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Facts
The assessee, Bilaspur Model Education Society, registered under Sections 12A/12AA and running educational institutions, failed to file its original income tax return for AY 2022-23. While it later filed an updated return under Section 139(8A) claiming exemption under Section 11, it admittedly did not file the mandatory audit report in Form 10B within the prescribed time as per Section 12A(1)(b). Consequently, the Assessing Officer treated the entire gross receipts of Rs.36,60,410/- as income without deducting the expenses of Rs.39,72,977/-.
Held
The Tribunal upheld the decision of the CIT(Appeals)/NFAC, confirming that the exemption under Section 11 was correctly denied due to the assessee's failure to file the audit report in Form 10B. It ruled that without fulfilling the conditions for exemption, the trust is assessed as an AOP, and therefore, the claim for administrative/establishment expenses cannot be allowed, leading to the entire gross receipts being brought to tax.
Key Issues
Whether exemption under Section 11 of the Income Tax Act can be denied for non-filing of the audit report in Form 10B, and whether expenses are allowable if the exemption is denied.
Sections Cited
10(23C), 11, 11(1), 12, 12A, 12A(1)(b), 12AA, 12AB, 13, 139(1), 139(4), 139(4A), 139(8A), 143(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, RAIPUR BENCH “SMC”, RAIPUR
Before: SHRI PARTHA SARATHI CHAUDHURY
आदेश / ORDER PER PARTHA SARATHI CHAUDHURY, JM The captioned appeal preferred by the assessee emanates from the order of the Ld.CIT(Appeals)/NFAC, dated 11.03.2025 for the assessment year 2022-23 as per the grounds of appeal on record.
The sole grievance of the assessee is that the Ld. CIT(Appeals)/NFAC has erred in not allowing administrative /establishment expense and upholding action of CPC/A.O in bringing to tax entire receipts of assessee.
The A.O had treated the gross receipts of Rs.36,60,410/- as income without deducting the expenses of Rs.39,72,977/- while processing the return of income u/s.143(1) of the Income Tax Act, 1961 (for short ‘the Act’).
The brief facts in this case are that the assessee is a society registered under Society Registration Act running educational institutions. The assessee is also registered u/s.12A/12AA of the Income Tax Act, 1961 (for short ‘the Act’). Admittedly, the assessee had not filed return of income for A.Y.2022-23 either u/s.139(1) or u/s.139(4) of the Act although it was having receipts of Rs.36,60,410/- during the year. Subsequently, the assessee had filed updated return of income as per
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Section 139(8A) of the Act on 04.04.2023 in ITR-7. In this regard, it was observed by the revenue authorities that the ITR-7 is applicable to persons required to file the return of income as per Section 139(4A) of the Act claiming exemption u/s.11, 10(23C) etc. In other words, the assessee had claimed exemption u/s.11(1) of the Act in respect of income from charitable institutions. Therefore, it was held by the Ld. CIT(Appeals)/NFAC that the submission of the assessee that it had not claimed exemption and the updated return had been filed to declare its income and expenditure was not tenable. The assessee had also filed detailed written submissions before the Ld.CIT(Appeals)/NFAC and after considering the same a/w. assessment order, the said authority held and observed as follows:
“5.2 As per provisions of section 12A(1)(b) of the Act applicable to the A.Y.2022-23, the accounts of the trust was required to be got audited and the report of such audit in Form No.10B was required to be furnished one month prior to the due date for filing the return of income under section 139(1) of the Act. But, admittedly, the appellant has not furnished such audit report at all. Therefore, exemption under section 11 was not allowable to the appellant. It is not correct to say that no reasons have been given by the CPC while denying the exemption. It has been mentioned in the intimation that 'no forms filed'. Further, at the end of intimation, the CPC has given the reasons for denying exemption as under- "The Trust or Institution registered u/s.12A/12AA/12AB has not E-filed the Audit Report in Form 10B one month prior to the due date for furnishing return u/s.139(1). Hence the exemption claimed in Sr.no.2 [exemption claimed u/s.11(1)(d)] and Sr.no. 4i to 4viii of Part B-TI is not
