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Facts
The assessee, a society running a primary school, claimed exemption under section 11 for A.Y. 2022-23. The Centralized Processing Center (CPC) disallowed the exemption of Rs. 15,44,586 and raised a demand, citing discrepancies in registration details and, crucially, the late e-filing of the Audit Report in Form 10B, which was not submitted one month prior to the return filing due date. The assessee argued the delay was unintentional due to technical issues and the COVID period, and the audit was completed on time. The CIT(E) dismissed the appeal, stating it lacked power to condone the delay.
Held
The Income Tax Appellate Tribunal (ITAT) observed that the audit report was prepared well before the due date for Form 10B filing, and the assessee provided a reasonable cause for the delay in e-filing. Citing precedents, the ITAT held that the non-filing of the audit report along with the return of income is a procedural omission. Therefore, the ITAT allowed the appeal and directed the CIT(E) to consider the Form 10B on merits and pass a fresh order after providing an opportunity of hearing to the assessee.
Key Issues
Whether the exemption claimed under section 11 can be denied solely due to the delayed e-filing of Form 10B, or if such delay, with reasonable cause, constitutes a procedural omission that should not preclude the exemption claim on merits.
Sections Cited
143(1), 143(1)(a)(ii), 11, 11(1)(a), 12A, 12AA(1)(b), 12A(i)(ac)(1), 80G(5)(i), 12A(1)(b), 139(1)
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Income Tax Appellate Tribunal, DELHI BENCHES : G : NEW DELHI
Before: SHRI S. RIFAUR RAHMAN & SHRI ANUBHAV SHARMA
(Appellant) (Respondent) Assessee by : Shri Saurav Rastogi, Advocate Revenue by : Shri Anuj Garg, Sr. DR Date of Hearing : 04.07.2024 Date of Pronouncement : 27.08.2024 ORDER
PER ANUBHAV SHARMA, JM:
This appeal is preferred by the Assessee against the order dated 09.10.2023 of the Commissioner of Income-tax (Appeals)-13, Mumbai (hereinafter referred as Ld. CIT(E) or in short Ld. ‘FAA’) in Appeal No.NFAC/2021-22/262391 arising out of the appeal before it against the intimation dated 26.05.2023 u/s 143(1) of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’), by DCIT, CPC, Bengaluru (hereinafter referred to as the CPC).
The assessee has come in appeal challenging the impugned order of the CIT (E) before whom the assessee had challenged the disallowance of the exemption claimed u/s 11 of the Act. The assessee is a registered society registered under Societies Registration Act 1860 vide registration no. S-13904 of 1983 dated 05 October 1983 and is running a primary school recognised by Municipal Corporation of Delhi. The assessee is registered under section 12A read with section 12AA(1)(b) of the Act since 05 October 1983. The assessee has claimed to have been regularly filing its return and claiming exemption under section 11 of the Act. The assessee society applied for registration under newly inserted provision of the Act for an order of registration under section 12A of sub section(i) of clause(ac) of sub clause(1) which was granted for the period A.Y. 2022-2023 to A.Y. 2026-27 and an approval under section 80G sub section (5) clause(i) was also granted.
2.1 The return of the assessee for A.Y. 2022-2023 was filed on 07/11/2022 and the assessee had claimed exemption under section 11 for Rs.15,31,104/- for income applied during the year and exemption under section 11(1)(a) of Rs.13,482/- for income accumulated upto 15 percent, but, the CPC disallowed the entire exemption of Rs.15,44,586/- and created a demand and a notice for adjustment was issued under section 143(1)(a)(ii) mentioning two incorrect claims:- i. The details provided at SL.No. A19 of schedule part A general are not matching with the information as per form 10AC. Hence, the amount mentioned at SL. No. 4 and 6 (viii) of part B1 Part B TI not allowable. Old registration number 12A (S-3141/02/576) written in Form instead of new regime registration number AABTS4159DE20211.
To which assessee responded: The appellant mentioned the old 12A Registration No. S-3141/02/576 dated 05 October 1983 because the application for registration under new regime was fled on dated 07/11/2022 and at the time of fling return the same was not processed by Income Tax Department. The order of registration in form 10AC was received on 14/11/2022 and Unique Registration Number AABTS4159DE20211 was granted from A.Y. 20222023 to A.Y. 2026- 2027. Hence the appellant is eligible for claiming exemption under section 11 for the A.Y. 2022-2023 under appeal. ii. The trust or institution registered u/s 12A/12AA/12AB has not E-fled the Audit Report in Form 10B at least one month prior to the due date for furnishing return u/s 139(1). Hence the exemption claimed in Sr. no. 6i to 6vii of part B1 part B-TI is not allowable in accordance with the provisions of section-12A(1)(b) of the Income Tax Act. 3
To which assessee responded: The appellant fled the audit report in form no. 10B with the Income Tax Return fled. The audit report could not be E-fle at least one month prior to the due date for furnishing return because of the reason that during the COVID period the educational activities were badly effected and the primary school run by the society was closed for a long time. Hence the situations were beyond the control of the appellant. The audit of the society was completed on dated 30/09/2022 but it is e-fled on dated 07/11/2022. Further the above provision for E-fle the audit report one month prior to fling the return has come in force first time in A.Y. 2022-2023. The delay was unintentional and not causing any loss to the revenue hence prayed to be ignored. The appellant fled its response but without considering the response CPC taxed the entire income of Rs. 15,44,586/- and created a demand of Rs. 3,41,570/-.
