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JAYSHRI GOPALLAL MAHARAJSHRINI SURAT SRUSTI TRUST,SURAT vs ITO, EXEMPTION WARD, SURAT | BharatTax

JAYSHRI GOPALLAL MAHARAJSHRINI SURAT SRUSTI TRUST,SURAT vs. ITO, EXEMPTION WARD, SURAT

ITA 1238/SRT/2024Status: DisposedITAT Surat06 May 2025AY 2022-23Bench: SHRI SIDDHARTHA NAUTIYAL (Judicial Member), SHRI BIJAYANANDA PRUSETH (Accountant Member)1 pages

AI SummaryAllowed

Facts

The assessee, a charitable trust, filed its return of income along with Form 10B. However, due to an inadvertent error by an employee of the chartered accountant, the request for filing Form 10B was revoked, leading to a technical non-filing. The assessee re-uploaded Form 10B later, but the delay resulted in the disallowance of exemption under Section 12A by the CPC and subsequently by the CIT(A).

Held

The Tribunal held that the delay in filing Form 10B was a procedural lapse and not a violation of a mandatory requirement. Citing various judicial precedents, it was observed that such a procedural defect should not disentitle the assessee from claiming exemption under Section 12A of the Act, especially when the form was filed before the order/intimation under Section 143(1) was issued.

Key Issues

Whether the disallowance of exemption under Section 12A due to a procedural delay in filing Form 10B is justified, especially when the audit report was filed before the intimation order?

Sections Cited

12A, 143(1), 11, 11(1), 11(2), 250, 251, 139(1), 80J

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, SURAT BENCH, SURAT

Before: SHRI SIDDHARTHA NAUTIYAL & SHRI BIJAYANANDA PRUSETH

For Appellant: Shri Sapnesh Sheth, C.A

For Respondent: Shri Mukesh Jain, CIT DR

Hearing: 23.04.2025Pronounced: 06.05.2025

O R D E R PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:

This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeal), (in short “Ld. CIT(A)”), ADDL/JCIT (A)-8, Mumbai vide order dated 25.11.2024 passed for A.Y. 2022-23.

2.

The assessee has raised the following grounds of appeal:

“1. On the facts and circumstances of the case as well as law on the subject, the Ld. ADDL/JCIT Commissioner of Income Tax (A) has erred in not appreciating the fact that assessee trust has already filed Form 10B on 25.09.2022 and also filed the screen shot of the UDIN generated at that time.

2. On the facts and circumstances of the case as well as law on the subject, the Ld. ADDL/JCIT Commissioner of Income Tax (A) has erred in confirming the action Jayshri Gopallal Maharajshrini Surat Srusti Trust vs. ITO (E) Asst. Year –2022-23 - 2– of Asst. Director of Income Tax, CPC in making huge addition of Rs. 44,68,753/- to the income of assessee by not allowing the amount claimed as application of income & accumulation of income.

3.

On the facts and circumstances of the case as well as law on the subject, even otherwise also the addition if any can be made in respect of net income i.e. after allowing the experience and that gross amount cannot be charged to tax.

4. It is therefore prayed that the above addition made by Asst. Director of Income Tax, CPC and confirmed by Ld. ADDL/JCIT Commissioner of Income Tax (A) is prayed to be deleted.

32.

We further note that a Division Bench of the Gujarat High Court has in its decision rendered after the insertion of the 2015 Act and the 2016 Amendment Rules in Association of Indian Panelboard Manufacturer v. Deputy Commissioner of Income-tax 2023 : GUJHC : 27028-DB/[2023] 157 taxmann.com 550 clearly held that the electronic submission of Form 10B is essentially a matter of procedure as opposed to being a mandatory condition which may be recognized to Form part of substantive law. We deem it apposite to extract the following passages from that decision:- "5.4 Recollecting the relevant dates, the income was filed on 31.8.2018. On 15.3.2019 Form 10B was filed electronically. On 7.12.2019 intimation under Section 143(1) of the Act was given to the appellant that the exemptions were denied, while processing the return of income on the ground that alongwith the return of income Form 10B was not filed. 5.5 It is to be observed in the present case that the Form D- the audit report, though was not filed with the return of income, the same was available with the Assessing Officer when he processed the return of income under Section 143(1) of the Act. The conditions for claiming exemption under Section 11 was satisfied. Although the requirement of furnishing report was mandatory, filing thereof is a procedural aspect. Even though the Form 10B was filed at a later stage, when it was part of the record of the Assessing Officer in course of the processing of the return of income, the Assessing Officer could not have denied the exemption claimed by the assessee under Sections 11(1) and 11(2) on the ground that the audit report was not filed. 5.6 The tribunal further committed an error in appreciating the import of Section 119 2(b) of the Act inasmuch as the application contemplated thereunder is only additional remedy for the assessee which could not be said to be compulsorily resorted to by the assessee. The circular No.7/18 dated 20.12.2018 issued under Section 119 of the Act could not be, therefore said to have taken away the appellate remedy.

