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Income Tax Appellate Tribunal, PUNE
Before: SHRI PARTHA SARATHI CHAUDHARY & SHRI G. D. PADMAHSHALI
आयकर अपीलीय �यायािधकरण, पुणे �यायपीठ,“बी” ब�च पुणे म�। IN THE INCOME TAX APPELLATE TRIBUNAL, PUNE “B” BENCH, PUNE BEFORE SHRI PARTHA SARATHI CHAUDHARY, JUDICIAL MEMBER AND SHRI G. D. PADMAHSHALI, ACCOUNTANT MEMBER आयकर अपीलसं. / ITA No. 554/PUN/2021 करिनधा�रण वष�/ Assessment Year :2016-17 Sant Bhagwanbaba Shikshan Mandal Phule Nagar, Ahmadpur, Dist. Latur. . . . . . . . अपीलाथ� / Appellant PAN :AACTS 5514 P बनाम / V/s. Income Tax Officer (Exemption), . . . . . . . ��यथ� / Respondent Nanded – 431 601. �ारा / Appearances Assessee by : Mrs J. R. Chandekar Revenue by : Shri M. G. Jasnani सुनवाई क� तारीख / Date of conclusive Hearing :12/08/2022 घोषणा क� तारीख / Date of Pronouncement :12/08/2022 आदेश / ORDER PER G.D. PADMAHSHALI, AM; The present appeal of the assessee filed against the order of Commissioner of Income Tax(Appeals), NFAC [for short “CIT(A)”] dt. 24/03/2017 passed u/s 250, which in turn sprung out of assessment order of Income Tax Officer (Exemption), Nanded [for short “AO”] dt. 02/11/2018
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Sant Bhagwanbaba Shikshan Mandal PAN : AACTS5514P Asstt. Yr.: 2016-17
passed u/s 143(3) of the Income-tax Act, 1961 [for short “the Act”] for the assessment year [for short “AY”] 2016- 17.
The sole dispute under present appeal encircled around denial of exemption u/s 11 and 12 of the Act, due to delay in filing Form No. 10B alongwith ITR, alleging the violation of provision of section 12A(1)(b).
In advancing the matter on facts for adjudication, it is necessary to reproduce grounds of appeal challenged by the appellant, such are; “1.On the facts and in the circumstances of the case and in law the Learned CIT(A) NFCA is not justified in mentioning that the appellant had not complied with the notices when the appellant had made compliance with the notices.(Proof enclosed) The order may please be cancelled.
2.On the facts and in the circumstances of the case and in law the Learned Assessing Officer and the Ld. CIT(A) are not justified in not appreciating the evidence on records in its proper and pragmatic prospectiveignoring the application for adjournment. The order of the Ld CIT(A) may please be cancelled.
ITAT-Pune Page 2 of 14
Sant Bhagwanbaba Shikshan Mandal PAN : AACTS5514P Asstt. Yr.: 2016-17
3.On the facts and in circumstances of case and in law Learned CIT(A) NFCA is not justified in confirming order of AO disallowing claim of deduction of 11(2) ignoring that the fact appellant had filed form No 10B (through late) and that appellant had filed application for condonation of delay with CIT(E), Pune. The order may be cancelled.
On the facts and in the circumstance of the case and in law the Learned Assessing Officer and Ld. CIT(A) is not justified in not appreciated the facts that the provisions of section 11(2) r.w.r. 17 were amended from 01.04.2016 which was the first year and could have sympathetically considered the form No. 10B sympathetically.
On the facts and in the circumstance of the case and in law the Learned CIT(A) is not justified in not calling for any remand report as called for in the grounds of appeal. The order may please be cancelled.
On the facts and in the circumstances of the case and in law the learned CIT(A) NFCA in not keeping the appeal proceedings pending when the provisions of section 250(6A) are not mandatory and are discretionary.
