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Facts
The assessee, a charitable trust, filed its income tax return for AY 2018-19 belatedly. The audit report in Form 10B was also filed significantly late, due to reasons attributed to the trustee's illness and lack of technical staff. Consequently, the claimed deductions under Section 11 were denied.
Held
The Tribunal acknowledged the delay in filing the appeal and the audit report, but condoned the delay in filing the appeal itself. However, it was held that the delay in filing the statutory Form 10B could not be condoned by the appellate authority and that the assessee was not eligible for exemption under Section 11 due to non-compliance with the mandatory filing requirements. The Tribunal set aside the CIT(A)'s order and restored the file to the AO to consider the condonation petition pending before the CIT(Exemptions).
Key Issues
Whether the assessee is eligible for exemption under Section 11 despite late filing of the audit report (Form 10B), and whether the delay in filing Form 10B can be condoned by the appellate authorities.
Sections Cited
250, 11, 12A, 139, 119(2)(b), 234A, 234B, 234C, 234F
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “C’’ BENCH: BANGALORE
Before: PRASHANT MAHARISHI & SHRI KESHAV DUBEY
PER KESHAV DUBEY, JUDICIAL MEMBER:
This appeal at the instance of the assessee is directed against the order of ld. Addl/JCIT(A)-4, Chennai dated 13.6.2024 vide DIN & Order No. ITBA/APL/S/250/2024-25/1065626271(1) for the assessment year 2018-19 passed u/s 250 of the Income Tax Act, 1961 (in short “The Act”). The assessee has raised following grounds of appeal:
1. The appellate order of the learned Commissioner of Income-tax [Appeals]ADDL/JCIT [A]-4, Chennai, passed under Section 250 of the Act dated 13/06/2024 for the impugned assessment year 2018-19, in so far as it is against the Appellant is opposed to law, weight of evidence, probabilities, facts and circumstances of the Appellant's case, requires to be quashed.
Chikkanna Puttamma Educational Trust, Bangalore Page 2 of 9 2. The appellant denies itself liable to be assessed on a total income of Rs. 39,98,111/- as determined by the learned assessing officer and upheld by the learned Commissioner of Income-tax [Appeals], as against the income returned by the appellant of Rs. NIL/-, on the facts and circumstances of the case.
3. The learned Commissioner of Income-tax [Appeals] is not justified in confirming the action of the learned assessing officer in not granting the eligible claim of exemption made by the appellant under section 1 1 of the Act merely for not filing the audit report in Form 10B along with the return of income, facts and circumstances of the case.
The learned Commissioner of Income-tax [Appeals] and the learned assessing officer failed to appreciate that filing of Form 10B along with the return of income is only directory in nature and not mandatory even though the word shall in t/e said section is used and consequently the learned Commissioner of Income-tax [Appeals] and the learned Assessing Officer ought to have allowed the claim of exemption by the appellant under section 11 of the Act, on the facts and circumstances of the case.
5. The learned Commissioner of Income-tax [Appeals] failed to appreciate that the non-filing of Audit Report in Form 10B of the Income-tax Rules, was beyond the control of the appellant and was also not deliberate or intentional and it is merely a technical breach by the appellant for not filing Form 10B along with the return of income and the appellant having filed the condonation petition as per the provisions of section of the Act ought to have kept the appellate proceedings in abeyance till the disposal of application made by the appellant under section 119[2][b] of the Act, on the facts and circumstances of the case.
The learned Commissioner of Income-tax [Appeals] and the learned assessing officer further failed to appreciate that the provisions of section 11 [2] of the Act is a beneficial provision and a liberal view has to be taken, on the facts and circumstances of the case, 7. The learned Commissioner of Income-tax [Appeals] and the learned assessing officer failed to appreciate that the appellant being a trust registered under section 12A of the Act, is entitled for all the benefits as envisaged under the provisions of section 11, 12 and 13 of the Act and ought to have held that since the appellant is a charitable institution is eligible for all the deductions and other benefits given to a charitable institution, on the facts and circumstances of the case.
Without prejudice, the appellate order passed by the learned Commissioner of Income-tax [Appeals], is against the principles of natural' justice, since the appellant was not afforded a reasonable opportunity of hearing to make its submission, consequently the impugned appellate order passed requires to be cancelled, on the facts and circumstances of the case.
Without prejudice, to the right to seek waiver as per the parity of reasoning of the decision of the Hon'ble Apex Court in the case of Karanvir Singh 349 ITR 692, the Appellant denies itself liable to be charged to interest under section 234 B of the Income Tax Act on the facts and circumstances of the case. The appellant 'Contends that the levy of interest under section 234A, 234B& 234 C of the Act is also bad in law as the period, rate, quantum and method of calculation adopted by the learned assessing officer on which interest is levied are not discernible and are wrong on the facts of the case.
The appellant craves leave of this Hon'ble Tribunal to add, alter, amend, substitute or delete any or all of the grounds of appeal
urged above at the time of hearing of the appeal by this Hon'ble Tribunal.
11. For the above and other grounds to be urged during the course of hearing of the appeal the Appellant prays that the appeal be allowed in the interest of equity and justice.
