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Facts
The assessee, a charitable trust, filed its return of income for AY 2021-22 on March 14, 2022. The audit report in Form 10B was also filed on the same date, which was a delay of 27 days from the prescribed due date of February 15, 2022. The CPC denied exemption under section 11(1)(d) due to the late filing of the audit report.
Held
The Tribunal noted that while the CIT(A) does not have the power to condone delay, the power is vested with the CIT under Section 119(2)(b) of the Act, and CBDT circulars empower CITs to condone delays under specific conditions. The Tribunal also referenced judicial precedents emphasizing that filing of the audit report is directory and not mandatory, and the benefit of exemption should not be denied for marginal delays.
Key Issues
Whether the exemption under Section 11(1)(d) can be denied solely on the ground of a 27-day delay in filing the audit report (Form 10B), especially when the delay was inadvertent and it was the first year of compliance with the amended provisions?
Sections Cited
11(1)(d), 143(1), 139(1), 44AB, 119(2)(b), 119(2)(d), 246, 246A, 253
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘H(SMC
आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the assessee against order dated 03/05/2024 passed by Addl. / JCIT-2, Chennai for the quantum of assessment passed u/s.143(1) for the A.Y.2021- 22. 2. The grounds raised by the assessee are as under:-
2 ITA No.3150/Mum/2024 Damani Welfare and Cultural Association 1. On the facts and circumstances of the case as well as in law the Ld. CIT(A) erred in confirming the action of the CPC in denying the exemption under section 11(1)(d) of the Act of Rs. 35,00,000/- on the ground that form 10B was not filed within the prescribed time limit. 2. On the facts and circumstances of the case as well as in law the Ld. CIT(A) had erred in confirming the action of the CPC in making an addition of the corpus donations received ignoring the fact that the same are in the nature of capital receipts. 3. The order confirmed by the Ld. CIT(A) is devoid of any merit, arbitrary uncalled for and bad in law the appellant be given such relief or reliefs as prayed for 4. Appellant craves leave to add, alter and/or modify the grounds of appeal on or before the date of hearing of the appeal. 3. The brief facts are that assessee is a charitable trust and has been granted registration u/s.12AB as it has been formed to carry out charitable activities. For the A.Y. 2021-22, the assessee had filed its return of income on 14/03/2022 as the due date for was extended up to 15/03/2022 for the A.Y. 2021-22. Thus, the return was filed within the due date u/s. 139(1). However as per the amended provision, the due date for filing of audit report falls one month prior to the due date of furnishing of return of income u/s.139(1). Such a provision has been brought u/s.44AB r.w. Explanation (ii) by the Finance Act, 2020, w.e.f. 01/04/2020. Thus, the audit report was required to be filed on or before 15/02/2022 for the A.Y.2021-22. The assessee has filed the audit report alongwith return of income on 14/03/2022. Thus, there was a delay of 27 days as per the amended law applicable from this year. The CPC has denied the claim of exemption
3 ITA No.3150/Mum/2024 Damani Welfare and Cultural Association u/s.11 vide intimation dated 23/12/2022 passed u/s. 143(1)(a) on the ground that audit report had been filed late. The assessee vide petition dated 26/12/2022 filed on 27/12/2022 before the CIT (Exemption) applied for condonation of delay in filing of form 10B stating as under:- “The assessee is the Section 8 Company having registered with ROC vide CIN no U85300MH2021NPL 354560 dated 04-02-2021 The company is having income tax registration as per new provision U/S 12AB of Income-tax vide Unique Reg. No AAICD2940FE20206 dated 27-05-2021. The due date for filing of return of income for AY 2021-22 was on 15-03- 2022 and the due date for filing of audit report was 15.02.2022 The income tax return is filed within the extended due date on 14-03-2022 along with audit report in form 10B. There is delay in filing of audit report in form 10B of 27 days however it is filed along with the return, as per old provision, before the due date of filling of the return. Sir. as per CBDT circular no. 02/2020 dated 03.01.2020 for condonation of delay in filing of form 108 for AY 2018-19 and for subsequent years, the CIT (Exmp) has been authorized u/s. 119(2) (b) to grant the condonation on the merits of the case. The assesse is covered under the aforesaid circular for the purpose of making an application for condonation of delay Sir, the delay in filing of audit report in form 10B was caused due to the fact that the directors were the under wrong impression that the audit report is to be filed along with the return and due to this inadvertently it remained to be obtained and filed by 15.02.2022 and due to the fact that this was the first year of the company for filing audit report and Income-tax return and the directors were under Bona fide belief that it is to be submitted along with the return Sir, this company/trust is formed and promoted by the D'Mart group for medical services, particularly for providing services needed for a hospital including construction of hostel. During the year the company/trust has received corpus donations of Rs. 35
4 ITA No.3150/Mum/2024 Damani Welfare and Cultural Association lakhs. The said corpus donations are received from the promoters as under.