“We have heard the rival contentions and perused the material on record. In this case, on going through the facts of the case, what transpires from the records is that the audit report for assessment year 2018-19 was duly signed by the auditor on 21-09- 2018, though the same was omitted to be filed on the income tax portal. The due date of filing of income tax return for assessment year 2018-19 was 26-09-2018. Notice under section 143 (1) (a) was issued on 19-12-2019. The audit report of the assessee trust was filed on the income tax portal by the auditors of the assessee trust on 20-01- 2020. Intimation under section 143 (1) denying the claim of the application of income was issued by CPC, Bengaluru on 8-02-2020. Therefore, what can be seen is that as on the date on which the intimation/order under section 143(1) of the Act was passed by CPC, Bengaluru, the auditor of the assessee trust had already filed the audit report in Form 10B, before such order/intimation under section 143 (1) of the Act was issued. From the facts placed on record before us, we see no deliberate/mala fide intention on the part of the assessee or it's auditor to file the audit report in Form 10 B belatedly. 7.1 In the case of Shree Jain Swetamber Murtipujak Tapagachha Sangh v. CIT (Exemptions) [2024] 161 taxmann.com 114 (Bom.), the High Court held that where assessee-trust filed Form No. 10 beyond due date and assessee's auditor admitted to oversight that he did not consider provisions of Rule 17 and was under bona fide impression that since factum of accumulation of receipts was reported in audit report in Form No. 10B a separate statement in Form No. 10 was not required, in view of fact that delay was not intentional, assessee could not be prejudiced on account of an ignorance of rules admitted by professional engaged by assessee and thus, delay was to be condoned. 7.2 In the case of Social Security Scheme of GICEA v. CIT (Exemptions) [2023] 147 taxmann.com 283 (Guj.), the Assessee a Public Charitable Trust had been filing returns of income in time along with audit report under section 12A(1)(B). For relevant assessment year 2016-17, assessee obtained audit report from Chartered Accountant well before time, however, same could not be uploaded along with return of income inadvertently. In absence of any audit report, Central Processing Centre had not granted exemption under section 11 which otherwise was available to it since many years and resultantly demand was raised. The Assessee therefore filed a rectification application under section 154, seeking to place on record audit report to Central Processing Centre but same was rejected on ground that Form No. 10Bauditreport, was not filed in time. The Assessee filed an application before CBDT to condone delay in filing Form No. 10Baudit report, however same was rejected. The High Court held that since assessee was a public charitable trust for past 30 years and substantially satisfied conditions for availing exemption under section 11 it should not be denied exemption merely on bar of limitation especially when legislature had Jayshri Gopallal Maharajshrini Surat Srusti Trust vs. ITO (E) Asst. Year –2022-23 - 8– conferred wide discretionary powers to condone such delay. Accordingly, the Gujarat High Court directed that the order of rectification under section 154 be quashed 7.3 In the case of Jt. CIT (OSD) v. Gujarat Energy Development Agency [2023] 154 taxmann.com 348/202 ITD 733 (Ahd. - Trib.), the ITAT held that where assessee, a charitable trust, filed audit report in Form No. 10B during assessment proceedings, Assessing Officer could not have denied exemption under section 11 on ground that audit report was not e-filed along with return. 7.4 In the case of Sarvodaya Charitable Trust v. ITO (Exemptions) [2021] 125 taxmann.com 75/278 Taxman 148 (Guj.), the High Court held that where assessee, a public charitable trust registered under section 12A, had substantially satisfied condition for availing benefit of exemption as a trust, it could not be denied exemption merely on bar of limitation in furnishing audit report in Form no. 10B. 7.5 In the case of CIT v. Gujarat Oil & Allied Industries [1993] 201 ITR 325 (Guj.), the High Court held that where an assessee could not file audit report along with return but filed it later before completion of assessment by ITO, he was entitled to deduction under section 80J of the Act. 7.6 Accordingly, in light of the above judicial precedents cited above and the assessee's set of facts, we are of the considered view that the claim of application of income cannot be denied to the assessee only on the ground that the assessee/the auditor of the assessee omitted to file Form 10B (auditor's report) along with return of income, when the same was submitted to the tax authorities before the order/intimation under section 143 (1) of the Act was issued.

13. Now coming to assessee’s particular set of facts, we observe that it is an undeniable fact that at the time of filing of original return of income, the assessee had submitted Form 10B and in support of which, the transaction ID of Form 10B as well as UDIN number were also placed on record to show that the Form 10B was ready and uploaded on 25-09-2022 i.e. before the date of filing of return of income itself. It was on account of an inadvertent error committed on part of the employee of the chartered accountant of the assessee, that the request for filing of Form No. 10B was revoked, resulting into technical non-filling of Form 10B, as a result of which the assessee again uploaded Form No. 10B on the Government Portal on 25-11-2023. Accordingly, in the instant facts it is evident that there was only a procedural lapse/ delay on part of the assessee in submitting Form Number 10B, for which the assessee cannot be penalised. In the preceding part of our judgement, we have cited various judicial precedents which have held that mere delay in filing of Form number 10B is a procedural defect and not a violation in following a mandatory requirement, so as to disentitle the assessee the benefit of exemption under section 12A of the Act, itself. In the Jayshri Gopallal Maharajshrini Surat Srusti Trust vs. ITO (E) Asst. Year –2022-23 - 10– instant case, when the assessee came to know about the mistake committed by the employee of the chartered accountant, the assessee again filed Form 10B and the above facts are not in dispute. Further, while processing the return of income by the CPC under section 143(1) of the Act, not only the claim of exemption under section 12A of the Act was denied to the assessee, but the entire/gross receipts of the assessee were subject to tax in its hands, without allowing deduction of corresponding expenditure as well. In view of the above position and the facts of the assessee’s case and the judicial precedents on the subject, we are of the considered view that mere delay in filing of Form 10B, being a procedural lapse should not disentitle the assessee the benefit of exemption under section 12A of the Act.