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Facts
The assessee, a charitable trust, filed its return of income for AY 2021-22. The return was processed under Section 143(1) of the Act, disallowing a claim of exemption under Section 11 because the Audit Report in Form 10B was not filed before the due date. The CIT(A) dismissed the appeal for non-prosecution.
Held
The Tribunal held that a delay in filing Form 10B is a procedural default and should not disentitle the assessee from claiming exemption under Section 11 if other conditions are met and the report was available before the assessment order. The CIT(A)'s dismissal for non-prosecution was also noted.
Key Issues
Whether denial of exemption under Section 11 solely on account of delayed filing of Audit Report in Form 10B is justified when the report was available before assessment proceedings.
Sections Cited
143(1), 11, 139(1), 12A
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Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: DR. BRR KUMAR & SHRI SIDDHARTHA NAUTIYAL
(Assessment Year: 2021-22) Shree Bhakt Samaj Vikas Vs. Assistant Commissioner of Education Trust, Income Tax (Exemption), Dalia Mill Compound, Bodeli, Vadodara Chhotaudepur, Vadodara-391165 [PAN No.AAATS5728F] (Appellant) .. (Respondent) Appellant by : Shri Rushin Patel, AR Respondent by: Shri Alpesh Parmar, CIT DR 24.06.2025 Date of Hearing Date of Pronouncement 25.06.2025 O R D E R
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeal), (in short “Ld. CIT(A)”), ADDL/JCIT(A)-9, Mumbai vide order dated 28.03.2025 passed for A.Y. 2021-22.
The Assessee has taken the following grounds of appeal:-
“1. Under the facts and circumstances of the case Ld. CIT Appeal has erred in confirming the adjustments 143(1)(A) and or disallowance of the expenses and not granting exemptions legally available to charitable trust.
2. Ld. CIT Appeal also erred in not considering ITAT Ahmedabad bench order submitted with appeal. Being the case of Shri Mahudi Madhupuri Jain NSM Bhojanshalal & Prashafi Bhavan V. CPC, Bangalore Present Jurisdiction – ITO Ward-2, Exemption, Ahmedabad (Ahd-Trib.) reported in 2024 ITL 2053 order dated 04-06-2024.
Shree Bhakt Samaj Vikas Education Trust vs. ACIT(E) Asst.Year –2021-22 - 2– 3. Appellant reserves its right to add or vary the grounds of appeal before final hearing of this perition.”
3. The assessee has raised the following revised grounds of appeal: “1. The CPC, Bengaluru has erred in law and on facts of the case, in denying benefits u/s 11 of the assessee-trust, while processing the return of income u/s 143(1), on account of non-filing/belated filing of audit report in Form 10B despite availability of the said form at the time of such processing.
2. The ld. CIT(A) has erred in law and on facts of the case, in passing the order ex-parte merely for alleged non-prosecution, without providing proper opportunity of hearing and without adjudicating the matter of the merits. The appellant reserves its right to add, amend, alter and/or delete any of the grounds stated hereinabove either before or at the time of hearing.”
4. The brief facts of the case are that the assessee is a trust registered under Section 12A of the Act and a return of income was filed by the assessee / trust on 29.03.2024 for A.Y. 2021-22. The return of income of the assessee trust was processed under Section 143(1) of the Act, disallowing the claim of exemption under Section 11 of the Act amounting to Rs. 2,84,31,074/- on the ground that the assessee had not filed the Audit Report in Form 10B prior to the due date for furnishing return of income under Section 139(1) of the Act.