On the facts and in the circumstances of the case and in law the learned CIT(A) NFCA is not justified in confirming the order of Ld. AO when the CIT(A) has not plenary powers and could have kept the proceedings pending till the decision of CIT(E) Pune. The order may be cancelled. ITAT-Pune Page 3 of 14
Sant Bhagwanbaba Shikshan Mandal PAN : AACTS5514P Asstt. Yr.: 2016-17
On the facts and in the circumstance of the case and in law the Learned Assessing Officer is not justified in taxing the grants of Rs.75,46,967 and confirming the same by CIT(A). This may be allowed.
On the facts and in the circumstances of the case and in law the Learned Assessing Officer & Ld. CIT(A) are not justified in confirming the income when there was apparent mistake that the AO has taxed part of the other Grants also. The correct working is enclosed which was within the plenary powers of the Ld. CIT(A). This may be cancelled.
The appellant craves leave to add, alter, amend or withdraw any of the grounds of appeal.”
The facts emanating from case records, succinctly are; 4.1 The assessee is a Public Charitable Trust registered under the provisions of Bombay Public Trust Act, 1950 [for short “BPT”] and u/s 12A of the Act, with the objects of imparting education. The assessee, for AY 2016-17 filed its Income Tax Return [for short “ITR/ROI”] on 24/12/2016 with a “NIL” income, which was subjected to scrutiny under CASS by issue of statutory notice dt. 18/09/2017 u/s 143(2) of the Act and consequential notices u/s 142(1) r.w.s 129 upon change of incumbent. ITAT-Pune Page 4 of 14
Sant Bhagwanbaba Shikshan Mandal PAN : AACTS5514P Asstt. Yr.: 2016-17
Pursuant to notices, in reply the authorised representative of the assessee [for short “AR”] furnished the copies of Trust-deed, ITR, Computation of Income, Audit Report in Form No. 10B and other financial statements etc., and bearing in mind the said submission, Ld. AO completed the assessment holding the assessee as Association of Person [for short “AOP”] and assessed the total taxable income at ₹82,51,911/- denying the exemption which is otherwise available to Trust u/s 11 and 12 of the Act, owning to delayed or late filing of ITR and Form No. 10B.
4.2 Aggrieved assessee trust carried the matter in an appeal before the first appellate forum [for short “FAA”], wherein Ld. CIT(A) not finding infirmity in the view taken by the Ld. AO, upheld denial of exemption entitlement u/s 11 and 12 for violating the provisions of section 12A(1)(b) of the Act. The appellant being aggrieved with the orders of the lower tax authorities, brought up the matter in appeal before Tribunal with the grounds of appeal reproduced herein before at Para 3. ITAT-Pune Page 5 of 14
Sant Bhagwanbaba Shikshan Mandal PAN : AACTS5514P Asstt. Yr.: 2016-17
During the course of physical hearing, the Ld. AR adverting to the assessment records, reiterated the submissions made before lower tax authorities and contended that, subsequent to filing of ITR on 24/12/2016, the trust suo-motto furnished the audit report in Form No. 10B on 11/03/2017, however there was a reasoned delay which remained as such without a formal written application for condonation. To drive home the entitlement for exemption, the Ld. AR submitted that, in the light of due compliance of 12A(1)(b) before culmination of assessment the exemption should not be taken away for technical or unintended delay in filing Form No. 10B. Au contraire, the Ld. DR acquiesced that, in the absence of any written application for condonation of delay in filing of audit report in Form No 10B explaining the reasonable cause for non-compliance with the statutory provisions, the orders of tax authorities below denying the entitlement for exemption on account of violation of prime condition laid u/s 12A(1)(b) of the Act is perfectly in law, ergo prayed for dismissal of appeal in limine.
ITAT-Pune Page 6 of 14
Sant Bhagwanbaba Shikshan Mandal PAN : AACTS5514P Asstt. Yr.: 2016-17
We have heard the rival contentions of both the parties; and subject to the provisions of rule 18 of Income Tax Appellate Tribunal Rules, 1963 [for short “ITAT, Rules”] perused the material placed on record and duly considered the facts of the case in the light of settled legal position and the case laws relied upon by the appellant assessee as well the respondent revenue.
