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Facts
The assessee, a charitable organization, filed a NIL return for AY 2020-21 claiming exemption under Section 11. The CPC, processing the return under Section 143(1), disallowed the exemption and raised a demand, citing late filing of Form 10B (audit report). The assessee's subsequent appeal to the CIT(A) was dismissed due to a 767-day delay in filing, leading to the current appeal before the ITAT.
Held
The ITAT condoned the 83-day delay in filing the appeal before it, noting that the delayed audit report (Form 10B) was available at the time of processing. Citing previous judgments, the Tribunal held that filing the auditor's report is a procedural and directory requirement, not mandatory. Therefore, the matter was remitted back to the Assessing Officer to reconsider the Section 11 exemption claim.
Key Issues
Condonation of delay in filing appeal before CIT(A) and ITAT; Whether Section 11 exemption can be denied solely due to delayed filing of Form 10B (audit report) during Section 143(1) processing.
Sections Cited
250, 143(1), 11, 12A, 139(1), 10B, 139(4), 139(9)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH KOLKATA
Before: SHRI SONJOY SARMA & SHRI RAKESH MISHRA&
Present for: Appellant by : Siddarth Agarwal, Advocate Respondent by : Kallol Mistry, JCIT, Sr. DR Date of Hearing : 15.05.2025 Date of Pronouncement : 16.06.2025 O R D E R
PER RAKESH MISHRA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is against the order of the Ld. Commissioner of Income Tax (Appeals), Addl/JCIT(A)-11, Mumbai (hereinafter referred to as “the Ld. Addl./Joint CIT(A)”) passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for AY 2020- 21 dated 04.09.2024, which has been passed against the intimation u/s 143(1) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 23.11.2021.
The ITAT Registry has pointed out that there is a delay of 83 days in filing of this appeal. The assessee has filed an application for condoning the delay as under:
Riddhi Seva Kendra A.Y. 2020-21 “1. That your petitioner filed an appeal before the Ld. CIT(A) against the intimation order passed by the A.O., CPC u/s 143(1) dated 23.11.2021 for the A.Y.: 2020- 2021.
2. That the Ld. CIT(A), NFAC dismissed the appeal of your petitioner vide an order dated 04.09.2024.
3. That the last day of filing the appeal before the Hon'ble Tribunal was on or around 3.11.2024.
4. That appeal was filed on 21.02.2025.
That there is a delay of around 83 days in filing of the appeal.
The delay is explained hereunder- a) That an order u/s 250 was passed on 04.09.2024 was received in email by the assessee and the same was lying in the spam folder and no physical copy was served by the department. b) That the mail containing the said appellate order was lying in spam folder and, as such it skipped the attention of the concerned person of the assessee. c) That later on, on receipt of a notice of hearing from Ld. CIT(A), NFAC for AY: 2024- 25 on 17.02.2025, the assessee checked the status in the income tax portal and thereupon it was noticed that an appellate order for AY: 2020-21 was already passed on 04.09.2024. d) That then the assessee immediately contacted Advocate Siddharth Agarwal for filing an appeal before the Ld. Tribunal and handed over the relevant papers to him. e) Then the appeal was accordingly prepared by him and finally deposited in the office of the Hon'ble Tribunal on 21.02.2025. f) Thus, there is a reasonable cause for not filing appeal within time and it is humbly prayed that the delay of around 83 days may please be condoned and the case of your petitioner be heard on merit. In the circumstances, your petitioner prays that the delay in filing appeal before this Ld. Tribunal may kindly be condoned and the case be heard on merits or such order/orders be passed as this Ld. Tribunal deems fit and proper.”
Considering the reasons for delay as mentioned above, the delay is hereby condoned and the appeal is admitted for adjudication.
The grounds of appeal
raised by the assessee are reproduced as under: “1. For that the Ld. CIT(A) was not justified in not condoning delay in filing appeal before him though there was a reasonable cause for the delay.
2. Without prejudice to the above grounds, the Ld. CIT(A) ought to have admitted the appeal and disposed of the same on merit adjudicating various grounds of appeal taken before him.
3. For that, on the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in confirming the action of the A.O (CPC) in denying the exemption claimed by the assessee u/s 11 of the Act on the alleged ground that Form 10B was not filed within due date.
Riddhi Seva Kendra A.Y. 2020-21 4. Without prejudice to grounds no. 3, the A.O. (CPC) ought to have computed the net income of the assessee after allowing related expenditure and charged tax thereon. 5. The appellant craves leave to add further grounds of appeal or alter the grounds at the time of hearing.”
5. Brief facts of the case are that the assessee is a charitable organization registered under the Societies Registration Act and having registration u/s 12A of the Income Tax Act bearing no. DIT(E) /727/8E/88/96-97 dated 09.10.2012, (present Unique Registration No. AAATR2893QE20213 dated 29.03.2022) and had filed its return of income for the A.Y. 2020-21 on 03.02.2021 showing total income of Rs. NIL after claiming exemption u/s 11 considering the registration u/s 12A of the Act. The return was processed u/s 143(1) of the Act by CPC, Bangalore on 23.11.2021 by disallowing expenses on the ground that the assessee is not registered u/s 12A of the Act and a demand of Rs. 3,44,880/- was raised. The claim of exemption was denied on the ground that the assessee had filed Form No. 10B on 3.2.2021 along with the return of income and was required to the file the audit report in Form No. 10B one month before the due date of filing the return of income 139(1) of the Act and the audit report was filed late. Subsequently, while processing the return, the CPC on 23.11.2021 disallowed the expenses and the claim of application of income and the exemption was denied.
