THE SIRUR SHIKSHAN PRASARAK MANDAL,PUNE vs. ACIT, EXEMTION CIRCLE, PUNE, PUNE

Assessment Year : 2021-22 The Sirur Shikshan Prasarak Vs. ACIT, Exemption Mandal, Circle, Pune. 2, Shirur, S.O. Pune, Pune- 412210. PAN : AADTT7639M Appellant Respondent Assessee by : Shri Kishor B. Phadke Revenue by : Shri Ajay Kumar Keshari Date of hearing : 11.07.2024 Date of pronouncement : 04.09.2024 आदेश / ORDER

PER VINAY BHAMORE, JM:

2. The learned AO ought to have granted exemption u/s 10(23C)(iiiab) since the appellant trust solely engaged in the activities for educational purposes and not for purposes of profit, and it is substantially financed by the government.

3. The appellant contends that taxable income of a charitable institution ought to be computed only after reducing all valid applications and only after granting benefit of accumulation of income.

, and to seek any just and fair relief.”

3. The appellant also raised the following additional grounds of appeal :- “6. Appellant contends that, the provisional 12A registration dated 7/4/2022 and permanent 12A registration dated 31/3/2023 entitle the Appellant to claim exemption u/s 11 read with second proviso to section 12A(2) of the ITA, 1961 for AY 2021-22; since a) the objects of the Appellant in AY 2021-22 as well as for subsequent period considered in the 12A registration are same, and b) the assessment proceedings were pending on the date of the above referred 12A registration.”

4. The facts of the case, in brief, are that the assessee is a society/trust registered under the Societies Act, 1860. It is also registered under the Bombay Public Trust Act, 1950. Since last 75 years, the assessee society/trust is providing education facility to the students. The assessee society/trust filed its return of income along with Form 10B on 30.03.2022 claiming exemption u/s 11 of the IT Act, 1961. An intimation dated 27.10.2022 u/s 143(1) of the IT Act 143(1)(a)(ii) of Rs.46,79,75,225/-. As per the said intimation, two reasons were mentioned regarding disallowance of claim made by the assessee u/s 11 of the Act i.e. (i) the detail of registration or approval u/s 12AB was not mentioned and (ii) the trust has not e-filed the audit report in Form 10B one month prior to the due date for furnishing of return u/s 139 of the Act. Hence, the exemption of Rs.46,79,75,225/- claimed u/s 11 of the IT Act was not allowed.

