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Facts
The appeal arises from the denial of exemption under Section 11 of the Income Tax Act due to the non-furnishing of Form No. 10 within the due date. The Assessing Officer denied the exemption, and the CIT(A) confirmed this denial. The appellant argued that the delay was due to technical glitches and that Form 10 was filed belatedly within a month of the portal allowing it.
Held
The Tribunal noted that decisions relied upon by the appellant were for periods prior to the amended provisions of the Act. The Tribunal observed that the power to condone delay in filing Form 10B (audit report) for AY 2018-19 and subsequent years is vested with the Commissioner of Income Tax (CIT(E)) under Section 119(2)(b) of the Act, not the Appellate Authorities.
Key Issues
Whether the delay in filing Form 10 can be condoned by the Appellate Authorities, or if the power to condone lies solely with the CIT(E) as per the amended provisions and CBDT circulars.
Sections Cited
Section 11 of the Income Tax Act, Section 139(1), Section 119(2)(b), Section 246, Section 246A, Section 253
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Mumbai “A” Bench, Mumbai.
Before: Shri Narender Kumar Choudhry (JM) & Shri Omkareshwar Chidara (AM)
Per Omkareshwar Chidara (AM) :-
The present appeal emanates from the denial of the exemption under section 11 of the Income Tax Act (the Act for short) for not furnishing Form No. 10 within the due date. As the learned Assessing Officer (Ld. AO for short) denied this exemption, an appeal was filed before the learned Commissioner of Income Tax (the Ld. CIT(A) for short) by the appellant and the first appellate authority has confirmed the denial of exemption u/s. 11 of the Act.
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Aggrieved by the orders of the Ld. AO and the Ld. CIT(A), further appeal was instituted by the appellant with the following grounds :-
While doing so the Ld. AO as well as the Ld. CIT(A) failed to appreciate that:
(i) The Appellant has fulfilled all the conditions for claiming exemption under the Act for undertaking charitable activities and the same has also been allowed year after year;
(ii) The Appellant has complied with all other compliances as mandated, such as, filing of Form No. 10B (audit report), tax return before the due date of filing tax return under Section 139(1) of the Act and the non-filing of form 10 within the time provided u/s 139(1) was purely due to unexpected technical glitches and for reasons beyond the control of the Assessee and in any case such form 10 was filed belatedly almost within a month once allowed by the portal;
(iii) As per the very Circular 3 of 2020 relied on by the Ld. CIT(A), the primary condition for claiming exemption is that the income derived from property held under trust is applied for charitable purposes and is accumulated for charitable purposes as provided in the Act and undisputedly, the Assessee has fulfilled the said conditions; and;
(iv) In any case, the exemption could not be denied for mere non-filing of form 10 which, in the humble submission of the Appellant, is only directory in nature and not mandatory as held in various judicial precedents and the Ld. CIT(A) is empowered to hold so.
It is submitted that the action of the Ld. AO as well as the Ld. CIT(A) be reversed and the exemption as claimed by the Assessee be allowed.
Without prejudice to the above, the Ld CIT(A) erred in considering an application for condonation of delay in filing of Form No. 10 filed on 19 May 2021 before the Commissioner of Income-tax (Exemption), Mumbai.
With the above grounds of appeal, appellant has submitted that the action of Ld. AO as well as the Ld. CIT(A) be reversed and the exemption as claimed by the appellant is allowed.
During the hearing proceedings before the Bench, Ld. AR of the appellant has argued that the said Form 10 was duly uploaded on the portal on 1.11.2018 i.e. with the delay of 31 days. Ld. AR has argued further that the issue was covered by the Judgement of Hon'ble Jurisdictional High Court
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in the case of CIT Vs. Sakal Relief Fund, ITA No.1822 of 2014 and ITA No. 63 of 2015 vide order dated 3.4.2017. it was argued that the exemption u/s. 11 should be granted to the appellant if Form No. 10 is filed before completion of assessment proceedings, whereas in the present case the said Form was filed on 1.11.2018 i.e. much before initiation of assessment proceedings itself. Hence, the issue is covered in favour of the appellant by virtue of the said Judgement and it was prayed that the exemption as claimed may be allowed.
Ld. AR has mentioned that the CBDT Circular No. 3 of 2020 dated 3.1.2020 gives the power to condone the delay up to 365 days in filing Form No. 9A and Form No. 10 for A.Y. 2018-19. It was also submitted that the Ld. CIT(A) in his order rejected the appeal of the appellant by reading the above said circular in erroneous manner. The Ld. CIT(A) rejected the appeal of the appellant on the ground that since the application for condotion of delay filed before the Ld. CIT(E) u/s. 119(2)(b) of the Act was beyond 365 days, the Ld. CIT(A) cannot allow the claim. While doing so, it was argued that the Ld. CIT(A) completely wrong in stating that the period of 365 days was provided for belated filing of Form No. 10 and not filing of application for condonation of delay u/s. 119(2)(b) in filing the said Form. Hence, it was argued that the order of the Ld. CIT(A) is incorrect and runs contrary to the Circular issued by the CBDT and also against the Judgement rendered by Hon'ble Jurisdictional High Court as mentioned above. The appellant has further submitted that the delay in filing the said Form was caused due to reasons beyond the control of the appellant and it was duly explained in its application for condonation of delay u/s. 119(2)(b) of the Act. This application was furnished before the Ld. CIT(A) and also before the Tribunal. Ld AR of the appellant has also relied on the Judgement of Hon'ble Supreme Court in the case of Improvements Trust Vs. Ujagar Singh (2010) 6 SCC 786, wherein it was held that unless malafides are writ large on the conduct of the party, generally as a normal rule, delay should be condoned. In the present case, Ld. AR has mentioned that the delay was caused because of glitches on
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the portal, which was explained even by the earlier Chartered Accountant of the appellant. In view of the above argument, appellant submitted that the deduction u/s. 11 as claimed by it should be allowed and the order of Ld. AO as well as the Ld. CIT(A) be set aside.
