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Facts
The Income Tax Officer appealed an order allowing exemption under Section 11 of the Income Tax Act. The assessee, an educational trust, filed its return and Form 10B for AY 2021-22 but with a delay. The Assessing Officer denied the exemption, which was later allowed by the CIT(A).
Held
The Tribunal held that the delay in filing Form 10B was condonable, especially given the pandemic and extended due dates. The Tribunal found that the assessee had substantially complied with the procedural requirements and relied on various judicial precedents where similar delays were condoned.
Key Issues
Whether exemption under Section 11 of the Income Tax Act can be denied for a delay in filing Form 10B, and if such delay is condonable.
Sections Cited
Section 11, Section 12A, Section 154, Section 139, Section 44AB, Section 119(2)(b)
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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI, AM & SHRI RAJ KUMAR CHAUHAN, JM
A.Y. 2021-22, is filed by the The 01. Income Tax Officer, Ward 2(2), Mumbai [the learned Assessing Officer] against the appellate order passed by National Faceless Appeal Centre, Delhi [the learned CIT (A)] dated 10th August, 2023, wherein the appeal filed by the assessee against the order of Central Processing Centre, Bangalore, passed under Section 154 of the Therefore, the learned Assessing Officer is aggrieved with the same 02. and has preferred this appeal raising following grounds of appeal :-
1. Whether on facts and circumstances of the case and in law, the Ld. CIT (A) was justified in allowing the exemption u/s 11 of the Act ignoring the fact that there was clear cut violation in view the Form 10B (Audit report) not being filed within the extended time for the said A.Y. 2021-22 as stipulated in CBDT circular No. 01/2022 in F.No.225/49/2021/ITA-II dated 11.01.2022? 2. Whether on facts and circumstances of the case and in law, the Ld. CIT (A) was erred in granting relief for the delay for filing of audit report within due date/extended time, when the remedy to deal with such instances lies with CIT(E) as specified in CBDT Circular No. 02/2020 dt. 03.01.2020 under the provision section 119(2)(b) of the Act?
The assessee is a educational trust registered under Section 12A of 03. the Act, who filed its return of income for A.Y. 2021-22 on 14th March, 2022, at a total income of ₹ nil. It was further revised on 29th March, 2022, at the same income. The return of income filed on 14th March, 2022, was processed under Section 143(1) of the Act on 10th August, 2022, under Section 143(1) of the Act. Subsequently, an order under Section 154 of the Act was passed on 7th March, 2023, holding that form No. 10B of the Act and 10BB of the Act has not been filed in time and accordingly, the exemption under Section 11 Against this, the assessee preferred the appeal before the learned CIT 04. (A). The claim of the assessee was that assessee filed form no.10B of the Act, prior to the filing of the return and the acknowledgement copy of the form no. 10B of the Act filed, was also shown. Accordingly, the ROI filed by the assessee claiming the exemption under Section 11 of the Act was correct and thus, rectification order passed under Section 154 of the Act was bad. The assessee also submitted that the trust was registered under Section 12AB of the Act and further, for filing form no.10B of the Act, the CBDT extended the date of filing till 25th November, 2022. Thus, the CPC completely ignored these facts. Based on this information, the learned CIT (A) held that , assessee has filed form no.10B of the Act along with original return of income on 14th March, 2022, and further along with the revised return on 29th March, 2022, the order of rectification passed on 7th March, 2023, denying exemption under Section 11 of the Act, for form no.10B and 10BB of the Act not filed in accordance with provision of section 12A (1) (b) of the act, is not correct. The learned CIT (A) considering clause (ii) of explanation to section 44AB which provided that these forms are required to be filed one month prior to the due date of furnishing of return of income under Section 139 of the Act., which was imported in section 12A (1) (b) of the Act, such time limit being directory. Though, the assessee filed those form along with their original as well as revised return is in compliance with the provision of the Act . The ld CIT (A) followed decision of Hon'ble Gujarat High Court in case of Sarvodya Charitable Trust and other judicial precedents.
The learned Departmental Representative vehemently submitted that 05. according to the Provisions of Section 44AB of the Act, as per explanation (ii) the specified date means, the date of one month prior to the date of furnishing of the return of income under Section 139(1) of the Act. This time limit is also imported u/s 12A (1) (b) of the Act. Thus, form no 10 B is also required to be filed one month before the due date of filing ROI. The assessee has furnished form no.10B of the Act along with the return of income but not one month prior to the due date of filing of the return of income. For violation of these conditions, the CPC has held that assessee is not entitled to exemptions under Section 11 of the Act. He submitted that the learned CIT (A) has incorrectly relied upon the decision but ignoring statutory conditions and allowed the claim of the assessee, which is not correct.