Krishnan Educational Trust (supra), wherein the Tribunal decided the appeal in favour of the assessee by observing as under :- “13. The impugned assessment year is assessment year 2021 – 22 , the learned CIT – A has considered the issue in earlier assessment year. However, CBDT has extended due date of filing of the return of income my press release dated 9/9/2021 as under :- 5. The duedate of furnishing of Return of Income for the Assessment Year 2021-22, which is 30th November, 2021 under sub-section (1) of section 139 of the Act, as extended to 31st December, 2021 vide Circular No.9/2021 dated 20-5-2021, is hereby further extended to 28th February, 2022; 6. The duedate of furnishing of belated/revised Return of Income for the Assessment Year 2021-22, which is 31st December, 2021 under sub-section (4)/sub-section (5) of section 139 of the Act, as extended to 31st January, 2022, vide Circular No.9/2021 dated 20- 5-2021, is hereby further extended to 31st March, 2022; 14. Therefore, the extended time limit available to the assessee for the due date of filing of the return of income was 28 February 2022. Admittedly assessee filed return of income on 14/3/2022 and also furnished form number 10 B along with that. Therefore, the due date for filing of form number 10 B was one month prior to the due date of filing of the return of income i.e. 31 January 2022. As, the due date of filing of the return have been extended by the CBDT, the delay caused in filing form number 10 B is minimal and also due to the uncertainty of the due date of filing of the return which is duly extended by CBDT. Identical issue arose before the coordinate bench in case of Kedar Nath Saraf Charity Trust [2024] 161 taxmann.com 671 (Kolkata - Trib.) albeit for assessment year 2021– 22 wherein coordinate bench held as under:- 4.1. It is an admitted fact that from March, 2020 to March, 2022, country was passing through Covid Pandemic and there were various restriction on the movements of the citizens and carrying out of the normal official works was hindered. It is also an accepted fact that many changes have been brought into the Act regarding procedure of filing of income-tax return as well as audit reports and certain technical glitches have been faced time and again. Also on account of change of the utility of furnishing the reports, the forms and change in the due dates have given rise to delay in furnishing of details and documents with the revenue authorities. Considering these aspects, CBDT Notification dt. 03/01/2020 authorising the Commissioners to admit applications of condonation of delay in filing Form No. 10B for Assessment Year 2018-19 and subsequent Assessment Years, where there is a delay of up to 365 days. Subsequently on 19/07/2022 i.e., after the end of the Covid Pandemic restrictions again a Circular 16/2022 was issued where the delays in filing of Form 10B beyond 365 days but upto three years were also directed to be considered for admitting the application for condonation of delay. This Circular in itself shows that the Income-tax Department was aware about the technical glitches and the problems faced by the tax-payers in furnishing various types of Forms including Form No. 10B is with regard to the furnishing of audit report in case of Trusts and Societies. In the instant case since, delay is merely 28 days, we find that the said delay deserves to be ignored in larger interest of justice. The assessee is thus entitled to claim exemption u/s 11 of the Act made in the Income- tax return e-filed by it. We further fund support from the decisions of this Tribunal in the case of Bangarh Educational Welfare Trust v. ITO (Exemptions) in Assessment Year 2018-19, order dt. 02/01/2022, wherein also similar issue was raised for Assessment Year 2018-19 and the return was filed within time limit prescribed u/s 139(1) of the Act but there was a delay in furnishing of the audit report on Form 10B and this Tribunal after considering the facts of the case as well as judicial precedents allowed the benefit of Section 11 & 12 of the Act to the assessee."

“7. We have heard the rival contentions and perused the material on record. In this case, on going through the facts of the case, what transpires from the records is that the audit report for assessment year 2018-19 was duly signed by the auditor on 21-09-2018, though the same was omitted to be filed on the income tax portal. The due date of filing of income tax return for assessment year 2018-19 was 26-09- 2018. Notice under section 143 (1)(a) was issued on 19-12-2019. The audit report of the assessee trust was filed on the income tax portal by the auditors of the assessee trust on 20-01-2020. Intimation under section 143 (1) denying the claim of the application of income was issued by CPC, Bengaluru on 08-02-2020. Therefore, what can be seen is that as on the date on which the intimation/order under section 143(1) of the Act was passed by CPC, Bengaluru, the auditor of the assessee trust had already filed the audit report in form 10B, before such order/intimation under section 143 (1) of the Act was issued. From the facts placed on record before us, we see no deliberate/mala fide intention on the part of the assessee or it’s auditor to file the audit report in form 10 B belatedly. 7.1 In the case of Shree Jain Swetamber Murtipujak Tapagachha Sangh v CIT 161 taxmann.com 114 (Bombay), the High Court held that where assessee-trust filed Form No. 10 beyond due date and assessee’s auditor admitted to oversight that he did not consider provisions of Rule 17 and was under bona fide impression that since factum of accumulation of receipts was reported in audit report in Form No.10B a separate statement in Form No. 10 was not required, in view of fact that delay was not intentional, assessee could not be prejudiced on account of an ignorance of rules admitted by professional engaged by assessee and thus, delay was to be condoned. 7.2 In the case of Social Security Scheme of GICEA v. CIT 147 taxmann.com 283 (Gujarat), the Assessee a Public Charitable Trust had been filing returns of income in time along with audit report under section 12A(1)(B). For relevant assessment year 2016-17, assessee obtained audit report from Chartered Accountant well before time, however, same could not be uploaded along with return of income inadvertently. In absence of any audit report, Central Processing Centre had not granted exemption under section 11 which otherwise was available to it since many years and resultantly demand was raised. The Assessee therefore filed a rectification application under section 154, seeking to place on record audit report to Central Processing Centre but same was rejected on ground that Form No. 10Bauditreport, was not filed in time. The Assessee filed an application before CBDT to condone delay in filing Form No. 10Baudit report, however same was rejected. The High Court held that since assessee was a public charitable trust for past 30 years and substantially satisfied conditions for availing exemption under section 11 it should not be denied exemption merely on bar of limitation especially when legislature had conferred wide discretionary powers to condone such delay. Accordingly, the Gujarat High Court directed that the order of rectification under section 154 be quashed 7.3 In the case of JCIT v. Gujarat Energy Development Agency154 taxmann.com 348 (Ahmedabad - Trib.), the ITAT held that where assessee, a charitable trust, filed audit report in Form No. 10B during assessment proceedings, Assessing Officer could not have denied exemption under section 11 on ground that audit report was not e-filed along with return. 7.4 In the case of Sarvodaya Charitable Trust v. ITO 125 taxmann.com 75 (Gujarat), the High Court held that where assessee, a public charitable trust registered under section 12A, had substantially satisfied condition for availing benefit of exemption as a trust, it could not be denied exemption merely on bar of limitation in furnishing audit report in Form no. 10B. 7.5 In the case of CIT v. Gujarat Oil & Allied Industries201 ITR 325 (Gujarat), the High Court held that where an assessee could not file audit report along with return but filed it later before completion of assessment by ITO, he was entitled to deduction under section 80J of the Act. 7.6 Accordingly, in light of the above judicial precedents cited above and the assessee’s set of facts, we are of the considered view that the claim of application of income cannot be denied to the assessee only on the ground that the assessee/the auditor of the assessee omitted to file form 10 B (auditor’s report) along with return of income, when the same was submitted to the tax authorities before the order/intimation under section 143 (1) of the Act was issued.”

