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Facts
The assessee trust filed its return for AY 2016-17. The AO denied a deduction of Rs. 4,82,850/- for non-submission of the Audit Report in Form 10B before the due date and also denied deemed application of Rs. 8,09,074/- for not furnishing Form 9A. The assessee appealed against these disallowances.
Held
The Tribunal held that the delay in filing the Audit Report on Form 10B is directory and can be furnished at the appellate stage. The Tribunal also condoned the delay in filing Form 9A, citing a CBDT circular and acknowledging technical issues during the first year of e-filing.
Key Issues
Whether delay in filing Form 10B and Form 9A can be condoned for claiming deductions and deemed application of income respectively.
Sections Cited
143(3), 11(1)(a), 139(1), 119(2)(b), 11, 13
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Income Tax Appellate Tribunal, PUNE BENCHES “SMC”, PUNE
Before: DR.MANISH BORAD
आदेश / ORDER
The captioned appeal at the instance of assessee pertaining to Assessment Year 2016-17 is directed against the order dated 15.07.2025 of Addl/JCIT(A)-3, Chennai emanating out of Assessment order dated 29.11.2018 passed u/s.143(3) of the Income Tax Act, 1961.
Though the assessee has raised effectively five grounds of appeal but they all relate to following issues :
(i) Denial of deduction u/s.11(1)(a) of the Act at Rs.4,82,850/- for non submission of Audit Report on Form 10B. (ii) Denial of deemed application of Rs.8,09,074/- exercised on Form No.9A as per clause 2 to Explanation 2 to sub-section (1) for non furnishing of section 11 of Form 9A prescribed under the Income Tax Rules.
Brief facts of the case are that the assessee is a trust and furnished return for A.Y. 2016-17 on 29.10.2016. The case being selected for scrutiny through CASS for the reason “Approval obtained u/s.80G and large increase in total voluntary contributions as per Part B-TI of ITR” followed by serving of statutory notices u/s.143(2) and 142(1) of the Act. Assessee trust has shown receipts of Rs.30,66,561/- and incurred expenditure to the extent of Rs.17,74,343/-. Ld. Assessing Officer (AO) noticed that assessee has claimed deemed application of Rs.8,09,074/- under clause 2 of Explanation to sub-section (1) of section 11 but the requirement of filing of Form No.9A has not been furnished. Though the assessee has uploaded Form No.9A online on 29.10.2016 but on verification of e-filing portal ld. AO did not found Form 9A and thus declined the claim. Further, ld. AO observed that assessee has claimed application of income of Rs.4,82,850/- u/s.11(1)(a) of the Act but since the Audit Report on Form No.10B was not furnished before the due date specified in section 139(1) of the Act, the said claim was also denied and total income assessed at Rs.12,91,924/-.
4. Aggrieved assessee preferred appeal before ld.CIT(A) but failed to succeed. Now the assessee is in appeal before this Tribunal.
5. Ld. Counsel for the assessee contended that Audit Report on Form No.10B has been furnished on 29.10.2016 which is prior to the passing of the assessment order and in view of plethora of decisions where it has been consistently held that filing of Audit Report is directory in nature and even if it is filed during the course of assessment proceedings or before the culmination of the appellate proceedings before ld.CIT(A) the same should be entertained.
6. So far as the issue regarding filing of Form No.9A is concerned, ld. Counsel for the assessee submitted that as per the information given by the assessee Form No.9A furnished online but due to some technical fault the same was not uploaded properly and was not appearing on the e-filling portal. He further submitted that subsequently assessee has furnished Form No.9A again on 15.01.2019 and in view of CBDT Circular No.07/2018 dated 20.12.2018 such delay ought to have been condoned and the claim of deemed application of income deserves to be allowed. Reference also made to the various documents placed in the paper book running into 66 pages.
On the other hand, ld. Departmental Representative vehemently argued supporting the order of ld.CIT(A).
I have heard the rival contentions and perused the record placed before me. The first issue is regarding denial of claim of deduction u/s.11(1)(a) of the Act at Rs.4,82,800/- for delay in filing of Audit Report on Form No.10B. The issue is no longer res integra. It has been held by Hon’ble Courts including that of Hon’ble Gujarat High Court in the case of Sarvodaya Charitable Trust Vs. ITO reported in (2021) 133 taxmann.com 43 (Guj HC) that delay in filing of Form No.10B is directory in nature and the same can even be furnished even at the appellate stage. Respectfully following the judicial precedent and also observing that assessee has finally furnished Audit Report on 29.10.2016 which is much prior to the culmination of the assessment proceedings, therefore, the claim of application of income at Rs.4,82,850/- u/s.11(1)(a) of the Act stands allowed. Ground Nos. 2 and 3 raised by the assessee are allowed.
