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Facts
The assessee, a Charitable Trust, filed its return of income claiming accumulation of income. However, the audit report in Form 10B was filed after the due date. The Assessing Officer denied the benefit of Sections 11 and 12 of the Income Tax Act, which was upheld by the CIT(A).
Held
The Tribunal held that the provision regarding the furnishing of the audit report is procedural and directory, not mandatory. The delay in filing Form 10B was a procedural omission and should not be an impediment to claiming exemptions under Section 11.
Key Issues
Whether denial of exemption under Sections 11 and 12 of the Income Tax Act is justified due to the delayed filing of the audit report in Form 10B.
Sections Cited
Section 11, Section 12, Section 139(1), Section 143(1), Section 119 2(b), Section 12A, Rule 12 (2)
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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
O R D E R PER PRASHANT MAHARISHI, AM:
This appeal is filed by the assessee against the appellate order passed by the Commissioner of Income Tax (Appeal), Ludhiana for Assessment Year (A.Y.) 2020-21 dated 15.03.2024 wherein the appeal filed by the assessee against the order issued under Section (u/s.) 143(1) of the Income Tax Act, 1961 (the Act) dated
30.11.2021 by the Central Processing Centre (CPC) was dismissed.
Assessee is aggrieved with the appellate order and is in appeal before us raising following grounds of appeal: “Grounds of appeal against the order dated 15th March, 2024 received on 20. March 2024 passed by the learned Commissioner of Income Tax Appeal (ADDL/JCIT (A)-21, Bengaluru [‘ld. CIT(A)] for Assessment Year 2020-21 under Section (u/s) 250 of the Income Tax Act, 1961 [the Act]. The following grounds of appeal are distinct and separate and without prejudice to each other: 1.0 GROUND NO 1. The ld. CITIA) has erred-on facts and in law in confirming the action of the Deputy Director of Income Tax, CPC, Bengaluru of denying the exemption of Rs. 9,12,547/- u/s it on the ground of non-filing of the Audit Report in form 108 within the prescribed time limit. 2.0 GROUND NO.
2. The ld. CIT(A) has erred in not appreciating the fact that the exemption otherwise available to the appellant u/s. 11 cannot be denied merely on account of the delay in furnishing of audit report in Form 10B. The appellant craves leave to add and/ or to amend/ or to delete any ground out of the foregoing grounds of appeal, at any time before the hearing or during the course of hearing.”
The brief facts of the case show that the assessee is a Charitable Trust, who filed its return of income on 06.02.2021 at ₹NIL. In the return of income, the assessee has claimed accumulation of total income of ₹1,07,066/- being restricted to the maximum of 15% of to the total income. The assessee has received voluntary contribution of ₹2,87,863/- and further other sum of ₹6,24,684/-. The assessee applied ₹9,23,640/- for the objects of the trust and claimed 15% of the accumulation amounting to ₹1,07,066/-. The return of assessee was processed u/s. 143(1) of the Act on 30.11.2021 wherein the assessee was assessed at total income of ₹9,12,547/- thereby denied the application of the income of the trust. Thus, the total income of the assessee was assessed at ₹9,12,547/-.
Against this intimation, the assessee preferred the appeal before the learned CIT(A) stating that the assessee trust filed Form No. 10B on 30.01.2021 and assessee was denied exemption u/s. 11 of the Act that trust did not file Form No. 10B in time. The rectification request was also rejected, and therefore, the appeal.
It was claimed that assessee trust filed Form No. 10B on 30.01.2021 and filed return of income on 06.02.2021 where the extended due date of filing of the return of income was 15.02.2021, therefore, Form No. 10B was available before the return of income filed. Assessee relied upon the CBDT circular also and submitted that the benefit of Sections 11 and 12 denied to the assessee is not correct.
The learned CIT(A) noted that the assessee trust was given an opportunity to explain that audit report in Form No. 10B is required to file at least one month prior to the due date of furnishing the return of income u/s. 139(1) of the Act. As the assessee did not file the same, the Assessing Officer has correctly denied the benefit of Sections 11 and 12 of the Act. He held that the due date of filing of return is 15.02.2021, the Form No. 10B is required to be filed on or before 15.01.2021, same was filed on 30.1.2021 and, therefore, there is no infirmity in the order of the Central Processing Centre. Learned CIT(A) further considered that three extensions were given for the impugned year by notification dated 11.01.2021. He further referred to the CBDT Circular No. 16 dated 19th July, 2022 wherein condonation in filing Form No. 10B rests with respective authorities if reasonable cause for filing such form late is shown. The learned CIT(A) is not authorized to condone the delay. He further noted that the assessee has also not filed any condonation of delay application with the Commissioner of Income Tax, Exemption. Hence, the appeal of the assessee was dismissed.