. Section 251 deals with the powers of the CIT(A). Clause (a) of sub-section (1) of section 251 provides that in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment. Clause (c) provides that in any other case, he may pass such orders in the appeal as he thinks fit. Explanation to section 251 provides that in disposing of an appeal, the CIT(A) may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before him. A close scrutiny of the above provisions abundantly shows that the CIT(A) can not only allow the appellant to go into any fresh ground of appeal not specified in the grounds of appeal, but he can suo motu consider and decide any matter arising out of the assessment proceedings even if such a matter was not raised before him. Thus, it is overt that he can take up new issues arising from the assessment at his own volition as well as at the instance of the assessee. Further, he is empowered to confirm, reduce, enhance or annul the assessment. It is thus clearly borne out from the above provisions that the CIT(A) has got plenary powers in an appeal before him against an assessment order. What AO can do, can be done by CIT(A) in an appeal before him. Even what the AO could have done but failed to do, can also be done by him. It shows that the powers of a CIT(A) in an appeal against an assessment order are almost similar to those of an AO. If extend this analogy to the provisions of section 12A(2), an irresistible conclusion which follows is that the benefit of the proviso is available not only when the assessment proceedings are pending before the AO but also when an appeal against the assessment order is pending before the ld. CIT(A). It is so for the reason that the appeal proceedings are nothing but continuation of the assessment proceedings.

8. At this juncture, it would be pertinent to note that the main object of proviso to section 12A(2) is to liberally grant the benefit of registration when the trust is otherwise engaged in genuine charitable activities and the registration has been actually granted albeit after the close of the relevant period. Purpose of this proviso is to benefit assessees in the given circumstances subject to the fulfillment of other conditions. In such a situation, the object of the proviso is furthered if its benefit is made available to the extended assessment proceedings, being, the proceedings before CIT(A). As at the time of granting registration by the ld. CIT (Exemptions) to the assessee, the appeal of the assessee was pending before the ld. CIT(A), in my considered opinion, the benefit of first proviso to section 12A(2) ought to have been granted. My view is fortified by the judgment of Hon’ble Rajasthan High Court in CIT (Exemptions) Vs. Shree Shyam Mandir Committee (2018) 400 ITR 466 (Raj.) in which it has been held that “an assessment proceedings which is pending in appeal before the appellate authority should be deemed to be “assessment proceedings pending before the AO.” within the meaning of the term as envisaged under the proviso. It follows there from that the assessee which obtained registration u/s.12AA of the Act during the pending of appeal was entitled for exemption claimed u/s.11 of the Act”. The additional ground thus raised is allowed by holding that the assessee would be entitled to exemption u/ss. 11 and 12 of the Act for the year under consideration on the raison d’etre that the registration was, in fact, granted to the assessee u/s.12AA during the pendency of proceedings before the ld. CIT(A).

