INCOME TAX OFFICER (EXEMPTIONS) WARD, KOLHAPUR , KOLHAPUR vs. THE NEW MIRAJ EDUCATION SOCIETY, MIRAJ, DIST. SANGLI

“6.2.1 Verdict: The contention of the appellant has been gone through. During the course of appellate proceedings the appellant had submitted that: With reference to the notice dated 20.02.2024 fixing the date of furnishing of written submissions in the captioned appeal on or before 27.02.2024. In response to the same, we hereby submit as under in this regard: The assessee trust is an educational institution, registered under The Societies Registration Act 1860 (having registration no. F-56) and also registered under The Bombay Public Trust Act, 1950 (having registration number Bom. XXIX of 1950) since 1960. The main activities of the trust are carrying on educational activities in the interest of general public. The assessee has received an intimation u/s 143(1) of the Act from CPC, Bengaluru on 23rd August, 2022 against which assessee has preferred an appeal before the Hon'ble CIT(A) for relief. There is a delay in filing of appeal by 449 days

3 ITA.No.928/PUN/2025 (The New Miraj Education Society) Regarding the delay in filing of appeal, we would like to submit that the assessee trust was not properly advised for espousing the legal issue now sought to be raised. The managing committee of the assessee society was given to understand that all the compliances were made and nothing further is required to be done and thus under bonafide impression that filing of Form 10B would resolve the issues involved in the subject intimation u/s 143(1) of the Act. However, after receipt of demand recovery notice on 09.08.2023, the assessee trust approached another tax professional to seek advice on the matter. The same has been stated in its affidavit enclosed with the appeal memo. Upon discussions with another tax professional, it was informed to us that the subject matter involved in the subject intimation u/s 143(1) of the Act is a legal issue which is covered in favour of the assessee by various precedents. After considering the same, the assessee trust considered filing an appeal before the Hon'ble CIT(A) in the matter. The due date for which was 23.09.2022, and therefore, there is a delay of 449 days in filing of the appeal. In this regard, we wish to refer to the decision of the Hon'ble Bombay High Court in Vijay Vishin Meghani vs. DCIT & Anr [(2017) 398 ITR 250 (Bom)) wherein it has been held that none should be deprived of an adjudication on merits unless it is found that the litigant deliberately delayed the filing of appeal. Further we also wish to rely upon the decision of the Hon'ble ITAT Pune in case of DCIT, Circle-8, Pune vs. Atlas Copco (India) Limited (ITA No.649/PUN/2013 & 1726/PUN/2014] wherein the jurisdictional ITAT also condoned delays of 1965 & 1018 days and took up the matter for disposal on merits. An affidavit to this effect was also submitted along with the appeal memo, that is also attached herewith Annexure-1 for your ready reference. Considering the facts as well as the law, we earnestly request that the appeal may kindly be accepted and the delay may please be condoned. Ground No.1 & 2: Brief facts of the case are as under, For the year under consideration ie. AY 2021-22, it filed its Income Tax return on 30.12.2021, vide Ack No. 653076820301221 declaring total income of Rs. 36,460. The due date for filing of the Income, Tax return was 15.02.2022. In the ITR filed, the assessee trust has stated that it is a Trust/Institution Registered u/s 12A and claiming exemption u/s 11 of the Act. The extended due date for filing of the Income Tax return was 15.02.2022 and the extended due date for filing of Form 10B was 15.01.2022. The assessee trust filed the audit report in Form 10B along with its return of income on 23.09.2022 i.e. with a delay of 251 days from the due date for filing of the same. But the audit u/s 12A of the Act for the year under consideration was already completed on 30.06.2021, The assessee trust has also appropriately claimed the exemptions u/s 11 of the Act. We would like to mention here that though it was filed on 23.09.2022, the accounts were audited under Income Tax Act 1961 on 30.06.2021 itself, i.e. before filing the ITR. As such, there is a delay in filing of Form 10B of 251

