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Facts
The assessee, a Non-Profit Foundation engaged in Nature Conservation, filed its return for AY 2022-23 declaring NIL income. The return was processed under Section 143(1), assessing income at Rs. 3,02,91,619/- due to a 13-day delay in filing Form 10B. The AO refused to condone the delay, denying benefits under Sections 11 and 12.
Held
The Tribunal held that Form 10B is procedural in nature and a delay in filing it, especially when filed before assessment processing, should not be fatal. Citing precedents, the Tribunal found the delay to be bona fide and unintentional, caused by operational difficulties in rural project execution. The delay was within the 365-day limit for condonation as per CBDT Circulars.
Key Issues
Whether the delay of 13 days in filing Form 10B by the assessee can be condoned to allow exemption under Sections 11 and 12 of the Income Tax Act.
Sections Cited
11, 12, 119(2)(b), 139(1), 139(4), 143(1), 143(3), 246(A), 12A
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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: SHRI NARENDER KUMAR CHOUDHARY & SHRI GAGAN GOYAL
This appeal by assessee is directed against the order of National Faceless Appeal Centre (for short “NFAC”) dated 31.03.2024 passed u/s. 250 of the Income Tax Act, 1961 (in short ‘the Act’) for A.Y. 2022-23. The assessee has raised the following grounds of appeal:-
1) The order of the CIT (A) is contrary to law and opposed to the facts of the case. i) The learned CIT(A) has erred in concluding to dismiss the appeal on the fact that, due to lack of powers with AO/JCIT to condone the delay in filing Form 108 as per CBDT Circular 16/2022 dated 19-07-2022. Here the principle of Natural justice is not provided to the appellant as NO opportunity of being heard has been provided. The intimation of Enablement of Communication Window is the only information received and NO notice u/s. 250 asking to submit the written submissions has been served on the appellant. iii) Also, the learned CIT (A) failed to appreciate the fact that, the appellant has responded to notice issued u/s. 143(1) (a) with DIN EFL/2223/G22/TTR000469194622 dated 14-02- 2023 on 16-02-2023 itself. However, the response submitted was not considered and department has proceeded to serve the intimation u/s. 143(1) by considering the total receipts as income of appellant to the extent of Rs. 3, 02, 91,619/-. iv) The appellant has also filed an application to condone the delay on filing the Form 10B for the relevant assessment year under consideration in accordance with CBDT Circular 16/2022 dated 19-07-2022. Copy of is attached herewith for your reference.
In this regard, we would like to bring your attention that the delay in filing the Form 10B only for a period of 13 days caused by the genuine hardship of management operational difficulties because of the projects undertaken in the rural areas where the entire management was occupied in executing such projects involving uplift of rural areas including the working for nature conservation in tribal dominated regions in India, mainly tree plantation, rain water harvesting, wetland protection, promoting organic farming, honey bee farming in Jharkhand, Odisha, West Bengal States. v) Further, for form 10 there are a number of legal precedents which supports the view that the provisions of section 11(2) relating to filing of Form 10 for the purpose of accumulation by the time limit under 139(1) is directory in nature. It is also held that form 10 filed before the completion of assessment is valid.
The Bombay High court has held that in the case of CIT vs. Ziarat Mir Syed Ali Hamdami (2001) 248 ITR 769/114 that a return filed within the time specified under section 139(4) has to be considered as having been filed within the time prescribed under Section 139(1). It is also held in the case that where the return in filed under due date of 139(4) and the option is exercised before the expiry of the time 139(4) such an option is valid. It is also held that the requirement of exercising the option within the specified time is directory in nature. Therefore, the Form 10B filed is valid and hence no disallowance of Income is called for on the ground that the form for accumulation has been filed belatedly.
