RAJRATAN FOUNDATION,INDORE vs. ASSTT. COMMISSIONER OF INCOME TAX (EXEMPTION), INDORE, INDORE

आदेश/ O R D E R

Per B.M. Biyani, A.M.:

Page 1 of 11 present appeal. Ld. AR for assessee submitted that the assessee has filed a condonation-application/affidavit explaining the reason of delay. The averments made in affidavit are discussed and the Ld. DR for revenue left the matter to the wisdom of bench. Small delay of 20 days is condoned taking into account the facts of case and the assessee’s solemn averments in the light of Collector, Land Acquisition Vs Mst. Katiji and others 1987 AIR 1353, 1987 2 SCC 387 having settled the law long back that all such technical aspects must make a way for the cause of substantial justice.

(i) The assessee is a charitable trust registered u/s 12A of Income-tax

Act, 1961 by Income-tax Department and eligible to claim exemption u/s 11/12 of the Act.

(ii) On 29.10.2021, the assessee filed return of income of AY 2021-22 under consideration. The due date (extended) for filing return as per section 139(4A)/139(1) was 15.03.2022.

(iii) On 07.03.2022, the assessee filed Audit Report [Form No. 10B] although the Audit Report [Form No. 10B] was required to be filed by 15.02.2022 (i.e. one month prior to the due date for filing of return].

Thus, there was a delay in filing of Audit Report.

Page 2 of 11 (iv) On 14.09.2022, the AO processed assessee’s return u/s 143(1) and denied the benefit of exemption u/s 11/12 to assessee for the reason that Audit Report [Form No. 10B] was not filed within statutory period.

(v) Aggrieved, the assessee carried matter in first-appeal but the CIT(A) rejected assessee’s appeal and did not grant any relief.

(vi) Now, the assessee has come before us by way of next appeal.

Further, the assessee filed Audit Report to Income-tax Portal on 07.03.2022 before passing of intimation by AO u/s 143(1) dated 14.09.2022. Therefore, the limited issue before this bench is whether in such a situation the assessee should be given the exemption u/s 11/12 or not?

5. Ld. AR for assessee submitted that the assessee is engaged in charitable activities and the registration granted to it by tax authorities u/s 12A was in force. That the delay in filing audit report is a procedural lapse

Page 3 of 11 of section 11/12 to assessee. Ld. AR submitted that the assessee should not be denied the legitimate exemption of section 11/12 when the assessee is genuinely doing charitable activities for the welfare of public and satisfying all conditions prescribed in income-tax law for being entitled to exemption.

Ld. AR submitted that if the audit report in Form No. 10B filed by assessee belatedly on 07.03.2022 is accepted, the assessee would be entitled to the benefit of exemption. Ld. AR submitted that in following decisions, the Hon’ble High Courts and ITAT Benches have held that the requirement of filing audit-report in time is one of the conditions for claiming benefit of exemption u/s 11/12 but it is a procedural-cum-directory requirement and even if the report is subsequently filed to AO, the exemption u/s 11/12 can’t be denied:

(a) ITAT, Indore - Indore Contract Bridge Association Vs. CPC, Bangalore in order dated 18.04.2023 (b) ITAT, Indore - Navratna Sukrat Foundation Vs. CPC, Bangalore, dated 21.04.2023 (c) ITAT, Indore - DCIT Vs. Shri Vaishnav Polytechnic College, Indore order dated 06.11.2020 (d) ITAT, Jodhpur - ITO, Exemption Ward Vs. Society for Education Conscietisation Awareness & Training, dated 06.05.2019

Page 4 of 11 (f) ITAT, Ahmedabad - Hari Gyan Pracharak Trust Vs. DCIT, CPC, Bangalore in order dated 16.06.2023 (g) Hon’ble Gujrat High Court - Sarvodaya Charitable Trust Vs. ITO, Exemption (2021) 125 taxmann.com 75 (Gujrat)

(h) Hon’ble Gujrat High Court - Indian Panel Board Manufacturer Vs. DCIT Tax Appeal No. 655 of 2022 dated 21.03.2023.

6. Ld. DR for revenue dutifully relied upon orders of lower authorities but, however, could not oppose the submissions of Ld. AR.

“8. The exact controversy involved in these grounds is whether or not the assessee was entitled for exemption u/s 11/12 as claimed in the return of income, when the audit-report (Form No. 10B) was filed belatedly after processing of return u/s 143(1)? 9. Apropos to this issue, the precise facts are: The assessee is a charitable society registered u/s 12A of the Income-tax Act, 1961 and entitled for exemption u/s 11/12; accordingly it claimed exemption u/s 11/12 in the return of income. But when the AO processed return u/s 143(1) vide intimation dated 09.03.2019, he did not allow exemption u/s 11/12 for the reason that the audit report (Form No. 10B) was not filed by assessee with return of income. Subsequently after processing of return, the Form No. 10B was Page 5 of 11 AY 2021-22 e-filed/uploaded on 03.04.2019 / 04.05.2019 before filing of first- appeal.

