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Facts
The assessee society's claim for exemption under sections 11 and 12 of the Income Tax Act was denied for Assessment Year 2023-24 because they filed audit report in Form No. 10B instead of Form No. 10BB. Although the correct form was filed later, the assessing officer and CIT(A) denied the exemption.
Held
The Tribunal noted that judicial opinion on the issue of filing incorrect audit report form is not uniform. Considering various precedents and CBDT Circular No. 2/2024, the matter was remitted back to the Assessing Officer for fresh examination.
Key Issues
Whether filing audit report in Form 10B instead of Form 10BB disentitles the assessee from claiming exemption under sections 11 and 12 of the Income Tax Act.
Sections Cited
11, 12, 250, 143(1)
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IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “SMC”, CHANDIGARH HEARING THROUGH: PHYSICAL MODE BEFORE: SHRI. LALIET KUMAR, JM & SHRI. VIKRAM SINGH YADAV, AM 2025 Assessment Year : 2023-24 Shaping Careers Education Society Vs The ITO Exemption SCO 65, Swastik Vihar, Mansa Devi Ward, Ambala Complex, Sector-5, Panchkula, Haryana PAN NO: AAJAS1032L Appellant Respondent Assessee by : Shri Jaspal Sharma, Advocate Revenue by : Dr. Ranjit Kaur, Addl. CIT, Sr. DR (Virtual Mode) Date of Hearing : 19/08/2025 Date of Pronouncement : 20/08/2025 Order PER LALIET KUMAR, J.M:
This appeal by the assessee is directed against the order of the Ld. CIT, Appeal, Addl/JCIT(A)-2, Noida dated 29.03.2025 for the Assessment Year 2023-24 whereby the exemption claimed under sections 11 and 12 of the Act was denied on the ground that the assessee had filed its audit report in Form No. 10B instead of the prescribed Form No. 10BB as mandated under Rule 17B of the Income-tax Rules, 1962.
In the present appeal Assessee has raised the following grounds:
1. The impugned order u/s 250 dated 29.03.2025 passed by ADDL/JCIT(A) - 2, Noida, is opposed to law, facts and circumstances of the case.
2. On the facts and circumstances of the case the Ld. the ADDL/JCIT(A) - 2, Noida, has erred in having confirmed the action of the CPC in denying the exemption claimed by the assessee society u/s 11 of the Income Tax Act, although no notice or reason was given before denying the exemption by the CPC.
3. On the facts and circumstances of the case the Ld. the ADDL/JCIT(A) - 2, Noida, has erred in having not appreciated the fact that there was technical mistake in filing Form 10B along with return of income instead of Form 10BB and that prescribed Form 10BB was duly filed before passing the impugned order, although the powers of the first appellate authority are co- terminus with that of the AO i.e. he can do all that AO could do.
4. The impugned order passed u/s 250 of Income Tax Act, 1961 by the ADDL/ JCIT(A) - 2, Noida is against law and facts on the file in as much as he has confirmed the order of CPC, Bengaluru which added the depreciation in the income claimed exempt and making the whole income taxable inspite of the fact that without deduction of depreciation the assessee education society has spent more than 85% of the Gross Receipts/Income.
5. The assessee craves leave to add to, alter or amend the above grounds of appeal before the same is heard or disposed off.
It is prayed that the exemption claimed in the return of income, be allowed.
At the time of hearing, the Ld. Counsel for the Assessee submitted that the assessee society is duly registered under section 12A of the Act and had e-filed its return of income on 06.11.2023 claiming exemption of income. However, due to an inadvertent mistake, the audit report was furnished in Form No. 10B in place of Form No. 10BB, though the correct form was subsequently filed upon noticing the error. It was argued that this lapse is only procedural in nature and exemption under sections 11 and 12 cannot be denied once the substantive conditions of application of income and registration are fulfilled. Reliance was placed on the decision of the Pune Bench of the Tribunal in ACIT v. Nanded Sikhgurudwara Sachkhand Hazur Sahib [2025] 174 taxmann.com 1116, where belated filing of Form 10BB during assessment proceedings was held to constitute sufficient compliance. Further reliance was placed on the decision of the Bangalore Bench in Ashwini’s Sports Foundation v. ITO (Exemptions) [2025] 175 taxmann.com 1073 wherein, in view of CBDT Circular No. 2/2024 dated 05.03.2024, belated filing of Form 10BB was considered as being within due date if furnished before 31.03.2024. The AR also placed reliance on the coordinate bench decision in Sanskriti KMV School v. ACIT (Exemptions) [2021] 127 taxmann.com 178/190 ITD 29, as well as B.R. Hospital Research Institute v. ITO [2024] 167 taxmann.com 389 (Delhi – Trib.), both holding that filing of audit report before completion of assessment is sufficient compliance. Support was also drawn from the judgment of the Hon’ble Gujarat High Court in CIT (Exemptions) v. Laxmanarayan Dev Shrishan Seva Khendra [2024] 167 taxmann.com 548, which, after considering the decision of the Hon’ble Supreme Court in Wipro Ltd., held that belated filing of audit report during assessment or appellate proceedings amounts to sufficient compliance. It was further submitted that more than 85% of the receipts had been applied for charitable purposes and, therefore, exemption could not be denied on mere technicalities.