2. The Brief Facts of the case are that the assessee is a Resident Non-Profit Foundation which has been recognized as an institution exclusively existing for the purpose of Nature Conservation in Tribal Dominated regions of India under section 12A of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) filed its return of income on for the Assessment Year 2022-2023 on 21.10.2022 declaring total income at Rs. NIL. The return of the Assessee processed under section 143(1) of the Act on 08.03.2023, wherein a sum of Rs. 3, 02, 91,619/- was determined to be the total income and due to the Assessee delay in filing Form 10B. A demand of Rs. 1, 17, 35,610/- was raised. The last date to file the return of income was 07.10.2022 and thus, the last date to file form no. 10B was also 07.10.2022, the Assessee filed their Form no. 10B on 20.10.2022, i.e. with a delay of 13 days. The AO refused to condone this delay and thus denied the Assessee the benefit of Section 11 and 12 of the Act.
3. The Assessee being aggrieved preferred an appeal before the Ld. CIT (A), but the proceedings were transferred to the Addl. /JCIT (A)-2 in accordance with section 246(A) of the Act and as per the Central Board of Direct Taxes’ (CBDT) e- Appeals scheme. The Assessee submitted that the reason for delay was due to operational difficulties faced by the management due to them being involved in executing rural projects. The Addl. /JCIT (A)-2 vide his order dtd. 21.03.2024 confirmed the decision of the AO and did not condone the delay in filing Form 10B. The Ld. CIT (A) referred to Circular No. 16/2022 dated 19.07.2022 of the Central Board of Direct Taxes (CBDT) and held as follows in para 7.3 of his order-:
It is evident from the CBDT Circulars and Section 119(2) (b) that the Assessing Officer (AO), Joint Commissioner of Income Tax (Appeals) [JCIT (A)], and Commissioner of Income Tax (Appeals) [CIT (A)] do not have the authority under Section 119(2) (b) of the Act to grant condonation of delay in filing Form 10B
The Assessee being aggrieved with this order preferred the present appeal before us. We have gone through the order passed by the AO under section 143(1) of the Act, order of the Addl. /JCIT (A)-2under section 250 of the Act and submissions of the Assessee alongwith the grounds taken before us. For the sake of convenience and better understanding of the case the relevant excerpt Circular No. 16/2022 dated 19.07.2022 of the CBDT has been reproduced herein below -:
In exercise of the powers conferred under section 119(2) of the Income-tax Act, 1961 (hereinafter referred to as 'Act'), the Central Board of Direct Taxes (CBDT) by Circular NO.2/2020 [F.No. I97/55/20 18-ITA-I] dated 03.01.2020 authorized the Commissioners of Income-tax to admit applications of condonation of delay in filing Form No. 10B for A.Y. 2018-19 or for any subsequent Assessment Years where there is delay of upto 365 days and decide on merits.
It is observed that there was a delay of 13 days in filing form no. 10B on part of the Assessee. The only issue before us is whether the said delay in filing form 10B ought to be condoned or not. We observe that the Assessee is engaged in the activity of Conservation of Nature in Tribal Areas, these activities include tree plantation, rainwater harvesting, wetland protection, promoting organic farming and honeybee farming, in the States of Jharkhand, West Bengal and Odisha. The delay of 13 days in Filing Form no. 10B occurred due to the management team being occupied with projects in Rural Areas. Since the delay is under 365 days the Ld. CIT (A) has been authorized by the CBDT vide Circular No. 16/2022 dated 19.07.2022 to decide whether the delay should be condoned on merits or not. The Hon’ble Bombay High Court in the case of Al Jamia Mohammediyah Education Society v. CIT, 2024 SCC Online Bom. 1157 held as follows-:
7. Moreover, in our opinion, Petitioner does not appear to have been lethargic or lacking in bonafide in making the claim beyond the period of limitation which should have a relevance to the desirability and expedience for exercising such power. We are conscious that such routine exercise of powers would neither be expedient nor desirable, since the entire machinery of tax calculation, processing of assessment and further recoveries or refunds, would get thrown out of gear, if such powers are routinely exercised without considering its desirability and expedience to do so to avoid genuine hardship. 8. in a similar matter in Shree Jain Swetamber Murtipujak Tapagachha Sangh v. Commissioner of Income Tax (Exemptions) and Anr. Was also a case where auditor had due to oversight not filed Form no. 10B. The Court held that the error on the part of auditor cannot be rejected but should be accepted as a reasonable cause shown by the trust management. In that case also, Petitioner did not suo moto realize its mistake and filed a condonation request only after Centralised Processing Centre (“CPC ) sent an intimation about non- filing of Form 10B.”
