ASSTT. COMMISSIONER OF INCOME TAX (EXEMPTIONS), CIRCLE, PUNE, PMT BUILDING, SWARGATE vs. SHIVAI VIDYA PRASARAK MANDAL, THANE

The Ld. AR, on the other hand, submitted that though the Ld. Addl./JCIT(A) has allowed the assessee’s appeal on the ground that no prior intimation was given to the assessee by the Ld. CPC/AO before making adjustment, nonetheless, the impugned issue is covered in favour of the assessee by the catena of decisions of various Tribunals including the Pune Bench of the Tribunal wherein the assessee’s claim of exemption u/s 11 has been allowed even if Form 10B has been filed belatedly. The Ld. AR submitted that both the return of income and Form 10B were duly filed by the assessee prior to passing of the intimation order u/s 143(1) of the Act and hence the Ld. CPC/AO is not justified in denying the assessee’s claim of exemption u/s 11 of the Act. He further contended that the conditions of filing of Form 10B for availing exemption u/s 11 are only directory in nature and not a mandatory requirement. In support thereof, the Ld. AR relied on the following decisions :

We have heard the Ld. Representatives of the parties and perused the material on record and various judicial precedents cited by the Ld. AR as well as the paper book filed by the Ld. AR on behalf of the assessee. It is the case of the assessee that the Ld. CPC/AO had denied its claim of exemption u/s 11 vide intimation order passed u/s 143(1) of the Act allegedly on account of late filing of audit report in Form 10B for the relevant AY 2020-21 under consideration. The Ld. Addl./JCIT(A) has allowed the assessee’s claim of exemption u/s 11 directing the Ld. AO to delete the additions made in the intimation order for the reasons already reproduced in the preceding paragraphs. Undisputedly, the assessee filed return of income for AY 2020-21 on 30.03.2021 for the AY 2020-21. Form 10B was also filed on the same day i.e. on 30.03.2021. The intimation order u/s 143(1) of the Act was passed on 24.12.2021. It is thus evident that Form 10B was filed much prior to processing of return of income by the Ld. CPC/AO. Form 10B was duly available before the Ld.CPC/AO at the time of passing of intimation order u/s 143(1) of the Act while denying the assessee’s claim of exemption u/s 11 of the Act. Before us, drawing support of the decisions (supra), the Ld. AR has submitted that the assessee is eligible for its claim of exemption u/s 11 of the Act.

We have perused the various decisions (supra) relied upon the Ld. AR in support of its claim and find that under the similar set of facts the Co-ordinate Bench(es) of the Tribunal have allowed the claim of exemption u/s 11 of the Act to the assessee. We find an identical issue had come up before the Pune Bench of the Tribunal in the case of Shri Ganadhipati Gandharacharya Kuntiusagar Vidya Sodh Sansthan Vs. ITO in to 2026/PUN/2025, order dated 09.12.2025 wherein the assessee’s claim of exemption u/s 11 of the Act has been allowed by the Tribunal observing as under : “9. We have heard the Ld. Representatives of the parties and perused the material available on record as well as the paper book filed by the Ld. AR on behalf of the assessee. We have also perused the judicial precedents cited before us. We find that the Ld. AO while passing the intimation order u/s 143(1) of the Act has denied the assessee’s claim of exemption u/s 11 of the Act on account of late filing of the return of income and the audit report in Form 10B which was due to be filed by 31.10.2018 for the relevant AY 2018- 19. The Ld. Addl./JCIT(A) upheld the action of the Ld. AO for the reasons already reproduced in the preceding paragraphs. Undisputedly, the assessee filed the return for the AY 2018-19 on 12.01.2019. Form 10B was filed on 07.01.2019. The intimation order u/s 143(1) of the Act was passed on 04.03.2020. Thus, in the instant case, although the return has been filed belatedly but Form 10B was filed before the processing of return. It is thus evident that Form 10B was duly available before the Ld. AO at the time of passing intimation order u/s 143(1) of the Act denying the claim of the assessee u/s 11 of the Act. Before us, drawing support from the decision(s) (supra), the Ld. AR has contended that filing of Form 10B for claiming exemption u/s 11 is not a mandatory requirement but only directory in nature and therefore even if Form 10B is furnished belatedly, the claim of exemption u/s 11 should be granted to the assessee.

