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Facts
The assessee, a public charitable trust, claimed exemption under Section 11 of the Income Tax Act, but this claim was denied by the CPC and upheld by the CIT(A). The denial stemmed from a delay in uploading Form 10B, which was filed three days after the due date, leading to a demand of Rs. 50,28,260/- under Section 143(1).
Held
The Tribunal ruled that the minor delay in uploading Form 10B was a procedural lapse and technical in nature, not warranting the denial of the substantive Section 11 exemption. Relying on High Court precedents, it held that procedural provisions are directory, and substantial compliance suffices. The demand raised was set aside, and the CPC was directed to allow the exemption claim.
Key Issues
Whether the benefit of exemption under Section 11 of the Income Tax Act can be denied solely due to a minor procedural delay in uploading Form 10B.
Sections Cited
250, 11, 143(1), 119(2)(b), 139(1), 11(2)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH KOLKATA
Before: Shri Rajesh Kumar & Shri Sonjoy Sarma
Assessment Year: 2017-18 Bengal Education Foundation…………….………………………..………….……Appellant 17/1, Rishi Bankim Chandra Road, Dum Dum, Kol-28. [PAN: AACTB1869Q] vs. ITO, Ward-1(2), Exemption, Kolkata…..……....….….. ……………….........…..Respondent Appearances by: Shri Manish Tiwari, FCA, appeared on behalf of the appellant. Smt. Archana Gupta, Addl. CIT-Sr. DR, appeared on behalf of the Respondent. Date of concluding the hearing : May 15, 2025 Date of pronouncing the order : May 20, 2025 ORDER
Per Sonjoy Sarma, Judicial Member:
The present appeal has been preferred by the assessee against the order dated 26.12.2024 of the Commissioner of Income Tax, Appeal ADDL/JCIT(A)-2, Pune [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’).
Brief facts of the case are that the assessee is a public charitable trust and had filed its return of income for the assessment year 2022-23 in ITR-7 on 02.11.2022 under the status of AOP/BOI by declaring Nil income after claiming exemption u/s 11 of the Act amounting to Rs.1,15,12,715/-. The said return of income was processed by CPC and vide intimation order dated 31.03.2023 a demand of Rs.50,28,260/- had been raised after denying the assessee’s claim of exemption u/s 11 of the Act made in the return of income. Before passing of the intimation order u/s 143(1) of the Act, the CPC had sent communication to the assessee on 14.02.2023 intimating the proposed adjustments.
Assessment Year: 2017-18 Bengal Education Foundation 3. Aggrieved by the order of the Assessing Officer, the assessee filed an appeal before the ld. CIT(A). During the appellate proceedings, the assessee submitted that audit report in Form 10B though stood on 28.09.2022 and ITR was also filed on 02.11.2022. However, the assessee failed to file Form 10B online which was required. As a result, the auditor’s report in Form 10B was technically treated as not filed along with ITR which was filed later on i.e. on 11.10.2022 which was much before the date of filing of ITR for the relevant assessment year. After considering the facts in details, the ld. CIT(A) rejected the claim of the assessee stating that the Form 10B was not filed along with return as per the provisions of law and it was suggested by the ld. CIT(A) that the assessee may file condonation petition u/s 119(2)(b) of the Act before the competent authority.