The claim of assessee is that the appellant society has always been filing the audit report & other compliances, well in time. During the year under appeal i.e. for AY 2022-23, audit report in form no. 10B which was due to be filed on or before 07.10.2022 as per section 12A(1)(b) could not be filed in time by their auditor, namely, M/s. Goyal Parul and Company. (FRN: 016750N) & was filed on 07.11.2022 thus causing a delay of 31 days. Due to this, the non-compliance in terms of section 12A(1)(b) has happened at the end of the petitioner assessee. It is submitted that as a matter of record that audit of the society was completed on dated 30/09/2022 i.e well within time as per the provisions of the Income Tax Act. This fact is evident from the Audit Report in Form 10B (attached page No. 20) but the same was e-filed on dated 07/11/2022. Further the audit report could not be E-filed at least one month prior to the due date for furnishing return because of the reason that the staff of auditor who was entrusted to upload and file the audit report on Income Tax Portal did not file the same due to some technical problem and filed it on 07.11.2022. The Certificate in this regard from our auditor is filed. (Page no. 29.
The ld.CIT(E) had dismissed the appeal with the following relevant observations:- “5. Observation of this office:- 5.1 In the instant case, the return of income was processed by denying claim of exemption as the required form 10B was not submitted within the due date i.e. u/s 139(1) of the Act. In this regard, the CBDT Circular No. 16/2022 bearing F.No.197/89/2022-ITA-I dated 19th July, 2022 authorised the concern Commissioners of Income to admit applications of condonation of delay in filing Form No. 10B for AY 2018-19 or for any subsequent Assessment Years where there is delay of upto 365 days and decide on merits.
In the instant appeal, Audit report in Form 10B is not e-filed at least one month prior to the due date for furnishing return of income under section 5
139(1) and the assessee has failed to do so. Further, as per the CBDT’s circular No. 16/2022, the appellant was required to file condonation of delay in this regard before the concern Commissioner of Income-tax. After filing of condonation of delay and getting order from the concern Commissioner of Income-tax, the appellant may file rectification application accordingly. Since this office is not able to take further action as the concerned authority in the matter is the concerned Commissioner of Income-tax, hence the instant appeal is required to be dismissed at this stage.”
The ld. AR has primarily relied the facts and submissions as were raised before the CIT(E) and it was further submitted that the condonation application was filed which has also not been considered. The ld. AR, however, has relied the following orders to submit that non-filing of audit report along with return of income was a procedural omission and cannot be an impediment in law in claiming the exemption:-
(i) SHREE BHAIRAV SEVA SAMITI VS. ITO IN DTD. 08.12.2022 OF MUMBAI ITAT; (ii) GYANDEEP CHARITABLE TRUST VS. ITO IN ITA NO. 555/AHD/2023 DTD. 03.01.2024 OF AHMEDABAD ITAT; (iii) ITO VS. PAPATHIYAMMAL PITCHAI EDUCATIONAL TRUST IN ITA NO. 18/CHNY/2023 DTD. 19.10.2023 OF CHENNAI ITAT; & (iv) HARI GYAN PRACHARAK TRUST VS. DCIT IN ITA NO. 245/AHD/2021 DTD. 16.06.2023 OF AHEMADABAD ITAT 5.1 The ld. DR submitted that CIT(E) had no power to condone delay and that condonation application was filed separately.
After taking into consideration the facts and circumstances and submissions made before us, we find that Form 10B was based on the audit report prepared on 30th September, 2022. The fact of registration u/s 12A and approval u/s 80G under the old regime is not disputed. It is also not disputed that on 07.11.2022, application for registration u/s 12A under the new regime stood filed. Thus, the audit was completed well before the due date fixed for filing Form 10B i.e., 07.10.2022. The assessee had provided a reasonable cause of lapse on the part of the auditors. Though the condonation of delay in filing audit report in Form 10B may not have been under the jurisdiction of the CIT(E), however, being a quasi judicial authority was supposed to take into consideration the case laws relied wherein it is firmly held that non-filing of audit report along with the return of income is a procedural omission.
In the light of the aforesaid, we are inclined to allow the appeal to the extent that CIT(E) shall take into consideration the Form 10B of the assessee and pass an order afresh on merits as per law. Needless to say, an opportunity of hearing to the assessee be given. Order pronounced in the open court on 27.08.2024. Sd/- Sd/- (S. RIFAUR RAHMAN) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 27th August, 2024. dk 7