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Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: SHRI ABY T. VARKEY & SHRI JAGADISH
आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee Trust against the order of the Learned Commissioner of Income Tax (Appeals)/NFAC, (hereinafter in short "the Ld.CIT(A)”), Delhi, dated 05.02.2024 for the Assessment Year (hereinafter in short "AY”) 2020-21.
The main grievance of the assessee is against action of the Ld.CIT(A) dismissing the appeal of the assessee and thereby upholding the action of the CPC rejecting the rectification application filed by the assessee u/s.154 of the Income Tax Act, 1961 (hereinafter in short ‘the Act’) against the order dated 23.08.2022, viz the intimation order of CPC dated 29.11.2021 u/s.143(1) of the Act.
The main grievance of the assessee is that the CPC while processing the return of the assessee for AY 2020-21 had disallowed the exemption u/s.11 of the Act alleging failure on the part of the assessee to file the Audit Report of the accounts of the Trust (Form 10B) within due time which in this case was 15.02.2021 and the assessee belatedly filed the same within ‘32’ days on 20.03.2021 (refer rectification order u/s.154 of the CPC). According to the Ld.AR, the assessee Trust which enjoys sec.12 Registration can file the return of income within the time allowed u/s.139 of the Act and referred to the provisions of Sec.139(4A)
r.w.s.12A(1)(ba) of the Act. According to the Ld.AR, as per the said provisions, nothing prevented the assessee from filing the return of income along with Audit Report within the timeline provided by Sec.139(4) of the Act, which means, three months prior to the end of the relevant assessment year or before completion of the assessment.
According to the Ld.AR, in this case, admittedly, order u/s.143(1) was passed on 29.11.2021 and undisputedly, assessee had filed return of income along with Audit Report on 20.03.2021 (due-date for relevant assessment year was 15.02.2021). Thus, according to Ld DR, there was a delay of ‘32’ days which either ought to have been condoned or RoI along with Form 10B should have been processed by CPC u/s.143(1) of the Act since there was enough time available as per sec. 139(4) of the Act. For such a preposition, he drew our attention to the Finance Minister’s statement/Memorandum of the Finance Bill, 2017 (Page No.31), which has been quoted as under:
'Further, as per the existing provisions of said section, the entities registered under section 12AA are required to file return of income under sub-section (4A) of section 139, if the total income without giving effect to the provisions of sections 11 and 12 exceeds the maximum amount which is not chargeable to income-tax. However, there is no clarity as to whether the said return of income is to be filed within time allowed u/s.139 of the Act or otherwise. In order to provide clarity in this regard, it is proposed to further amend section 12A so as to provide for further condition that the person in receipt of the income chargeable to income tax shall furnish the return of income within the time allowed under section 139 of the Acts. These amendments are clarificatory in nature.
And according to the Ld.AR, the amendments are clarificatory in nature and submitted that neither in sec.12A(1)(ba) nor in the Budget Memorandum to Finance Bill, 2017, there is any mention about time-line under sec.139(1) or within due date u/s.139(1) has been mentioned.
Therefore, according to him, the exemption u/s.11 and 12 ought to have been allowed to the assessee-Foundation on the Returns filed u/s.139, i.e., u/s.139(1) as well as 139(4) of the Act. Further, the memorandum itself states that the amendments are clarificatory in nature which clearly means that there should be no change in the position of law and for such a proposition, he drew our attention to the decision of the Kolkata Tribunal in the case of ITO (Exemption) v. Debendra and Rohini Memorial Trust reported in [2023] 153 taxmann.com 687 (Kolkata Trib.), Head notes reads ‘Section 11, read with Section 12A, of the Income Tax Act, 1961, Charitable or religious trust Exemption of Income from property held (Scope of provision) - Assessment Year 2020-21 Assessee-Trust filed return of income after time allowed under Section 139(4A) claiming exemption under Section 11 - Assessing Officer denied exemption for not filing return within time as prescribed under Section 139(4A) as required under Section 12A(1)(ba) - Tribunal in Bangarh Educational Welfare Trust v ITO (Exemptions) [IT Appeal No. 496 (Kol.) of 2021, dated 2-1-2022] taking note of CBDT Circular F. No. 173/193/2019ITAI, dated 23-4-2019 held that since Section 139(1) and Section 139(5) are part of Section 139 only and in this Section 139 and sub-section (5) provides mechanism to file a belated return, therefore, even if assessee files return before last date of filing of belated return same should be treated as due compliance to Section 12A(1)(ba) - Whether in view of said order of Tribunal, assessee was entitled for exemption under section 11-Held, yes [Paras 4 and 5] [In favour of assessee]’. Citing the aforesaid decision of Tribunal, Ld AR prayed that sec.11 exemption may be granted.
Per contra, the Ld.DR drew our attention to the Circular F. No.
173/193/2019ITAI, dated 23-4-2019 which empowers the Ld.CIT to condone the delay up to ‘365’ days in filing Form 10AB (Audit Report) as
per Rule 17 of Income Tax Rules, 1962 (hereinafter in short "the Rules")
and direct admitting such belated application by condoning the delay.
Therefore, he wants us to direct the assessee to file application before the Commissioner to condone the delay of ‘32’ days in filing of the Audit Report.
