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Facts
The assessee, Indian Red Cross Society, filed its return claiming exemption under Section 11. The CPC denied this exemption due to the late e-filing of Form 10B, assessing gross receipts. The CIT(A) upheld this decision.
Held
The Tribunal held that furnishing the audit report is a procedural requirement, and a delay should not lead to the denial of exemption, especially for a long-standing charitable institution. The delay in filing Form 10B was condoned.
Key Issues
Whether the denial of exemption under Section 11 due to the late filing of Form 10B is justified, or if the procedural delay should be condoned.
Sections Cited
11, 12AA, 154, 250, 119(2)(b)
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Income Tax Appellate Tribunal, CHANDIGARH BENCH “A”, CHANDIGARH
Before: SHRI. RAJPAL YADAV, VP & SHRI. KRINWANT SAHAY, AM
िनधा�रती की ओर से/Assessee by : Shri Sudhir Sehgal, Advocate राज� की ओर से/ Revenue by : Shri Manav Bansal, CIT, DR सुनवाई की तारीख/Date of Hearing : 04/06/2025 उदघोषणा की तारीख/Date of Pronouncement : 07/07/2025 आदेश/Order
PER KRINWANT SAHAY, AM:
This is an appeal filed by the Assessee against the order of the Ld. CIT(A)/NFAC, Delhi dt. 02/08/2023 pertaining to Assessment Year 2018-19.
During the course of hearing, it is pleaded by the assessee that he has filed concise grounds of appeal
and that only be considered as filed vide letter dated 23.08.2024 which are as under:-
1. The Ld. CIT(A) NFAC has erred on facts and law in dismissing the appeal of the assessee, vide order u/s 250 of the act Dt. 02.08.2023 for Ay 2018-19, filed against order u/s 154 of the Act Dt. 24.07.2020, passed by CPC, in which, the request was made by the assessee to rectify the mistake of denying the exemption u/s 11 of the Act and assessing the income at Rs.
2 5,73,37,740/-, as against nil income declared in the return of income, has been rejected.
2. That the Ld. CIT(A) NFAC has erred in denying the request of the assessee in the appeal filed against order u/s 154 of the Act Dt. 24.07.2020 to allow the exemption u/s 11 of the Act on account of non-filing of Form-10B by the auditors, within prescribed period under the Act.
That the Ld. CIT(A) NFAC has erred in deciding the appeal filed against order u/s 154 of the Act Dt. 24.07.2020 while relying upon the CBDT Circular No.07/2018 and decision of Ahmedabad Bench of the ITAT in the case of Associations of Indian Panel Board vs. DCIT, CPC Bangalore for Asstt. Year 2018-19 in Dt. 22.07.2022, which judgment was delivered by relying on Board Circular No.7/2018, which was relevant to filing of Form No.10 and Form No.9A and 10B as in the case of assessee.
Notwithstanding the above said grounds of appeal
, the Ld. CIT(A) NFAC has erred in computing the income of the assessee at Rs.5,73,37,740/- being the Gross Receipts of the assessee as per audited consolidated Income and Expenditure Account.
5. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed of.
3. At the outset, it is noticed that appeal is late by three days for which the assessee has filed request for condonation of delay on 25.10.2023 alongwith affidavit of the assessee and the reasons for delay is as under:- Date of service of order 02.08.2023 Appeal to be filed 30.09.2023 Appeal filed on 04.10.2023 Delay in filing the appeal 3 days 3.1 It has been contended in the application and affidavit that the Ld. Counsel of the assessee had dispatched the appeal
3 through courier on 30.09.2023 but it took three days’ time to reach its destination since, Ist of October was Sunday and 2nd of October 2023 was holiday, the appeal was accordingly, delivered to the office of ITAT on 04.10.2023 and, thus, it was prayed for condonation of delay. The CIT (DR) did not object to such condonation. After going through the application and affidavit, we condone the delay.
4. The facts as emerging out from the order of Ld. CIT(A) are that the assessee is a registered society u/s 12AA of the Income Tax Act 1961 vide order, dated 25.03.2015 of the CIT (Exemption). The facts, in brief, are that the assessee had filed the return of income on 30.09.2018 i.e. within time after claiming exemption u/s 11 of the Act. While processing the return, it was discovered by the CPC that, though, the return has been filed in time i.e. on 30.09.2018 but the audit report on Form, No. 10B which was signed on 11.09.2018 by the CA, could not be e-filed in the prescribed Form No.10B and, accordingly, the CPC vide order, dated 10.11.2019, in an intimation withdrew the said exemption as claimed to the tune of Rs. 5,50,30,907/- and also assessed the gross receipts as disclosed at Rs. 5,73,37,740/- and passed the order. The assessee, thereafter, filed an application u/s 154 of the Act on 09.02.2020 with the CPC but the same was also rejected by CPC, vide order, dated 24.07.2020.
Aggrieved with the order of the CPC, the Assessee filed an appeal before the CIT(A). The Ld. CIT(A) vide his order dated 2.8.2023, dismissed the appeal of the Assessee. The Ld. CIT(A) has 4 given his finding that the Assessee seems to have not filed any application for condonation of delay u/s 119(2)(b), for late filing of 10B Reports.
During proceedings before us, It was argued by the Ld. Counsel for the assessee that the said society is administered by the ‘District Magistrate’. The activities of the Trust/Society include providing aid and medicines to the poor, the handicapped and to Widows. It also runs an educational institution under the name and style of M/s Mahant Gurbanta Dass School for Deaf & Dumb, Bathinda, which is affiliated with Punjab School Education Board, Mohali.