On the other hand, the Ld. DR supported the order of the CIT(A) and contended that filing of audit report in Form No. 10BB is a mandatory statutory requirement, the non-compliance of which disentitles the assessee from claiming exemption. He strongly relied upon the judgment of the Hon’ble Punjab & Haryana High Court in Silver Rock Educational Charitable Society v. CIT (Exemptions) [2025] 175 taxmann.com 530, wherein condonation of delay was refused on the ground that filing Form 10B instead of Form 10BB does not establish any genuine hardship, particularly where repeated defaults were committed by the assessee. According to the DR, the CPC had no discretion to condone such lapse while processing returns under section 143(1) and the CIT(A) has rightly confirmed the denial of exemption.
We have carefully considered the rival submissions and perused the material available on record. The limited controversy before us is whether filing of Form No. 10B in place of Form No. 10BB disentitles the assessee from the benefit of exemption under sections 11 and 12 of the Act. We note that judicial opinion on the issue is not uniform. While the Pune Bench in Nanded Sikhgurudwara Sachkhand Hazur Sahib (supra) and the Bangalore Bench in Ashwini’s Sports Foundation (supra) have adopted a liberal view by holding that belated filing of Form 10BB constitutes sufficient compliance, especially in light of CBDT Circular No. 2/2024, the Hon’ble Punjab & Haryana High Court in Silver Rock Educational Charitable Society (supra) has taken a strict view, refusing to condone delay on the ground that mere filing of Form 10B instead of 10BB is not a hardship. In addition, other precedents such as Sanskriti KMV School (supra), B.R. Hospital Research Institute (supra) and Laxmanarayan Dev Shrishan Seva Khendra (supra) have held that filing of audit report before completion of assessment or appellate proceedings is sufficient compliance and that procedural lapses should not defeat substantive rights of charitable institutions. We also noticed that the Hon'ble Supreme Court has granted the liberty to the assessee in the case of Silver Rock Educational Charitable Society(supra) to file a rectification application before the Hon’ble Punjab & Haryana High Court to prove the hardship in SLP Appeal (C) No(s).15312 of 2025 on MAY 30, 2025.
5.1 In the present case, the factual matrix relating to the date of filing of Form 10B, subsequent filing of Form 10BB, applicability of CBDT Circular No. 2/2024, and whether the conduct of the assessee reflects negligence or genuine hardship, requires proper verification. These issues, involving mixed questions of fact and law, are best examined at the stage of the Assessing Officer.
5.2 In view of the above discussion, we deem it appropriate to remit the matter back to the file of the jurisdictional Assessing Officer. The Assessing Officer shall re-examine the claim of exemption afresh in the light of the judicial precedents cited on both sides, namely Nanded Sikhgurudwara Sachkhand Hazur Sahib (Pune – Trib.), Ashwini’s Sports Foundation (Bangalore – Trib.), Sanskriti KMV School (Amritsar – Trib.), B.R. Hospital Research Institute (Delhi – Trib.) and Laxmanarayan Dev Shrishan Seva Khendra (Gujarat High Court), together with CBDT Circular No. 2/2024 dated 05.03.2024. Neeless to say at that time the Assessing Officer shall be bound by the decision of the Jurisdictional High Court in the case of Silver Rock Educational Charitable Society (Punjab & Haryana High Court), and the subsequent direction issued by the Hon'ble Supreme Court in the said case on 30th May 2025. The Ld. Assessing Officer shall afford due opportunity of hearing to the assessee and thereafter a reasoned order shall be passed in accordance with law. We make it clear that we have not expressed any conclusive view on the merits of the case and all contentions are left open.
In the result, the appeal is allowed for statistical purposes.
Order pronounced in the open Court on 20/08/2025