The learned Authorized Representative submitted that assessee has 06. filed form No. 10B along with the original return and revised return which is available before the CPC, therefore, CPC showing that assessee has not filed form no.10B of the Act is not correct. He further stated that the requirement of Act is to file from no.10B on or before the due date of filing return of income. Further, The ld CIT (A) has relied up on the decision of Honourable High court holding that such time limit is directory in nature and benefit of section 11 and 12 cannot be denied. Thus, there is no error in the order of the learned Commissioner of Income-tax (Appeals).
We have carefully considered the rival conditions and perused the 08. orders of the lower authorities.
Fact of the case is that assessee is an educational trust which file its return of income for assessment year 2021 – 22 on 14/3/2022 declaring total income at Rs. Nil. This return was revised on 29/3/2022 at Rs. Nil. Original return of income filed on 14/3/2022 was processed under section 143 (1) of The Act on 10/8/2022. This return was rectified on 7/3/23 under section 154 of the act for the reason that form number 10 B was not find in time and claim of exemption under section 11 of the act was rejected bringing to tax income of ₹ 40,921,419/ –.
Provision of section 12 A describes the conditions for applicability of section 11 and 12. As per provisions of section 12 A (1) (b) of the provided that "(b) where the total income of the trust or institution as computed under this 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 been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 before
thus it is clear that form number 10 B is required to be filed on or before specified date. Such date is defined under explanation (ii) of section 44AB of the act as under:-
(ii) "specified date", in relation to the accounts of the assessee of the previous year relevant to an assessment year, means 65[date one month prior to] 66[the due date for furnishing the return of income under sub-section (1) of section 139].]] 012. The learned CIT (A) has allowed the claim of the assessee for following reasons:-
“4. I have considered the ROI filed, order u/s 143(1) of the Act, order u/s 154 of the Act, grounds of appeals raised by the appellant, submissions made by the appellant and material on record. In ground no. 1 is against the rejection of exemption u/s 11 of the Act. The appellant trust is registered u/s 12A vide registration number was TR-28707 on 24.12.1991. The appellant also got provisional registration u/s 12A vide order dated 06.04.2022 which is effective for the A.Ys. from 2022-23 to 2024-25. On consideration of the ROI filed, Form 10B filed, orders u/s 143(1) and u/s 154, following picture emerges in the case –
ORIGINAL REVISED Extended due 15.03.2022 31.03.2022 date of filing of ROI Date of filing 14.03.2022 29.03.2022 of ROI Date of filing 14.03.2022 29.03.2022 of Form No. 10B Date of 10.08.2022 10.08.2022 processing of ROI u/s 143(1)
Date of 07.03.2023 -- rectification order u/s 154 4.1 In the order u/s 154 dated 07.03.2023, the reason for rejection of exemption u/s 11 of the Act has been stated to be “Suomoto for form 10b/10bb not filed.” The screenshot of the reason is extracted and placed below for the sake of clarity - 4.3 The appellant has filed Form 10B in both the cases i.e. filing of original ROI and the filing of Revised ROI on the same date of filing of ROI. The appellant claimed that it is holding valid registration u/s 12A of the Act and had complied with the requirement of the Act by way of filing Form 10B and hence it cannot be denied exemption u/s 11 of the Act. The appellant relied on the following caselaws on the issues that though s. 12A(1)(b) provides that the exemption u/s 11 will be available only if the accounts are audited and audit report “furnished along with the return”, the same is not mandatory but is directory and when the requirements if law are complied with, exemption u/s 11 of the Act cannot be denied. ii. CIT VS Hardeodas Agarwalla Trust (1992) (198 ITR 511) (Calcutta) wherein it has been held that - though s. 12A (1)(b) provides that the exemption u/s 11 will be available only if the accounts are audited and audit report “furnished along with the return”, the same is not mandatory but is directory. The audit report in Form 10B affirms the statements contained in the balance sheet and income-expenditure statement and is intended to enable the AO to allow the exemption by relying on the audit report and without having to ask the Assessee to furnish supporting documents in support of the claim. Such a procedural provision cannot be construed as mandatory because the defect can be cured at a subsequent stage. It is not the intention of the Legislature that the exemption u/s 11 should be denied merely because the audit report was not filed