Dissatisfied with the above order, the assessee has filed the present appeal before this Tribunal raising various grounds. However, the primary contention of the ld. AR is that the lapse/delay was technical in nature and the failure of the assessee to upload Form 10B in time was due to bona fide belief that the auditor of the assessee who was responsible of such compliance duly filed Form 10B. The ld. AR added that once the issue identified by the assessee on 11.10.2022, the assessee promptly has taken collective measure well before the due date of filing of the return. He also said filing of Form 10B is a procedural aspect and directory in nature, therefore, exemption u/s 11 of the Act should not be denied merely on this technical ground. The ld. AR, in this context, has relied upon a decision of Jurisdictional Calcutta High Court in the case of CIT vs. M/s Indian Sugar Mills Association in ITAT/270/2023 dated 10.01.2024, wherein, the Hon’ble High Court has held that filing of Form 10B is a procedural provision. The relevant part of the decision is as under:
The short question falls for consideration in the instant case is whether the Principal Commissioner of Income Tax (Appeals), NFAC was justified in allowing the appeal filed by the assessee thereby condoning the delay in filing the Form 10B of the Act. The learned Tribunal after going through the facts of the case took note of the latter circular issued by the Board in Circular No. 16 of 2022 dated 19-07-2022 issued under Section 119(2)(b) by which the powers delegated to the Principal Chief Commissioner of Income Tax/Commissioner of Income Tax to condone the delay in filing Form 10B beyond 365 days up to 3 years from the assessment year 2018-19 or for subsequent year. Applying the said circular the learned Tribunal affirmed the order passed by the CIT (Appeals) in grounds before us in this appeal. The revenue has not dealt with the said circular nor anything has been brought on record to show that Circular No. 16 of 2022 dated 19-07- 2022 cannot be applied to the case on hand. The Commissioner of Income Tax (Exemptions) while rejecting the application for condonation of delay by order dated 17-08-2020 has referred to the Circular No. 2 of 2020 dated 3.1.2020 which admittedly gives power to condone the delay in filing Form 10B up to a period of 365 days. The CIT (Appeals), NFAC also took note of a decision of the High Court of Gujarat in Commissioner of Income Tax Vs Gujarat Oil And Allied Industries reported in 1993 ITR (201) 325 wherein it was held that the filing of the auditor's report along with return of income has to be treated as procedural provision and therefore, directory in nature. Thus we find that there is no error committed by the learned Tribunal in dismissing the appeal filed by the revenue. Accordingly, the appeal is dismissed. Substantial questions of law are answered against the revenue.
On the other hand, the ld. DR supported the orders of the authorities below.
After hearing rival contentions and perusing the materials available on record, we find that in the present case, audit report in Form 10B was filed on 28.09.2022 and ITR was also filed on 02.11.2022 and the said Form 10B was uploaded on 11.10.2022, whereas, as per the requirement u/s 139(1) of the Act, the Form 10B was required to be uploaded at least one month prior to the due date of filing of return i.e. on or before 07.10.2022, thus there was a small delay of only 3 days in uploading the Form 10B. We note that the delay is procedural in nature and does not Assessment Year: 2017-18 Bengal Education Foundation go to the root of the eligibility of assessee to claim exemption u/s 11 of the Act. The Jurisdictional Calcutta High Court in the case of CIT vs. M/s Indian Sugar Mills Association (supra) held that such procedural lapse should not be the denial of the substantive claim. We also note that filing of Form 10B is procedural lapse on the part of the assessee which was duly filed during the course of assessment proceedings itself and filing of Form 10B cannot be a ground for denying the legitimate exemption u/s 11(2) of the Act, when all the conditions precedent for allowing such exemption have been fulfilled by the assessee and the activities of the trust are not in doubt and therefore, the exemption u/s 11(2) of the Act could not be denied on technicalities. We also place reliance to the decision of this Court in CIT v. Gujarat Oil and Allied Industries Ltd. [1993] 201 ITR 325 (Gujarat), wherein it is held that the provision regarding furnishing of audit report with the return has to be treated as a procedural proviso. It is directory in nature and its substantial compliance would suffice. In that case, the assessee had not produced the audit report along with the return of income but produced the same before the completion of the assessment. This Court took the view that the benefit of exemption should not be denied merely on account of delay in furnishing the same and it is permissible for the assessee to produce the audit report at a later stage either before the Income-tax Officer or before the appellate authority by assigning sufficient cause." The ld. Departmental Representative has failed to place before us any other binding precedents of Hon'ble Jurisdictional High Court or the Hon'ble Apex Court. Keeping in view the above cited decisions and considering the facts of the present case, we are of this view, we hold that this small delay in uploading the Form 10B is condonable and the assessee cannot be denied benefit of exemption on such technical ground. Therefore, the demand raised in the intimation u/s 143(1) of the against the assessee is accordingly set aside and we Assessment Year: 2017-18 Bengal Education Foundation direct the CPC to allow the claim of exemption u/s 11 of the Act of the assessee.
In the result, the appeal of the assessee is allowed. Kolkata, the 20th May, 2025.