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Facts
The assessee, a Charitable Trust, filed its Income Tax Return for AY 2020-21 belatedly, claiming exemption under Section 11 of the Income Tax Act. The return was processed under Section 143(1), and the exemption was disallowed due to the belated filing of Form 10B. The Ld. Addl./Joint CIT(A) dismissed the assessee's appeal, confirming the disallowance and also noting issues with the delay in filing the appeal itself. Aggrieved, the assessee filed an appeal before the Income Tax Appellate Tribunal.
Held
The Tribunal condoned the delay in filing the appeal before the Ld. Addl./Joint CIT(A). Following judicial precedents and CBDT instructions, it held that the filing of Form 10B is directory and not mandatory. Crucially, the Tribunal found that the intimation issued under Section 143(1)(a) was invalid as no prior show cause notice was issued to the assessee before making the disallowance. The matter was remanded to the Ld. Addl./Joint CIT(A) to ascertain the facts regarding the issuance of the show cause notice and, if none was issued, to delete the adjustment, providing the assessee a reasonable opportunity.
Key Issues
1. Whether the delay in filing the appeal before the CIT(A) should be condoned. 2. Whether the disallowance of Section 11 exemption due to belated filing of Form 10B is justified, especially when no prior intimation was issued under Section 143(1)(a). 3. Whether the filing of Form 10B is mandatory or directory for claiming Section 11 exemption.
Sections Cited
250, 143(1), 143(1)(a), 11, 139, 139(4), 139(9), 12AA, 12(1)(ba), 46A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, KOLKATA ‘SMC’ BENCH, KOLKATA
Before: SHRI SONJOY SARMA & SHRI RAKESH MISHRA
order
: April 4th, 2025 ORDER
PER RAKESH MISHRA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is against the order of the Ld. ADDL/JCIT(A)-1, Surat [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 2020-21dated 24.09.2024, which has been passed against the intimation order u/s 143(1) of the Act, dated 30.11.2021.
“1 For that the Ld. CIT(A) erred in not condoning the delay in filing the appeal even when reasonable cause for not filing the appeal within time was duly explained.
For that the Ld. CIT(A) erred in confirming the action of CPC in not issuing any prior intimation 143(1)(a) before making the impugned disallowance of application of income u/s 143(1) of the I.T. Act and therefore the disallowance is liable to be deleted and returned income be accepted.
3. For that the Ld. CIT(A) erred in confirming the action of CPC in disallowing the amount of Rs. 12,96,197/- on account of application of income during the year without assigning any specific reason.
For that the Ld. CIT(A) erred in confirming the action of CPC Bangalore in disallowing the claim of exemption u/s 11 in the intimation u/s 143(1) for delay in filing audit report in Form 10B when there was no mismatch of data uploaded in the audit report and the data contained in the return of income which was not disturbed by way of selection under scrutiny.
For that the Ld. CIT(A) erred in confirming the action of CPC Bangalore in disallowing the claim of exemption u/s 11 in the intimation u/s 143(1) for delay in filing audit report in Form 10B when the requirement was only directory and not mandatory and therefore the exemption should not be denied only for technical breach of law and procedural irregularities 6. For that the Ld. AO erred in disallowing the claim of exemption in the intimation u/s 143(1) when such adjustment was outside the purview of the section.”
Brief facts of the case are that the assessee is a Trust and had filed the return of income on 31.03.2016 showing total income of Rs. ‘NIL’ that is after the due date of filing i.e. 15.02.2021. The return was processed u/s 143(1) of the Act and the exemption claimed by the assessee u/s 11 of the Act was disallowed. Aggrieved with the intimation u/s 143(1)(a) of the Act, the assessee preferred an appeal before the Ld. Addl./Joint CIT(A) who, vide order dated 24.09.2024 “5.1. However, notwithstanding with the above, for sake of natural justice, the appeal is adjudicated on merit also. The grounds of appeal are pertaining to making adjustment by way of disallowance of deduction under section 11 of the Act during processing of ITR filed for A.Y. 2020-21 u/s. 143(1) of the Act. Aggrieved by the said disallowance, the appellant is in appeal and has raised this ground which is adjudicated hereunder. 5.2. During the appellant proceedings, notices u/s 250 of the Act was issued to the appellant. In response to the notice, the appellant has filed written submission along with evidences in the e-filing portal of the Department. In view of the above facts, I proceed to dispose the appeal of the appellant, accordingly. I have gone through the order passed u/s.143(1) of the Act, grounds of appeal, statement of facts and submission of the appellant. The appellant had filed its original return of income for AY 2020-21 on 31.03.2021 i.e. after the extended due date of 15.02.2021 claiming exemption of Rs. 13,66,994/- u/s. 11 of the I.T. Act however Form 10B was not filed within due date.
5. Rival submissions were heard, the paper book filed and the submissions made have been examined. As regards the delay in filing the appeal before the Ld. Addl./Joint CIT(A), the assessee has filed an affidavit of Shri Sunil Kumar Jalan (CS), the contents of which are as under:
“I, Sunil Kumar Jalan, (CS) and A/R aged about 55 years, residing at 123/4, Bangur Avenue, Block-B, North 24 Parganas, Kolkata-700055 working for gain at 4 Fairlie Place, Kolkata-700001, do solemnly affirm and declare as under:
1. 1. That I was looking after the Audit, Income Tax Return filing and Tax matters of M/s Seth BD Goyal Charitable Trust for Assessment Year-2020-21.
2. That in December 2021, Sri Birdhi Chand Goyal, trustee of M/s Seth B D Goyal Charitable Trust handed me order under section 143(1) dated 30.11.2021 for Assessment Year-2020-21 to file an appeal before CIT(A).
3. That I kept the order on my table. However I could not attend office subsequently as the third Covid wave just started. Later on after a month when I joined, there was huge piling of work on my table. I could not remembrance the pending work and the order got misplaced and therefore I could not keep track of filing the appeal.
4. Later on, in the month of May 2023, the trust wanted to know the status of appeal from me. On searching all the files, it was unfortunately noticed that the order against which appeal was to be filed was by mistake kept in another file.
6. That delay of 384 days in filing appeal was accidental and due to lapse on my part and was unintentional. The trust was not gaining any benefit by delaying the appeal.
The Ld. AR relied upon the decision of the Coordinate Bench of ITAT, Kolkata in the case of ITO vs. Camellia Educare Trust in order dated 30.05.2023 and the judgment of Hon'ble Calcutta High Court in the case of CIT(Exemptions), Kolkata vs. Camellia Educare Trust reported in I.A. No. GA/2/2024 dated 15.05.2024 besides other decisions in support of the claim that belated audit report in Form No. 10B ought to have been accepted as the filing of the same along with the return of income is directory and not mandatory.
We have gone through the submissions made. The Hon'ble Calcutta High Court in the case of Camellia Educare Trust (supra) has confirmed the order of the Coordinate Bench dated 30.05.2023. The Hon'ble Tribunal in the case of Camellia Educare Trust (supra) has held as under:
“7. We have heard the rival contentions and perused the material available on record and have gone through various references made by both the parties in the course of their arguments. We do find force in the submissions made by the Ld. Counsel for his reliance on the CBDT Instruction extracted above, wherein reference is made to sec. 139 in respect of filing of return for the purpose of claiming benefit of exemption u/s. 11 for trust registered u/s. 12AA of the Act. Clarification given by the CBDT instruction gets verified
In the result, the appeal filed by the assessee is allowed for statistical purposes.