KINKINI,BHILWARA,BHILWARA vs. ITO EXEMPTION WARD 1, JAIPUR, JAIPUR

At the outset itself, it was stated that the solitary issue in the present appeal pertains to denial of exemption claimed by the assessee u/s. 11/12 of the Act, for the reason that Form 10BB was filed delayed by the assessee. It was pointed out, that the impugned assessment year was AY 2023-24 ,the due date of furnishing return of income for the impugned year was 30-11-23and the assessee was required to file Form 10BB one month prior to the said due date, however the said form was filed delayed on31.03.2024. The assessee, it was pointed out, being a charitable trust had claimed its entire income exempt in terms of the provisions of Section 11 of the Act. However, due to delayed filing of Form 10BB the Centralized Processing Centre (CPC) denied assessee claim of exemption while processing its return u/s 143(1)(a) of the Act and determined income at Rs.18,49,950/-. The same , it was pointed out, was confirmed by the ld. CIT(A) stating that neither the AO nor the first appellate authority had been granted powers by the Act to condone the delay in filing Form 10BB, which power it was stated vested only with the jurisdictional CCIT/PCIT.

I have heard the rival contentions. The issue before me is the denial of exemption u/s. 11 of the Act to the assessee being a charitable trust on account of delay in filing Form 10BB . As rightly pointed out by the Ld. Counsel for the assessee Hon'ble High Courts and the coordinate Benches of the ITAT have consistently held the requirement of filing Form 10BB to be a mere procedural requirement and not a mandatory condition therefore holding the denial of deduction for the said reason to be not sustainable in law. It has been held that as long as the requisite form is filed and is made available during assessment proceedings for scrutiny, it is sufficient compliance with the condition of filing Form 10BB and the mere fact of delay in the same would not adversely affect the right of the assessee to claim exemption u/s. 11 of the Act. In this regard, I draw support from the judgment of the Hon'ble Gujarat High Court in the case of Commissioner of Income Tax (Exemption) vs. Laxmanarayan Dev Shrishan Seva Khendra [2024] 167 taxmann.com 548 (Gujarat) [10.09.2024],wherein it was held at paragraph Nos. 7 & 9 of the order as under:- ……………………… 7. Reference to the aforesaid decision has no connection whatsoever remotely to the facts of the present case and therefore, in the facts of the present case, the Tribunal has rightly followed the decision of this Court in case of Sarvodaya Charitable Trust v. ITO (Exemption) in Application No.6097 of 2020 decided on 09th December, 2020/[2021] 125 taxmann.com 75/278 Taxman 148 (Gujarat) as well as the decision in case of Social Security Scheme of GICEA (supra) to uphold the decision of the CIT (Appeals), wherein this Court has held that the approach of the authority in such type of cases should be equitable, balancing and judicious. In the facts of the case, when the assessee has already filed the audit report in Form 10B electronically on 27.02.2021 during pendency of appellate proceedings along with copy of audited financial statements, delay in filing the said form is rightly condoned by CIT(A) and the Tribunal. ……………………… 9. In view of the foregoing reasons, we are of the opinion that no question of law much less any substantial question of law arises from the impugned order of the Tribunal. The Appeal is accordingly dismissed.

In view of the aforesaid discussion, the present Petition succeeds and accordingly allowed. The impugned Orders dated 31.03.2021, 30.4.2021 and the Demand Notice dated 06.05.2021 are hereby quashed and set aside. The Respondent No.1 is directed to pass a fresh order upon the Petitioner's application under Section 119(2)(b) of the Act dated 23.02.2021 within a period of Twelve (12) weeks from the date of receipt of a copy of this judgment and order in light of the findings in Paragraph Nos. 7.1 to 7.2 hereinabove. Rule is made absolute to the aforesaid extent. No order as to costs.