So far as Ground Nos. 4 and 5 relating to denial of claim of deemed application of income at Rs.8,09,074/- for not exercising the option of filing of Form No.9A before the due date of filing of return of income u/s.139(1) of the Act, I note that the assessee during the course of assessment proceedings has claimed that Form No.9A has been filed on 29.10.2016, i.e. along with filing of ITR. However, ld. AO could not find the same on verification of e-filing portal. Subsequently, assessee has e-filed Form No.9A on 15.01.2019 exercising the option under clause 2 of Explanation to section 11(1)(a) of the Act. Admittedly, the same has not been filed before the prescribed due date of filing the return of income u/s.139(1) of the Act and therefore the said claim of deemed application of income has been denied.
Before me, Ld. Counsel for the assessee has referred to CBDT Circular No.07/2018 dated 20.12.2018. It has been issued by the CBDT regarding condonation of delay u/s.119(2)(b) of the Act in filing of Form No.10/9A for A.Y. 2016-17 and the same reads as under :
“Sub: Condonation of delay under section 119(2)(b) of the Income-tax Act, 1961 in filing of Form no. 10 and Form No. 9A for AY 2016-17 Under the provisions of section 11 of the Income-tax Act, 1961 (hereafter Act) the primary condition for grant of exemption to trust or institution in respect of income derived from property held under such trust is that the income derived from property held under trust should be applied for the charitable purposes in India. Where such income cannot be applied during the previous year, it has to be accumulated and applied for such purposes in accordance with various conditions provided in the section.
2 The Finance Act, 2015 amended section 11 and section 13 of the Act with effect from 01.04.2016 (Α.Υ. 2016-17). Consequently, Income-tax Rules, 1962 (hereafter 'Rules') were also amended vide the Income-tax (1" Amendment) Rules, 2016. As per the amended provisions of the Act read with rule 17 of the Rules, while 15% of the income can be accumulated indefinitely by the trust or institution, 85% of income can only be accumulated for a period not exceeding 5 years subject to the conditions, inter alia, that such person submits the prescribed Form No. 10 electronically to the Assessing Officer within the due date specified under section 139(1) of the Act.
3. Further, where the income from the property held under trust and applied to charitable or religious purposes falls short of 85% of the income derived during the previous year for the reason that the income has not been received during that year or any other reason, then on exercise of the option by submitting in Form No.9A electronically by the trust/institution on or before the due date of furnishing the return of income, such income shall be deemed to have been applied for charitable or religious purpose.
Representations have been received by the Board/ field authorities stating that the Form No. 9A and Form No.10 could not be filed in the specified time for AY 2016-17, which was the first year of e-filing of these forms. It has been requested that the delay in filing of Form No. 9A and Form No.10 for AY 2016-17 may be condoned under section 119(2) (b) of the Act
Accordingly, in supersession of earlier Circular/Instruction issued in this regard, with a view to expedite the disposal of applications filed by trusts for condoning the delay and in exercise of the powers conferred under section 119(2)(b) of the Act, the Central Board of Direct Taxes hereby authorizes the Commissioners of Income-tax, to admit belated applications in Form No. 9A and Form No.10 in respect of AY 2016-17 where such Form No. 9A and Form No.10 are filed after the expiry of the time allowed under the relevant provisions of the Act.
The Commissioners will, while entertaining such belated applications in Form No. 9A and Form No.10, satisfy themselves that the assessee was prevented by reasonable cause from filing of applications in Form No. 9A and Form No.10 within the stipulated time. Further, in respect of Form No. 10 the Commissioners shall also satisfy themselves that the amount accumulated or set apart has been invested or deposited in any one or more of the forms or modes specified in sub-section (5) of section 11 of the Act.
Now perusal of the above circular indicates that various representations were received by Board/Field authorities that on account of technical reasons and also the first year of filing of these forms there had been delay in filing Form No.10 and Form 9A for A.Y. 2016-17 and the said circular was issued to condone the delay u/s.119(2)(b) of the Act. I find that the case of the assessee is also for A.Y. 2016-17 and this being a common problem faced by the various assessees, I find that delay in filing Form No.9A deserves to be condoned in the larger interest of justice, considering the new rules and regulations for e-filing of such forms and also observing that Commissioner(s) have been directed to entertain the uploaded applications and after satisfying themselves may condone the delay as specified u/s.119(2)(b) of the Act. Accordingly, since the assessee has also exercised option of filing Form No.9A on 15.01.2019 which is also prior to the conclusion of the appellate proceedings before ld.CIT(A) and also considering the CBDT Circular No.07/2018, the delay in filing of Form No.9A is hereby condoned and the claim of the assessee for deemed application of income of Rs.8,09,074/- under clause 2 of Explanation to section 11(1) of the Act is allowed. Ground No. 4 and 5 raised by the assessee are allowed.
Ground Nos. 1 and 6 are general in nature which needs no adjudication.
In the result, appeal filed by the assessee is allowed as per the terms indicated above.