It was further argued by the Ld. Counsel for the assessee that earlier also, the scrutiny assessment have taken place and the exemption u/s 11 have been granted on the basis of return filed by the assessee and during the year under consideration, it was only on account of the inadvertent mistake on the part of the counsel of the assessee that the said audit report could not be filed in time. On the other hand, the assessee was under a bonafide belief that the said auditor would have filed the Form No.10 B from his e-filing portal to meet the necessary requirement. It was also stated that there were certain technical glitches as well on the web site of the department and that also caused delay and, thus, the withdrawal of exemption and taxing of gross receipts was not in order.
The Ld. Counsel in this context relied upon the judgment of Gujarat High Court in the case of“Sarvodaya Charitable Trust Vs
5 ITO (Exemptions) 125 taxmann.com 75”, in which, relying upon the earlier decision of same Court in the case of “Gujarat Oil and Allied Welfare Trust Vs ITO (Exms)”, 201 ITR 325, wherein, it was held that provisions regarding furnishing of audit report with the return of income has to be treated as procedural provisions, substantial compliance would be suffice, if the Compliance is furnished later on. The court also took the view that the bonafide exemption should not be denied merely on account of delay in furnishing the said audit report and it is permissible for the assessee to produce the ‘audit report’ at later stage, either before the AO or before the Appellate authority. Reliance was placed on the following case laws.” i). Judgement of ITAT, Ahmedabad Bench in the case of ITO, Ward (Exemptions) Vs. Laxminarayan Dev. ShrishanSevaKhendra in . In this case, the earlier judgment of ITAT, Ahmedabad Bench in the case of Hari Gyan Pracharak Trust Vs DCIT in vide order, dated 16.06.2023 was relied for the preposition that the filing audit report is only procedutral and, as such, the delay was condoned and exemption u/s 11 of the ACT was allowed. ii). Similar is the judgment of ITAT, Ahmedabad In the case of Gyandeep Charitable Trust Vs ADIT, CPC Bangalore/ITO, Ward-3 (3)(1) in ITA No. 555/Ahd/2023.
In the above said cases, it was again laid down, the following judgment of Gujarat Oil and Allied Welfare Trust Vs ITO (Exm) as ‘cited supra’ that furnishing of audit report is procedural in nature and, as such, it was argued that no doubt have been raised about the aims and objects of the Trust, so, the said exemption needs to be allowed. It was further pointed out that the CIT(A), while deciding the appeal has relied upon the Circular
6 No. 7/2018, dated 20.12.2018 at page 10 of his order, which related to Form No. 10 and Form No. 9A and, in the present case, it is a the case of delay in filing the audit report on Form No.10B and thus, it was argued that wrong conclusion has been drawn by the CIT(A).
The CIT (DR) relied upon the order of CIT(A) and stated that there was no sufficient reason for the delay. Further, the assessee is assisted by the counsel in day-to-day compliances in respect of Income Tax matters therefore, the ld. DR sought the confirmation of the order of CIT(A).
11. We have gone through, the order of CIT(A), Brief synopsis and Paper Books filed by the assessee, including the judgment as relied upon. There is no doubt by the Authorities below have not doubted activities of the society. The disallowance of exemption u/s 11 has been made only on account of delay in furnishing the Form No.10-B. We also find that lateron, the said report was furnished.
11.1. We have carefully gone through the judgments as relied upon by the Ld. Counsel in the case of ‘Sarvodaya Charitable Trust’ as ‘cited supra’ in which, the identical facts were there. In that judgment by relying upon the earlier judgment of ‘Gujarat High Court’ in the case of Gujarat Oil and Allied Welfare Trust, it was held as under:- “31. Having given our due consideration to all the relevant aspects of the matter, we are ofthe view that the approach in the cases of the present type should be equities, balancing and judicious. Technically, strictly and liberally speaking, the respondent no. 2 might be justified 7 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.”
11.2 In the present case also, the Indian Red Cross Society has been in existence for the past more than 50 years. The exemption was withdrawn only on account of some technical issue, without doubting the charitable activities of the Trust. We are also in agreement with the judgment in the case of “Hari Gyan Pracharak Trust” as cited above, in which, by following the earlier judgment of the Coordinate Bench, it has been held that filing of audit return is only procedural and the same view have been taken in the judgment of Allahabad Bench in the case of Shri Laxmanarayan Dev Shrishan Sewa Khendra in wherein, it has been held as under:-
8 “6. We have given our thoughtful consideration and perused the materials available on record. The moot question whether it is permissible to the assessee to produce the audit report at the appellate stage is correct in law is been decided by the Jurisdictional High Court in the case of CIT Vs. Gujarat Oil & Allied Industries Ltd. [1993] 201 ITR 325 (Guj.) wherein it is held that the provisions 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. Thus the Hon’ble Court Held that the benefit of exemption should not be denied merely on account of delay in furnishing the same.”
11.3. We have also noted that the CIT(Exmptions), while deciding the issue has relied upon the circular, which relates to Form No. 10 and Form No.9A . It is not applicable to facts of the case and, thus, it is held that the exemption as withdrawn u/s 11 by the order of CPC and confirmed by the CIT(A) was not proper. Thus, we direct that the said exemption u/s 11 as claimed by the assessee deserves to be allowed.
In the result, appeal of the Assessee is allowed.
Order pronounced in the open Court on 07.07.2025