We have perused the various decisions (supra) relied by the Ld. AR in support of his above contention and find that the Courts/Tribunals under the similar set of facts have allowed the claim of exemption u/s 11 of the Act to the assessee. We find an identical issue had come up before the Pune Bench of the Tribunal in the case of Indian Medical Association Pune Branch Vs. DCIT in wherein the Tribunal vide its order dated 16.06.2025 allowed the assessee’s claim of exemption u/s 11 of the Act by observing as under : “7. We have heard the rival contentions and perused the record placed before us. Assessee has been denied benefit of exemption w/s.11 of the Act for delay in filing the return as well as delay in uploading the Audit Report on Form 10B. Admittedly, the due date for filing the return for impugned assessment year is 31.12.2021. Return has been filed on 16.02.2022. Last date to file the belated return u/s.139(4) of the Act in 31.03.2022. Thus, assessee has filed valid belated return. Under similar set of facts and circumstances where a belated return has been filed u/s.139(4) of the Act and Audit Report has been furnished after the due date, Coordinate Bench, Kolkata in the case of Bangarh Educational Welfare Trust (supra) has examined the issue in detail and granted relief to the assessee observing as follows: "8. We have heard the rival contentions and perused the records placed before us. The assessee is a charitable trust established for imparting education to rural areas without any profit motive. It enjoys registration u/s 12AA of the Act granted vide order dated 12.09.2018 effective from A.Y 2018-19 onwards. It claimed benefit ws 11 and 12 of the Act of Rs. 13587109/-. However, CPC while processing w/s 143(1)(a) of the Act denied the said exemption on account of two reasons; firstly the return of income was not filed before due date as prescribed u/s 139(4) of the Act and secondly audit report on Form 108 not uploaded before due date prescribed under the Act. Now, undisputedly in the case of assessee, the return of income is filed on 15.11.2018 and audit report on form 10B e-filed on 30.03.2019. Now, before adverting to the grounds, we would first like to go through the relevant provisions which have a direct bearing on the issue of requirement of filing of audit report and income tax return by the trust or institutions registered u/s 124 of the Act. Section 124(1)(b) and 12(1)(ba) of the Act reads as follows: "Conditions for applicability of sections 11 and 12. 124. (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:- (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 48/before the specified date referred to in section-44AB and the person in receipt of the income furnishes by that date) 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:) (ba) the person in receipt of the income has furnished the return of income for the previous year in accordance with the provisions of sub- section (44) of section-139, within the time allowed under that section.

Section 124(1)(ha) of the Act provides that the provisions of section 11 and 12 shall apply in relation to income of any trust or institution if the person in receipt of the income has furnished the return of income for the previous year in accordance with the provisions of sub-section (44) of section 139 te within the time allowed under that section. Now, since reference has been made to section 139(44) of the Act and the same is reproduced below: "S.139(4A) Every person in receipt of income derived from property held under trust or other legal obligation wholly for charitable or religious purposes or in part only for such purposes, or of income being voluntary contributions referred to in sub-clause (ta) of clause (24) of section 2. shall, if the total income in respect of which he is assessable as a representative assessee (the total income for this purpose being computed sunder this Act without giving effect to the provisions of sections 11 and 12) exceeds the maximum amount which is not chargeable to income-tax, furnish a return of such income of the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and all the provisions of this Act shall, so far may be, apply as if it were a return required to be furnished under sub-section (1).]]"

Now, the second reason for which lower authorities have denied the deduction u/s 11 of the Act is of filing the belated audit report on form 10B of the Act. Now, clause (b) of section 124(1) of the Act provides for a condition that if the income of a trust exceeds a maximum amount which is not chargeable to tax in the previous year the account have to be audited and the person in receipt of such income furnishes the audit report before the specified date. In the case of the assessee. Form No.10B was to be filed and the relevant rule is rule 17B of the Income Tax Rules which provides that the report of audit of the accounts of a trust or institution which is required to be furnished under Clause (b) of section 124. shall be in Form No. 10B.

Now, on perusal of the Form 10B, we notice that the same is required to be submitted electronically, one month prior to the due date of the filing of return of income. Admittedly, in the case in hand, the audit report on form 10B has been uploaded on 30.03.2019 which is even after the date of filing the return of income on 15.11.2018. Now, before us, it has been contended by the ld counsel for the assessee that filing of audit report is directory in nature and even if report is submitted in time before the conclusion of the assessment proceedings, the same needs to be considered. Though the assessee referred to the various decisions, we find it pertinent to refer to the judgment of the Hon'ble Gujarat High Court in the case of Sarvodaya Charitable Trust us. ITO(Exemption) (supra) wherein Para 32 of the said judgment reads as follows: "32. We may also refer to the decision of this Court in CIT v. Gujarat Oil and Allied Industries Ltd. (1993) 201 ITR 325 (Guj), wherein it is held that the provision regarding furnishing of audit report with the return has to be treated as a procedural proviso. It is directory in nature and its substantial compliance would suffice. In that case, the assessee had not produced the audit report along with the return of income but produced the same before the completion of the assessment. This Court took the view that the benefit of exemption should not be denied merely on account of delay in furnishing the same and it is permissible for the assessee to produce the audit report at a later stage either before the Income-tax Officer or before the appellate authority by assigning sufficient cause."