10. Ld. AR submitted that the assessee was engaged in charitable activities; that the registration granted to it by tax authorities u/s 12A was in force; that the assessee had been granted benefit of section 11/12 in preceding assessment-years as well as subsequent assessment-years. He further submitted that the assessee filed return of income on 03.08.2017 and prior to such filing, the accounts of assessee were duly audited on 08.06.2017, a copy of the audited-accounts is placed in the Paper-Book. However, the auditors of assessee failed to upload the audit-report alongwith the return of income. But, post-processing of return u/s 143(1) and before filing of first- appeal, the assessee arranged to get the audit-report e-filed/uploaded on 03.04.2019 / 04.05.2019. Ld. AR submitted that the CIT(A) has, without appreciating these facts, dismissed the appeal of assessee merely on a technical defect that the audit-report was not filed alongwith the return of income. Ld. AR submitted that except such technical defect, there is no other reason to deny the benefit of section 11/12 to assessee. Ld. AR submitted that the e-filing/uploading of audit-report is done by auditors and not by assessee; therefore the defect is not per se attributable to assessee. Ld. AR submitted that in any case, the defect is due to an inadvertent human error and the assessee should not be denied the legitimate exemption, when the assessee is genuinely doing charitable activities for the welfare of public and satisfying all conditions prescribed in income-tax law for being entitled to exemption. Ld. AR submitted that if the audit-report obtained by assessee on 08.06.2017 but filed on 03.04.2019 / 04.05.2019 is accepted, the assessee would be entitled to the benefit of exemption. Ld. AR placed a heavy reliance on the latest decision of ITAT in Savitri Foundation Vs. ITO, (AY 2018-19) order dated 01.08.2022 wherein the AO made processing of return u/s 143(1) denying exemption u/s 11 to assessee for the very same reason of non-uploading of audit report before filing of return but subsequently the assessee uploaded audit-report during the course of first-appeal; when the matter reached ITAT, the Mumbai Bench has allowed exemption to assessee. Ld. AR submitted that the decision taken by ITAT is directly applicable to assessee. Ld. AR also submitted that the decision of Hon’ble Supreme Court in Wipro Ltd. 446 ITR 1 relied upon by Ld. CIT(A) is quite distinguishable for the reasons that (i) the said decision involved deduction u/s section 10B whereas the present-appeal is concerned with exemption u/s 11/12; and (ii) the said decision involved interpretation of sub-section (8) of section 10B which is a negative provision i.e. it provides that if the assessee did not want to apply section 10B, then the assessee had to file a declaration but this is not a case in section 11/12.

Page 6 of 11 AY 2021-22 12. We have heard rival contentions of both sides and examined the present controversy in the light of judicial decisions. At first, we are convinced that the controversy is directly settled in favour of assessee by decision in Savitri Foundation (supra) where the Hon’ble Mumbai ITAT, following the decision of Hon’ble Mumbai High Court in CIT vs. Mumbai Metropolitan Regional Iron & Steel Market Committee 378 ITR 103 has observed and held thus: “4. Submissions made by rival sides heard, orders of authorities below examined and the case law on which the ld. Authorized Representative of the assessee placed reliance considered. The assessee is a charitable trust registered under section 12AA of the Act and has been purportedly enjoying the benefits of section 11 since 2011. In the impugned assessment year, the benefit of exemption under section 11 of the Act has been denied to the assessee for the reason that assessee has failed to furnish audit report along with return of income. The contention of the ld. Authorized Representative of the assessee is that the audit report was available with the assessee at the time of filing of return of income however due to inadvertent error the assessee failed to upload Audit Report in Form 10B along with e-filing of return of income. Non-filing of Audit Report is a bonafide error. The assessee has placed on record Audit Report dated 19/10/2018 in the prescribed Form 10B at page 15 of the Paper Book. The assessee after receiving the intimation under section 143(1) of the Act uploaded the Audit Report on 18/04/2020 in First Appellate proceedings.

