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Income Tax Appellate Tribunal, PUNE BENCH A, PUNE
Before: SHRI R. K. PANDA & MS. ASTHA CHANDRA
This appeal filed by the assessee is directed against the order dated 27.02.2025 of the Ld. Addl / JCIT(A)-1, Gurugram relating to assessment year 2014-15.
Although a number of grounds have been raised by the assessee, however, these all relate to the order of the Ld. Addl / JCIT(A) in upholding the denial of exemption u/s 11 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by the Assessing Officer on the ground that Form 10B was not electronically uploaded at the time of filing of the return.
Facts of the case, in brief, are that the assessee filed its return of income on 14.07.2015 declaring Nil income. The ITR was processed on 30.03.2017 by raising a demand of Rs.98 lakhs. Since the assessee did not pay any tax against the demand so raised u/s 143(1) a recovery letter was issued to the assessee in response to which the assessee submitted a rectification application stating that the demand was raised due to non filing of Form 10B along with the ITR within due date. It was argued that the CPC denied the exemption u/s 11 of the Act due to non-filing of Form 10B in time. On verification of the order u/s 143(1) and the financial statements submitted by the assessee the Assessing Officer noticed that the gross receipt for the year under consideration was taxed. Since the assessee did not file its Form 10B in time within the meaning of section 139 the Assessing Officer rejected the rectification application filed by the assessee.
4. In appeal the Ld. Addl / JCIT(A) upheld the action of the Assessing Officer.
Aggrieved with such order of the Ld. Addl / JCIT(A), the assessee is in appeal before the Tribunal.
The Ld. Counsel for the assessee at the outset referring to the decision of the Hon’ble Gujarat High Court in the case of CIT vs. Xavier Kelavani Mandal (P.) Ltd. (2014) 41 taxmann.com 184 (Gujarat) submitted that the Hon’ble High Court in the said decision has held that in order to claim exemption under section 11, the assessee can file audit report in Form No.10B even at a later stage either before Assessing Officer or before appellate authority by showing sufficient cause.
Referring to the decision of the Hon’ble Gujarat High Court in the case of Sarvodaya Charitable Trust vs. ITO (2021) 125 taxmann.com 75 (Guj) she submitted that the Hon’ble High Court in the said decision has held that where the assessee, a public charitable trust registered under section 12A, had substantially satisfied the condition for availing benefit of exemption as a trust, it could not be denied exemption merely on bar of limitation in furnishing audit report in Form No.10B.
Referring to the decision of the Pune Bench of the Tribunal in the case of DCIT vs. Audyogik Shikshan Mandal (2022) 195 ITD 153 (Pune-Trib.) she submitted that the Tribunal in the said decision has held that where audit report could not be filed by the assessee-trust before Assessing Officer due to reason beyond control but it was filed belatedly before Commissioner (Appeals) during appellate stage in prescribed Form No.10B as was required under section 12A(1)(b), the claim of exemption under section 11 was to be allowed.
9. Referring to the decision of the Mumbai Bench of the Tribunal in the case of Shree Bhairav Seva Samiti vs. ITO (2023) 101 ITR (T) 708 (Mumbai-Trib.) she submitted that the Tribunal in the said decision has held that where the assessee- trust had complied with procedural requirement of obtaining and filing Form 10B, exemption under section 11 could not be denied to it merely on technical ground of non-filing of Form 10B along with return of income. She accordingly submitted that the grounds raised by the assessee be allowed.
10. The Ld. DR on the other hand heavily relied on the orders of the Assessing Officer and the Ld. Addl / JCIT(A).
We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and the Ld. Addl / JCIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. It is an admitted fact that due to non-filing of the audit report in Form No.10B along with the return of income the Assessing Officer / CPC rejected the claim of exemption u/s 11. Further, the rectification application filed by the assessee was also rejected by the Assessing Officer. We find in appeal the Ld. Addl / JCIT(A) also upheld the action of the Assessing Officer on the ground that the audit report in Form No.10B was not filed along with the return of income. Therefore, failure to furnish such report in the prescribed form resulted in disentitling the trust from claiming the exemption u/s 11 and 12.
