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Facts
The assessee, a charitable trust engaged in educational activities, filed its return of income declaring Nil income and claiming a refund. However, the return was processed under section 143(1) of the Income-tax Act, 1961, assessing a total income of Rs. 1,81,24,428/- and demanding Rs. 84,53,550/-. This adjustment was made because the assessee did not file the audit report in Form-10B at least one month before the due date of filing the return.
Held
The CIT(A) held that the power to condone the delay in filing Form-10B does not rest with the CIT(A) and that the assessee must approach the jurisdictional CIT or DIT. The Tribunal, while acknowledging the merit in the assessee's alternative contention, agreed with the CIT(A) that the delay in filing the audit report was not condonable by the CIT(A) and upheld the processing of the return.
Key Issues
Whether the assessee is eligible for exemption under Section 11 of the Act despite a delay in filing Form-10B, and whether the gross receipt can be taxed without allowing expenses.
Sections Cited
12A, 139(1), 143(1), 250
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Before: SHRI DINESH MOHAN SINHA & SHRI BIJAYANANDA PRUSETH
आदेश / O R D E R
PER BIJAYANANDA PRUSETH, AM:
This appeal by assessee emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) dated 30.08.2024 by the Commissioner of Income-tax (Appeal) Addl/JCIT(A)-11, Delhi [in short, ‘CIT(A)’] for the Assessment Year (AY) 2022-23, which in turn arises out of assessment order passed by the Centralized Processing Centre/Assessing Officer (AO) u/s 143(1) of the Act on dated 02.06.2023.
Grounds of appeal
raised by the assessee are as under:
1. In view of the facts and circumstances of the case the CPC UNIT/Jurisdictional AO erred in law and in facts in disregarding the Form 10B filed by the appellant and Ld. CIT(A), NFAC, New Delhi erred in law and in facts, in affirming the action of CPC Unit thereby confirming the adjustment of Rs.1,81,24,428/- intimation u/s 143(1) of the I.T. Act, 1961 and hence your (AY 22-23) MBG Education Trust appellant prays that the CPC/Jurisdictional AO be directed to take on record and consider Form 10B filed by the appellant and delete the adjustment made to the returned income of the appellant.”
Facts of the case in brief are that the assessee is a charitable trust and was incorporated on 09.06.1999. It is engaged in educational activities such as, running of schools and nursing college. The trust was registered u/s 12A of the Act on 14.10.2021. The assessee-trust filed its return of income declaring total income at Rs. Nil on 20.12.2022 and claimed refund of Rs.20,620/-. The return was processed u/s 143(1) of the Act on 02.06.2023 assessing the total income at Rs.1,81,24,428/- and raising a demand of Rs.84,53,550/-. The AO/CPC has not granted exemption u/s 11 of the Act on the ground that assessee is registered u/s 12A but did not e-file the audit report in Form-10B at least one month before due date of return u/s 139(1) of the Act in accordance with the provision of Section 12A(a)(b) of the Act. The total receipt was taxed without giving deduction of expenditure incurred by the assessee-trust. Aggrieved by the order of AO assessee preferred appeal before CIT(A).
The CIT(A) observed that the power to condone delay in filing Form-10B does not vest with the CIT(A) and the assessee has to make request before the appropriate authority. The contention that accountant of assessee-trust was sick and hence there was delay in filing audit report was not accepted on the ground that assessee-trust could have made alternative arrangement to finalize the books of account. The assessee-trust had relied on a number of decisions to state that exemption u/s 11 of the Act cannot be denied only on (AY 22-23) MBG Education Trust account of delay in filing the audit report in Form-10B. He did not accept the decision relied upon by the appellant by observing that they were rendered when electronic filing of ITR and audit reports were not in vague. He relied on the decision of ITAT Delhi in case of Pradeep Kumar Batra vs. DCIT (CPC) dated 23.10.20220 in where deduction u/s 80IB was not allowed for non-filing of the audit report in electronic manner in time on or before the due date of filing of the return. The CIT(A), therefore, upheld the processing of return and dismissed the appeal.
Aggrieved by the order of CIT(A), the assessee-trust has filed present appeal before the Tribunal. The Ld. AR of the assessee-trust filed a small paper book enclosing therein the audit report and written submission. He submitted that the delay in filing Form-10B was due to illness of the accountant which should have been condoned and relief should have been granted. He further submitted in the alternative that the CPC disregarded all expenses incurred for running of the schools and nursing college as well as administrative expenses incurred by the trust. The gross receipt was Rs.1,81,24,428/- and surplus after the expenses was only Rs.11,44,305/-. He submitted that only the net surplus of the income instead of gross receipt can be taxed.
On the other hand, Ld. Sr-DR for the revenue supported the order of lower authorities. He relied on the decision of Hon’ble Supreme Court in the case of PCIT vs. Wipro Ltd. 446 ITR 1 (SC) and submitted that the audit report
We have heard both the parties and perused the materials on record. We have also deliberated the case law relied upon by both the parties. There is no dispute regarding the fact that the appellant had not filed audit report in Form-10B at least one month before the due date of filing return. The CIT(A) has rightly held that all necessary documents must be filed a month prior to the due date of filing the return. We find that the CIT(A) does not have power to condone the delay in filing Form No.10B, for which the appellant is required to approach the jurisdictional CIT or the DIT as the case may be. Useful reference may be made to the decision of ITAT Ahmedabad in the case of Association of Indian Panelboard Manufacturer vs. DCIT (2022) 143 taxmann.com 418 (Ahmedabad-ITAT). Hence, the CIT(A) has rightly refused to condone the delay in filing the audit report. The decision of the Hon’ble Supreme Court in case of Wipro Ltd. (supra) is directly on the issue which mandates that requirement of furnishing declaration before the AO before due date of original return u/s 139(1) of the Act is a mandatory condition and not directly. Hence, we do not find any infirmity in the order of CIT(A).
7.1 However, there is merit in the alternative contention of the Ld. AR of the appellant. The gross receipt cannot be taxed without allowing the expenses incurred to earn the total income. The appellant has filed the audit report, as per which gross receipt was Rs.1,81,24,428/-. This includes corpus (AY 22-23) MBG Education Trust donation of Rs.18,50,000/-. The gross receipt as per the Income and Expenditure account was Rs.1,62,74,428/-. The total expenses as per the said account was Rs.1,51,30,123/- and the surplus was Rs.11,44,305/-. The AO is directed to verify the Income and Expenditure account and tax only the surplus amount after granting adequate and reasonable opportunity of being heard to the appellant. The appellant is also directed all necessary details as required by the AO. The ground is allowed for statistical purposes.
In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in accordance with Rule 34 of ITAT Rules, 1963 on 14/10/2025 in the open court.