5. In appeal, Ld. CIT(A) dismissed the appeal of the assessee on the ground that despite issuance of various notices of hearing, none appeared on behalf of the assessee to present it’s case on merits. Accordingly, Ld. CIT(A) dismissed the appeal of the assessee with the following observations:
“The facts and circumstances of the case, the observations of the AO and material available on record on the above matter have been considered. A perusal of the appellate proceedings shows that appellant have not made any submissions to prove Shree Bhakt Samaj Vikas Education Trust vs. ACIT(E) Asst.Year –2021-22 - 3– that the conclusion reached by the AO was untrue. Further, the fact remained that the appellant failed to furnish any document/evidence in support of the various grounds of appeal raised; and that therefore, the explanation submitted by the assessee in support of the grounds of appeal remained unsubstantiated. It remained inexplicable as to what had prevented the assessee not to produce documents even during the course of appellate proceedings. As mentioned in above paragraph of this appeal order, this office has issued several letters to file written submission. However, neither any adjournment was sought for nor any written submissions were filed. The letters were issued through ITBA System at the e-mail ID provided in ITBA System. From the above conduct of the appellant, it is evident that the appellant is no more interested in pursuing the appeal. The Hon'ble Supreme Court in the case of CIT Vs B.N. Bhattachariee and others [1979]
10. CTR 354 (SC) observed that preferring an appeal, means effectively pursuing it. The Hon'ble M.P. High Court in the case of Estate of Late Tukojirao Holkar Vs CWT [1979] 223 ITR 480 (M.P.) dismissed the reference filed at the instance of the assessee for default and for not taking necessary steps. Considering the conduct of the appellant in the present circumstance, I am of the view that the appellant is not interested in pursuing the appeal. This view has been affirmed by Hon'ble ITAT Ahmedabad in case of Amitkumar H. Shah Vs. ACIT in vide their order dated 31.12.2013, wherein following the order of ITAT Delhi Bench in the case of CIT Vs Multiplan India Pvt. Ltd., [1991] 38 ITD 320 (Del), ITAT has dismissed the appeal filed by the assessee for want of persuasion. Under these circumstances, the current appeal of the appellant is liable to be dismissed. As a result, the appeal stands Dismissed.”
6. The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(A) upholding the disallowance made by CPC, Bengaluru. Before us, the Counsel for the assessee admitted that there was a delay in filing of Form 10B on account of mistake of the consultant of the assessee trust. However, the Counsel for the assessee submitted that at the time when the Assessing Officer processed the return of income under Section 143(1) of the Act denying claim of exemption under Section 11 of the Act on the ground that Audit Report in Form 10B has not filed alongwith return of income, since such Audit Report in Form 10B (though filed belatedly) was available with the Assessing Officer when he processed the return of income, requirement of law was satisfied and the assessee could not be denied exemption claimed under Section 11 of the Act on this ground Shree Bhakt Samaj Vikas Education Trust vs. ACIT(E) Asst.Year –2021-22 - 4– alone. In support of this argument, the Counsel for the assessee placed reliance in the case of Association of India Panelboard Manufacturer vs. DCIT 157 taxmann.com 550 (Gujarat). Further, the Counsel for the assessee furnished copy of Form 10B and submitted that the same was filed with the Tax Authorities on 01.04.2024 and since the same was available with the Assessing Officer, CPC before passing of order under Section 143(1) of the Act dated 17.12.2024, this was not a fit case for denial of exemption under Section 11 of the Act, only on account of delay in filing of Form 10B.
7. In response, Ld. D.R. placed reliance on the observations made by the Assessing Officer and Ld. CIT(A) in their respective orders.
We have heard the rival contentions and perused the material on record.
