Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DEHRADUN BENCH ‘DB’: DEHRADUN
Before: SHRI CHALLA NAGENDRA PRASAD & SHRI AVDHESH KUMAR MISHRA
Rajput Panchayat Dharmshala, Income Tax officer, Haridwar, Dehradun (Exemption), Dehradun PAN: AAATR2514C Vs. Dehradun (Appellant) (Respondent) Appellant by Shri Anil Jain, Advocate, Sh. Rishab Jain, Advocate Respondent by Sh. A. S. Rana, Sr. DR Date of Hearing 08/05/2025 Date of Pronouncement 27/05/2025 ORDER PER AVDHESH KUMAR MISHRA, AM
These appeals of the assessee for the Assessment Year (AY) 2013-14 and 2014-15 are directed against orders dated 30.08.2024 by the Commissioner of Income Tax(Appeals), NFAC, New Delhi [CIT(A)].
These appeals contain common facts and grounds; therefore, these were heard together and are being disposed off by this common order.
Similar grounds have been raised in both AYs as under: - “1. The Ld. CIT(A) has grossly erred on facts and in law in sustaining the addition made by the Ld. ITO (Exemption) on the ground that the appellant & 186 /DDN/2024 Rajput Panchayat Dharmshala has not filed its audit report in form 10-B within the due date as per section 139(1) of the Income Tax Act.
The appellant prays for leave to add, modify and amend any of the grounds of appeal and to take any sub grounds of appeal within the aforesaid grounds of appeal.”
3. The relevant facts giving rise to these appeals are that the assessee, a registered under section 12A of the Income Tax Act, 1961 (Act) vide order dated 03.03.1994. The assessee’s books of accounts were duly audited and the Income Tax Return (ITR) of relevant years were filed on 21.01.2015 (belated ITR). Both ITRs were processed under section 143(1) of the Act; wherein the exemptions claimed under section 11 and 12 of the Act were denied by the Assessing Officer [AO (CPC) due to not filing/annexing the Form 10B (audit reports) of the Income Tax Rule. Aggrieved, the assessee filed applications under section 154 of the Act for both years, which were also not acceded to on the reasoning that the reports in Form 10B (audit reports) were not filed/annexed on or before filing both ITRs. Aggrieved, the assessee filed appeals, against orders under section 154 of the Act for both years, before the CIT(A), but did not succeed. Hence, these appeals are here.
The Ld. Authorized Representative (AR) submitted that the proviso to section 12(1)(b) of the Act read with Rule 12(2) of the Income Tax Rules mandated filing of the audit report in Form 10B electronically. It was contended that there was no time limit prescribed for filing the ITR and the audit report in Form 10B. The Ld. AR further submitted that the section & 186 /DDN/2024 Rajput Panchayat Dharmshala 12(1)(ba) of the Act was brought in the Statute from 01.04.2018. The section 12(1)(ba) of the Act, for the first time, prescribes the date of filing of the ITR by the persons eligible for filing ITR under 139(4A) of the Act. He, drew our attention to the CBDT Clarification dated 23.04.2019; wherein it has been categorically mentioned that: - “there is no clarity as to whether the said return of income is to be filed within the time allowed u/s 139 of the Act or otherwise. Hence, the amendment brings the clarity that the return is to be filed within the time allowed u/s 139 wef. 01.04.2018.”
4.1 Further, Ld. AR drew our attention to Circular No. 2/2018 dated 15.02.2018, to submit that this Circular prescribes that the assessee registered under section 12AA of the Act has to file the ITR under section 139(4A) of the Act if total income without giving effect to the provisions of section 11 and 12 of the Act exceeds the maximum amount which is not chargeable to tax. However, there is no clarity as to whether the said ITR has to be filed within the time allowed under section 139 of the Act or otherwise. Therefore, to provide clarity, the amendment in Section 12A of the Act was brought to provide the time limit for filing the ITR within the time stipulated under section 139 of the Act. The Ld. AR contended that the Circular and Press release were clarificatory in nature, therefore, the same would apply from 1st April, 2018. Accordingly, he contended that since there was no time limitation provided under section 139 of the Act for filing the ITR under section 139(4A) of the Act prior to 01.04.2018, so the question of filing of audit report in Form No. 10B on or before the filing of ITR did not arise. Accordingly, he prayed for & 186 /DDN/2024 Rajput Panchayat Dharmshala setting aside the impugned orders allowance of claim under section 11 and 12 of the Act. The Ld. AR placed reliance on the following decisions: - (i) Trust for Reaching the unreached through Trustees (2021) 126 Taxmann.com 77 (Guj) (ii) Navbharat Charitable Trust (2023) 150 taxmann.com 311(Surat Trib.)
