through the order passed by the Co- ordinate Bench of Kolkata and find that the Co-ordinate Bench, Kolkata in Manav Seva Trust Vs. AO, Ward-1(4), Kolkata in dated 9.8.2024 has discussed this issue and held thus: “3. We have considered the submissions by both the ld. A/R and ld. D/R and also perused the orders of ld. AO and the ld. CIT(A). Ld. A/R has relied on the case of Hari Gyan Pracharak Trust vs. DCIT in order dated 16.06.2023. In this case, the Coordinate Bench has held that since filing of Form-10B is merely a procedural requirement, any defect in that is curable. It is seen that the Hon'ble Orissa High Court in the case of Oneness Educational and Charitable Trust vs. Commissioner of Income-tax (Exemption) reported in [2024] 161 taxmann.com 544 (Orissa) has held that the oversight in not filing Form-10B within the due date was to be condoned and the exemption was to be allowed and granted. Also, the Hon'ble Telangana High Court in the case of Global Organization for Development vs. Commissioner of Income-tax (Exemption) reported in [2024] 162 taxmann.com 633 (Telangana) has held that the delay on the part of the assessee in submitting Form-10B was to be condoned and the matter remanded back to the file of the AO for passing appropriate order on merits. Similarly, the Hon'ble Bombay High Court in the case of Al Jamia Mohammediyah Assessment Year: 2022-23 Vivekananda Math Education Society vs. Commissioner of Income-tax (Exemptions) reported in [2024] 162 taxmann.com 114 (Bombay) has held that where the assessee Trust belatedly submitted Form-10B, along with return, on account of oversight by the Chartered Accountant, the delay in filing of Form-10B deserves to be condoned. In fact, some relevant portions from the said order deserves to be extracted as under: “■ Admittedly, Petitioner is a charitable trust and had been filing its returns and Form 10B for AY 2015-16, for AY 2017-18 to AY 2021-22 within the due dates. On this ground alone, delay condonation application should have been allowed because the failure to file returns for AY 2016-17 could be only due to human error. Even in the impugned order, there is no allegation of mala fide. As held by the Gujarat High Court in Sarvodaya Charitable Trust v. ITO (Exemption) [2021] 125 taxmann.com 75/278 Taxman 148, the approach in the cases of the present type should be equitious, balancing and judicious. Technically, strictly and liberally speaking, Respondent No.1 might be justified in denying the exemption by rejecting such condonation application, but an assessee, a public charitable trust with almost over thirty years, which otherwise satisfies the condition for availing such exemption, should not be denied the same merely on the bar of limitation especially when the legislature has conferred wide discretionary powers to condone such delay on the authorities concerned. [Para 6] ■ Moreover, the Petitioner does not appear to have been lethargic or lacking in bona fides in making the claim beyond the period of limitation which should have a relevance to the desirability and expedience for exercising such power. Such routine exercise of powers would neither be expedient nor desirable, since the entire machinery of tax calculation, processing of assessment and further recoveries or refunds, would get thrown out of gear, Page 3 of 5 I.T.A. No.: 940/KOL/2024 Assessment Year: 2018-19 Manav Seva Trust. if such powers are routinely exercised without considering its desirability and expedience to do so to avoid genuine hardship. [Para 7] ■ In a similar matter in Shree Jain Swetamber Murtipujak Tapagachha Sangh v. CIT (Exemptions) [2024] 161 taxmann.com114 (Bombay) 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. [Para 8] ■ Having considered the matter in its entirety, one is satisfied that the delay was not intentional or deliberate. Petitioner cannot be prejudiced on account of an ignorance or error committed by professional engaged by Petitioner. Respondent No.1 ought to have exercised the powers conferred. [Para 9] ■ In the circumstances, this Writ Petition has to be allowed and is hereby allowed in terms of prayer clause. ■ Since the delay has been condoned, Respondent shall process Petitioner’s returns in accordance with law by giving effect to this order on the basis that Form No.10B has been filed within time. [Para 11]”
Assessment Year: 2022-23 Vivekananda Math 4. Considering the discussions made above, the delay in filing of Form10B is hereby condoned and it is directed that the appellant be allowed exemption as would be due to him as per law. The ld. AO is directed accordingly.
In the result, the appeal filed by the assessee is allowed for statistical purposes.”
7. Keeping in view the above decision and considering the facts of the present case delay in filing form 10B is here by condoned. A.O is directed that the appellant be allowed exemption as would be due to him as per law.”
Keeping in view the facts of the case and the order passed by the AO as well as Ld. CIT(A), we are inclined to restore the appeal back to the file of AO to consider this fact in the light of the judgement discussed as above. The AO is directed to consider the audit report to be filed by the assessee and thereafter passed an afresh order as would be due to him as per law.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order is pronounced in the open court on 2nd July, 2025