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Facts
The assessee, a children's relief society engaged in promoting education, filed its return after getting accounts audited. The auditor inadvertently filed the audit report in Form 10BB instead of Form 10B. The assessee later obtained and filed the correct report in Form 10B.
Held
The Tribunal held that the disallowance of exemption was based on a technical defect due to an inadvertent human error by the auditor. It noted that the assessee had taken steps to rectify the error and referred to previous judgments supporting such rectifications.
Key Issues
Whether the disallowance of exemption under Section 11 of the Income Tax Act, 1961, is justified due to a technical error in filing the audit report in the wrong form, when the assessee subsequently rectified the error.
Sections Cited
143(1), 250, 11, 12A, 13(9), 11(1)(a), 11(2), 288, 119(2)(b), 139(5)
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Income Tax Appellate Tribunal, JAIPUR BENCHES,”A” JAIPUR
Before: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;djvihyla-@ITA. No. 235 & 236/JPR/2025
आयकरअपीलीय अधिकरण] जयपुरन्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A” JAIPUR Mk0 ,l- lhrky{eh]U;kf;dlnL; ,oaJhjkBkSM+ deys'kt;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;djvihyla-@ITA. No. 235 & 236/JPR/2025 fu/kZkj.ko"kZ@AssessmentYear : 2017-18 & 18-19 Enochy Children Relief Society, cuke The ITO Exemption, 1, shiv Nagar, near Ramnagar, Vs. Ward-1, Jagatpur, Jaipur. Jaipur. LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAATE2169E vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksjls@Assesseeby : Shri R.S. Poonia, C.A. jktLo dh vksjls@Revenue by Mrs. Anita Rinesh, JCIT-DR lquokbZ dh rkjh[k@Date of Hearing : 09/04/2025 mn?kks"k.kk dh rkjh[k@Dateof Pronouncement : 24/06/2025 vkns'k@ORDER PER: DR. S. SEETHALAKSHMI, J.M.
These are two appeals filed by the assessee against two separate orders of ld. Addl/JCIT(A)-1,Ludhiana both dated 27.01.2025 passed under section 250 of the I.T. Act, 1961, for the assessment years 2017-18 & 18- 19 respectively. The grounds raised by the assessee are common in both the appeals except the figures, therefore, grounds raised in AY 2017-18 are reproduced as under :-
& 236/JPR/2025 Enochy Children Relief Society, Jaipur. “1. That on the facts and in the circumstances of the case, the ld. Assistant Director of Income Tax, CPC is wrong, unjust and has erred in law and facts in invoking the section 143(1) for making adjustment which is not covered under section 143(1) of the I.T. Act, 1961. Kindly delete the addition.
2. That under the facts and circumstances of the case the ld. JCIT (Appeals) has erred in law and facts in confirming the disallowance of benefit of section 11 of the I.T. Act, 1961 amounting to Rs. 1,64,83,099/- despite of the fact that assessee is registered u/s 12A of the I.T. Act, 1961 and made all compliance accordingly which is wrong, unwarranted and bad in law. Kindly allow the benefit of Section 11 and delete the addition.
3. That the appellant craves the permission to add to or amend to any of the above grounds of appeal or to withdraw any of them.”
As the facts involved in these appeals are common, therefore, for the sake of convenience both these appeals are being disposed off by this common order.
The brief facts of the case are that the assessee society is engaged incharitable activity by way of promoting education. The assessee society is registered under section 12A of the Income Tax Act, 1961 vide order dated 29.08.2008, having registration No. 859 and renewed its registration under section 12A of the IT Act, 1961 as per new provisions of law vide order dated 24.09.2021 (having URN – AAATE2169EE20219) for the period from A.Y. 2022-23 to AY 2026-27. The assessee society filed its ITR on 30.10.2017 well within the stipulated time disclosing as follows :- (i) Gross Receipts : Rs. 1,64,83,099/- Less : Application of Income (revenue) : Rs. 1,38,23,486/- & 236/JPR/2025 Enochy Children Relief Society, Jaipur. Less : Application of Income (Capital) : Rs. 22,150/- Rs. 26,49,611/- Less: 15% general accumulation u/s 11(1)(a) : Rs. 24,72,465/- Less: Accumulation u/s 11(2) : Rs. 1,64,996/- For the year under consideration assessee society got its accounts audited on 30.09.2017 from the accountant qualified under section 288 of the IT Act, 1961 well within the stipulated time period. The auditor of the assessee society filed audit report well in time but in wrong form i.e. Form No. 10BB on 30.09.2017 instead of prescribed Form No. 10B. The assessee society when came to know about it, immediately got the audit report filed in correct Form of Audit Report which is Form No. 10B on 19.06.2024. Intimation order under section 143(1) of the IT Act, 1961 dated 27.03.2019 was passed by the DCIT CPC disallowing the benefit of Section 11 of the IT Act, 1961 by ignoring the Audit Report filed by assessee society amounting to Rs. 1,64,83,099/- on the basis of following allegations :- “As per Section 12A(1)(b) of Income tax Act read with 1st Proviso to Rule 12(2) (i) of the Income Tax Rules, where the total income of the trust or institution without giving effect to the provisions of section 11 and section 12 exceeds the maximum amount which is not chargeable to income tax, the audit report in Form 10B has to be E-filed along with the return of income. Since assessee has not E-filed the Audit Report in Form 10B along with or before filing of the Return of income, the exemption u/s 11 i.e. sr. no. 1 & Sl. No. 4i to 4viii in Schedule Part B-TI is not allowed.