The assessee is aggrieved with the same is in appeal before us. The learned Authorized Representative filed a paper book containing 43 pages. He submitted that there
is no dispute on the facts of the case that due date of filing of the return is 15.02.2021, the assessee filed his return of income on 06.02.2021 and filed Form No. 10B on 30.01.2021. He also submitted that there is no dispute that the due date for filing of Form No. 10B was one month prior to the due date of filing of return of income i.e. 14.01.2021. However, he submitted that before processing of the return of income, Form-10B was available before the Central Processing Centre, Form No. 10B and its due date are directory in nature. He relied upon the several judicial precedents of the coordinate Bench as well as the decision of the Hon'ble Gujarat High Court in the case of Sarvodya Charitable Trust vs. ITO.
The learned Departmental Representative vehemently supported the order of the learned CIT(A) and stated that power of the condonation of the delay rest only with the learned CIT(E) and therefore, the assessee should make an application for condonation of delay. There is no application made by the assessee for such condonation of delay and, therefore, the benefit of Sections 11 and 12 is rightly denied to the assessee.
We have carefully considered the rival contention and have perused the orders of the learned lower authorities. The brief facts of the case clearly shows that Form No. 10B in this case is filed on 30.01.2021 it should have been filed before one month prior to the due date filing of return of income under Section. 139(1) of the Act. The
We find that this issue is squarely covered by the decision of Honourable Gujarat High court in case of Association of Indian Panelboard Manufacturer [2023] 157 taxmann.com 550 (Gujarat)[21-03-2023] as under :-
The decision of the Division Bench of this court in Xavier Kelavani Mandal (P.) Ltd. (supra) leaves the issue no longer res integra. In that case Form10B was not filed by the assessee alongwith the return of income, however the appellate authority permitted the assessee to fileForm10B audit report at the appellate stage and accepted the same to allow the exemption under section 11. The department filed appeal which came to be dismissed.
5.1 The Division Bench of this court dismissed the appeal before it confirming the view taken observing that the provisions regarding filing of audit report was procedural in nature,
"4. The question whether it is permissible to the assessee to produce the audit report at the appellate
5.2 The decision of this court in Mayur Foundation (supra) stands to support the submission of the appellant. The decision in Rai Bahadur Bissesswarlal Motilal Malwasie Trust (supra) of Culcutta High Court takes a same view as was taken as by this court in Xaviers Kelavni Mandal (P.)Ltd. (supra). It that case the assessee- charitable
5.3 Learned advocate for the respondent was not in position to dispute the law emanating from the decision of Xavier Kelavani Mandal (P.) Ltd. (supra) and the other decisions on the issue.
5.4 Recollecting the relevant dates, the income was filed on 31-8-2018. On 15-3- 2019 Form10B was filed electronically. On 7-12-2019 intimation under section 143(1) of the Act was given to the appellant that the exemptions were denied, while processing the return of income on the ground that alongwith the return of income Form10B was not filed.
5.5 It is to be observed in the present case that the Form D-the audit report, though was not filed with the return of income, the same was available with the Assessing Officer when he processed the return of income under section 143(1) of the Act. The conditions for claiming exemption
5.6 The tribunal further committed an error in appreciating the import of section 119 2(b) of the Act inasmuch as the application contemplated thereunder is only additional 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 section 119 of the 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 2016-17 changed the legal position. There is no such change which could be said to have altered the legal position. The only change is with regard to compulsory filing of audit report in Form10B in electronically form which is made mandatory under
The moot aspect thus 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 is held to be substantive requirement but not the mode and stage of filing, which is procedural. Once the audit report in Form 12B 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 11(2) of the Act and the alleged ground of non-filing of audit report alongwith return of income which was at the best procedural omission, could never to an impediment in law in claiming the exemption.'
Honourable Delhi High court in Associated Chambers of Commerce and Industry of India 2024] 165 taxmann.com 510 (Delhi)[05-08-2024] also has taken same view.
Decision of various coordinate benches relied up on before us also supports that view that timeline of filing form no 10 B is directory in nature.
Accordingly, respectfully following the above judicial precedents , we direct the ld AO to grant benefit of Form no 10 B filed by assessee by allowing accumulation of income. Accordingly appeal of the assessee is allowed.
Order pronounced in the open court on 08/10/2024.
Sd/- Sd/- Sd/-S Sd/- (Raj Kumar Chauhan) (PRASHANT MAHARISHI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Mumbai, Dated: 08.10.2024 Aks/- Copy of the Order forwarded to : The Appellant, The Respondent, The CIT, The DR ITAT & Guard File BY ORDER, True Copy//
Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai