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Facts
The assessee, a charitable trust registered under section 12A, claimed deduction under section 11 for AY 2017-18. The audit report in Form 10B, essential for claiming exemption, was prepared and e-filed belatedly, more than a year after the Income Tax Return (ITR). Consequently, the CPC processed the return under section 143(1), denying the section 11 deduction and determining an income of Rs.58,51,640/-. The CIT(A) upheld this denial, leading to the current appeal before the Tribunal.
Held
The Tribunal upheld the CIT(A)'s decision, finding no error in the denial of deduction under section 11. It noted that the facts, particularly the belated filing of Form 10B and the filing of the ITR before the deduction was quantified, were identical to the assessee's own case for AY 2018-19, where a coordinate bench had already dismissed a similar appeal. The Tribunal also observed a discrepancy between the deductible income claimed in the ITR and the amount reported in Form 10B, and respectfully followed its previous binding decision.
Key Issues
Whether the adjustment made under section 143(1) denying deduction under section 11 of the Income Tax Act due to belated filing of Form 10B was valid, and if the filing of Form 10B is directory or mandatory.
Sections Cited
143(1), 12A, 11, 139(1), 11(2)(c), 13(9), 11(1), 11(1B), 13(3), 11(2), 11(2)(b), 12(2), 10(21), 10(22B), 10(23A), 10(23B), 10(23C), 10(24), 10(46), 10(47), 10(23D), 10(23DA), 13A, 13B, 17B, 12A(b)
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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI MANISH BORAD & SHRI VINAY BHAMORE
ORDER
PER VINAY BHAMORE, JM:
This appeal filed by the assessee is directed against the order dated 17.01.2025 passed by Ld. Addl./JCIT(A)-2, Visakhapatnam [‘Ld. CIT(A)’] for the assessment year 2017-18.
The appellant has raised the following grounds of appeal :-
1. The Ld CIT(A) erred in sustaining the order under section 143(1) without appreciating that the adjustment made was beyond the purview of the provisions of section 143(1).
The Ld CIT(A) erred in sustaining a demand created under section 143(1) without appreciating that there was no arithmetical error or incorrect claim or any loss claimed or inconsistencies in the return and thus, creating demand under section 143(1) was without jurisdiction and hence bad in law.
The Ld CIT(A) erred in not allowing the assessee's claim of deduction/exemption of Rs.58,51,640/- though the assessee was registered under section 12A of the I T Act, vide Order dated 24.02.2011 of the then CIT-III, Pune.
The Ld CIT(A) erred in not appreciating that the Ld ADIT, CPC, had carried out adjustment without allowing the assessee opportunity of being heard/ to respond to the proposed adjustment.
The Ld CIT(A) erred in not appreciating that the assessee had uploaded the Auditor's Report in Form No. 10B before the ITR was processed under section 143(1) and the provision regarding filing of this report along with ITR was procedure and directory in nature.
The Ld CIT(A) erred in not appreciating that there was reasonable and sufficient cause for delay in uploading the Auditor's Report on 21.11.2018 and not along with the ITR within the due date under section 139(1).
The Ld CIT(A) erred in rejecting the assessee's appeal without appreciating that provisions of section 11(2)(c) and section 13(9) were not applicable to the assessee's case.
The above grounds of appeal
are without prejudice to one another.
9. The appellant craves leave to furnish Additional Evidence which may be relevant to the above Grounds of Appeal in course of the appeal proceedings.
10. The appellant craves leave to amend or alter any of the above Grounds of Appeal or to add new Grounds of Appeal during the course of appeal proceedings.”
3. Facts of the case, in brief, are that the assessee is a charitable trust duly registered u/s 12A of the IT Act, engaged in the activity of providing educational services by running an English Medium School at Patan, Distt. Satara. The return of income for the year under consideration i.e. for assessment year 2017-18 was furnished by the assessee trust on 15.12.2017 declaring Nil income after claiming deduction of Rs.58,51,640/- u/s 11 of the IT Act.