Name of Donor Amount Bright Star Investments Pvt. 10,00,000/- Ltd. Shrikantadevi Damani 25,00,000/- TOTAL 35,00,000/-
The required direction letters and other documents to donate are submitted herewith for your verification. The said amount is invested in the purchase of the land at Borivali (East) Mumbai for the construction of hostel and to provide other hospital services. The trust has utilized out of the said corpus a sum of Rs. 21,00,000/- paid as advance for the purchase of land for fulfillment of objects of the Trust The documents for the purchase of the land are attached herewith for your verification. Sir, in view of the facts and circumstances of the case and particularly having object of proving hostel and medical services and for delay in filing form 10B of just 27 days we request you sir to kindly condone the delay since the said company will suffer future tax liability which is not justified since just because of a small technical error due to inadvertence done by the assessee Sir the trust has not yet received order u/s 143(1) from the CPC which is expected any time. Sir your granting of condonation of delay will certainly avoid prospective long litigation which in turn delay the noble project. Sir, therefore we request you to consider the case sympathetically and the delay may be pleased condoned in the interest of justice for aforesaid company which is doing good charitable activities.”
5 ITA No.3150/Mum/2024 Damani Welfare and Cultural Association 4. However, it has been informed that ld. CIT (Exemption) has not passed any order. In the meantime, assessee filed an appeal before the ld. CIT (A). The ld. First Appellate Authority following the decision of ITAT Ahmedabad in the case of Shri Ambica Sarvajnik Trust, Anklav vs. The DCIT, CPC, Bangalore in ITA No.355 and 356/Ahd/2021 dated 15/07/2022 wherein the Tribunal has held that CIT(A) does not have power to condone the delay and the power to condone the delay is vested u/s.119(2)(b) of the Act, he rejected the appeal. Thus, he held that JCIT lacks authority to condone such delay. 5. Before us ld. Counsel relied upon several judgments of Co- ordinate Benches of ITAT wherein the Tribunal have condoned the delay holding that filing of Audit Report is directory and not mandatory as held by various courts. 6. 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 have 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, which powers has been
6 ITA No.3150/Mum/2024 Damani Welfare and Cultural Association 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)(d) to the CITS/CCITs/PCCITs. If the power has been given to condone the delay and various courts have held that it is only directory then under such circumstances such powers needs to be exercised judicially and favorably, because in most of the cases Audit Reports have been filed alongwith Return of income; or could not be filed due technical glitches on the portal; or assessee had very genuine difficulties. If the CBDT has entrusted such power to high officials then they are expected to be more judicious rather than being too stringent even for marginal delays when all judicial courts have held that the purpose of Audit report is to be available at the time of filing of return or before the AO before completion of assessment. 7. In so far as 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 no other provision given to any other appellate authority to entertain such appeal or condone the delay.
Once Section 119 of the Act has conferred power upon the CBDT to issue instructions and directions 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
7 ITA No.3150/Mum/2024 Damani Welfare and Cultural Association 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 condone the delay following the judicial precedents laid down by the various Courts. For instance Hon’ble Gujarat High Court in the case of Sarvodaya Charitable Trust reported in (2021)125 taxmann.com 75 has discussed this issue in detail including the CBDT Circular held that approach in such cases should be equitious, balancing and judicious and benefit of exemption should not be denied merely on account of such marginal delay especially in the present case where audit report has been filed alongwith return of income within the due date of Section 139(1). Similarly, the Hon’ble Jurisdictional High Court in the case of Little Angels Education Society vs. Union of India and Others in Writ Petition No.1061 of 2020 and Writ Petition No.1288 of 2020 vide judgment and order dated 25/03/2021 have also directed to condone the delay even beyond 365 days. Further the Hon’ble Gujarat High Court in the case of Social Security Scheme of GICEA vs. Commissioner of Income Tax (Exemptions) reported in (2023) 147 taxmann.com 283 also reiterated the same. Thus, power to condone delay should be based on such judicial principles. 9. Now that power has been given to ld. CIT (Exemption) and looking to the fact that this was difficult period post COVID and also initial year of the amendment that the audit report was to be
8 ITA No.3150/Mum/2024 Damani Welfare and Cultural Association filed one month prior to the due date of filing of return of income which otherwise prior to this amendment the due date of filing of audit report was the date of filing of return u/s. 139(1). Thus, the ld. CIT (Exemption) is directed to consider the petition for condonation of delay by taking a liberal view that it was the first year that assessee had to make compliance of filing audit report before the due date of filing of return of income and for subsequent years it has been informed that assessee has duly complied the time limit of filing of the Audit Report. For statistical purposes the appeal of the assessee is treated as dismissed. 10. In the result, for statistical purposes, the appeal of assessee is dismissed.
Order pronounced on 08th August, 2024.
Sd/- Sd/- (OMKARESHWAR CHIDARA) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 08/08/2024 KARUNA, sr.ps Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, //True Copy// (Asstt. Registrar)
9 ITA No.3150/Mum/2024 Damani Welfare and Cultural Association ITAT, Mumbai