with the return. (ii) On facts, as the trust had filed, with the return, the audit report required to be given iii. Shree Bhairav Seva Samiti v. Income-tax Officer (Exemption) (ITA NO. 2225/MUM/2022) [A.Y. 2016-17] (Date of order – 08.12.2022) wherein it has been held that - We find that the Hon'ble jurisdictional High Court in case of CIT v. Xavier Kalavani Mandal (P.) Ltd. (supra) held that in order to claim exemption under section 11, the Assessee can filed audit report in Form 10B even at later stage either before the Assessing Officer or before appellate authority by showing a sufficient cause. Further, Hon'ble jurisdictional High Court decision in case of Sarvodaya charitable Trust v. ITO (Exemption) (supra) also held that where the Assessee is a public charitable trust registered under section 12A of the Act and substantially satisfied condition for availing benefit of exemption as a charitable could not be denied exemption, the Assessee merely on bar of limitation in furnishing audit report in Form 10B. Considering the aforesaid and legal discussion, we find that though the Assessee has not filed any return of income at the time, however, it was available before the ld. CIT (A) as it was uploaded much As in the present case also the Assessee has complied with the procedural requirement of obtaining and filing Form 10B, therefore, respectfully following the aforesaid decision of the Coordinate Bench of the Tribunal, the Assessing Officer is directed to decide the claim of the Assessee under section 11 on merits, after accepting the Form 10B filed by the Assessee. Accordingly, grounds raised by the Assessee are allowed for statistical purposes. iv. Shri Shyam CharanSewa Trust Vs DCIT (I.T.A. No.214/Asr/2022) (A.Y. 2018-19) wherein it has been held that - We respectfully relied on the order of the Jurisdictional High Court for adjudication the issue. The filling of Form No. 10B is a procedural direction in the proviso. The Assessee is registered u/s 12A and followed the direction as per the Act during filing of return. For nonfiling of Form No. 10B with the return is just a failure of procedural system. Form 10B was filed within 4.4 I agree with the contentions of the appellant. The appellant trust is registered u/s 12A of the Act, it had filed original and revised ROI in time and also Form 10B on the dates of filing of the ROI. Thus, the appellant had complied with the requirements of furnishing of Form 10B. I have gone through the caselaws relied upon by the appellant and came to the conclusion that the appellant cannot be denied exemption u/s 11 of the Act on the facts of its case. The AO is, therefore, directed to allow exemption u/s 11 of the Act to the appellant. Accordingly, the ground no. 1 is allowed.”
The impugned assessment year is assessment year 2021 – 22 , the learned CIT – A has considered the issue in earlier assessment year. However, CBDT has extended due date of filing of the return of income my press release dated 9/9/2021 as under :-
The duedate of furnishing of Return of Income for the Assessment Year 2021-22, which is 30th November, 2021 under sub-section (1) of section 139 of the Act, as extended to 31st December, 2021 vide Circular No.9/2021 dated 20-5-2021, is hereby further extended to 28th February, 2022; 6. The duedate of furnishing of belated/revised Return of Income for the Assessment Year 2021-22, which is 31st December, 2021 under sub-section (4)/sub-section (5) of section 139 of the Act, as extended to 31st January, 2022, vide Circular No.9/2021 dated 20- 5-2021, is hereby further extended to 31st March, 2022;
4.1. It is an admitted fact that from March, 2020 to March, 2022, country was passing through Covid Pandemic and there were various restriction on the movements of the citizens and carrying out of the normal official works was hindered. It is also an accepted fact that many changes have been brought into the Act regarding procedure of filing of income-tax return as well as audit reports and certain technical glitches have been faced time and again. Also on account of change of the utility of furnishing the reports, the forms and change in the due dates have given rise to delay in furnishing of details and documents with the revenue authorities. Considering these aspects, CBDT firstly came up with a Notification dt. 03/01/2020 authorising the
Coordinate bench held that up to March 2022, the country was passing through pandemic. The due dates for filing of the return of income as well as compliance made by the assessee also falls during that period. In view of this, we find that the delay caused in filing of number 10 B deserves to be condoned. Accordingly, as indicated above, the learned CIT – A was correct in allowing the appeal of the assessee.
In the result, appeal filed by the learned assessing officer is dismissed.
Order pronounced in the open court on 07.05. 2024.