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Facts
The assessee, a registered Trust, filed its return of income for AY 2020-21 claiming exemption under Section 11. The return was processed under Section 143(1) without allowing the exemption due to non-filing of the audit report in Form 10B. Despite filing the report and a rectification application, the exemption was denied.
Held
The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) denied the exemption under Section 11 on the grounds of delay in filing the audit report in Form 10B. The Tribunal noted that the petition for condonation of delay was pending before the Principal Commissioner of Income Tax (Exemptions).
Key Issues
Whether the exemption under Section 11 can be denied solely on the ground of delay in filing the audit report in Form 10B, especially when a petition for condonation of delay is pending and there is a sufficient cause for the delay.
Sections Cited
11, 12A, 143(1), 154, 234B, 234C, 10B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY&
(Assessment Year: 2020-21) The Market Research Society of ITO(Exemptions), Ward-2(4), 6th Floor, MTNL Building, India, 5D/5E Siddhivinayak Chambers, Cumbala Hills, Pedder Road, Vs. Opp. MIG Club, Kalanagar Bandra Mumbai-400026. (East), Mumbai-400052. PAN : AAATT3876F Assessee) : Respondent) : Shri Dinesh Kukreja, Assessee /Assessee by Mr. S. Sriram, AR Revenue / Respondent by : Shri R.R. Makwana, Sr. DR Date of Hearing : 28.11.2024 Date of Pronouncement : 05.12.2024 O R D E R
Per Padmavathy S, AM:
This appeal by the assessee is against the order of Commissioner of Income Tax (Appeals)-4, Kolkata [in short 'the CIT(A)'] dated 30.07.2024 for Assessment Year (AY) 2020-21. The assessee raised the following ground of appeal: –
1. On the facts and circumstances of the case and in law, the CPC as well as the Id. CIT(A) erred in making an addition of Rs.72,65,004/- to the income of the Assessee and raising a demand of Rs. 19,83,340/- on the Assessee.
2. On the facts and circumstances of the case and in law, the CPC as well as the Id. CIT(A) erred in denying the benefit of exemption under section 11 of the Act to the Assessee which is registered as a Trust.
3. On the facts and circumstances of the case and in law, the CPC as well as the Id. CIT(A) erred in considering the gross receipts of Rs.72,65,004/-as total income of the Assessee.
4. On the facts and circumstances of the case and in law, the CPC as well as the Id. CIT(A) erred in denying exemption under section 11 of the Act on the sole ground of delay in filing audit report in Form 10B by the Assessee. 5. On the facts and circumstances of the case and in law, availability of exemption under section 11 of the Act cannot be decided by the CPC in an intimation under section 143(1) of the Act or order under section 154 of the Act. 6. On the facts and circumstances of the case and in law, the CPC erred in not providing intimation in writing or electronic mode with respect to proposed adjustment in terms of section 143(1)(a) of the Act. 7. On the facts and circumstances of the case and in lave, the CPC as well as the M. CTT(A) erred in taxing gross receipts of the Assessee without allowing deduction for expenses incurred by the Assessee. 8. On the facts and circumstances of the case and in law, the CPC as well as the id CITEAS erred in ignoring the adjournments sought and pled by the Assessee in response to the hearing Notices issued by him, and contending that no adjournment is sought by the Assessee. 9. On the facts and circumstances of the case and in law, the Id. CTT(A) erred in holding the Assessee intransigent and non-compliant by not filing explanations or documents in response to the said hearing notices, ignoring the fact that the Assessee had already responded to the hearing notices in form of an adjournment to the said hearings. 10. On the facts and circumstances of the case and in law, the CPC as well as the ld. CIT(A) erred in levying interest under section 234B and 234C of the Act. 11. The Assessee craves leave to add to or alter, by deletion, substitution or otherwise, any or all of the foregoing grounds of appeal at or before the hearing, and to submit such statements, documents, and papers as may be considered necessary either at or before the hearing for the present appeal.”
