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Facts
The assessee, a cooperative society, had its exemption under Section 11 denied due to a delay in filing its audit report in Form 10B. The assessee's appeals for AY 2016-17 and 2018-19 were filed against this denial. The grounds for appeal included that the delay in filing Form 10B should not result in the denial of exemption and that the CPC erred in considering gross receipts as total income without allowing deductions.
Held
The Tribunal noted that while the delay in filing Form 10B was confirmed, various judicial precedents establish that filing such a report is a directory provision, not mandatory, and can be uploaded during appellate proceedings. The Tribunal also referred to a previous ruling stating there is no precondition for an assessee to file for condonation before the CIT(Exemption).
Key Issues
Whether the denial of exemption under Section 11 of the Income Tax Act due to delayed filing of the audit report (Form 10B) is justified, considering judicial precedents that treat such filing as directory rather than mandatory.
Sections Cited
Section 11, Section 12A, Section 12AA, Section 143(1), Section 234A, Section 234B, Section 234C, Section 119(2)(b)
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Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI SATBEER SINGH GODARA & SHRI OMKARESHWAR CHIDARA
O R D E R Per : Satbeer Singh Godara, Judicial Member: These assessee’s twin appeals for assessment year 2016- 17 & 2018-19 arise against the Commissioner of Income Tax, Appeal, Addl/JCIT(A)-2 Jaipur’s as many DINs & orders No.ITBA /APL/S/250/2023-24/1059789932(1) & No.ITBA / 16.01.2024 respectively, in proceedings under section 143(1) r.w.s. 250 of the Income Tax Act, 1961 (in short ‘the Act’).
Heard both the parties at length. Case files perused.
The assessee pleads the following identical substantial grounds in the instant argument:
“1. On the facts and circumstances of the case and in law, the CPC erred in denying benefit of exemption u/s 11 of the Act to the appellant who is a co-operative society registered under Section 12A of the Income Tax Act, 1961 (hereinafter referred is as "Act")
2. On the facts and circumstances of the case and in law, the CPC erred in considering gross receipts of the appellant amounting to INR 2,66,67,210 as total income of the Appellant.
3. On the facts and circumstances of the case and in law, the CPC and learned JCIT(A) erred in denying exemption u/s 11 of the Act only on account of delay in filing of audit report by the appellant in Form 108.
On the facts and circumstances of the case and in law, availability of exemption u/s 11 of the Act cannot be decided by the CPC in an intimation issued u's 143(1) of the Act.
5. On the facts and circumstances of the case and in law, the CPC erred in not providing an intimation in writing or 3 & 1928/M/2024 M/s. Sahakari Shikshan Vikas Samooh Limited through electronic mode to the appellant of the adjustments proposed to made in accordance with first proviso to Section 143(1)(a) of the Act
6. On the facts and circumstances of the case and in law, the CPC and learned JCIT(A) have erred in taxing the gross receipts of the appellant without allowing deduction for expenses incurred by the appellant.
7. On the facts and circumstances of the case and in law, the CPC erred in levying consequential interest u/s 234A, 234B and 234C of the Act and in not granting credit for tax deducted at source totaling to INR 72,410.
8. The Appellant 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 appeal hearing.”
4. Coming to the assessee’s sole substantial grievance challenging both the learned lower authorities’ action denying it section 11 exemption benefit, we note that the additional/JCIT(A’s) lower appellate discussion to this effect for the lead assessment year 2016-17 reads as under:
“5.1 Ground No. 1, 4 and 5 are general in nature and hence does not need any specific adjudication, Ground no 2 is regarding denial of exemption u/s 11 and 12 by the 4 & 1928/M/2024 M/s. Sahakari Shikshan Vikas Samooh Limited CPC. The ground no 2 raised by appellant is decided as under: Considering all the facts and submission of the appellant, it is noted that assessee filed its return of income for A.Y. 2016-17 on 16.03.2018 belatedly and had not uploaded Form 10B electronically within the due date as required under law. The appellant had uploaded audit report u/s 10B for A.Y. 2016-17 on 23.01.2021 which is way beyond the due date of filing said report. Hence, there was delay on the part of appellant in filing form 10B which is mandatory for claiming exemptions u/s 11 for institutions registered u/s 12A/12AA. As per the CBDT Circular 273 dated 3-6-1980, the CBDT has authorized the jurisdictional CIT/DIT to condone the delay in filing forms such as Form 10 & 10B. Thus, the CIT (A)/Additional CIT (A) have not been empowered u/s. 119(2)(b) of the Income- tax Act to condone the delay in filing Form 10B. Therefore, the appeal filed by the appellant on this ground is without merit and the same is dismissed. The appellant is requested to approach for remedy before the jurisdictional CIT/PCIT/DIT for condoning the delay in filing Form 10B and claim benefit of section 11 of the Act. Thus, the ground no. 2 raised by the appellant is hereby rejected.”
Suffice to say, the sole substantive issue between the parties is that of denial of the impugned section 11 exemption on account of the fact that the assessee had belatedly filed its form 10B audit report beyond the prescribed due date. chartered account’s sad demise which could not be properly corroborated/explained in both the lower proceedings. The fact, however, remains that various judicial precedents i.e. Trust for Reaching the Unreached through Trustee vs. CIT(E)
(2021) 279 Taxman 229 (Guj. HC), JCIT (OSD) vs. Gujarat Energy Development Agency (2023) 202 ITD 733 (Ahd.) have already settled the issue that filing of such an audit report in Form 10B is only a directory provision than a mandatory one, which could also be uploaded in the course of appellate proceedings. This tribunal in Nav Bharat Charitable Trust vs. ITO (2023) 200 ITD 812 (Surat) further concludes that there is no precondition for an assessee to file for condonation before the CIT(Exemption) which could indeed be considered in appellate proceedings. Faced with this situation, we reject the learned departmental representative’s vehement contentions inter-alia that the assessee has to mandatorily file/upload its form 10B audit report within the due date or it must approach the learned CIT(E) for condonation of the corresponding delay therein; as the case may be, in very terms.
We accordingly accept the assessee’s install sole substantive grievance in principle and leave it open for the both the lower appeals afresh followed by their necessary adjudication as per law in very terms after getting all the necessary files verified in due course. Ordered accordingly.
Delay of 26 & 27 days each in filing of both the instant appeals is condoned in light of assessee’s corresponding condonation averments and in the interest of justice keeping in mind Collector, Land Acquisition vs. MST Katiji [1987] 167 ITR 471 (SC) holding that all such technical aspects must make way for the cause of substantial justice.
These assessee’s twin appeals i.e. & 1928/M/2024 are allowed for statistical purposes in above terms. A cop of this common order be placed in the respective case files.
Order pronounced in the open court on 24.07.2024.