The Hon’ble Delhi High Court in G. V. Infosutions Pvt. Ltd. v. Deputy CIT, 2019 SCC Online Del 6861 held as follows:-
“8. The rejection of the petitioner's application under section 119(2) (b) is only on the ground that according to the Chief Commissioner's opinion the plea of omission by the auditor was not substantiated. This court has difficulty to understand what more pleas or proof any assessee could have brought on record, to substantiate the inadvertence of its advisor. The net result of the impugned order is in effect that the petitioner's claim of inadvertent mistake is sought to be characterised as not bona fide. The court is of the opinion that an assessee has to take leave of its senses if it deliberately wishes to forego a substantial amount as the assessee is ascribed to have in the circumstances of this case. "Bona fide" is to be understood in the context of the circumstance of any case. Beyond a plea of the sort the petitioner raises (concededly belatedly), there cannot necessarily be independent proof or material to establish that the auditor in fact acted without diligence. The petitioner did not urge any other grounds such as illness of someone etc., which could reasonably have been substantiated by independent material. In the circumstances of the case, the petitioner, in our opinion, was able to show bona fide reasons why the refund claim could not be made in time. 9. the statute for period of limitation prescribed in provisions of law meant to attach finality, and in that sense are statutes of repose; however, wherever the Legislature intends relief against hardship in cases where such statutes lead to hardships, the concerned authorities, including the Revenue authorities have to construe them in a reasonable manner. That was the effect and purport of this court's decision in Indglonal Investment and Finance Ltd. (supra). This court is of the opinion that a similar approach is to be adopted in the circumstances of the case.”
Having considered the matter and In light of the above decisions, we are satisfied that the delay was not intentional or deliberate, the delay made by the Assessee appears to be bona fide and the delay should thereby by condoned to avoid causing genuine hardship to the Assessee.
In these circumstances and facts on record we are inclined to allow the appeal of the assessee in view of the ratio laid down by the Hon’ble Bombay High Court in the case of Al Jamia Mohammediyah Education Society v. CIT, 2024 SCC Online Bom 1157and the Hon’ble Delhi High Court in the case ofG. V. Infosutions Pvt. Ltd. v. Deputy CIT, 2019 SCC Online Del 6861.
For better clarity and objective analysis of the issue, we are reproducing herein below the provisions of section 139(4A) of the Act as under:-
Section - 139, Income-tax Act, 1961 - FA, 2023 Return of income. 139. “(4A) Every person in receipt of income derived from property held under trust or other legal obligation wholly for charitable or religious purposes or in part only for such purposes, or of income being voluntary contributions referred to in sub-clause (iia) of clause (24) of section 2, shall, if the total income in respect of which he is assessable as a representative assessee (the total income for this purpose being computed under this Act without giving effect to the provisions of sections 11 and 12) exceeds the maximum amount which is not chargeable to income-tax, furnish a return of such income of the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and all the provisions of this Act shall, so far as may be, apply as if it were a return required to be furnished under sub-section (1)”.
We have further analyzed Rule 12 applicable to the matter and reproduced as under:-
Rule - 12, Income-tax Rules, 1962 Return of income and return of fringe benefits.