Per contra, Ld. DR relied on the order of the Ld. AO and The Ld. CIT(A) and argued that the Ld. AO was correctly denied the claim of exemption u/s. 11 of the Act for not furnishing Form No. 10 within due date.
After hearing both sides, it is observed that the Ld. AR of the appellant has relied on certain decisions which are applicable for A.Y. 2018-19 and earlier years. Subsequently the law has changed and Explanation was introduced in the Act, which is applicable for A.Y. 2018-19 and afterwards. Accordingly, CBDT has issued Circular No. 3/2020 (F.No. 197/55/2018-ITA- I) dated 3.1.2020 and the relevant paragraphs are reproduced as under :-
In addition to the above, it has also been decided by the CBDT that where there is delay of upto 365 days in filing Form No.9A and Form No 10 for Assessment Year 2018.-19 or for any subsequent Assessment Years, the Commissioners of Income-tax are hereby authorized to admit such belated applications of condonation of delay u/s 119(2) of the IT Act and decide on merits.
The Commissioners of Income-tax shall, while entertaining such belated applications in Form No.9A and Form No. 10, satisfy themselves that the assessee was prevented by reasonable cause from filing of applications in Form No.9A and Form No.10 within the stipulated time.. Further, in respect of Form No.10, the Commissioners shall also satisfy themselves that the amount accumulated or set apart has been invested or deposited in any one or more of the forms or modes specified in sub-section (5) of Section 11 of the Act.
Decision : a) It is observed that the decisions relied on by the appellant are for the period prior to the amended provisions and hence not applicable for the present appeal for A.Y. 2018-19.
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b) The statute has given a time limit for filing of the audit report which is one month prior to the date of filing of return prescribed u/s.139(1). The power to condone such kind of delay has been provided u/s.119 (2)(b). The CBDT vide Circular dated 03/01/2020 has directed that, where there is a delay up to 365 days in filing Form 10B for A.Y.2018-19 or for any subsequent years, the Commissioner of Income Tax is obliged to admit such application for condonation of delay u/s.119(2) of the Act and decide on merits. Again CBDT vide Circular No.16 of 2022 dated 19/07/2022 has extended the period of delay to condone beyond 365 days upto three years in filing of Form 10B for A.Y.2018-19 after subsequent years, and the powers were given to the Pr. Chief Commissioner and Chief Commissioner to condone the delay and decide on merits. Thus, the statute has given this power for condonation of delay in filing of Form 10B or any audit report u/s. 119(2)(b) to the CITS/CCITs/PCCITs.
c) The power to condone the delay has not been given to Appellate Authorities, or enshrined in section 246 or 246 A or 253. Other than Section 119(2)(b), there is no other provision given to any other appellate authority to entertain such appeal or condone the delay.
d) Once Section 119 of the Act has conferred power upon the CBDT to issue instructions and directions were given to the Income Tax Authorities as it may deem fit for proper administration of the Act which are required to be observed and followed by the Income Tax authorities and CBDT under Sub- section 2 of (b) Section 119 to avoid genuine hardship in the matter of filing of audit report in Form 10B has issued various circulars empowering the authorities at the level of CITs and above to condone the delay in filing of Form 10B for A.Y.2018-19 and subsequent years, then such authorities should only can condone the delay following the judicial precedents laid down by the various Courts i.e., the power to condone delay lies only with the CIT(E) for A.Y. 2018-19 and subsequently years.
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Now, that the power has been given to the Ld. CIT(E) and the petition for condonation of delay is pending before him, the Ld. CIT(E) is directed to consider the same and pass an order on merits. In ITA No. 3150/Mum/2024 (A.Y. 2021-22) M/s. Damani Welfare and Cultural Association dated 8.8.2024, similar decision was rendered by the Coordinate Bench of Mumbai Tribunal.
Respectfully following the above decision and also due to the elaborate discussions as above, the appeal of the appellant is dismissed. However, the dismissal of this appeal will not have any effect on the fresh decision being taken by the Ld. CIT(E), where petition for condonation of delay of appeal is pending. In other words, decision taken by the Ld. CIT(E) with regard to condonation of delay will prevail in this case even though the present appeal filed by the appellant is dismissed because the power to condone the delay is given to the Ld. CIT(E) .
For statistical purposes, the present appeal is dismissed.
Order pronounced in the open court on 20th September, 2024.
Sd/- Sd/- (Narender Kumar Choudhry) (Omkareshwar Chidara) Judicial Member Accountant Member
Mumbai : 20.09.2024 Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT 5. DR, ITAT, Mumbai. 6. Guard File. BY ORDER, //True Copy// (Assistant Registrar) PS ITAT, Mumba