Having heard both parties and after perusal of the records, we note that the assessee Trust is a registered Public Charitable Trust and has filed its return of income for AY 2020-21 on 20.03.2021 and had shown income/receipt of Rs.15,02,000/- and expenditure of Rs.14,61,735/- with a surplus of Rs.40,265/-. It is noted that due to Covid-19, CBDT extended due-date for filing of return and resultantly, Audit Report was to be filed by 15.02.2021. But the Managing Trustee of the assessee due to reasons beyond his control was able to get the paper work completed only by 20.03.2021 when he filed return of income along with Audit Report.
The ibid return of income of the assessee was processed u/s.143(1) of the Act by the CPC on 29.11.2021 taxing the entire receipts as income and consequently raised demand of Rs.3,57,040/-. Pursuant to which, assessee filed rectification-application u/s.154 of the Act, which was rejected by CPC vide order dated 23.08.2022. Aggrieved the assessee preferred an appeal before the Ld.CIT(A) against the rejection of rectification-application, which was dismissed by the Ld.CIT(A). The assessee is therefore before us assailing the action of Ld CIT(A). At the outset, we note that the CBDT Circular (supra) permits the assessee-Trust to file an application before the CIT for condonation of delay up to ‘365’ days if the assessee is able to show reasonable cause for not filing the Audit Report within the stipulated time. The Ld.CIT has been delegated the powers by CBDT to condone the delay. Be that as it may, we note that in this case, assessee Trust has filed return along with Audit Report (‘32’ days delay) before the CPC and it had processed the return of the assessee. Therefore, taking into consideration sec.12A(1)(ba) r.w.s.139(4A), we are of the view that the CPC ought not to have denied exemption u/s.11 of the Act without giving proper opportunity as stipulated by first proviso to sec.143(1) of the Act. Since, there is violation of natural justice and the assessee has complied with stipulation of filing Audit Report which was very well before the CPC, the impugned action of the CPC can’t be legally sustained. Therefore, we set aside the impugned order of the Ld.CIT(A), and direct the assessee to file application for condoning delay in filing of Audit Report as per Circular No.2/2020 dated 03.01.2020, which is noted as under:
CIRCULAR NO. 2/2020 [F. NO. 197/55/2018-ITA-I], DATED 3-1- 2020 Under the provision of section 12A of Income-tax Act, 1961 (hereafter 'Act') where the total income of a trust or institution as computed under the 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 to be audited by any accountant as defined in the Explanation below sub-section (2) of section 288 and the person in receipt of the income is required to furnish along with the return of income for the relevant assessment year the report of such audit in the prescribed from duly signed and verified by such accountant and setting forth such particulars as may be prescribed.
As per Rule 17B of the Income-tax Rules, 1962 (hereafter 'Rules') the audit report of the accounts of such a trust or institution is to be furnished
in Form No. 10B. As per Rule 12(2) of the Rules, such audit report is to be furnished electronically. The failure to furnish such report in the prescribed from along with the return of income results in disentitlement of the trust or institution from claiming exemption under sections 11 and 12 of the Act.
Representations have been received by the Board/field authorities stating that Form No. 10B could not be filed along with the return of income for A.Y. 2016-17 and A.Y. 2017-18. It has been requested that the delay in filing of Form No. 10B may be condoned. Previously, vide instruction in F.No. 267/482/77-IT(part) dated 9-2-1978, the CBDT had authorized the ITO to accept a belated audit report after recording reasons in cases where some delay has occurred for reasons beyond the control of the assessee.
Accordingly, the CBDT issued Circular No. 10/2019 circulated through F.No. 197/55/2018-ITA-I in supersession of earlier circular/Instruction issued in this regard, and with a view to expedite the disposal of applications filed by such trust or institution for condoning the delay in filing Form No. 10B and in the exercise of the powers conferred under section 119(2) of the Act, the Central Board of Direct Taxes vide Circular No. 10/2019 dated 23rd May, 2019 and Circular No. 28/2019 dated 27th September, 2019 both issued vide F.No. 197/55/2018-ITA-I has directed that :—
(i) The delay in filing of Form No. 10B for A.Y. 2016-17 and A.Y. 2017-18, in all such cases where the Audit Report for the previous year has been obtained before the filing of return of income and has been furnished subsequent to the filing of the return of income but before the date specified under section 139 of the Act is condoned.
(ii) In all other cases of belated applications in filing Form No. 10B for years prior to AY. 2018-19, The commissioner of Income-tax are authorized to admit and dispose off by 31-3-2020 such applications for condonation of delay u/s 119(2)(b) of the Act. The Commissioner will while entertaining such belated applications in filing Form No. 10B shall satisfy themselves that the assessee was prevented by reasonable cause from filing such application within the stipulated time.
In addition to the above, it has also been decided by the CBDT that where there is delay of up to 365 days in filing Form No. 10B for Assessment Year 2018-19 or for any subsequent Assessment Years, the Commissioners of Income-tax are hereby authorized to admit such belated applications of condonation of delay under section 119(2) of the IT Act and decide on merits.
The Commissioners of Income-tax shall, while entertaining such belated applications in filing Form No. 10B, satisfy themselves that the assessee was prevented by reasonable cause from filing such application within the stipulated time.
(AY 2020-21) Hari Foundation :: 8 :: 6. In the light of the CBDT Circular supra, the assessee to prefer an application as stated in Para No.5 (supra) and thereafter, the CPC to process the return of income afresh and pass orders after giving opportunity to the assessee if any adjustments are proposed to be made in accordance to law.
In the result, appeal filed by the assessee is allowed for statistical purposes.
Order pronounced on the 18th day of September, 2024, in Chennai.