The coordinate Benches of the Tribunal have also consistently held that delayed filing of Form 10BB is a procedural lapse and cannot be the basis for denial of exemption u/s. 11 and 12 of the Act. Reference may be made to decision of the ITAT Ahmedabad Bench in the case of Shree Vardhman Stanakvasi Jain Shravak Trust vs. Income-tax Officer [2025] 172 taxmann.com 165 (Ahmedabad Trib.) [14.02.2025], wherein it was held at paragraph Nos.9, 10, 11 & 12 of the order as under:- …………………………… 9. On going through the facts of the instant case, we observe that the adjustments made by CPC have been confirmed by the JCIT(A) on three grounds. Firstly, the assessee had not filed the return of income within the prescribed time limit. Secondly, the assessee had not filed Form 10B within the prescribed time limit. Thirdly, this addition was permissible by way of adjustment under Section 143(1) of the Act. Therefore, on account of the above reasons, the assessee was not eligible for grant of exemption under Sections 11 & 12 of the Act, and hence the corpus donation was liable to be taxed as income in the hands of the assessee. In response, the Counsel for the assessee submitted before us that in the return of income, it was specifically submitted that such amount of Rs. 17,96,000/- received by the assessee was a voluntary donation and not a corpus donation. Secondly, since the income of the assessee, as per the Profit & Loss account, was below the taxable limit, the assessee trust was not under an obligation to file return of income and therefore, also not an obligation to file Form 10B as well. Thirdly, delayed filing of Form 10B is a procedural defect and since the assessee trust had filed the same before Ld. JCIT(A) during the course of appellate proceedings, no disallowance was called for on account of late filing of said Form 10B.

On going through the various adjustments which have been incorporated under Section 143(1) of the Act, we are of the considered view that treatment of such corpus donation as voluntary donation falls outside the scope of adjustments contemplated under Section 143(1) of the Act, unless such incorrect claim is apparent from any information in the return of income. In the return of income filed by the assessee, such donation of Rs. 17,96,000/- was specifically treated as corpus donation and not as voluntary donation. Accordingly, in our considered view, treatment of corpus donation as voluntary donation falls outside the scope of adjustments contemplated under Section 143(1) of the Act. Secondly, we observe that in the case of Shree Swaminarayan Charitable Trust (supra), wherein the ITAT has made the following observations: "3. The issue before me pertains to delayed submission of Form no.10B which Id.counsel for the stated to be a technical default. He further submitted that ld.Bench of the ITAT, Ahmedabad rejected similar claim in the case of Association of Indian Panelboard Manufacturer v. DCIT, of 2022. However, the said decision of the ITAT was reversed by the Hon'ble Jurisdictional High Court by judgment dated 21.3.2023 reported in [2023] 157 taxmann.com 550 (Gujarat) holding that w.e.f. Astt.Year 2016-17 filing of form though mandatory in nature but procedural in nature, owing amendment made in Finance Act, 2015. In the present case, however, the ld.counsel for the assessee submitted that the same has been filed subsequently, and therefore, the above decision of the Hon'ble Jurisdictional High Court is squarely applicable. The relevant portion of the judgment of the Hon'ble High Court at para 6.1 is held as under: 6. 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 alongwith (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 JK law is satisfied. In that view, the Income Tax Tribunal was not justified in dismissing the appeal of the assessee. 6.1 The appellant assessee has to be held to be eligible and entitled to exemptions under section 11(1) and 11 (2) of the Act and. the alleged ground of non-filing of audit report alongwith return of income which was at the best procedural omission, could never to an impediment in law in claiming the exemption.

On the other hand, the ld.DR relied on the order of the ld.CIT(A).

I have gone through the record and the orders of the Revenue authorities. Keeping in view the decision of the Hon'ble jurisdictional High Court in the case of Association ofIndian Panel Board Manufactureres (supra), and the assessee having satisfied the requirement of the law, I set aside the impugned orders of the Revenue authorities, and allow the grounds of appeal."

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 writapplicant before the respondent no. 2 is hereby allowed." ……………………….

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.

Ld. DR was unable to draw our attention to any decision of the jurisdictional High Court holding to the contrary. In view of the same respectfully following the binding judicial precedents and having regard to the fact that the audit report in Form 10BB was duly filed and was available on record prior to the issuance of intimation u/s. 143(1)(a) of the Act, I hold that the denial of exemption u/s. 11 of the Act was not justified.