(1) The return of income required to be furnished under sub-section (1) or sub-section (3) or sub-section (4A) or sub-section (4B) or sub-section (4C) or sub-section (4D) or sub- section (4E) or sub-section (4F) of section 139 or clause (i) of sub-section (1) of section 142 or section 148 or section 153A relating to the assessment year commencing on the 1st day of April, 2024 shall,— (g) in the case of a person including a company whether or not registered under section 25 of the Companies Act, 1956 (1 of 1956), required to file a return under sub-section (4A) or sub-section (4B) or sub-section (4C) or sub-section (4D) of section 139, be in Form No. ITR-7 and be verified in the manner indicated therein; Provided that where an assessee is required to furnish a report of audit specified under sub-clause (iv), (v), (vi) or (via) of clause (23C) of section 10, section 10A , section 10AA, clause (b) of sub-section (1) of section 12A, section 44AB , section 44DA, section 50B, section 80-IA, section 80-IB, section 80-IC, section 80-ID, section 80JJAA, section 80LA, section 92E, section 115JB, section 115JC] or section 115VW or to give a notice under clause (a) of sub-section (2) of section 11] of the Act, he shall furnish the same electronically.
In view of the above provisions of the Act and Rules, it can be said that filing of audit report in Form No. 10B is a procedural requirement, although the document i.e. Form No. 10B is substantive in nature and once it is filed and made available to the AO before finalization of assessment, it can reasonably conclude that purpose of the law is served. As per the provisions of Section 12A(1)(b) r.w. Rule 17B, Audit Report in Form No. 10B is to be filed before specified date by a trust whose total income exceeds maximum amount not chargeable to tax as computed under the Act before giving effect to the provisions of section 11 and section 12 of the Act. 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.
12. The appellant is a registered charitable trust. As per the appellant, the claim of exemption u/s. 11 was denied in the intimation due to late filing of audit report in Form No. 10B. It is also noted from the submission of the appellant that Form No. 10B was electronically uploaded. From the above details, it is clear that Form No. 10B was not filed by the appellant along with the return of income as required under section 12A (1) (b) of the Act. But the same was filed before the processing of return u/s. 143(1) (a) of the Act. Therefore, the CPC incorrectly denied the exemption in the intimation. In the absence of the audit report in Form No. 10B, it can’t be said that there was mistake apparent from record in the intimation as the Form No. 10B was uploaded much before.
We further deliberated upon Circular No. 2/2020 [F. NO. 197/55/2018-ITA- I], DATED 3-01-2020, which are as under:-
“Under the provision of section 12A of Income tax act ,1961 where the total income of a trust or institution as computed under the act without giving effect to the provisions of section 11 and section 12 exceeds the maximum amount which is not chargeable to income tax in any previous year, the accounts of the trust or institution for that year have to be audited by any accountant as defined in the Explanation below sub section (2) of section 288 and the person in receipt of the income is required to furnish along with the return of income for the relevant assessment year the report of such audit in the prescribed from duly signed and verified by such accountant and setting forth such particular as may prescribed. . As per Rule 17B of the Income Tax Rules, 1962 the audit report of the account 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 section 11 & 12 of the act. 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 AY. 2016-17 and AY 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 09.02.1978, the CBDT had authorized the ITO to accept date a belated audit report after recording reasons in case where some delay has occurred for reasons beyond the control of the assesse. Accordingly, the CBDT issued circular no. 10/2019 circulated through F. no. 197/55/2018- ITA -1 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 power conferred under section 119(2) of the Act, the Central Board of Direct Taxes vide circular no. 10/2019 dated 22 march,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 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 application in filing Form No. 10B for years prior to A.Y. 2018-19, The commissioner of