& 236/JPR/2025 Enochy Children Relief Society, Jaipur. (ii) As per section 13(9) of Income Tax Act, in Part BTI Amount entered against in sr. no. 4vi “Amount in addition to amount referred to in (iv) above, accumulated or set apart for specified purposes if all the conditions in section 11(2) and 11(5) are fulfilled (fill out schedule I)” is allowed if (a) Return is filed before due date, (b) Statement in Form 10 is E-filed before due date. Since assessee has not E-filed the Form 10 within due date hence the exemption under section 11(2) (i.e. sr. no. 4vi of Schedule Part-BTI) is not allowed. (iii) In Schedule Part-BTI, Exemption claimed in sr.no. 4vi “Amount in addition to amount referred to in (iv) above, accumulated or set apart for specified purposes if all the conditions in section 11(2) and 11(5) are fulfilled (fill out schedule I)” is restricted to the amount entered in Form-10”.
On the basis ofabove 3 allegations CPC disallowed the entire application of income and accumulation claimed by assessee society. Aggrieved by the order of AO, the assessee preferred appeal before the ld. CIT (A), who dismissed the appeal of the assessee.
Now, the assessee has come in appeal before the Tribunal, on the grounds reproduced herein above.
Before us, the ld. AR of the assessee challenges the impugned order by submitting as under :- “ 1. That the extended due date of filing of ITR on 30.10.2017 and Audit report for the year under consideration was 30.09.2017. 2. That assessee society gets its accounts audited on 30.09.2017 and also filed its Audit report & ITR for the year under consideration on 30.10.2017 (i.e. well within the time) as per mandate of Section 288 of the I.T. Act, 1961, so the allegation about assessee has not E-filed the Audit Report along with or before filing of the Return of income is factually incorrect. So, kindly allow the benefit of section 11 to assessee society.
& 236/JPR/2025 Enochy Children Relief Society, Jaipur.
3. That by inadvertent mistake and without any bad intention the auditor of assessee society filed form of Audit Report in Form No. 10BB instead of Form No. 10B on 30.09.2017.
But, when assessee society gets to know about this mistake, then assessee society obtained & submitted suo moto the Audit Report in correct Audit Form No. 10B.
That this mistake committed by auditor of assessee society was a technical defect only and except such technical defect there is no other reason to deny the benefit of Section 11 to assessee society. The defect is due to an inadvertent human error & beyond the control of assessee society and the assessee society should not be denied the legitimate exemption when the assessee society is genuinely doing charitable activities for the welfare of public and satisfying all conditions prescribed in income-tax law for being entitled to exemption. Moreover, the judgment of Hon’ble ITAT, Indore Bench in the case of Adarsh Shishu Vihar v. DCIT, CPC, Bangaluru (having date of order 13.06.2024, where the court held that “mistake committed by auditor of assessee society was a technical defect only and except such technical defect there is no other reason to deny the benefit of Section 11 to assessee society and the defect is due to an inadvertent human error and the assessee society should not be denied the legitimate exemption when the assessee society is genuinely doing charitable activities.
