Loading judgment…
Facts
The assessee, a charitable trust, filed its return for AY 2021-22 declaring NIL income. The assessee uploaded Form 10B on 07.01.2022 but could not e-verify it due to technical glitches. It was subsequently verified on 08.09.2022. The AO denied exemption under Section 12A as Form 10B was not e-verified prior to the return filing.
Held
The Tribunal held that non-filing of Form 10B along with the return of income is a procedural omission and not an impediment to claiming exemptions. Relying on High Court and ITAT judgments, it was observed that the delay in filing the audit report could be condoned.
Key Issues
Whether the delay in filing Form 10B can be condoned and if non-compliance vitiates the claim for exemption under Section 11 and 12A. Whether the AO can tax the entire receipts in such a situation.
Sections Cited
11, 12A, 80G, 139(1), 250, 119, 143(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, BANGALORE “A” BENCH, BANGALORE
Secondary School Education The Income Tax Officer Society Hegdekatta (Exemption), Ward -1 1. Shri Gajanan Sec. School Albuquerque House vs. Hegdekatta Sirsi Attavar Road, Attavar Sirsi 581403 Karnataka Mangalore 575001 PAN – AANAS3479D (Appellant) (Respondent) Assessee by: Shri Prabhath P. Bhat, CA Revenue by: Ms. Neha Sahay, JCTI-DR Date of hearing: 24.06.2024 Date of pronouncement: 24.06.2024 O R D E R Per: Prakash Chand Yadav, J.M. The present appeal of the assessee is arising from DIN & Order No. ITBA/APL/S250/2003-24/1063671684(1) passed by the Commissioner of Income Tax (Appeals), Aurangabad (CIT(A)) dated 30.03.2024 passed under Section 250 of the Income Tax Act, 1961 (the Act) in respect of Assessment Year (AY) 2021-22.
The brief facts of the case are that the assessee, a charitable trust registered with Income Tax Department under Section 12AA and also got 80G of the Act. The main object of the assessee is to provide education to aspirants from primary level to secondary level. For the impugned year, assessee has filed its return of income electronically on 07.01.2022, declaring gross total
Secondary School Education Society receipt of Rs. 75,68,298/- and Net Income as NIL. The assessee uploaded Form 10B on 07.01.2022. However, could not e-verify it because of some technical glitches at the income tax portal. Therefore, the assessee verified 10B Form on 08.09.2022. The CPC Bangalore (Assessing Officer) (AO) while processing the return of income denied exemption of 12A to the assessee on the ground that the assessee has not e-verified the audit report in Form 10B prior to the date of furnishing of the return under Section 139(1) of the Act.
Aggrieved by the order of the AO assessee preferred appeal before the learned CIT(A) and inter alia argued that the appellant being a trust doing services in education in rural areas may be granted benefits of section 11 and 12A after condoning the delay in filing Form 10B report. The assessee also relied upon certain judgements of various benches of the ITAT. However, the learned CIT(A) dismissed the appeal of the assessee.
Aggrieved with the order of the learned CIT(A) the assessee preferred appeal before us. And drew the attention of Bench to certain sequences of events, reproduced hereunder :-
Sl. Dates of Nature of Report / Documents Contents / Subject No. Report / Filing 1. 07-01-2022 Form: ITR 7 Return of Income for AY 2021-22 2. 07-01-2022 Form 10B – uploaded Audit Report under Rule 17B 3. 31.08.2022 Intimation with Demand Intimation under Section 143(1); Notice from CPC received by the Appellant on 09.09.2022 4. 08-09-2022 3-verification of Form 10B Compliance re: Form 10B – e- filing Filing of 1st Appeal 5. 30-12-2022 Form – 35 6. 30-03-2024 Order u/S 250 of the First Appellate Order ADDL/JCIT(A), Aurangabad from the NeFAC 7. 26.04.2024 Payment – Appeal Fee (Form Rs. 10,000 36) 8. Form 36 Appeal before the Hon'ble ITAT, Bangalore Secondary School Education Society 5. A perusal of the above sequence of events would show that the assessee has e-verified Form 10B on 08.09.2022. It is pertinent to note here that the assessee has not filed any application for condonation of delay vis-a-vis filing of Form 10B before the CIT in term of CBDT circular no 19/2021 dated 03.11.2020. The main contention of the assessee is that filing of audit report by way of Form 10B is a procedural requirement and hence delay in filing the same would not prejudice the assessee. Assessee has also cited various judgments on this aspect. Second contention of the assessee is the AO has erred in taxing the entire receipts. Assessee has placed reliance on the following judgments a. Sindhi Youth Education 48 ITD 119(Bang) b. HMV Education Vs ITO ITA Number 9/Bang/2023 dated 23.3.2023. c. Maa Bhagwati Shiksha Samiti 157 Taxman.com 359 (All) d. Gagan Deep Charitable Trust Vs ADIT- ITA No. 555/Ahd/2023.