Since audit report in Form 10B which was required to be filed either before or along with the return of income, for the purposes of claiming exemption u/s 11 of the IT Act, was prepared belatedly i.e. on 21-11-2018 & was e-filed belatedly, i.e. on 19-03-2019 which is more than a year after filing of the Income Tax Return, CPC vide Intimation dated 25.03.2019 processed the above said return u/s 143(1) of the IT Act by denying the deduction u/s 11 of the IT Act as claimed by the assessee and determined income of Rs.58,51,640/- as against the Nil income returned by the assessee.
Being aggrieved with the above Intimation dated 25.03.2019 issued by CPC u/s 143(1) of the IT Act, the assessee preferred an appeal before Ld. CIT(A). After considering the reply of the assessee, vide order dated 17.01.2025, Ld. CIT(A) dismissed the appeal filed by the assesse.
It is the above order against which the assessee is in appeal before this Tribunal.
Ld. AR appearing from the side of the assessee submitted before us that the order passed by Ld. CIT(A) is not justified. Ld. AR submitted before the bench that the filing of audit report in Form 10B is only directory and not mandatory and for this procedural error, deduction u/s 11 cannot be denied. In support of this contention, Ld. AR relied on coordinate bench decision passed in the case of ITO vs. Sir Kikabhai Premchand Trust, [2010] 42 SOT 403 (Mum.) and also relied on the judgement passed by Hon’ble Calcutta High Court in the case of CIT vs. Rai Bahadur Bissesswarlal Motilal Malwasie Trust, [1992] 195 ITR 825 (Calcutta) & also furnished copy of CBDT Circular with regard to condonation of delay.
Ld. AR fairly conceded before the bench that for assessment year 2018-19 similar addition was made by CPC by denying the deduction u/s 11 of the IT Act on the ground of belated filing of Audit Report in Form 10B and a coordinate bench of this Tribunal vide order dated 28.06.2023 has already dismissed the appeal filed by the assesse. However, Ld. AR submitted that the facts of the instant case in hand & that of the case of asstt. year 2018-19 are different. Accordingly, Ld. AR requested before the bench to allow the deduction u/s 11 of the IT Act of Rs.58,51,640/-.
Ld. DR appearing from the side of the Revenue relied on the earlier order dated 28-06-2023 passed in by this Tribunal in the case of the assessee for asstt. year 2018-19, wherein the deduction u/s 11 was denied on the identical ground of belated preparation of Audit Report in Form 10B & accordingly requested to confirm the orders passed by the subordinate authorities.
We have heard Ld. counsels from both the sides and perused the material available on record including the paper book, copy of Form 10B audit report, copy of case laws, copy of circular issued by CBDT for condonation of delay and copy of decision already passed by this Tribunal in the case of the assessee for assessment year 2018-19 wherein the Tribunal dismissed the appeal of the assessee on identical facts.
In this regard, we find that in the instant case in hand i.e. for asstt year 2017-18 the claim of deduction u/s 11 of the IT Act of Rs.58,51,640/- was denied by CPC vide Intimation order dated 25-03-2019 issued u/s 143(1) of the IT Act . In this regard, we also find that prior to making the above addition/ disallowance, CPC communicated to the assesse, vide communication dated 20-11-2018 sent on email patanvalley@yahoo.co.in of the assessee wherein denial of exemption u/s 11 of the IT Act was informed, since audit report in Form 10B was not filed either before or along with the return of income. Admittedly, the audit report in Form 10B was prepared belatedly & was also furnished belatedly & there is no quarrel in this regard, however it is the contention of Ld. AR that the filing of Form 10B audit report is directory & not mandatory. In this regard, we perused the copy of CBDT Circular dated 03-01-2020 which suggests to file condonation application before the Commissioners of Income Tax, however the assessee has not filed any such application.
