INCOME TAX OFFICER EXEMPTIONS, WARD 1, 1, CIVIC CENTRE, NEW DELHI vs. ARYAWART WELFARE SOCIETY, VASANT KUNJ, NEW DELHI

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ITA 3873/DEL/2023Status: DisposedITAT Delhi26 July 2024AY 2016-17Bench: SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER, SHRI NAVEEN CHANDRA (Accountant Member)8 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the sole issue was the delay in filing Form 10B. The assessee obtained the Audit Report in Form 10B online before filing the return of income, which was not controverted by the Revenue. The delay in e-verification of Form 10B, dated December 14, 2016, was only one day, attributed to a technical snag on the income tax portal. The Tribunal found that CBDT Circular No. 2/2020, in such circumstances, automatically condones the delay. Therefore, the Tribunal concluded that the decision of the CIT(A) needed no interference. The appeal filed by the Revenue was dismissed. The ratio decidendi is that a one-day delay in e-verifying Form 10B due to technical issues, when the report was obtained before filing the return, is condonable under CBDT Circular No. 2/2020, entitling the assessee to Section 11 exemption.

What were the facts?

The Revenue has appealed the order of the NFAC, Delhi for Assessment Year 2016-17. The assessee, Aryawart Welfare Society, is registered under Section 12A and approved under Section 80G(5)(vi), running a school for educational purposes. The assessee filed its return of income on October 14, 2016, claiming an exemption of Rs. 6,67,90,834/- under Section 11. The return was processed under Section 143(1) by the CPC, Bengaluru, disallowing the exemption. Subsequently, an application for rectification under Section 154 was filed, and the ADIT reprocessed the return, again denying the Section 11 exemption because Form 10B was filed after the return, and a condonation application was pending. The assessee appealed to the CIT(A), who directed the AO to grant the exemption if the delay in filing Form 10B was condoned by the CIT(Exemptions). The Revenue is now aggrieved.

What were the issues?

1. Whether the CIT(A) erred in accepting the submission of the assessee as additional evidence without verifying details from the income tax return, thereby appreciating the reasons for disallowing exemption under Section 11 of the Income-tax Act, 1961? 2. Whether the CIT(A) erred in accepting the fact that the assessee did not file a revised return within the stipulated time period? Assessee's Contentions: The assessee argued that the Audit Report in Form 10B was obtained online before filing the return. Due to a technical snag on the income tax portal, the e-verification by the trustee was delayed by one day. The assessee relied on CBDT Circular No. 2/2020, which provides for automatic condonation in cases where Form 10B was obtained before filing the return but filed subsequently. Revenue's Contentions: The Revenue contended that the CIT(A) erred in accepting additional evidence without verification and in appreciating the reasons for disallowing the exemption under Section 11. They also questioned the acceptance of the fact that the assessee did not file a revised return within the stipulated time.

Which sections of the Income-tax Act were involved?

Section 11,Section 12A,Section 80G(5)(vi),Section 143(1),Section 154,Section 119(2)(b),Section 139

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI ‘H’ BENCH,

Before: SHRI CHALLA NAGENDRA PRASAD, & SHRI NAVEEN CHANDRA

For Appellant: Shri Rajiv Khandelwal,CA, Shri Gagan Khandelwal, Adv, Shri Jaind Kumar Jaiswal, Adv
For Respondent: Shri Amit Katoch, Sr. DR
Hearing: 03.07.2024Pronounced: 26.07.2024

PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:-

1.

This appeal by the Revenue is preferred against the order of the NFAC, Delhi pertaining to A.Y 2016-17.

2.

The solitary grievance of the Revenue is that the Id. CIT(A) erred in accepting the submission of the assessee as additional evidence without verifying the details from those filed in the Income tax return, without appreciating the reasons of disallowing the exemption u/s 11 of the Income-tax Act, 1961 [the Act, for short] and the Id. CIT(A) has erred in accepting the fact the assessee has not filed revised return in stipulated time period.

3. Representatives of both the sides were heard at length. Case records carefully perused. Relevant documentary evidence brought on record duly considered in light of Rule 18(6) of the ITAT Rules.

4.

Brief facts of the case are that the assessee is a society, registered with the Registrar of Societies, as well as u/s 12A of the Act and also approved in terms of section 80G(5)(vi) of the Act with the sole object of educational purposes and not for the purposes of profit. The assessee runs a primary school under the name of Ryan International School at Rohini, New Delhi duly recognized by the Government of Delhi. Exemption u/s11 has been allowed to the assessee society in the preceding as well as in the succeeding previous years.

5.