The brief facts of the case are that the assessee is a Charitable Trust registered u/s 12AA of the Act. For the Assessment year 2018-19 under appeal, the assessee trust filed its return of income on 21.12.2018, whereas the due date of filing the return was extended to 31.10.2018 by an order vide F.No.225/358/2018-ITA 31, dated 8.10.2018. The assessee did not file the audit report in Form No.10B within the due date due to the reasons beyond his control and in fact actually filed the audit report in Form No.10B as per the provisions contained in section 12A(b) of the Act only on 11.5.2023 placed in pages 6 to 9 of the paper book filed before us. Thereafter the assessee trust have been served with an intimation u/s 143(1) of the Act dated 30.9.2019 vide document identification No. CPC/18-19/A-7/1908979434, wherein the deductions claimed u/s 11 of the Act were denied and the entire gross receipt amounting to Rs.36,81,123/- along with Rs.16,988/- declared under head income from other sources totaling to Rs.36,98,111/- had been treated as the income of the assessee trust and accordingly raised a demand of Rs.11,99,833/- including interest u/s 234A, 234B, 234C & 234F of the Act.
Chikkanna Puttamma Educational Trust, Bangalore Page 4 of 9 2.1 Aggrieved by the intimation passed u/s 143(1) of the Act dated 30.9.2019, the assessee preferred an appeal before the ld. Addl/JCIT(A). In the meanwhile, after filing the audit report on 11.5.2023, the assessee has also moved an application for condonation of delay in filing the Audit report in Form 10B on 20.6.2023, which reads as follows:
2.2 The ld. CIT(A) has partly allowed the appeal with the following observations:
Chikkanna Puttamma Educational Trust, Bangalore Page 7 of 9 2.3 Aggrieved by the order of ld. CIT(A), the assessee has filed the present appeal before the Tribunal. Assessee has also filed a paper book comprising 13 pages enclosing therein following documents: a) Copy of letter to the Commissioner of Income Tax (Exemption) dated 9.6.2023 requesting for condonation of delay. b) Copy of audit financial statement for year ended 31.3.2018 c) Copy of audit report u/s 12A(b) of the Act. d) Case law relied by the assessee in dated 19.10.2023. 2.4 Before us, the ld. A.R. of the assessee submitted that the order passed by the ld. Addl/JCIT(A) not granting the eligible claim of exemption u/s 11 of the Act on the sole ground of not filing the audit report in Form No.10B along with return of income is not justified. Further, the ld. A.R. of the assessee vehemently submitted that filing of form 10B along with return of income is only directory in nature and not mandatory. He submitted that the non-filing of audit report in Form 10B was beyond the control of the assessee and was not deliberate or intentional and it is merely a technical breach by the assessee. Lastly, the ld. A.R. submitted that the assessee having filed the condonation petition as per the provisions of section 119(2)(b) of the Act ought to have kept the appellate proceedings in abeyance till the disposal of application made by the assessee u/s 119(2)(b) of the Act and accordingly, prayed to remit back the issue to the file of AO(Exemptions) to give effect of the condonation petition pending before ld. CIT(Exemptions), Bangalore.
The ld. D.R. on the other hand supported the order of the authorities below and vehemently submitted that the appellate proceedings and the petition for condonation pending before the ld. CIT(E) are two independent and separate proceedings and therefore the ld. CIT(A) has rightly passed the order on merits of the case.
Chikkanna Puttamma Educational Trust, Bangalore Page 8 of 9 4. We have heard the rival submissions and perused the materials available on record. It is an undisputed fact that the assessee has filed belated return of income on 21.12.2018 and belated audit report on 11.5.2023. Further, the assessee has after delay of 580 days filed the appeal before the ld. Addl/JCIT(A) on 18.5.2023 although the intimation u/s 143(1) of the Act was issued and served on 30.9.2019. It is also an undisputed fact that assessee has also filed an application for condonation of delay dated 9.6.2023 in filing Form No.10B on 20.6.2023, whereas ld. CIT(A) passed an order u/s 250 of the Act on 13.6.2024 without waiting for the decision of ld. CIT(E)stating to be two separate & distinct proceedings. We also cannot brush aside the fact that assessee trust is registered u/s 12AA of the Act. We are of the considered opinion that even though the assessee has valid registration u/s 12AA of the Act, still it has to comply with the mandatory requirements of law to lay claim on impugned deduction. The Law not only mandates the assessee to file the return of income within the due date prescribed u/s 139(1) of the Act but also mandates to file the audit report in form No.10B within the due date also. Certainly, the assessee has defaulted in filing both the return of income as well as audit report in form No.10B in time. Before us, ld. A.R. of the assessee submitted the evidence of seeking relevant condonation from the ld. CIT(Exemptions), Bangalore as reproduced above. Therefore, considering the same, we set aside the order of ld. CIT(A) and restore the file back to the AO for fresh adjudication in the light of condonation petition filed by the assessee before the ld. CIT(Exemptions), Bangalore. The AO shall wait for the order of the ld.CIT(Exemptions) with regard to condonation application and thereafter pass necessary orders in accordance with law. All the other issues are kept open. The appeal stands partly allowed in terms of above directions.
In the result, appeal of the assessee is partly allowed for statistical purposes.