We find the Hon’ble Gujarat High Court in the case of Sarvodaya Charitable Trust vs. ITO (supra) has held that where the assessee, a public charitable trust registered under section 12A, had substantially satisfied the condition for availing benefit of exemption as a trust, it could not be denied exemption merely on bar of limitation in furnishing audit report in Form No.10B.
We find the Hon’ble Gujarat High Court in the case of CIT vs. Xavier Kelavani Mandal (P.) Ltd. (supra) has held that in order to claim exemption under section 11, the assessee can file audit report in Form No.10B even at a later stage either before Assessing Officer or before appellate authority by showing sufficient cause. The relevant observations of the Hon’ble High Court read as under: “3.2 In the appeal preferred by the assessee, the Commissioner of Income-tax (Appeals) permitted the assessee to file the audit report and directed to accept the same by his order dated 16.04.2009 and the exemption under section 11 of the Act allowed. The Department filed appeal which came to be dismissed by the impugned order bringing the Department before this Court by way of present appeal.
The question whether it is permissible to the assessee to produce the audit report at the appellate stage, has already been answered by this court in CIT v. Gujarat Oil & Allied Industries Ltd. (1953) 201 ITR 325 (Guj) wherein it is held that the provision regarding furnishing of audit report along with the return has to be treated as a procedural provision. 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 before completion of the assessment. The Punjab and Haryana High Court in CIT v. Shahzadanand Charity Trust [1997] 228 ITR 292 [1998] 96 Taxman 434 has reiterated the same principle holding 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 showing a sufficient cause. This decision of Punjab & Haryana High Court has been relied on by the Tribunal.
5. In the above view, the Tribunal is eminently justified both in law and on facts in observing and holding as under- "In this case, it is not in dispute that the audit report in prescribed form was obtained prior to filing of the return on 20/12/2006; therefore, there was no reason for the assessee to keep the audit report with it in order to loose the exemption. The assessee in the earlier as well as in the subsequent assessment years filed the audit report and got the exemption. The conduct of the assessee in earlier year and subsequent years would prove that due to the facts stated above there was delay in filing the audit report and the contention of the assessee was supported by the affidavit of Mohmad Iqbal Vohra (PB-4). The learned CIT(A) on proper appreciation of the facts and material on record in the light of the decisions of the Hon'ble Punjab & Haryana High Court and the Hon'ble Calcutta High Court rightly directed the AO to accept the audit report of the assessee and grant exemption u/s. 11 of the IT Act.
6. For the above reasons, the appeal of the Revenue is devoid of merit, raising no question of law much less any substantial question of law.