7. In the result, impugned order is set aside and appeal by assessee is allowed for statistical purposes.”

Page 7 of 11 AY 2021-22 & Allied Industries reported in 201 ITR 325 and CIT vs. Mayur Foundation reported in 274 ITR 562. The relevant paragraphs of the order of ITAT are as under: “12. We have heard the rival contentions of both the parties and perused the materials available on record. As per the provisions of section 12A(1)(b) of the Act, it is necessary for the assessee in order to claim exemption under section 11 of the Act to get the accounts audited as well as obtain the audit report in the prescribed form from the qualified chartered accountant which is to be filed along with the return of income. Admittedly, in the case on hand the assessee has not filed form 10B being the audit report along with the return of income and the same was also not filed till the completion of the assessment order as well as appellate order by the learned CIT-A. As such the order of the learned CIT(A) was passed dated 30th November 2017 whereas the Form 10B of the audit report was filed/uploaded dated 25th December 2017 which evidences that the audit report in Form 10B was filed subsequent to the appellate order by the learned CIT-A. At this juncture it is also pertinent to note that the audit report in the prescribed form was prepared and signed by the qualified chartered accountant dated 5th September 2014 much before the date of filing the return of income by the assessee. Thus, it appears that report for the audit in the prescribed form was prepared well in time but it was filed belatedly. 12.1 Now the controversy arises whether the assessee can claim the benefit of exemption under section 11 of the Act in a situation where the audit report in the prescribed form was not filed along with return of income. In this context we note that act of the assessee to file the audit report duly signed by the qualified chartered accountant is a procedural requirement and the courts have held that the assessee cannot be denied the benefit for which it is entitled in the event of any procedural contravention specified under the provisions of the Act. In holding so we draw support and guidance from the judgment of Hon’ble Gujarat High Court in case of CIT vs. Gujarat Oil & Allied Industries reported in 201 ITR 325, the relevant extract of the judgment is reproduced as under: “In our view, the aforesaid reasoning of the Allahabad High Court and the Patna High Court would squarely apply to the facts of the present case. The provision about furnishing of the auditors' report along with the return has to be treated as a procedural provision, directory in nature, and its substantial compliance should suffice, meaning thereby that such report should be made available by the assessee to the Assessing Officer latest when the question of framing of assessment is taken up by the Income-tax Officer and when he applies his mind to the claim of the assessee and if by that time, the assessee has put his house in order and has furnished the Page 8 of 11 AY 2021-22 report of the auditor for supporting the return, he can be said to have satisfied the requirement of section 80J(6A) of the Act.” 12.2 In view of the above we hold that the assessee cannot be denied the benefit of exemption for which it is entitled merely on the lapse of procedural requirement i.e. delay in filing the audit report in the prescribed form. In the judgment cited above, it was provided that the audit report was filed by the assessee before the completion of the assessment. In other words, the compliance of the law was made by the assessee when the assessment proceedings was pending before the AO whereas in the case on hand the assessee complied the requirement at the stage of appellate proceeding before tribunal. Thus, a question arises before us whether the principles laid down in the judgment cited above can be applied in the given facts and circumstances. In this context we note that, in the judgment cited above it was observed that procedural requirement for filing the audit report was fulfilled by the assessee before the completion of the assessment. But the facts of the case on hand are different in so far the audit report was filed by the assessee after the completion of the assessment framed under section 143(3) of the Act. In this regard we note that the assessment remains pending if any appeal is pending before the higher forum. In other words, if any appeal is pending either before the ld. CIT- A or before the ITAT which transpires the fact that the assessment is pending. In holding so we draw support and guidance from the judgment of Hon’ble Gujarat High Court in case of CIT vs. Mayur Foundation reported in 274 ITR 562, wherein it was held as under: “Thus, the proceedings before the Tribunal are meant to correctly assess the tax liability of an assessee: If this be so, it follows that the assessment proceeding cannot be said to be complete and is pending till the appeal is heard and disposed of by the Tribunal and the order of the Tribunal is given effect to by the assessing authority by computing the correct tax liability of an assessee. In other words, whether an assessee is required to pay tax or becomes entitled to a refund, would be ascertained by the assessing authority after giving effect to the order of the Tribunal.” 12.3 Admittedly, the appeal was pending before the ITAT at the time when the audit report in form 10B was filed which transpires that the assessment has not reached to the finality and therefore principle laid down by the Hon’ble High Court of Gujarat in the case of CIT vs. Gujarat Oil & Allied Industries (Supra), that the requirement for filing the audit report is a procedural requirement, can be applied in the given facts and circumstances. Therefore, the benefit for which the assessee is entitled cannot be denied.”

Page 9 of 11 AY 2021-22 therefore, deem it fit to remand this matter back to the file of AO for a fresh assessment after considering the audit-report filed by assessee, in accordance with law. These grounds are accordingly allowed.” 8. Other decisions cited above have also taken a view that the delayed filing of audit-report is a mere procedural irregularity for which the exemption u/s 11/12 cannot be denied.

Order pronounced in open court on 03/12/2025