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allowable in accordance with the provisions of Section- 12A(1)(b) of the Income tax Act." From the above, it is evident that the exemption has been disallowed for not filing the Form 10B and not for delay in filing the return as contended by the appellant. The case laws relied upon by the appellant in this regard are not applicable to the facts of the present case as in those cases, audit report in Form 10B was filed late before assessment whereas in the present case, the appellant had not filed the Form 10B at all. 5.3 So far as the contention of the appellant that only the surplus after reducing expenses from receipts should be charged to tax as per provisions of the Act is concerned, the same is not tenable in view of the scheme of sections 11, 12 and 13 of the Act dealing with exemption in respect of income of charitable or religious trust or institution. As per section 11(1), the income of such trust or institution is exempt if the same is applied for the specified charitable or religious objects. So, the exemption is allowable in respect of income on the basis of application of income and other conditions prescribed in section 11, 12 and 13 of the Act have also to be satisfied. Conversely, when the exemption under section 11 is denied as the trust has not satisfied the conditions prescribed for the same, no amount can be allowed as exempt as application of income towards charitable or religious purposes because the trust is no more considered charitable or religious and is assessed as AOP. Therefore, the claim of the appellant for the amount of Rs.39,72,977/- as expenses cannot be allowed. The facts of the case laws relied upon by the appellant are different from the facts of the case in as much as in those cases, the assessees were not registered under section 12A/12AA whereas the present appellant was registered under section 12A/12AA and has filed updated return in ITR -7 claiming exemption. In view of the above facts and circumstances of the case and the provisions of law, there is no infirmity in the action of the CPC denying exemption under section 11 of the Act and charging tax on the entire income of Rs.36,60,410/-. Therefore, the same is confirmed. Accordingly, the Grounds No. 1 & 2 are dismissed. 6. Ground No. 3-
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No submission has been furnished by the appellant on this ground and therefore, the same is dismissed being not pressed upon. 7. In the result, the present appeal is dismissed.”
As observed by the Ld.CIT(Appeals)/NFAC in the foregoing paras that as per Section 12A(1)(b) of the Act for A.Y.2022-23, the accounts of the trust was required to be audited and the report of such audit in Form No.10B was required to be furnished one month prior to the due date for filing the return of income under section 139(1) of the Act. Admittedly, the assessee had not furnished such audit report at all. Therefore, exemption under section 11 was not allowable to the assessee. It was contended by the assessee that while not allowing exemption u/s.11 of the Act, the CPC/A.O has not provided any reasons. However, it was observed correctly by the Ld. CIT(Appeals)/NFAC that the CPC/A.O has mentioned 'no forms filed'. Further, at the end of intimation, the CPC/A.O has given the reasons for denying exemption stating that “The Trust or Institution registered u/s.12A/12AA/12AB has not E-filed the Audit Report in Form 10B one month prior to the due date for furnishing return u/s.139(1). Hence the exemption claimed in Sr.no.2 [exemption claimed u/s.11(1)(d)] and Sr.no. 4i to 4viii of Part B-TI is not allowable in accordance with the provisions of Section-12A(1)(b) of the Income tax Act." Therefore, the said exemption has been disallowed to the assessee for not filing Form 10B.
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Further regarding the contention of the assessee that only the surplus after reducing expenses from receipts should be charged to tax, it has been held by the Ld. CIT(Appeals)/NFAC that since the exemption u/s.11 of the Act is denied to the assessee for not satisfying the conditions prescribed for the same, therefore, no amount can be allowed as exempt as application of income towards charitable or religious purposes because the trust is no more considered charitable or religious and is assessed as AOP. Therefore, the claim of the assessee that the amount of Rs.39,72,977/- as expenses may be allowed, was dismissed by the Ld. CIT(Appeals)/NFAC. Accordingly, the action of the CPC/A.O denying exemption u/s.11 of the Act and charging tax on the entire income of Rs.36,60,410/- was upheld by the Ld. CIT(Appeals)/NFAC.
The Ld. Counsel for the assessee could neither disprove these facts on record nor could demonstrate that audit report in Form 10B was filed as per provisions of the Act. It is further noted that the case laws relied by the Ld. Counsel are substantially different and therefore cannot come to the rescue since in those cases audit report in Form 10B were filed late before assessment whereas, in the present case the assessee has not filed Form 10B at all.
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Considering the totality of the facts, there is no infirmity found in the view taken by the Ld. CIT(Appeals)/NFAC which is hereby upheld.
As per the aforesaid terms the grounds of appeal of the assessee are dismissed.
In the result, appeal of the assessee is dismissed. Order pronounced in open court on 17th day of July, 2025.
Sd/- (PARTHA SARATHI CHAUDHURY) �या�यक सद�य/JUDICIAL MEMBER रायपुर / Raipur; �दनांक / Dated : 17th July, 2025. SB, Sr. PS आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The Pr. CIT-1, Raipur (C.G.) 4. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “एक-सद�य” ब�च, रायपुर / DR, ITAT, “SMC” Bench, Raipur. गाड� फ़ाइल / Guard File. 5.
आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपील�य अ�धकरण, रायपुर / ITAT, Raipur