We observe that admittedly there was a delay on filing Form 10B by the assessee trust. It was on this basis that AO, CPC denied the claim of exemption under Section 11 of the Act. Ld. CIT(A) upheld the denial of exemption under Section 11 of the Act on the ground that despite issuance of multiple notices of hearing, none appeared on behalf of the assessee to present it’s case during the course of appellate proceedings. However, we note that it is a well settled law that delay in filing of Form 10B is a procedural default and if other conditions have been met, then mere delay in filing of Form 10B should not disentitle the assessee from claiming exemption under Section 11 of the Act. In the case of Sarvodaya Shree Bhakt Samaj Vikas Education Trust vs. ACIT(E) Asst.Year –2021-22 - 5– Charitable Trust v. ITO(E) [2021] 125 taxmann.com 75/278 Taxman 148 (Gujarat), the Hon’ble Gujarat High Court held that where assessee, a public charitable trust registered under Section 12A of the Act had substantially satisfied 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. While passing the order the Hon'ble Gujarat High Court made the following observations:
“31. Having given our due consideration to all the relevant aspects of the matter, we are of the view that the approach in the cases of the present type should be equitious, balancing and judicious. Technically, strictly and liberally speaking, the respondent no. 2 might be justified in denying the exemption under section 12 of the Act by rejecting such condonation application, but an assessee, a public charitable trust past 30 years who substantially satisfies the condition for availing such exemption, should not be denied the same merely on the bar of limitation especially when the legislature has conferred wide discretionary powers to condone such delay on the authorities concerned.
We may also refer to the decision of this Court in CIT v. Gujarat Oil and Allied Industries Ltd. [1993] 201 ITR 325 (Guj.), 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.
In view of the above, this writ-application succeeds and is hereby allowed. The impugned order passed by the respondent no. 2 dated 19th August 2019 (Annexure-A to this writ-application) is hereby quashed and set aside. The impugned rectification order at page-13 of the paper-book dated 12th February 2020 is also hereby quashed and set aside. The delay condonation application filed by the writ-applicant before the respondent no. 2 is hereby allowed.”
In the case of Association of Association of Indian Panelboard Manufacturer v. Dy. CIT [2023] 157 taxmann.com 550/482 ITR 54 (Gujarat)/R/Tax Appeal No. 655 of 2022 vide order dated 21.03.2023 Shree Bhakt Samaj Vikas Education Trust vs. ACIT(E) Asst.Year –2021-22 - 6– the Gujarat High Court held that once the audit report in Form 12B is found to be available with the Assessing Officer before conclusion of assessment proceedings, the requirement of law is satisfied. While passing the order the Hon’ble Gujarat High Court made the following observations:
“5.7 The tribunal misdirected itself in yet another way when it observed that The Finance Act, 2015 with effect from 1.4.2016, that is from assessment year 2016-17 changed the legal position. There is no such change which could be said to have altered the legal position. The only change is with regard to compulsory filing of audit report in Form 10B in electronically form which is made mandatory under Rule 12 (2) of the Income Tax Rules, 1962 but there is no change with regard to the substantive law about filing of audit report as stated above.
The moot aspect thus centres around to the requirement of the availability of the audit report when the assessment was undertaken by the Assessing Officer even though the same may not have been filed along with the return of income. Filing of audit report is held to be substantive requirement but not the mode and stage of filing, which is procedural. Once the audit report in Form 12B is filed to be available with the Assessing Officer, before assessment proceedings take place, the requirement of law is satisfied. In that view, the Income-Tax Tribunal was not justified in dismissing the appeal of the assessee.”
Accordingly, in view of the decision of the Hon’ble Gujarat High Court in this issue, as well as various other judicial precedents which have upheld the principle that delay in filing of Form 10B being a procedural default should not disentitle the assessee / applicant trust the denial of grant of exemption under Section 11 of the Act, we are of the considered view that in the assessee’s set of facts, claim of exemption under Section 11 of the Act should not be denied only on account of delay in filing Audit Report in Form 10B, within the stipulated time. However, we make it clear that we are not making any observations with regard to the merits of the claim of exemption under Section 11 of the Act, but are only allowing the appeal on the legal principle what once Form 10B has been filed by the assessee and the same is available with the Department before passing of order / intimation under Section 143(1) of the Act, then in view of the decisions of Jurisdictional High Court referred to above, the claim of exemption under Section 11 of the Act cannot be denied only on account of delay in filing of Form 10B before the due stipulated date.
In the result, the appeal of the assessee is allowed. This Order pronounced in Open Court on 25/06/2025