4.2 The Ld. AR further submitted that had the AO treated both ITRs defective in accordance with the provisions of section 139(9) of the Act after affording atleast one opportunity to file Form 10B to cure the said defect; the assessee would have done the needful. Since there was no time limit for filing the ITR and audit report in Form 10B before 01.04.2018; therefore, another ITRs along with Form 10B would have been filed had the AO afforded an opportunity of being heard in accordance with the provisions of section 139(9) of the Act. Since the AO-CPC did not provide any opportunity to cure the defect; therefore, the Ld. AR prayed to hold the processing of defective ITRs under section 143(1) of the Act as void ab-initio.
On the other hand, the Ld. Sr. DR, placing reliance on various paras of orders of the lower authorities, prayed for dismissal of the appeal.
We have heard both the parties at length and have perused the material available on record. Online filing of the Audit Report in Form 10B has become mandatory along with ITR from AY 2013-14 onwards. The ITR without Form 10B have been processed without giving benefit of section 11 and 12 of the & 186 /DDN/2024 Rajput Panchayat Dharmshala Act. In other words, the total income declared in both ITRs was subjected to tax without providing any benefit under section 11 and 12 of the Act.
The issue before us, in view of the above, is whether the requirement of submission of Form 10B along with the ITR, one of the conditions for claiming the benefit of under section 11 & 12 of the Act, is directory in nature and not mandatory and is a curable defect.
We find merit in the argument of the Ld. AR that the Act has not prescribed any time limit for filing the ITR and the audit report in Form 10B before the amendment brought in section 12(1)(ba) of the Act from 01.04.2018, which is also well evident from the CBDT Clarification dated 23.04.2019. Accordingly, we hold that there was no delay in filing the ITR and the audit report in Form 10B in the cases in hand.
The CBDT Circular No. 7/2018 dated 20.12.2018 deals with the filing of Form No.10 and Form No. 9A. Vide Circular No. 7/2018, the CBDT has authorized the Commissioners of Income tax to admit belated applications in Form No. 9A and Form No.10 in respect of AY 2016-17 where such Form No. 9A and Form No.10 have been filed after the expiry of the time allowed under the relevant provisions of the Act, if the assessee was prevented by reasonable cause from filing of applications in Form No. 9A and Form No.10 within the stipulated time. The language used in the above mentioned CBDT circular is indicative that the furnishing of Form No.10 along with the ITR before the due date specified under section 139(1) of the Act is procedural and not directory 5 & 186 /DDN/2024 Rajput Panchayat Dharmshala in nature. Similar circular clarifying the above issue; i.e. the provisions related with the requirement of submission of the audit report are directory and not mandatory, has also been issued by the CBDT vide F. No. 1/1148-CBDT F. No. 267/482/77-IT (Part) dated 09.02.1978. In view of the above, we are of the considered opinion that the auditor's report in Form 10B along with the ITR is also procedural and not directory in nature and by showing sufficient cause, the auditor's report can be produced at any later stage either before the AO or the appellate authority.
We also find merit in the argument of the Ld. AR that when the Audit Report in Form 10B was not submitted along with the ITRs, then such ITRs should had been treated as defective and a notice under section 139(9) of the Act should had been issued to the assessee to rectify the defect/deficiency in such ITRs. However, the AO-CPC has not followed the due procedure. But we are refraining to comment on this argument as the same has not been insisted upon in case the appeals are allowed on other grounds.
The Hon’ble Calcutta High Court, in the case of Rai Bahadur Bissesswarlal Motilal Malwasie Trust (1992) 195 ITR 825, has held that the requirement of filing the audit report ITR is merely a procedural requirement; therefore, the exemption cannot be denied so long as the report is available to the AO. Similar view has been taken by the Hon’ble Gujarat High Court in the case of Gujarat Oil & Allied Industries [1993] 201 ITR 325; wherein it has been held that the provision about furnishing of the auditor's report along with the & 186 /DDN/2024 Rajput Panchayat Dharmshala ITR has to be treated as procedural provision and, therefore, directory in nature. The Hon’ble Calcutta High Court in the case of Hardeodas Agarwala Trust (1992) 198 ITR 511 has held that whether a provision is directory or mandatory has to be considered in the context in which the conditions have been imposed therein along with the intent of legislature and upon the language in which that section is drafted. The Hon’ble Punjab & Haryana High Court in the case Shahzedanand Charity Trust – (1997) 228 ITR 292 has clarified that the exemption available under section 11 of the Act may not be denied merely on account of delay in furnishing the auditor's report. The word 'shall' occurring in section 12A of the Act cannot, under the circumstances, be read as a 'must' making it mandatory for the trust to furnish the auditor's report along with the ITR. If for certain unavoidable circumstances, the assessee is unable to furnish the auditor's report along with the ITR, then the same can be furnished at a later date.
In view of the above discussions and judicial pronouncements, we are of the considered opinion that failure to file/upload Form 10B along with ITRs on the part of the assessee in both years is justified and such defect itself cannot result in denial of exemptions to the assessee under section 11 and 12 of the Act. Accordingly, we set aside both impugned orders and delete the additions made by the AO in both years. Consequentially, the assessee gets relief.
In the result, both appeals of the assessee are allowed as above.
Order pronounced in open Court on 27 May, 2025.