4 ITA.No.928/PUN/2025 (The New Miraj Education Society) days in furnishing of form 10B. Copy of the Audit Report in Form 10B is attached herewith at Sr.No. Particulars Date 1 Date of obtaining audit report in Form 10B 30/06/2021 2 Due date of filing of Audit Report in Form 10B 15/01/2022 Due date was extended vide circular No.17 of 2021 dated 09/09/2021 3 Date of filing of Form in 10B 23/09/2022 4 Due date of Filing of ROI for A.Y. 2021-22 15/02/2022 5 Date of filing of ROI for A.Y. 2021-22 30/12/2021 In this regard, it must be appreciated that, the assessee being a charitable organization is being run by its trustees and none of the trustees of the assessee trust belong to finance or legal background. The audit was being completed by an independent chartered accountant who has been looking after the same for past many years. Further, as per the online filing procedure for Form 10B, the online submission of the Form is to be done by the auditors first and then the same is to be approved by the assessee trust. As such, the assessee trust was relying upon its auditor with a bonafide belief that the auditor will complete the audit and will make sure that the related compliances will be done within the stipulated timeline. As such, the assessee trust was under bonafide belief that the auditor may have complied with all the statutory compliances related to the audit under the Act. The assessee trust received the subject intimation u/s 143(1) of the Act on 23.08.2022 and discussed the same with its auditor. That was the first time when the assessee got to know that the audit report was not submitted in stipulated timeline. The assessee trust then followed up with its auditor and made sure that the filing of Form 10B has been completed immediately. Consequently, the subject Form 10B has been uploaded by the auditor on 19.09.2022 which was e-verified on 23.09.2022 vide Acknowledgement No. 524018800230922. Considering the facts involved, it is clear that the subject delay of 251 days in filing of Form 108 was without any malafide intentions to jeopardize the interest of the revenue by delaying the filing of Form 10B. Also, this is merely a procedural default that does not invalidate the eligibility of the exemption u/s 11 of the Act to the assessee trust. Subsequently, the assessee trust was given to understand that all the compliances were made and nothing further is required to be done and thus under the bonafide belief that the subject filing of Form 10B will be sufficient to resolve the issues as well as the demand from the subject intimation u/s 143(1) of the Act to get the eligible claim u/s 11 of the Act vis-à-vis nullify the demand raised therein. However, while processing the ITR of the assessee trust at CPC, Bengaluru, the return was processed without providing with the eligible claim of exemption u/s 11 of the Act, on the basis that the Audit Report in form 10B was filed after the due date of filing of the same. The assessee was not provided with the opportunity of being heard before making such a disallowance which is not in line with the provisions of section 143(1) of the Act. The moot question now is whether furnishing of audit report u/s 12A(1)(b) of the Income Tax Act 1961 beyond the specified date but before the completion of assessment will disentitle the assessee from the benefits of section 5 ITA.No.928/PUN/2025 (The New Miraj Education Society) 11 of the Income Tax Act 1961 in respect of which the assessee trust would like to submit as under, "Section 124 (1)(b): 12. Conditions for applicability of sections 11 and 12. (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:- (a) (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 and the person in receipt of the income furnishes along with the return of income for the relevant assessment year 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;" Rule 17B of the IT Rules, 1962, lays down that the report of audit of the trust or the institution should be in Form No. 10B. The annexure to Form No. 10B requires the auditor to certify as to the application of income for charitable or religious purposes and the non- application or non- use of income or property for the benefit of the persons referred to in s. 13(3). The certificate is ordinarily based on the statement of the managing trustees. The balance sheet and income and expenditure statement would necessarily contain the particulars of the application of income and non-use of income or property. The certificate of the auditor only affirms the statements contained in the balance sheet and income and expenditure statement. The Assessing Officer can rely on the certificate for allowing the benefit of exemption. This is a procedural matter for the purpose of enabling the Assessing Officer to complete the assessment on the basis of the certificate of the auditor. It is now well-settled that a procedural provision, ordinarily, should not be construed as mandatory, if the defect in the act done in pursuance of it can be cured by permitting the appropriate rectification to be carried out at a subsequent stage. Procedural laws are devised and enacted for the purpose of advancing justice. It does not mean that the procedural laws should be brushed aside by the Court. It depends on the facts and circumstances of a particular case as to whether a breach in the observance of any procedural law, would cause real and substantial injustice to the parties. Having regard to the object of section 12A, it cannot be said that the legislature intended that, even where the trust has got its accounts audited and the certificate obtained in Form No. 10B before the assessment is completed, merely because such report could not be filed in the course of filing of ITR, it would deprive a trust