6. Aggrieved with the intimation, the assessee filed an appeal before the ld CIT(A), which was filed with a delay of 767 days. The assessee claimed before the ld CIT(A) in Form No.35 Column 2(c) that the intimation u/s.143(1) of the Act was served on 29.12.2023 but the appellant also claimed that the intimation u/s 143(1) was served on the portal on 23.11.2021 which was not seen by the appellant, therefore, there was contradiction in the statement. The appeal should have been filed on or before 23/12/2021 according to the Ld. CIT(A). In response to the notice Riddhi Seva Kendra A.Y. 2020-21 issued by the ld. CIT(A), the assessee filed written submission in which it was stated that the extended due date for filing of return was 15.02.2021 and Form No.10B was filed on 3.2.2021. The copy of Form No.10B was enclosed. It was also submitted before the ld. CIT(A) that the requirement of filing the audit report in Form No.10B is procedural and, therefore, it is directory in nature and the claim of exemption u/s.11 of the Act cannot be denied for the delay in filing the audit report. The assessee relied upon the following judicial pronouncements before the ld CIT(A): i) Income Tax Officer (Exemption), Ward-1(1), Kolkata vs Camellia Educare Trust in dated 30.05.2023. ii) Hari Gyan Pracharak Trust vs The Deputy Commissioner of Income Tax CPC, Bangalore in dated 16.06.2023. iii) Gyandeep Charitable Trust vs, ADIT, CPC Bangalore in ITA No.555/Ahd/2023 dt. 03.01.2024. iv) Shri Visha Oswal Jain Sewa Samaj vs. ITO vide ITA No. 59/Ahd/2022 order dated 11.10.2023.
7. Further submission was made stating that section 143(1) of the Act does not contain any provision for adjustment/addition to the returned income for disallowance of exemption and only any arithmetical error etc. could be added. Neither the assessee had made any incorrect claim which was apparent from the information in the return nor was there any arithmetical error in the return of income, therefore, the disallowance of exemption claimed u/s.11 of the Act cannot be denied. It was also submitted that when the assessee has filed the return u.s.139(4) of the Act, the department has not held it to be a defective return u/s.139(9) of the Act but has processed the same by accepting the revenue and capital expenditure though denying the claim u/s.11 of the Act and the entire Riddhi Seva Kendra A.Y. 2020-21 receipt has been computed as income and the adjustment could only be made in one of the specific adjustments specified in section 143(1) of the Act. The assessee further placed reliance on the following judicial pronouncements:
1) Packers (India) Vs. ITO (2006) 99 ITD 383 (ITAT Ahd) 2) CIT vs Pesticides India Ltd. 283 ITR 304 (Raj.) 3) CIT vs Mahesh Kumar A Rathod 198 Taxation 173 (Guj.)
The assessee also relied upon the decision of the Kolkata Bench of the Tribunal in Anita Seth VS DCIT, Bangalore CPC in order dated 18.4.2022 in support of the claim that the CPC cannot disallow the expenditure or make any disallowance u/s.143(1) of the Act, wherein the question of facts is involved. The assessee submitted the reasons for the delay of 776 days in filing the appeal before the Ld. CIT(A) that the assessee was unaware of the intimation through income tax portal, the assessee could not file the appeal within the due time due to non-availability of DSC, the non- availability of intimation order, and that the assessee could not engage any lawyer or C.A. to file the appeal in time and further since at the time of filing of appeal, the assessee came to know that 20% of the total demand was to be deposited which amount was not available, therefore, for this reason, the delay occurred in filing the appeal. The Ld. CIT(A) examined the case in this regard but did not condone the delay and dismissed the appeal. Aggrieved with the order of the Ld. CIT(A), the assessee has filed the appeal before the Tribunal.
We have heard the rival contentions and perused the material available on record. The Ld. AR drew our attention to para 5.3 of the order of the ld. CIT(A) and also page 14 of the order of ld. CIT(A) for the condonation of delay. Reliance has been placed by the Ld. CIT(A) on the Riddhi Seva Kendra A.Y. 2020-21 case of Ajay Dabra vs Pyare Ram & Others (SC) No. 15793 of 2019 dated 31.1.2023, which appears at page 17 of the order of ld. CIT(A). A copy of the written submission filed before the ld CIT(A) has also been enclosed. It was requested to allow the exemption claimed while the Ld. DR requested that the order of the Ld. CIT(A) may be upheld.
We have considered the rival submissions and have also gone through the facts of the case, the submission made and the documents filed. We find that the assessee had not been granted the exemption under section 11 as there was delay in filing the audit report u/s. 10B of the Act but the same was available at the time of processing of the return. In this respect, Hon’ble Jurisdictional High court in the case of CIT (E) vs Indian Sugar Mills Association in ITAT/270/2023 IA No.GA.1/2023, GA No.2/2023 order dated 10.1.2024 have held that filing of the auditor’s report along with the return of income has to be treated as a procedural requirement and, therefore, directory in nature and not mandatory. Hence, after examining the facts of the case, we deem it appropriate to set aside the order of the ld. CIT(A) as well as the intimation order passed by the CPC and remit the matter back to the file of the Assessing Officer for considering the claim of the assessee afresh as the audit report was available at the time of processing of the return, therefore, the claim u/s.11 of the Act could not be denied. The Ld. AO is directed to allow the claim u/s 11 of the Act as per law and after considering the audit report filed on Form No. 10B. Needless to say, the assessee shall be allowed to make any submission it wants to make in support of the relief claimed and shall not seek unnecessary adjournment.
Hence, ground Nos. 1, 2, 3 and 4 are allowed for statistical purposes. Ground No. 5 is general in nature, hence does not require any separate adjudication.
Order pronounced in the open court on 16.06.2025.