The sum and substance of grounds of appeal entreated by the Ld. AR and negated by the Ld. DR looped around the attraction of provision of section 12A(1)(b) of the Act disentitling the assessee from claiming exemption u/s 11 and 12 of the Act, for the reason of delayed filing of audit report in Form No. 10B, given that, before proceeding to adjudicate the solitary dispute, it is imperative to reproduce thenapplicable provision in verbatim as; “12A Conditions for applicability of section 11 and 12 (1) The provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely:— (a). . . . . . . ITAT-Pune Page 7 of 14
Sant Bhagwanbaba Shikshan Mandal PAN : AACTS5514P Asstt. Yr.: 2016-17
(aa). . . . . . . (b) where the total income of the trust or institution as computed under this Act without giving effect to the provisions of section 11 and section 12 exceeds the maximum amount which is not chargeable to income-tax in any previous year, the accounts of the trust or institution for that year have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the person in receipt of the income furnishes along with the return of income for the relevant assessment year the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed. (Emphasis supplied)
In terms of aforestated provision, the appellant being a Charitable Trust, for the impugned assessment year was under obligation to file the audit report obtained in From No. 10B alongwith the return of income u/s 139(4A) of the Act and it remained an undisputed fact that, the audit report in Form No. 10B (r.w.r. 17B) was furnished by the appellant subsequent to filing of its ITR but before the completion of assessment.
Nota bene, may it be assessment or re-assessment, the taxable income of every “Person” as defined by 2(31) ITAT-Pune Page 8 of 14
Sant Bhagwanbaba Shikshan Mandal PAN : AACTS5514P Asstt. Yr.: 2016-17
of the Act, has to be computed in accordance with the provisions of the Act and in the present case, as is abundantly evident from the order of assessment that, the appellant assessee is a registered trust u/s 12A of the Act and is engaged in providing or imparting education which falls well within the ambit of “Charitable purpose” as defined by section 2(15) of the Act, resultantly the appellant was entitled to the benefit of section 11 and 12 of the Act. From the para 05 on page 2/2 of assessment order it transpires that, the Ld. AO while framing the assessment has denied the benefit of exemption u/s 11 of the Act for the solitary reasoning that, the assessee failed to file its ITR within the due date u/s 139(4A) and the Form No. 10B r.w.s. 12A(1)(b) of the Act, however it is also an undisputed fact that, there was no finding vis-a-vis allegation against the trust of carrying or doing any object exterior activities disentitling itselffrom claiming exemption u/s 11 and 12 of the Act.
It is needless to mention that, the “Procedure for assessment” as stands u/c XIV of the Act, provides for ITAT-Pune Page 9 of 14
Sant Bhagwanbaba Shikshan Mandal PAN : AACTS5514P Asstt. Yr.: 2016-17
procedures and conditions for filing of return of income, and the section 139(4A) mandates that, every person in receipt of income derived from property held under trust, i.e., Charitable or religious Trust, etc., to file its return of income in case its total income of the previous year without giving effect to the provisions of section 11 and 12 of the Act exceeds the maximum amount not chargeable to tax and in case of failure to do so, a penal action has been prescribed u/s 272A(2)(e) of the Act. On a plain reading of the relevant provisions, in our opinion, failure to file Form No. 10B alongwith return u/s 139(4A) cannot be interpreted to mean that the charitable trust per se disentitles from the claim of exemption u/s 11 of the Act. On the contrary, during the impugned assessment year under appeal, there was no such provision in the Act that, in case return vis-à-vis audit report if not filed by the due date u/s 139(4A) by the Charitable Trust, then its income cannot to be computed in accordance with the provision of the Act. Albeit, clause (b) of section 12A(1) mandates every charitable trust or institution, whose total income
ITAT-Pune Page 10 of 14
Sant Bhagwanbaba Shikshan Mandal PAN : AACTS5514P Asstt. Yr.: 2016-17
before giving effect to the provisions of section 11 and 12 exceeds the maximum amount not chargeable to income tax, furnishing of audit report obtained in Form No. 10B alongwith the return of income, however for the impugned assessment year, it does not ispo-facto prescribed any time limit for furnishing the audit report. The Ld. AO, however tried to read a condition of clause (b) of section 12A(1) into section 139(4A) to hold that such audit report in Form No. 10B vis-à-vis return of income could have been filed before the due date of filing for claiming benefit of section 11 and 12 of the Act, which we do not subscribe. All that clause (b) of section 12A(1) mandates that, the provision of section 11 & 12 shall not apply unless the accounts are audited and audit report thereof is filed alongwith a return,thus as and when the income of the trust is to be assessed these conditions need to be complied in spirit.