of getting the exemption if it is otherwise entitled to it in law. It must also be appreciated that, the word "shall" occurring in section 12A cannot, under the circumstances, be read as a "must" making it mandatory for the trust to furnish the auditor's report along with the filing of the return. If for certain unavoidable circumstances, the assessee is 6 ITA.No.928/PUN/2025 (The New Miraj Education Society) unable to furnish the auditor's report along with the return then the same can be furnished at a later date. We would like to bring Your Honor's kind attention to CBDT Circular No. (1/1148-CBDT F. No. 267/482/77-IT (Part) dt. 9th Feb., 1978- CBDT Bulletin Tech. XXIII/582 (enclosed herewith at Annexure-3 for your honour's ready reference) wherein CBDT has said -"Charitable trust-Requirement of filing audit report in Form 10B-Section 124(1)(b)-Instructions regarding.- The Board have considered whether the requirement under Section 124(1)(b) of filing audit report 'along with the return of income' is mandatory so as to disentitle the trust from claiming exemption under Sections 11 and 12 in case of omission to furnish such report in the prescribed form along with the return. Normally, it should be possible for a charitable or religious trust or institution to file the auditor's report along with the return of total income, where such trust or institution claims exemption under Sections 11 and 12. However, in cases where for reasons beyond the control of the assessee some delay has occurred in filing the said report the exemption as available to such trust under Sections 11 and 12 may not be denied merely on account of delay in furnishing the auditor's report and the Income-tax Officer should record reasons for accepting a belated audit report." From the aforesaid CBDT circular a reasonable inference can be drawn that the provisions of section 12A(1)(b) are directory in nature and not mandatory for claiming of exemption u/s 11 and 12 of the Act in the sense that the assessing authority / appellate authority is not powerless to allow an assessee the eligible exemption u/s 11 and 12 of the Act, if the audit report is not filed before the specified date. One has to look at the intent of law behind the legal provisions. One has to construe the provision to ensure coherence and consistency to avoid undesirable consequences. Where the audit report was furnished after the due date for filing of the same but before the completion of assessment, there was no reason why such audit report should not be allowed to be filed before the completion of the assessment /appellate proceedings. In this regard, we wish to rely upon the decision of Hon'ble ITAT Delhi in case of RAM SHARAN KHAJANI DEVI vs. INCOME TAX OFFICER (2022) 65 CCH 0024 wherein it has been held that, "Since the assessee in the instant case has got its accounts audited before the due date and has undisputedly filed the same before the completion of the assessment, CIT(Appeals) is not justified in denying the claim of exemption u/s 11 on the allegation that form No. 10B has not been filed in time." We also rely upon the decision of Hon'ble MP High court in case of CIT v. Devradhan Madhavlal Genda Trust [(1998) 230 ITR 714, 717 (MP HC)] it has been held that if the audit report is not at all filed, there would be justification to reject the claim for exemption under s. 11 but if the same has been filed, even after the return has been filed but within the period permitted by law, it would be against the spirit of the Act to deny exemption. The requirement is, thus, directory and we find that the Tribunal was justified in holding that filing of the audit report in Form No. 10B with the return of income was not mandatory and it was sufficient compliance with section 7 ITA.No.928/PUN/2025 (The New Miraj Education Society) 124(b), if the same was filed during the course of the assessment proceedings. The aforesaid principal is also upheld by courts in the following cases - CIT vs. Hardeodas Agarwalla Trust (1992) 198 ITR 511 (Cal HC) CIT v. Shahzedanand Charity Trust, (1997) 228 ITR 292, 299 (Pun) HC) - CIT vs. Rai Bahadur Bishwesharlal Motilal Malwasie Trust (1992) 195 ITR 825 (Cal HC) Income Tax Officer vs. Sir Kikabhai Premchand Trust 42 SOT 403 (Mum ITAT) Swajan Pariwar Trust vs. ADIT(E) (1997) 57 TTJ 77 Commissioner of Income Tax II vs Mumbai Metropolitan Regional Iron 93CCH233 (Mum ITAT) Considering the facts involved, it is clear that the subject delay of 251 days in filing of Form 10B was without any malafide intentions to jeopardize the interest of the revenue by delaying the filing of Form 10B. Also, this is merely a procedural default that does not invalidate the eligibility of the exemption u/s 11 of the Act to the assessee trust. As such, it is our humble submission that, the audit report in Form 10B ought to be considered even if filed after the specified date as it is not a case where the return of income was filed without audit as prescribed u/s 12A(1)(b) of the Act. Based on the aforesaid facts, legal provisions, reasonable interpretations and legal precedents, we request your honour to consider the submission and allow the assessee frust the benefit of exemption under section 11 & 12 of the Act for the year under consideration. 6.2.2 The submission of the appellant has been gone through along with the case laws relied upon and Circular dated 09.02.1978, It is noticed that in the instant case there is delay in only procedure. As decided in various case laws relied upon by the appellant and factual aspects of the case, it is concluded that the appellant is entitled for exemptions u/s. 11 as other conditions are found fulfilled. Therefore, the assessing officer is directed to delete the addition of Rs. 6,37,30,847/-.