9. In the light of my above conclusion on the additional ground, the impugned order is set-aside and the matter is restored to the file of AO for framing a de novo assessment as per law after allowing a reasonable opportunity of hearing to the assessee. Needless to say, the assessee in such assessment proceedings would be considered to have been granted registration and the provisions of sections 11 and 12 shall apply pro tanto.”

11. Further, we also find that the Co-ordinate Bench of this Tribunal in the case of Lady Kikabai Premchand Lyambail Trust vs. ITO in order dated 21.01.2020 has taken similar view by following the above decision of the Tribunal in the case of Shri Krishnabai Ghat Trust (supra). The relevant paragraphs of the said decision are reproduced as under :- “8. I have heard the rival submissions and perused the material on record. The issue in the present appeal is with respect to denial of claim of exemption u/s 11 and 12 of the Act. It is an undisputed fact that assessment u/s 143(3) of the Act was framed by Assessing Officer on 20.03.2015 whereby the claim of exemption u/s 11 and 12 was denied by the Assessing Officer. Against the aforesaid order of Assessing Officer, assessee carried the matter before the CIT(A). In the interim, the assessee had applied for fresh registration before the CIT(E) and CIT(E) vide order dated 19.03.2015 has granted registration w.e.f. A.Y. 2015-16. I find that an identical issue arose in the case of Shri Krishnabai Ghat Trust Vs. ITO (Exemptions) (supra), wherein Pune Tribunal has held as under:- “6. A close scrutiny of the provision indicates that where an assessee has made an application for registration after the date specified in the sub-section (2), the provisions of sections 11 and 12 of the Act shall apply from the assessment year immediately following the financial year in which such application is made.

First proviso to this section is relevant for our purpose. This proviso states that where the registration has been granted to the assessee u/s.12AA, then the provisions of sections 11 and 12 shall apply to any assessment year preceding the aforesaid assessment year for which “assessment proceedings are pending before the Assessing Officer as on the date of such registration and the objects and activities of such trust remained the same for such preceding assessment year”. Crux of the provision is that if registration has been granted subsequently and the proceedings for some earlier year are pending before the AO as on the date of granting the registration, then the benefit of sections 11 and 12 should be granted to such earlier years as well provided the objects and activities of the trust remained the same. It is relevant to note that the registration in the extant case was granted by the CIT (Exemptions), Pune on 28-09-2017. The assessment in this case was completed u/s.143(3) of the Act on 15-12-2016. Thereafter, the assessee preferred first appeal before the ld. CIT(A) against the said assessment order, which came to be decided by means of impugned order dated 01-10- 2018. This manifests that as on the date of grant of registration by the ld. CIT (Exemptions), though the assessment order had already been passed but the appeal of the assessee was pending before the ld. CIT(A). Under such circumstances, a question arises as to whether or not the benefit of first proviso can be extended to the assessee? 7…..

by the assessee are allowed.”

12. Now, we find that the assessee trust was granted registration u/s 12A of the IT Act during the pendency of assessment proceedings and Form 10B audit report was also available with the CPC while processing the return. Therefore, considering the totality of the facts and in the light of the decisions of Co-ordinate Bench of the Tribunal (supra) discussed above, we allow the additional ground of appeal raised by the assessee in the present appeal. We therefore direct CPC to amend the intimation issued u/s 143(1) of the IT Act in the light of Form 10B Audit Report and provisional registration certificate u/s 12A of the IT Act furnished before us.