In the above judgment, Hon'ble Court has held that filing of audit report is directory in nature and its substantial compliance would suffice. The Id. Departmental Representative failed to place before us any other binding precedents of Hon'ble Jurisdictional High Court or the Hon'ble Apex Court. Therefore, considering the ratio laid down in the Hon'ble Gujarat High Court in the case of Sarvodaya Charitable Trust us. ITO(Exemption) (supra), we find that though the audit report has been uploaded after the filing of return of income but the said report has been signed by the auditor on 28.10.2018 and the copy of this report is placed at 40-41 of paper book and the date of audit report is prior to the filing of the return of income, therefore, it is presumed that conducting of audit for preparation of audit report is before e-filing of the return of income but as claimed by the assessee due to technical glitches, the report was uploaded after filing the return of income.

Though the Hon'ble Court holds that the report should be considered even filed in the course of assessment proceedings, or before in appellate authority, however, we notice that in the instant case, the case of the assessee was not selected for scrutiny assessment and it was mere processing of return by the computer with the set program. Had it been the case of scrutiny proceeding w/s 143(3) of the Act, the case could have been different. The Id. A.O may had an opportunity to go through the audit report. But still when the issue came before Id. CIT(A) who also possesses co-terminus power with that of A.O and as per section 251(1)(a) of the Act. the Id. CIT(A) in disposing the appeal against order of assessment has the power to confirm, reduce, enhance or annul the assessment, therefore. though, it was not possible to entertain the audit report while processing the return w's 143(1)(a) of the Act, but the ld. CIT(A) was well within its power to have entertained the said report and examined the same as could have been done by the A.O.

We, therefore, in the given facts and circumstances and respectfully following the judgment of Hon'ble Gujarat High Court in the case Sarvodaya Charitable Trust us. ITO(Exemption) (xupra), we are of the considered view that since the case of assessee is for A.Y 2018-19 and CBDT came up with a circular dated 23.04.2019 specially for A.Y 2018-19 providing that return of income to be filed within the time allowed u/s 139 of the Act, the assessee has complied with the conditions provided in sub-clause (b) and (ba) to section 12 and there is no dispute at the end of the reveme authorities that the assessee is carrying on charitable activities, for which it has been granted registration w/s 12A of the Act, the benefit of section 11 and 12 should be given to the assessee and deductions claimed by the assessee are, therefore, allowed. Thus, Ground Nos. 1 to 4 of the assessee are allowed.

So far as alternate plea praying that only the net income should have been subjected to tax rather than gross receipts, since we have already allowed the deduction u/s 11 and 12 of the Act to the assessee, this alternate plea becomes academic in nature. Other grounds are general in nature which needs no adjudication" 8 The above decision has subsequently been followed in the case of Debendra and Rohini Memorial Trust (supra) adjudicating similar issue. So far as delay in filing of the Audit Report if available before the Assessing Authority same needs to be considered. For this proposition, we would like to quote the decision of this Coordinate Bench in the case of Sahaj Seva Trust Vs. ITO in order dated 06.05.2025. Ld. Departmental Representative failed to controvert the ratio laid down in the above decision by placing any other binding precedent in favour of the Revenue. We therefore respectfully following the decision in the case of Bangarh Educational Welfare Trust (supra) and Sahaj Seva Trust (supra) are inclined to hold that exemption w/s.11 claimed by the assessee deserved to be allowed. Accordingly, effective grounds of appeal raised on merits of the case are allowed."

We have heard both the sides and perused the record placed before us. We note that assessee holds valid registration u/s.12A of the Act vide letter dated 13.03.2022, but has filed Form No.10B belatedly on 02.03.2022 and ld.CIT(A) who has also the co-terminus powers to that of ld. AO did not accepted the audit report filed on Form No.10B and denied the benefits of sections 11 and 12 to the assessee.

We note that the Coordinate bench, Surat in the case of S.M. K.R. Vashi High School Vs. ITO (Exemption) reported in 157 taxmann.com 702 (ITAT, Surat) has held that even if the Form No.10B could not be uploaded due to some technical error on the income-tax portal, benefit of section 11 could not be denied merely on account of delay in furnishing the audit report. Hon’ble High Court in the case of CIT (Exemption) Anjana Foundation reported in 168 taxmann.com 462 (Gujarat) has held that filing of Form No.10B is a procedural requirement and benefit of section 11 should not be denied for delay in furnishing Form No.10B. Hon’ble Court thus affirmed the view taken by the Tribunal in its order dated 07.02.2023 in ITA No.695/Ahd/2023. We therefore following the ratio laid down in the above referred decisions hold that the assessee holding valid registration u/s.12A of the Act has filed Form No.10B belatedly but during the appeal proceedings itself and filing of such report is directory and not mandatory as held by Hon’ble Courts, therefore, benefit of sections 11 and 12 claimed by the assessee in income-tax return deserves to be allowed. Grounds of appeal raised by the assessee are allowed.”

In the result, the appeal of the Revenue is dismissed.