“1. On facts and circumstance of the case, the Ld. Addl./Jt. Commissioner of Income Tax (Appeals) (hereinafter Addl./Jt. CIT(A) in short] erred in allowing the benefit of exemption u/s. 11 of the Income Tax Act, 1961 [hereinafter I.T. Act in short] to the assessee, without appreciating the fact that while processing the return of income u/s 143(1), the Assessing Officer at Centralized Processing 8 ITA.No.928/PUN/2025 (The New Miraj Education Society) Centre, Bengaluru had rightly denied the assessee's claim of exemption u/s. 11 of the Act as per Rule 17 of the I.T. Rules, 1962 and CBDT Circular No.02/2020 dated 03.01.2020, since the assessee had not uploaded its Form No. 10B for A.Y. 2021-22 within the prescribed time allowed u/s. 139 of the Act.

5. Ld. Departmental Representative (“DR”) submitted that assessee is habitual defaulter in filing Form 10B within the prescribed limit and hence, Ld.CIT(A) is not justified in accepting the plea of the assessee and allowing the exemption claimed u/s. 11 of the Act. Referring to the judgment of the Hon'ble Supreme Court in the case of PCIT vs. Wipro Ltd. [2022] 140 taxmann.com 223(SC), Ld. DR submitted that the Hon'ble Apex Court has held that exemption provisions should be construed strictly and the requirements for claiming exemption, even if procedural, should be 9 ITA.No.928/PUN/2025 (The New Miraj Education Society) followed in letter and spirit. In view of the above decision, ld. DR submitted that Ld.CIT(A) has erred in allowing the benefit of exemption u/s. 11 of the Act holding that filing of Form 10B is merely procedural formality. He further submitted that Ld. Commissioner of Income Tax (Exemptions), Pune vide order dated 05/10/2023 has already rejected the assessee’s application for condonation of delay in filing Form 10B for A.Y.2021-22 under consideration. He, therefore, submitted that the order of the Ld.CIT(A) should be set aside and that of the Ld.AO/CPC be restored.

12 ITA.No.928/PUN/2025 (The New Miraj Education Society) 6. Considering the language of the provision of Section 10B(8) of the Act, the Hon'ble Supreme Court held that it was mandatory on part of the assessee to file declaration before the due date of filing of return under Sub-section (1) of Section 139 of the Act, whereas, in the facts of the said case the assessee filed such undertaking along with the revised return under Sub-section (5) of Section 139 of the Act and in such facts, the Hon'ble Supreme Court held that the twin conditions prescribed under Section 10B(8) of the Act was mandatory to be fulfilled and it cannot be said that though the declaration is mandatory, the filing of such declaration within the due date of filing of return under Sub-section (1) of Section 139 of the Act would be directory.

13 ITA.No.928/PUN/2025 (The New Miraj Education Society) assessment proceedings itself, therefore, the assessee in our opinion is in a better position. The various other decisions relied on by the Revenue as per grounds of appeal or during the course of arguments are distinguishable and not applicable to the facts of the present case. In view of the above discussion, we do not find any infirmity in the order of the Ld. CIT(A) / NFAC allowing the claim of exemption u/s 10(23C)(v) of the Act for belated filing of Form No.10BB. We hold and direct accordingly. The grounds raised by the Revenue are accordingly dismissed.”

raised by the Revenue are dismissed.

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

Order pronounced in open Court on 01st January, 2026 Sd/- Sd/- [R.K. PANDA] [ASTHA CHANDRA] VICE-PRESIDENT JUDICIAL MEMBER Pune, Dated 01-01-2026 vr/- Copy to