Moreover, the assessee society is also submits asfollows :- (i) That the inadvertent mistake was beyond the control of assessee society, as they were totally unaware about the inadvertent human error by their auditor. That the mistake was due to inadvertent human error, by 3rd party who was (ii) auditor & duly qualified as per provisions of Income Tax Act, 1961. (iii) That due to this minor procedural lapse, the imposition of heavy tax burden on assessee society which is charitable in nature is against the principles of natural justice and against the mandate of law. (iv) That there is no Revenue loss to the Income Tax Department. Without prejudice to the above : If we assume that the assessee society filed its Audit report in prescribed form with delay even than the benefit of Section 11 can be allowed to assessee society and the said finding was made by Hon’ble ITAT, Delhi Bench- SMC in case of Rajdhani Vegetable Oil Suppliers Associations v. ITO, Ward Exemption, Delhi, having for AY 2020-21, order dated 08.01.2025.
In view of the above submissions and position of law, kindly allow the following :- (i) Application of Income (revenue) amounting to Rs. 1,38,23,486/-.
& 236/JPR/2025 Enochy Children Relief Society, Jaipur. (ii) Application of Income (Capita) amounting to Rs. 22,150/-. (iii) 15% general accumulation u/s 11(2) amounting to Rs. 24,72,465/-. (iv) Accumulation u/s 11(2) amounting to Rs. 1,64,996/-.” The assessee has also filed paper book containing 31 pages comprising followingdocuments :-
1. 1. Written submission before CIT (Appeals) 2. Copy of Appellant’s Financials audited on 30.09.2017.
3. Copy of Audit report in Form No. 10BB dated 29.10.2017. 4. Copy of Audit report in Form No. 10B dated 19.06.2024. 5. Copy of registration dated 29.08.2008 u/s 12A of the Act. 6. Copy of renewal of registration u/s 12A of the Act.
The ld. AR of the assessee also serviced the decision of the co-ordinate bench of Bangalore bench of ITAT in the case of Shri Madvirshiv Shivogimandir Samsthe, Bagalkot in wherein the similar issue was involved and the bench has considered that compliance of erroneous filling of form. 4. On the other hand, the ld. DR supported the orders of the Revenue Authorities.
5. We have heard the rival submissions, perused the material on record and gone through the orders of the lower authorities and the case laws referred therein. It is an undisputed fact that assessee has filed original return of income within the extended due date on 30.10.2017 i.e. well within the time, along with audit report in Form 10BB. The ITR was processed vide intimation dated 27.03.2019 wherein claim of the assessee u/s 11 was & 236/JPR/2025 Enochy Children Relief Society, Jaipur. disallowed due to non filing of audit report in proper form and further accumulation of funds under section 11(2) was also not allowed due to non submission of Form 10. The ld. AR has submitted that it was an advertent mistake on the part of the auditor that he filed Form 10BB in place of 10B and Form 10B was filed immediately after coming to know about this mistake. We have verified from the written submissions as filed by the ld. AR and the documents submitted by him that after processing of the ITR in the year 2019 and the assessee has filed correct audit report during 2024 (i.e. after five years). Therefore the contention that correct audit report was field immediately is wrong. Further, nothing has been submitted to us about taking any action in getting such delayed filing condoned by appropriate authority and even no request has been made before us also for suchcondonation. We have also noted that even Addl. CIT (A) in his order has also mentioned about seeking condonation of delay in submitting form 10B but it seems the appellant has not taken any step in filing a condonation request to the appropriate authority. Further the appellant has not spoken any word about submission of Form 10 for allowing accumulation of funds in terms of section 11(2) of the Income Tax Act, 1961. The issue on hand is similar in the decision of the co-ordinate bench of Bangalore bench of ITAT in the case of Shri Madvirshiv Shivogimandir & 236/JPR/2025 Enochy Children Relief Society, Jaipur. Samsthe, Bagalkot in wherein the similar issue was involved and the bench has considered that compliance of erroneous filling of form as sufficient by holding as under : ‘’6. We have heard the rival submissions and perused the materials available on record. It is an undisputed fact that assessee has filed original return of income within the extended due date on 31.10.2019 along with audit report in form 108B. It is also an undisputed fact that the assessee realizing the mistake that the wrong audit report had been filed, took voluntary steps to file revised return on 16.3.2020 u/s 139(5) of the Act accompanied with audit report u/s 12A(b) of the Act in form 10B. On perusal of the order of the rectification passed u/s 154 of the Act, we find that AO has observed that on verification, it is found that the assessee has not filed audit report in form 10BB at all. On going through the paper book placed before us, we find that the assessee has attached the copy of form 10BB dated 11.9.2019 uploaded on 31 10.2019 vide e-filing acknowledgement no.247395271311019 (pages 5 