The Assessee is a society registered the Societies Registration Act, 1860 and is also registered as a Trust under section 12A of the Income Tax Act, 1961 (the "Act"). The main objects of the assessee is to promote and educate public at large in field of market research, organize exhibitions, lectures, etc., provide and maintain library, to provide and institute scholarships and rewards to promote market research, and to promote the art and science of market research. The Assessee also offers membership to persons interested in the field of market research. The Assessee filed its return of income for AY 2020-21 on 01.01.2021 declaring a total income of Nil. The assessee out of the gross receipts of Rs.72,65,004/- claimed a sum of Rs.69,48,699/- as deduction towards application of funds on the objects and a further deduction of Rs. 10,89,751/- (restricted to Rs.3,16,305) towards deemed application to the extent of 15% of receipts as per clause (2) of Explanation to section 11(1) of the Act thereby declared Nil income. The return was processed by intimation under section 143(1) of the Act on 24.12.2021 by the Centralised Processing Centre, Bengaluru (CPC), assessing the entire receipts of Rs. 72,65,004/- for the reason that the Assessee had not filed audit report in Form 10B prior to filing the return of income. The Assessee consequently filed the audit report in Form 10B on 14.02.2022, and filed an application for rectification under section 154 of the Act on 15.02.2022 to rectify the mistake in the intimation under section 143(1) of the Act. An order under section 154 of the Act was passed by the CPC on 03.08.2024, denying the exemptions claimed by the Assessee under section 11 and determined the income of the Assessee at Rs. 72,65,004/- being the gross receipts of the Assessee, thereby raising a demand of Rs. 19,83,340.
Aggrieved the assessee filed further appeal before the CIT(A) against the order under section 154 of the Act. On the query raised by the CIT(A) with regard to the mismatch in the amount claimed towards deemed application as per clause (2) of Explanation to section 11(1) of the Act, the assessee filed a revised Form 10B on 22.05.2023. The assessee in response notice issued by the CIT(A), submitted the details of petition filed before the CIT(Exemptions) for condoning the delay in filing Form 10B along with other documents. Since the assessee did not respond to the subsequent notices issued, the CIT(A) dismissed the appeal stating that the assessee is not interested in pursuing the appeal further and that the power to condone the delay in filing Form 10B is not available to CIT(A). The assessee is in appeal before us against the order of CIT(A).
The ld AR submitted that the counsel of the assessee inadvertently missed to file the Form 10B due to Covid-19 situation which affected many of his family members. The ld AR further submitted that the assessee has subsequently filed the Form 10B and has also filed the petition to condone the delay in filing Form 10B and that further details as required by the Office of the Principle Commissioner of Income Tax (Exemptions) have also been submitted (page 70 to 78 of paper book). The ld AR also submitted that the petition for condonation is still pending before the PCCIT(E). The ld AR drew our attention to the circular issued by CBDT regarding admission of application for condonation of Form 10B and disposal of the same by PCCIT. It is also submitted by the ld AR that there are plethora of judgements where it has been held that the exemption under section 11 cannot be denied for the delay in filing Form 10B if the same is submitted during the course of assessment /appellate proceedings. The ld AR made an alternate submission that the denial of exemption under section 11 cannot be made through an intimation under section 143(1).
The ld DR on the other hand relied on the order of the lower authorities.
We heard the parties and perused the material on record. The claim of deduction towards application and accumulation under section 11 of the Act is denied to the assessee for the reason that the assessee has not filed the Form 10B while filing the return of income. We notice that the assessee has subsequently filed the Form 10B and petition for condoning the delay in filing the Form 10B is pending before the PCCIT(E). The CIT(A) has dismissed the appeal by placing reliance on the Circular No.10 of 2019 dated 22.05.2019 holding that the exemption under section 11 is not available if Form 10B is not filed within the due date and that the delay can be condoned only by CIT(E). The CIT(A) has further held that if the delay is condoned the AO can pass an order giving effect and until such time the claim cannot be allowed. In this regard it is relevant to note that the CBDT has issued a circular on 18th November 2024 (Circular No.16 of 2024) with regard to dealing with petitions for condoning the delay in filing Form 10B for AY 2018-19 and subsequent years and as per para 1.2 of the said circular if the delay is more than 365 days then the condionation petition shall be admitted and dealt with by the PCCIT(E). In assessee's case the delay is 366 days and on perusal of the records we notice that the officer of the PCCIT(E) has already raised certain queries on the condonation petition to which assessee has also responded. In view of these facts, we are of the considered view that the CIT(A) is not correct in dismissing the appeal without considering the fact that the petition for condonation is pending before the PCCIT(E). We therefore remit the appeal back to the CIT(A) with a direction to consider the claim of exemption under section 11 based on the decision of the PCCIT(E) with regard to condoning the delay in filing Form 10B and to keep in mind the settled legal position that the exemption under section 11 cannot be denied for the delay in complying with a procedural provision where there is a sufficient cause for such delay. Needless to say that the assessee be given a reasonable opportunity of being heard. It is ordered accordingly.
In the result, the appeal of the assessee is allowed for statistical purposes.