6. Ld DR strongly argued that assessee in this case has not filed any application of condonation of delay and hence action of AO is justified.
After considering the rival submission we observe that CBDT vide its circular no-19/2021 has delegated the power to condone the filing of audit reports with the concerned CIT. Now the issues which require consideration is a) whether non filing of Form 10B, would vitiate the entitlement of assessee for the benefits of section 11 and 12 b) whether AO can tax the entire receipts in such a situation. In respect of first issue, we find that recently the Ahmadabad Bench of the ITAT in the case of Gagan Deep Charitable Trust(Supra) has held that filing of Form 10B report is a mere a procedural lapse. Pertinent to note here that AY involved in that Gagan Deep case is also similar as of the present assessee i.e. AY 2021-22. Decision of Gagan Deep is Secondary School Education Society rendered by SMC Bench, which in turn has followed the decisions of Division Benches of the Ahmadabad in the cases of Hari Gyan Parcharak Trust & Shir Visha Oswal Jain Sewa ITA no 59/Ahd/2022.
We think it appropriate to quote the observation made by Ahmadabad ITAT in the case of Hari Gyan(Supra). “7. We have carefully considered the order passed by the authorities below and the judgment passed by the Hon’ble Jurisdictional High Court in case of Association of Indian Panelboard Manufacturer (supra) on the issue involved. While passing order in favour of the assessee, the Hon’ble Jurisdictional High Court has been pleased to observe as follows: “5.6 The tribunal further committed an error in appreciating the import of Section 119 2(b) of the Act inasmuch as the application contemplated thereunder is only additional remedy for the assessee which could not be said to be compulsorily resorted to by the assessee. The circular No.7/18 dated 20.12.2018 issued under Section 119 of the Act could not be, therefore said to have taken away the appellate remedy. 5.7 The tribunal misdirected itself in yet another way when it observed that The Finance Act, 2015 with effect from 1.4.2016, that is from assessment year 2016-17 changed the legal position. There is no such change which could be said to have altered the legal position. The only change is with regard to compulsory filing of audit report in Form 10B in electronically form which is made mandatory under Rule 12 (2) of the Income Tax Rules, 1962 but there is no change with regard to the substantive law about filing of audit report as stated above.
The moot aspect thus centres around to the requirement of the availability of the audit report when the assessment was undertaken by the Assessing Officer even though the same may not have been filed along with the return of income. Filing of audit report is held to be substantive requirement but not the mode and stage of filing, which is procedural. Once the audit report in Form 12B is filed to be available with the Assessing Officer, before assessment proceedings take place, the requirement of law is satisfied. In that view, the Income Tax Tribunal was not justified in dismissing the appeal of the assessee. 6.1 The appellant assessee has to be held to be eligible and entitled to exemptions under Section 11(1) and 11(2) of the Act and the alleged ground of non-filing of audit report along with return of income which was at the best procedural omission, could never to an impediment in law in claiming the exemption. 6.2 Accordingly the substantial questions of law have to be decided in favor of the appellant.
7. They are accordingly decided. The appeal is allowed.”
8. In view of the ratio laid down by the Hon’ble Jurisdictional High Court holding that non filing of Audit Report along with return of income is a procedural omission and cannot be an impediment in law in claiming the exemption, we allow this appeal condoning the delay in filing the Audit Report in Form No. 10B. However, we also upon condoning the delay, restore the matter to the file of the Ld. CIT(A) to pass order in regard to the exemption claimed by the assessee strictly in accordance with law”
Secondary School Education Society 9. Perusal of the above decision would show that coordinate Bench of Ahemdabad in the case of Hari Gyan Prachark has followed the verdict of Hon’ble Gujrata High Court, in the case of Association of Indian Panelboard Manufacturer Tax Appeal No. 655 of 2022. No contrary decisions has been brought to the notice of Bench by the Ld DR. Hence, respectfully following the above view we hereby condone the delay for filing Form 10B in the impugned case.
With respect to the issue of taxing of entire receipt, due to procedural lapse it is worthy to note that the coordinate bench in the case of HMV Educational Cultural & Social Trust v. ITO – has held that only income portion net-off all the expenses is to be taxed not the entire receipt.
In view of the above, we hereby condone the delay in respect of filing the Form 10B and restored the matter to CIT(A) to allow the benefits of section 11in accordance with law.
In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on 24th June, 2024.