Income Tax are authorised to admit and dispose off by 31.03.2020 such applications for condonation of delay u/s. 119(2) (b) of the Act. The commissioner will while entertaining such belated application in filing Form No. 10B shall satisfy them-selves that the assesse was prevented by reasonable cause from filing such application within the stipulated time. In addition to the above, it has also been decided by the CBDT that where there is delay of up to 365 days in filing form no. 10B for Assessment Year 2018-19 or for any subsequent Assessment Years, the commissioner of Income-Tax are hereby authorized of condonation of delay u/s. 119(2) of the Act and decide on merits. The commission of Income-Tax shall, while entertaining such belated applications in filing Form No. 10B, satisfy themselves that the assesse was prevented by reasonable cause from filing such application within the stipulated time. Circular no. 6/2020 (F. No. 197/55/2018-ITA-I), dated 19.02.2020 Sub: Condonation of delay under section 119(2)(b) of the Income-tax Act, 1961 in filing of Return of Income for A.Y 2016-17,2017-18, and 2018- 19 and Form No.9A and Form No. 10.-Reg. Representations have been received seeking condonation of delay in filing Return of Income by the charitable institutions for the Assessment Year 2016- 17 onwards on the grounds of hardship. The Board has issued Circulars authorizing the Commissioners of Income Tax to admit belated applications of Form 9A and Form 10 and to decide on merit the condonation of delay U/s. 119(2)(b) of the Income-tax Act, 1961 (Act). However, in those cases where the Income Tax Returns have also been filed beyond the due date prescribed under section 139(1) of the Act, the condonation of delay in filing of Form 9A & Form 10 by the Commissioners is not of any help to the assessee, as section 139 of the Act, inserted w.e.f. 01.04.2016, stipulates twin conditions of filing of Form 9A/Form 10 and also of filing Return of Income before the due date.
2. Accordingly, in continuation of earlier Circulars issued in this regard, with the view to prevent hardship to the assessee and in exercise of powers conferred under section 119(2)(b) of the Act, the CBDT has decided that where the application for condonation of delay in filing Form 9A and Form 10 has been filed , and the Return of Income has been filed on or before 31st March of the respective assessment years i.e. Assessment Years 2016-17, 2017-18 and 2018-19, the Commissioners of Income-tax (Exemptions) are authorised u/s. 119(2)(b) of the Act, to admit such belated applications for condonation of delay in filing Return of Income and decide on merit.
For all other application for condonation of delay not mentioned above, the power of condonation of delay u/s. 119(2) (b) of the Act wiII continue with the respective authorities as per the extant Rules and Practice.
In view of above circulars, it can be reasonably interpreted that if the return of income by the assessee was filed within the stipulation as provided in section 139 of the Act, the CIT (E) is empowered to condone the delay in filing the form no. 10B. In this case the assessee has filed the return well within the time provided in section 139 of the Act and condoning delay in form no. 10B is not an anomaly. Further, as held by various courts that document, i.e. form no. 10B is substantive in nature but filing of the same is procedural in nature and delay in filing of the same can’t be fatal for the claim of the assessee. Here in this case the assessee filed the form no. 10B well before processing of return u/s. 143(1) (a) of the Act and passing of assessment order u/s. 143(3) of the Act, in these circumstances, we do not find any force in the order of the authorities below and the assessee is entitled to claim the exemption. To strengthen our view we relied upon the following judicial pronouncements of coordinate benches and the Hon’ble High Courts as under:
[2024] 161 taxmann.com 544 (Ori.) Oneness Educational and Charitable Trust v. CIT (E)
[2024] 162 taxmann.com 568 (Jai.-Trib.) Rajasthan Medical Relief Society v. ITO 3. [2024] 161 taxmann.com 671 (Kol.-Trib.) Kedar Nath Saraf Charity Trust v. DDIT 4. [2024] 162 taxmann.com 899 (Mum.-Trib.) ITO v. P K Krishnan Educational Trust 8. Based on above, appeal of the assessee is allowed and the AO is directed to delete the addition and allow the exemption claimed u/s. 11 and 12 of the Act.
In the result, appeal of the assessee is allowed. Order pronounced in the open court on 8th day of August, 2024.