to 7 of PB) Therefore, we are of the considered opinion that it is not a case of non-filing of audit report on or before the due date for which condonation of delay in filing the audit report is required to be filed before the commissioner. It is also not disputed fact that audit of accounts was completed on or before the extended due date and the audit report was also obtained on or before the due date. We also find that the revised return was also processed by the CPC but the benefit of exemption u/s 11 & 12 of the Act were denied on the sole ground that the audit report in form 10B was not filed within the due date. At this juncture, we also cannot brush aside the fact that due to lot of confusion/misunderstanding and difficulties reported by the tax payer in filing audit reports, the CBDT has by way of circulars/press release on various dates had extended the date of filing audit report several times and also authorized the commissioners to condone the delay u/s 119(2) of the Act and decide on merits. We take a note of the fact that Id. CIT(A) on the ground of lack of powers had not adjudicated the case on & 236/JPR/2025 Enochy Children Relief Society, Jaipur. merits without proper understanding the real crux of the case. Taking into consideration the totality of the facts narrated above, we are of the opinion that it is not a case that audit report along with return of income were not filed within the due date applicable for assessment year 2019-20. The auditor had mistakenly uploaded form 10BB instead of form 108 as required in the case of the assessee trust. The assessee trust realizing the mistake that the wrong audit report being filed took voluntary steps not only to file revised return on 16.3.2020 but also filed audit report in form 10B on the same date. Therefore, we set aside the order of the Id. CIT(A)/NFAC and direct the AO to delete the additions and allow the exemption claimed by the assessee u/s 11 of the Act for the AY 2019-20.’’ From the entire conspectus of the case, the Bench feels that since the ld. CIT(A) has not considered the overall the arguments raised by the assessee as to the delay or wrong filing of the form of Audit Report in Form 10B instead of 10B on 30-09-2017. It is submitted by the ld. AR of the assessee that when the assessee society came to know about the mistake then the assessee society obtained and submitted suo moto the Audit Report in correct Audit Form No.10B. He submitted that this is a technical mistake and inadvertent human error. Hence, in this view of the matter, the appeal of the assessee is restored to the file of the ld. CIT(A) for afresh adjudication and consideration and the assessee is directed to submit all the documents before the ld. CIT(A) to end the dispute in question by filling all the required documents.
& 236/JPR/2025 Enochy Children Relief Society, Jaipur.
6. Before parting, we may make it clear that our decision to restore the matter back to the file of the ld. CIT(A) shall in no way be construed as having any reflection or expression on the merits of the dispute, which shall be adjudicated by ld. CIT(A) independently in accordance with law.
As regards the appeal of the assessee relating to assessment year 2018-19, it is noted that the similar finding has been given by the ld.CIT(A) as made in the assessment year 2017-18. The narrations are as under:- ‘’6.7 The same view has been taken by the Hon'ble ITAT Ahmedabad in the case of Association of Indian Panelboard Manufacturer vs. Deputy Commissioner of Income Tax[2022] 143 taxmann.com 418 (Ahmedabad -ITAT) where it is held by the Hon'ble ITAT that in case of delay in filing of Form 10B, assessee was required to approach jurisdictional Commissioner/Director of Income-tax to condone delay in filing Form 10B; Commissioner(Appeals) had no power to condone such delay as per section 119(2)(b) of the Act.
6.8 Hence, based upon the above discussion and the decision of the Apex Court in the case of Principal Commissioner of Income-tax v Wipro Ltd, the case of the appellant falls under section 11 and 12 of the Act which is part of Chapter -Ill of the Act and the claim of the appellant's plea for want of Form 10B is rejected and the action of the A.O of disallowing the deduction per provision of the Act is hereby upheld and confirmed. Also, it is evident from the above discussion that the Assessing Officer(AO), Addl./Joint Commissioner of Income(Appeals) [AddI/JCIT(A)]. and Commissioner of Income Tax(Appeals) [CIT(A)] do not have the authority under section 119(2)(b) of the Act to grant condonation for delay in filing of Form no. 10B. The appellant has the option to approach the competent authority authorized by the CBDT for condonation of delay in filing of Form 10B and to claim the benefits of section 11 and 12 of the Act. 6.9 Hence, I find no merit in the current appeal, grounds of appeal are hereby dismissed.’’ Since we have restored the appeal of the assessee for the assessment year 2017-18 to the file of the ld. CIT(A) for afresh adjudication, therefore, & 236/JPR/2025 Enochy Children Relief Society, Jaipur. the same modus operandi applies in the case of the assessee for the assessment year 2018-19.
8. In the result, the appeal of the assessee in and appeal in are allowed for statistical purpose.