The return of income was filed on 14-10-2016 electronically showing total Income of Rs. NIL after claiming exemption of Rs. 6,67,90,834/- u/s 11 of the Act. The assessee submitted Statement of total income, audited Statement of accounts, Statement of income and its application on the objects of the assessee trust and Acknowledgement with ITR-7.

6.

The return of income was processed u/s.143(1) by the Dy. Director of Income Tax, CPC, Bengaluru on 17-3-2018 making adjustments of Rs. 6,67,90,834/- by way of denying the claim for exemption u/s 11.

7.

Thereafter, the assessee submitted an application for rectification u/s 154 of the Act on 08.05.2019 against the intimation u/s 143(1) of the Act. The ADIT reprocessed the return of income vide order u/s 154 dated 12.07.2019 and computed total income u/s 143(1) of the Act at Rs. 6,67,90,830/- denying the claim of exemption u/s 11 of the Act on the ground that Form 10B was e filed after the date of filing the return of income and that the assessee's application for condonation of delay is pending.

9.

Aggrieved the assessee went in appeal before the ld. CIT(A) who directed the AO to give exemption u/s 11 as per law if the delay in filing Form 10 is condoned by the CIT(Exemptions). The Revenue is now aggrieved and is before us.

10.

Before us, the ld. counsel for the assessee as well as the ld. DR reiterated what has been stated before the lower authorities.

11.

We have heard the rival submissions and have perused the relevant material on record. The only bone of contention is the delay in filing the Form 10B after the date of filing the return of income. It is the say of the ld. counsel for the assessee that the Audit Report in Form 10B was obtained online before filing the return of income. However, due to technical snag on the income tax portal, the Form could not be e- verified by the trustee. There is a delay of 1 day in e-verification of the Form No. 10B dated 14.12.2016.

12.

The CBDT Circular No. 2/2020 deals with automatic condonation in those cases where audit report in Form 10B was obtained before the filing of the return of income but filed after the filing of the return of income. The relevant extract reads as under:

“2. As per Rule 17B of the Income-tax Rules, 1962 (hereafter 'Rules') the audit report of the accounts of such a trust or institution is to be furnished in Form No. 10B. As per Rule 12(2) of the Rules, such audit report is to be furnished electronically. The failure to furnish such report in the prescribed from along with the return of income results in disentitlement of the trust or institution from claiming exemption under sections 11 and 12 of the Act.

3.

Representations have been received by the Board/field authorities stating that Form No. 10B could not be filed along with the return of income for A.Y. 2016-17 and A.Y. 2017-18. It has been requested that the delay in filing of Form No. 10B may be condoned. Previously, vide instruction in F.No. 267/482/77-IT(part) dated 9-2-1978, the CBDT had authorized the ITO to accept a belated audit report after recording reasons in cases where some delay has occurred for reasons beyond the control of the assessee.

4. Accordingly, the CBDT issued Circular No. 10/2019 circulated through F.No. 197/55/2018-ITA-I in supersession of earlier circular/Instruction issued in this regard, and with a view to expedite the disposal of applications filed by such trust or institution for condoning the delay in filing Form No. 10B and in the exercise of the powers conferred under section 119(2) of the Act, the Central Board of Direct Taxes vide Circular No. 10/2019 dated 23rd May, 2019 and Circular No. 28/2019 dated 27th September, 2019 both issued vide F.No. 197/55/2018-ITA-I has directed that :— (i) The delay in filing of Form No. 10B for A.Y. 2016-17 and A.Y. 2017-18, in all such cases where the Audit Report for the previous year has been obtained before the filing of return of income and has been furnished subsequent to the filing of the return of income but before the date specified under section 139 of the Act is condoned. (ii) In all other cases of belated applications in filing Form No. 10B for years prior to AY. 2018-19, The commissioner of Income-tax are authorized to admit and dispose off by 31-3- 2020 such applications for condonation of delay u/s 119(2)(b) of the Act. The Commissioner will while entertaining such belated applications in filing Form No. 10B shall satisfy themselves that the assessee was prevented by reasonable cause from filing such application within the stipulated time.”

13.

We find that in the instant case, the year involved is AY 2016-17.

We also note that the assessee has obtained the Audit Report in Form 10B online before filing the return of income which was not controverted by the Id DR of the Revenue. The Form 10B could not be e-verified by the trustee due to technical snag on the income tax portal and there was a delay of 1 day in e- verification of the Form No. 10B dated 14.12.2016. The CBDT Circular No. 2/2020 in such facts and circumstances automatically condones the delay. In view of the above, we are of the considered view that the decision of the CIT(A) needs no interference. The appeal of the Revenue is dismissed.

14.

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

The order is pronounced in the open court on 26.07.2024.

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