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Income Tax Appellate Tribunal, DELHI BENCHES : G : NEW DELHI
Before: SHRI G.S. PANNU, HON’BLE & SHRI ANUBHAV SHARMA
ORDER
PER ANUBHAV SHARMA, JM:
This appeal is preferred by the Assessee against the order dated 30.12.2022 of the Commissioner of Income Tax (Appeals), NFAC (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in Appeal No.CIT(A), Delhi-40/10374/2019-20 arising out of the appeal before it against the order dated 28.12.2019 passed u/s 144 of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’), by the ITO, Exemption, Ward 2(2), New Delhi (hereinafter referred to as the Ld. AO).
The assessee is a charitable trust created by a Trust Deed dated 6th March, 2. 1978 and is registered u/s 12A of the Act. The assessee’s case was picked up for scrutiny and the AO examined the cash deposits of Rs.34,53,730/- during the demonetization period and further observed that during the relevant assessment year no return has been filed by the assessee either u/s 139 of the Act or in response to notice u/s 142(1) of the Act. Accordingly, the assessment was completed u/s 144 of the Act making an addition of Rs.1,22,87,399/- u/s 69A of the Act on account of following show cause notice:-
As the assessee approached the CIT(A), the appeal of the assessee was dismissed for the reason that there was delay in filing of Form 10 by holding as follows:- “6.4 In view of the above, the appellant is advised to apply for condonation of delay in filing Audit report in Form-10. From the above the power to condone the delay in filing audit report in form 10 vests with jurisdictional Commissioners of Income Tax to the extent as delegated vide circular reproduced above. Where the delay exceeds the time limits as given in the circulars the power to condone vests with the Central Board of Direct Taxes. 6.5 In the instant case, the appellant’s request to admit the audit report in form 10 cannot be accepted since the power to condone is not vested with the CIT (Appeal). Accordingly the appellant’s request is rejected.”
The assessee is in appeal raising the following grounds:- “
1. On the facts and circumstances of the case and in Law the ld. Commissioner of Income Tax (Appeals) (referred as CIT(A)) erred in confirming the ex parte order passed by the Assessing Officer (referred as AO) is opposed to law, equity, weight of evidence, therefore deserves to be quashed.
2. On the facts and circumstances of the case and in Law the ld. CIT(A) has erred in confirming addition of Rs.1,22,87,400/- u/s 69A of Income tax Act,1961 by completely disregarding all the factual parameters, submitted documentary evidences and cogent as well as faultless explanations of assessee.
3. That on the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in construing admission of Audit Report u/s 10B as additional evidence under Rule 46A of the Income-tax Rule, 1962, as condonation of the delay in filing Form no. 10B u/s 119(2) of the Income Tax Act,1961.
4. On the facts and circumstances of the case and in Law the ld. CIT (A) as well as ld. AO should have allowed the exemption as claimed by the assessee society being registered under section 12A is eligible for exemption under section 11 and 12 of the Act.
5. That on the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in holding that appellant is eligible for deduction u/s. 11 3 and 12 of the Act only if audited accounts and Form 10B are filed along with Return of Income and such conditional grant of benefit of claim is against the true spirit and intent of granting such benefits under the scheme of the Act.
6. That on the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in confirming addition of Rs.1,22,87,400/- u/s 69A of Income tax Act,1961 without giving any reasoning at all and is completely a non-speaking order is totally unjustified and illegal therefore deserves to be quashed.
7. That Both the lower authorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, faultless explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed.
8. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.”
Heard and perused the record. On behalf of the assessee it has been contended that after the death of Sardar Sujan Singh (settlor of trust), dispute arose between trustees. Two suits were filed in Delhi HC way back in 2011. The Hon’ble Delhi HC vide their order dt 01.02.2019 took over the functioning of the assessee trust by appointing new interim trustees for 1 year to take care of administration and management of assessee trust. The suits were finally withdrawn by parties as they reached a compromise and Hon’ble HC vide order dt 07.02.2020 discharged the interim board of trustees and directed handing over the possession of accounts and records of trust to new trustees. It was submitted that due to litigation between trustees and because matter was subjudice with Hon’ble High Court the returns of income and audit reports could not be filed for AY 2017-18 and earlier years. The assessee trust financial statements for AY 2017-18 were audited on 01.10.2020 and form 10B was also signed by auditors as on that date.
