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Facts
The assessee, Shashi Krishna Educational Avam Welfare Society, filed its return for AY 2018-19 declaring 'NIL' income. The return was processed under Section 143(1) where the claim for exemption under Section 11 was denied due to the late filing of the audit report in Form 10B. Consequently, the entire gross receipts were treated as taxable.
Held
The Tribunal held that the denial of exemption under Section 11 solely based on the delayed filing of Form 10B, when the report was available before the Assessing Officer during the processing of the return, was not justified. The Tribunal further observed that such denial should typically be determined during an assessment under Section 143(3), not during a prima facie adjustment under Section 143(1).
Key Issues
Whether the late filing of Form 10B is a procedural lapse that warrants denial of exemption under Section 11, and if so, whether this can be done during Section 143(1) processing.
Sections Cited
11, 12A, 143(1), 143(3), 119(2)(b)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PATNA DB BENCH AT KOLKATA
Before: SHRI SONJOY SARMA & SHRI RAKESH MISHRA
PER RAKESH MISHRA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is against the order of the Addl/JCIT(A)- 6, Kolkata [hereinafter referred to as Ld. ‘Addl/JCIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') for AY 2018-19 dated 19.08.2025. 2. The assessee is in appeal before the Tribunal raising the following grounds of appeal:
“1. That the order passed by the Learned CIT(A) is bad in law and unsustainable on facts.
That the Learned CIT(A) erred in upholding denial of exemption u/s 11 ignoring that the appellant is duly registered u/s 12A and had furnished the Audit Report in Form 10B before completion of assessment.
That the Learned CIT(A) failed to appreciate that delay in filing Form 10B is a procedural/technical lapse and the same stands condonable in view of various CBDT Circulars and judicial pronouncements (including CIT v. Xavier's Kelavam Mandal Pvt. Ltd. [Taxmann], Trustees of Tulsidas Gopalji
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ITA No.: 428/PAT/2025
Assessment Year: 2018-19
Shashi Krishna Educational Avam Welfare Society.
Charitable Trust v. CIT 1994 207 ITR 368 Bom.), wherein it has been held that exemption cannot be denied merely due to late filing of audit report when substantive conditions are fulfilled.
That the Learned CIT(A) erred in holding that the entire gross receipts are taxable without allowing expenditure, whereas it is settled law that only surplus of income over expenditure is taxable even if exemption is denied (CIT v. Society for Promotion of Education, Adventure Sport and Conservation of Environment (2016) 382 ITR 6 (SC)).
That the authorities below failed to appreciate that the appellant had in fact applied Rs. 1,06,33,000/- towards revenue expenditure, further applied Rs. 13,50,900/- towards capital expenditure (excluding borrowed funds), and set apart Rs. 7,92,441/- (within the 15% permissible limit u/s U(l)(a)) for charitable purposes, and therefore the conditions of section 11 were duly complied with.
That the demand of Rs. 53,13,260/- is unjustified, arbitrary, and deserves to be quashed.
That the appellant craves leave to add, alter or withdraw any ground of appeal at the time of hearing.”
Brief facts of the case are that the assessee is an AOP and had filed the return of income for AY 2018-19 on 11.09.2018 showing ‘NIL’ income. The return was first processed u/s 143(1) of the Act making certain adjustments/raising tax payable over and above the returned income/tax payable. Against the said Intimation, the assessee filed a rectification request which was rejected by the CPC vide its order u/s 154 of the Act dated 02.01.2020. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A) who vide, order dated 19.08.2025, dismissed the appeal of the assessee by holding as under:
“5.1 I have carefully gone through the Intimation u/s 143(1), the grounds of appeal and submission made by the appellant in this regard. Briefly stating facts of the case is that the appellant filed return of income which was processed u/s 143(1) by CPC making certain adjustments over and above the returned income. The only issue involved in this case is that the appellant which is an AOP had claimed exemption u/s 11 of the I.T. Act against its income which was disallowed in the Intimation u/s 143(1).
2 All the grounds of appeal raised by the appellant are against denying exemption u/s 11 of the I.T. Act and also against taxing the entire receipts
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ITA No.: 428/PAT/2025
Assessment Year: 2018-19
Shashi Krishna Educational Avam Welfare Society.
disallowing expenses incurred. Facts involved in the issue is that the appellant filed return of income disclosing gross receipts of Rs.1,27,76,341/-. As per the provisions of sec. 12A(1)(b) of the Act (prevalent for the relevant year), to be eligible for exemption u/s 11, the appellant was required to file audit report in Form 10B along with the return of income. In the present case, the appellant filed return of income on 11.09.2018 but e- filed Form 10B only on 04.03.2019 vide acknowledgement no. 428954601040319. Since due date of filing return was 30.09.2018, СРС denied claim of exemption u/s 11 while processing the return u/s 143(1). Requirement to file Form 10B along with return of income as stated above is a statutory requirement mandated by the I.T. Act. CBDT vide circulars issued from time to time had instructed that if there is delay in filing of such Form, the same should be got condoned by the concerned juri ictional Commissioner of Income Tax u/s 119(2)(b) of the Act. In the present case, there is no evidence on record that the appellant filed any such condonation petition before the Commissioner. CPC was therefore justified in disallowing the exemption u/s 11 as claimed in return. This authority has no juri iction to condone the delay in filing Form 10B.
3 As regard appellant's appeal against taxing the entire receipts instead of taxing the income over expenditure, it is stated that facts involved in the issue is that the appellant had disclosed gross receipts of Rs.1,27,76,341/- in the ITR and claimed expenses of Rs. 1,19,83,900/- (on revenue as well as capital account). Since exemption u/s 11 was denied, AO, CPC taxed the entire receipts of Rs.1,27,76,341/- at maximum marginal rate. On the other hand, the appellant claimed that even if exemption u/s 11 is denied, only the income over expenditure should be taxed and not the entire receipts. In this regard, I would like to highlight the heading of chapter III of Income Тах Act. It is “Incomes which do not form part of total income.”. Both sections 10 and 11 are included within this chapter. Moreover, first line of section 10(23C) starts with the words - “any income received by any person on behalf of....