Interestingly, during the scrutiny assessment proceedings, while determining the taxable income, both ITR and the audit report in Form No. 10B were on record ITAT-Pune Page 11 of 14
Sant Bhagwanbaba Shikshan Mandal PAN : AACTS5514P Asstt. Yr.: 2016-17
before the Ld. AO, however turning a blind eye to technical or procedural compliance, the assessment was culminated denying the exemption benefit which otherwise lawfully due to the appellant trust u/s 11.
The NFAC, on the other hand perfunctorily dismissed the appeal of the appellant without appreciating the facts of the case and the explicit text of para 4(i) of applicable Board [CBDT] Circular No 10/2016 dt. 22/05/2019 which stands as under; “4. Accordingly, in supersession of earlier Circular/ Instruction issued in this regard, and with a view to expedite the disposal of applications filed by such trusts or institutions for condoning the delay in filing Form no. 1013 and in exercise of the powers conferred under section 119(2) of the Act, the Central Board of Direct Taxes hereby directs that: (i) The delay in filing of Form no. 10B for AY 2016-17 and AY 2017-18, in all such cases where the Audit Report for the previous year has been obtained before the filing of return of income and has been furnished subsequent to the filing of the return of income but before the date specified under section 139 of the Act is condoned. (ii) . . . . . . . (Emphasis supplied)
ITAT-Pune Page 12 of 14
Sant Bhagwanbaba Shikshan Mandal PAN : AACTS5514P Asstt. Yr.: 2016-17
In so for as impugned assessment year is concerned, in terms Board Circular( supra) the requirement of filing report of audit in the prescribed Form No. 10B complied well within the provisions of section 139 and the delay in filing such report in all cases was condoned by the Board by the aforesaid blanket circular (supra). Furthermore, we are mindful to the fact that, in so far as the impugned assessment is concerned, the said condition of filing audit report has been held by Hon’ble Courts to be merely procedural and therefore directory in nature and not mandatory for the purpose of claiming exemption u/s 11 & 12 of the Act [CIT Vs Sahzadanand Charity Trust reported in 228 ITR 292].
In view of the above and for the reasons cited, we hold that Ld. AO was not justified in denying the benefit of exemption u/s 11 of the Act in pleno to the appellant trust, consequently we set aside the orders of tax authorities below and remind the matter back to the file of Ld. AO with a direction to assess the total income of the appellant trust after giving effect to the provision of section 11 and ITAT-Pune Page 13 of 14
Sant Bhagwanbaba Shikshan Mandal PAN : AACTS5514P Asstt. Yr.: 2016-17
section 12 of the Act in the light of then prevalent and applicable provisions and the Board circular (supra).
Resultantly, the appeal of the assessee is allowed in terms of our aforestated observation. In terms of rule 34 of ITAT Rules, the order pronounced in the open court on this Friday, 12th day of August, 2022.
- S/d - - S/d - PARTHA SARATHI CHAUDHARY G. D. PADMAHSHALI JUDICIAL MEMBER ACCOUNTANT MEMBER
पुणे/ PUNE ; िदनांक / Dated :12thday of August, 2022. आदेश क� �ितिलिप अ�ेिषत / Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant. 2. ��थ� / The Respondent. 3. The Pr. CIT, Pune (Mh-India) 4. The CIT(A), Pune (Mh-India) 5.िवभागीय �ितिनिध,आयकरअपीलीय �ायािधकरण, पुणे “बी”ब�च, पुणे / DR, ITAT, Pune Bench, Pune. 6. गाड�फ़ाइल / Guard File. आदेशानुसार / BY RDER, िनजीसिचव / Private Secretary आयकरअपीलीय�ायािधकरण, पुणे / ITAT, Pune.
ITAT-Pune Page 14 of 14