6. The ld. DR, however, relied the finding of ld. tax authorities below.
7. We have given thoughtful consideration to the matter on record and are of the considered view that CIT(A) has fallen in error in not adjudicating the grounds on merits. The amount credited in the bank accounts were explained to the AO by the submissions which are reproduced by the on page 7 of the assessment order as follows:-
8. After going through the assessment order, it becomes very obvious that a detailed reply was provided to the AO by submissions dated 23.12.2019 and without making any factual analysis AO discarded the submissions. We are of the considered view that for the purpose of section 69A of the Act, the assessee had brought in the knowledge of the AO the relevant facts with evidences and without discrediting the same merely on general observations making addition u/s 69 of the Act was not justified. The CIT(A) had fallen in error in not going on the merits of the addition at all as even if Form 10B was not there for which benefit u/ss 11 and 12 is denied, only the surplus could have been charged in the hands of the assessee trust. Thus, we restore the matter on merits to the files of the CIT(A) to pass a fresh order on merits of the grounds after giving an opportunity of hearing to the assessee.
9. The Hon’ble Gujarat High Court in the case of Association of Indian Panelboard Manufacturer v Deputy Commissioner of Income Tax [2023] 157 taxmann.com 550 (Gujarat), has categorically held that filing of Form 10B alongwith the return of income is only a procedural requirement and cannot be treated as mandatory requirement for the purpose of claiming exemption u/s 11 & 12 of the Act and even if filed at a later stage the assessee is entitled to exemption claimed. As far as the observation of CIT(A) are concerned that without filing delay condonotion application u/s 119 of the Act is concerned, in Hari Gyan Pracharak Trust vs. DCIT vide order dated 16-06-2023, Ahmedabad. Bench has decided the issue in favour of the assessee by observing as under: “7. We have carefully considered the order passed by the authorities below and the judgment passed by the Hon’ble Jurisdictional High Court in case of Association of Indian Panel board Manufacturer (supra) on the issue involved. While passing order infavour of the assessee, the Hon'ble Jurisdictional High Court has been pleased to observe as follows:
“5.6 The Tribunal further committed an error in appreciating the import of Section1192(b) of the Act inasmuch as the application contemplated hereunder is only remedy for the assessee which could not be said to be compulsorily resorted to by the assessee. The circular No 7/18 dated 20.12.2018 issued under Section119ofthe Act could not be, therefore said to have taken away the appellate remedy. 5.7 The tribunal misdirected itself in yet another way when it observed that The Finance Act, 2015 with effect from 1.4.2016, that is from assessment year 2016-17changed the legal position. There is no such change which could be said to havealtered the legal position. The only change is with regard to compulsory filing of audit report in Form 10B in electronically form which is made mandatory under Rule 12(2) of the Income Tax Rules, 1962 but there is no change with regard to the substantive law about fling of audit report as stated above.
The moot aspect that centres around to the requirement of the availability of the audit report when the assessment was undertaken by the Assessing Officer even though the same may not have been filed along with the return of income. Filing of audit report held to be substantive requirement but not the mode and stage of filing, which is procedural. Once the audit report in Form12B is filed to be available with the Assessing Officer before assessment proceedings take place, the requirement of law is satisfied. In that view the Income Tax Tribunal was not justified in dismissing the appeal of the assessee. 6.1 The appellant assessee has to be held to be eligible and entitled to exemptions under Section 11(1) and 112) of the Act and the alleged ground of non-filing of audit report along with return of income which was at the best procedural omission, could never to an impediment in law in claiming the exemption. 6.2 Accordingly the substantial questions of law have to be decided in favor of the appellant.
They are accordingly decided. The appeal is allowed.”
In view of the ratio laid down by the Hon'ble Jurisdictional High Court holding that non filing of Audit Report along with return of income is a procedural omission and cannot be an impediment in law in claiming the exemption, we allow this appeal condoning the delay in filing the Audit Report in Form No. 10B. However, we also upon condoning the delay, restore the matter to the file of the Ld. CIT(A) to pass order in regard to the exemption claimed by the assessee strictly in accordance with law.
In the result, assessee's appeal is allowed for statistical purposes.”
The reasons cited for non-fling of the returns in previous years or non auditing of the accounts justify the delay in compliance of filing From 10B. The affairs of assessee Trust, being run by Trustee when had run into litigation leading to delay in compliance, which is procedural, the CIT(A), independently of, condonation u/s 119 of the Act, should have allowed the compliance of fiing Form 10B, even if it was by way of additional evidence.
Thus we allow the appeal for statistical purpose and restore the issues on merits to the filed of CIT(A) to pass an order afresh, taking in consideration the aforesaid observations of this bench.