7. Accordingly the appeal is dismissed.”
We find the Mumbai Bench of the Tribunal in the case of Shree Bhairav Seva Samiti vs. ITO (supra) has held that where the assessee-trust had complied with procedural requirement of obtaining and filing Form 10B, exemption under section 11 could not be denied to it merely on technical ground of non-filing of Form 10B along with return of income. The relevant observations of the Tribunal read as under: “8. We have considered the rival submissions and perused the material available on record. The assessee trust is holding a valid certificate of registration under section 12AA of the Act since 24/09/1982. In its return of income filed under section 139(4) of the Act, the assessee claimed exemption in respect of revenue expenditure and capital expenses under section 11 of the Act. While processing the return filed by the assessee under section 143 (1) of the Act, CPC Bangalore denied the exemption claimed under section 11 of the Act and raised a demand of Rs.75,27,180. It is the plea of the assessee that Form 10B was obtained from the auditor on 15/09/2016, and due to the first year of e-filing Form 10B assessee faced some technical issues causing a delay in uploading the said Form. 9. In the present case, it is undisputed that the assessee trust is registered under section 12AA of the Act for the past 40 years and the said registration is still in existence. It is also not the case of the Revenue that the assessee has ceased to be a religious or charitable institution. Further, it is also not the case of the Revenue that the accounts of the assessee have not been audited by an accountant, and an audit report in Form 10B has not been obtained. Only on the technical aspect that Form 10B was not filed along with the return of income for the relevant assessment year, the exemption claimed under section 11 of the Act has been denied to the assessee without going into the merits. Further, no relief was granted to the assessee even when the assessee filed the application under section 154 of the Act. We find that while dealing with similar facts the Co–ordinate Bench of the Tribunal in Trinity Education Trust vs ITO, ITA No. 669/Srt./2018, vide order dated 28/02/2022, decided the issue in favour of the taxpayer by observing as under: “8. We have considered the rival submissions both the parties and perused the order of lower authorities carefully. We find that there is no dispute that at the time of filing of return of income, the audit report has required under Form 10B was not uploaded once uploaded on the system consequently the AO/CPC not allowed the exemption claimed under section 11. Assessing Officer/CPC brought the entire receipt as taxable income. On receipt intimation under section 143(1) of the Act the assessee uploaded in Form 10B and filed application for rectification under section 154 of the Act. The application of the assessee was rejected on the ground report in Form 10B was not furnished before due date of return of income. The Id. CIT(A) dismissed the appeal of the assessee by taking view the audit report in Form 10B was not uploaded before due date of return of income.
We find that the Hon'ble jurisdictional High Court in case of CIT vs. Xavier Kalavani Mandal (P.) Ltd. (supra) held that in order to claim exemption under section 11, the assessee can filed audit report in Form 10B even at later stage either before the Assessing Officer or before appellate authority by showing a sufficient cause. Further, Hon'ble jurisdictional High Court decision in case of Sarvodaya charitable Trust vs. ITO (Exemption) (supra) also held that where the assessee is a public charitable trust registered under section 12A of the Act and substantially satisfied condition for availing benefit of exemption as a charitable could not be denied exemption, the assessee merely on bar of limitation in furnishing audit report in Form 10B. Considering the aforesaid and legal discussion, we find that though the assessee has not filed any return of income at the time, however, it was available before the Id. CIT(A) as it was uploaded much before filing application under section 154. Therefore, respectfully following the decisions of Hon'ble jurisdictional High Court in case of CIT vs. Xavier Kalavani Mandal (P.) Ltd. (supra) and in Sarvodaya charitable Trust vs. ITO (Exemption) (supra), we find that the assessee has complied the procedural requirement, therefore, the Assessing Officer/CPC is directed to verify the claim of the assessee and grant necessary deduction under section 11 of IT Act. In the result, the appeal of the assessee is allowed for statistical purposes.”
As in the present case also the assessee has complied with the procedural requirement of obtaining and filing Form 10B, therefore, respectfully following the aforesaid decision of the Co-ordinate Bench of the Tribunal, the Assessing Officer is directed to decide the claim of the assessee under section 11 on merits, after accepting the Form 10B filed by the assessee. Accordingly, grounds raised
by the assessee are allowed for statistical purposes.
11. In the result, the appeal by the assessee is allowed for statistical purposes.”
Since in the instant case also the assessee is a trust registered u/s 12A(a) of the Act on 14.12.1988, copy of which is placed at page 2 of the paper book and has substantially complied with the provisions of section 11 and 12, therefore, merely because the audit report in Form No.10B was not filed along with the return of income should not be a ground to disentitle the assessee from the claim of exemption u/s 11 of the Act. We, therefore, set aside the order of the Ld. Addl / JCIT(A) and direct the Assessing Officer to allow the claim of exemption u/s 11 of the Act on merit after accepting the Form 10B filed by the assessee. The grounds raised by the assessee are accordingly allowed for statistical purposes.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 26th August, 2025.