In this regard, we further find that the issue is squarely covered against the assesse by an order passed by coordinate bench of this Tribunal in the case of the assesse in its own case for Asstt Year 2018-19, wherein under identical facts the Tribunal dismissed the appeal filed by the assesse in order dated 28.06.2023.
We also find that the Tribunal in its earlier order dated 28.06.2023 passed in the case of assessee for assessment year 2018-19 in has observed a peculiar fact that the Return of Income was filed on 23-09-2018 by claiming deduction u/s 11 of the IT Act even before the quantification of deductible amount u/s 11 of the IT Act, since the audit report in Form 10B itself was prepared on 21-11-2018 which was the basis of claiming deduction u/s 11 of the IT Act. Therefore, the Tribunal dismissed the appeal of the assesse by observing as under :- “11. After careful consideration of the case laws as relied on by the ld. AR, we note that the assessee therein filed audit report in Form No. 10B belatedly, but however, obtained before filing the return of income u/s. 139 of the Act. In the present case, as it is evident from impugned order vide submissions made through ground No. 3 at page 4 which clearly shows the audit report itself was dated 21-11-2018 which demonstrates that at the time of filing return of income audit report was not ready, consequently we can say the claim u/s. 11 was not quantified. We note that it is a substantial failure of the assessee in getting the books of account audited before prescribed due date and also before filing the return of income. Thus, there is no dispute, the audit report was not ready before filing return of income, in the absence of which the assessee however, claimed exemption u/s. 11 of the Act without auditor’s quantification. Thus, ratio laid down by the Hon’ble High Court of Calcutta and Gujarat are not applicable and as such, the finding of ITAT, Pune Benches. Therefore, we find no infirmity in the order of NFAC, Delhi in confirming the intimation issued by the CPC, Bangalore u/s. 143(1) of the Act denying the exemption u/s. 11 of the Act. Thus, the grounds raised by the assessee fails and are dismissed.
In the result, the appeal of assessee is dismissed.” 13. In this regard it was the contention of LD AR before the bench that the facts of asstt year 2017-18 & that of asstt year 2018-19 are different. However, we do not find any such difference, which is clear from following chart :- Asstt Year Return Filed on Form 10B audit report prepared on 2017-18 15-12-2017 23-11-2018 2018-19 23-09-2018 21-11-2018
From the perusal of above chart, it is apparent that in both the cases Audit Report in Form 10B was prepared & filed after filing return of income. Therefore, admittedly the return of income claiming deduction u/s 11 of the IT Act was filed even before quantification of deductible amount u/s 11 of the IT Act in Form 10B audit report. Therefore, there is no change as claimed by the Ld. AR in the facts of both the cases. Since there is no change & the facts & issues of assessment year 2017-18 are identical to the earlier decision passed by a coordinate bench of this Tribunal in the case of the assessee for assessment year 2018-19, the same is binding on us. Therefore, respectfully following the above decision passed by a coordinate bench of this Tribunal in the case of assessee itself for asstt year 2018-19, we are of the considered opinion that there is no reason to take a different view from that which has already been taken by the Tribunal in assessment year 2018-19.
Apart from above, we also find/observe that the quantification of deductible income in Form 10B audit report does not match with the figures mentioned in the return of income for the year under consideration. In this regard, we find that as per CPC’s intimation the assessee has claimed in the return of income as per section 11(1) of the IT Act an amount of Rs.8,94,696/- as amount accumulated or set apart for application to charitable or religious purposes to the extent it does not exceed 15% of the income derived , however this amount does not appear in item serial No.3 of Annexure to Form 10B audit report which is specifically meant for reporting of the above amount. For ready reference Form 10B Audit Report furnished by the assessee and relevant page of CPC’s Intimation dated 25.03.2019 are reproduced herein below wherein the discrepancy is apparent :-
Considering the totality of the facts of the case & respectfully following the decision dated 28-06-2023 already passed by the