S M K R VASHI HIGH SCHOOL,NA vs. ARIVS.INCOME TAX OFFICER, EXEMPTION WARD, SURAT

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A.L.SAINI, AM आयकर अपील सं./ITA No.515/SRT/2023 (िनधा�रण वष� / Assessment Year: (2021-22) (Physical Court Hearing) S.M.K.R Vashi High School Income Tax Officer-Exemption Ward, Surat, Aaykar Bhavan, Umbhrat Road Maroli Bazar, Vs. Majura Gate, Surat-395001 Jalalpore Navsari-396436 �थायीलेखासं./जीआइआरसं./PAN/GIR No.: AALFS 0980 J (अपीलाथ� /Appellant) (��थ�/Respondent)

िनधा�रती की ओर से /Assessee by : Ms. Chaitali Shah, C.A राज�व क� ओर से /Respondent by : Shri Ashish Pophare, CIT-DR सुनवाई की तारीख/ Date of Hearing : 27/10/2023 घोषणा की तारीख/Date of Pronouncement : 14/12/2023 आदेश / O R D E R PER DR. A. L. SAINI, ACCOUNTANT MEMBER: Captioned appeal filed by the assessee, pertaining to assessment year 2021-22, is directed against the order passed by the National Faceless Appeal Centre, Delhi, [‘NFAC/Ld.CIT(A)’ for short] dated 05.06.2023, which in turn arises out of an assessment order/Intimation passed by the assessing officer under section 143(1) of the Income Tax Act, 1961 (in short ‘the Act’). 2. The grounds of appeal raised by assessee are as follows:

“1. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of Assessing Officer/CPC by disallowing the exemption of Rs.3,30,07,028/- claimed u/s 11 of the Act and corpus donations of Rs.1,50,000/-. 2. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of Assessing Officer/CPC of taxing gross income as the total income without giving any deduction of expenses. 3. It is therefore prayed that the above addition made by the Assessing Officer and confirmed by CIT(A) may please be deleted.

ITA No.515/SRT/2023 A.Y. 21-22 SMKR Vashi High School 4. The appellant craves leave to add or alter or delete any of the ground of appeal at the time of hearing before Your Honour.” 3. Succinct facts qua the issue are that assessee before us is a trust registered u/s 12AA of the Act. The Trust was incorporated for the purpose of imparting pre-primary to higher secondary education. The assessee- trust filed the return of income for the year under consideration on 20.12.2021 declaring total income of “Nil” after claiming exemption of Rs.3,30,07,028/- u/s 11 of the Act. In the intimation u/s 143(1) issued on 23.08.2022 by the CPC, the exemption of Rs.3,30,07,028/-claimed u/s 11 of the Act, in the return of income was disallowed, due to non-filing of Form 10B prior to furnishing return of income. Further the voluntary contributions forming part of the corpus amounting to Rs.1,50,000/- is also added to the total income. 4. Aggrieved by the order of CPC/Assessing officer, the assessee carried the matter in appeal before the ld CIT(A), who has confirmed the action of the assessing officer. The ld CIT(A) observed that the assessee filed its return of income on 20.12.2021 for the assessment year 2021-22, declaring total income at Nil, after claiming exemption of Rs.3,30,07,028/- u/s 11 of the Act. The return of income was processed u/s 143(1) by Centralized Processing Centre, Bengaluru on 23.08.2022 and determined the total income at Rs.3,31,57,028/-. This adjustment was made by the CPC due to the non-filing of audit report in Form 10B prior to furnishing return of income. This adjustment done by CPC also includes voluntary contributions forming part of the cropus amounting to Rs.1.50 lakhs. 5. During the appellate proceedings, the assessee in its written submission has stated that the required audit report could not be uploaded on the e-filing portal due to some technical errors on Income Tax Portal. The assessee was not able to assign the role of its CA for electronic filing of Form 10B. Further, the assessee stated that it has also filed grievance in this

ITA No.515/SRT/2023 A.Y. 21-22 SMKR Vashi High School regard on the portal on 19.11.2021 but the grievance window was closed without providing any resolution on 13.12.2021. Subsequently, the assessee filed Form 10BB on 14.01.2022. The Form 10B was subsequently field on 04.08.2022. In view of the above submission, the assessee pleaded before ld CIT(A) that adverse views in respect of delayed filing of Form 10B should not be taken and exemption u/s 11 should be allowed. 6. The ld CIT(A) noted that assessee has filed return of income on 20.12.2021 and due date of filing of return was 15.03.2022. The tax audit in Form 10BB was filed on 14.01.2022 and tax audit in Form 10B was filed on 04.08.2022 (after filing return of income). The assessee is engaged in running pre-primary, primary, secondary and higher secondary school and is registered u/s 12A/12AA of the Act. Therefore, the assessee is required to file Form 10B one month prior to the due date of filing of the return. This has not been done by the assessee, instead, the assessee has filed Form 10BB. In any case, the filing of Form 10BB is not relevant for the claim of exemption u/s 11 of the Act. Before the adjustment was made by the CPC, a notice was issued to the assessee by the CPC, which is reproduced as under: “The Trust or Institution registered u/s 12A/12AA/12AB has not E-filed the Audit Report in Form 10B one month prior to the due date for furnishing return u/s 139(1). Hence the exemption claimed in Sr.No.2 [exemption claimed u/s 11(1)(d)] and Sr.No. 41i to 4viii of Part B-TI is not allowable in accordance with the provisions of Secetion-12A(1)(b) of the Income tax Act.” 7. In response to the adjustment notice issued the assessee has stated that there was some technical glitch in the e-filing portal due to which Form 10B could not be assigned to the Chartered Accountant on the portal. Finally, assessee assigned Form 10BB to the Chartered Accountant, it was also stated that a grievance was filed by the assessee to resolve the issue of assigning Form 10B to the Chartered Accountant on the portal.

ITA No.515/SRT/2023 A.Y. 21-22 SMKR Vashi High School The ld CIT(A) observed that Form 10BB is not the correct Form to be filed in this case, as assessee is registered u/s 12A/12AA of the Act. The correct Form to be uploaded is Form 10B, in the assessee`s case under consideration. Therefore, filing of this Form No.10BB is not relevant in the case of the assessee. The reason for the delay in filing Form 10B was stated by the assessee, as a technical issue faced by the e-filing portal. To resolve this technical glitch, a grievance was also filed on 19.11.2021 before the e- filing. The grievance of the appellant was resolved on 19.11.2021 by the e- filing as under-

View Grievance

Grievance acknowledgement number 2511285 Status CLOSED Date of resolution 13-Dec-2021 Grievance Description We have to file form 10B for A.Y 2021-2022 but we are not able to assign this form to our Chartered Accountant. We have filed Form 10B upto A.Y 2020-2021, please let us know what to do in this regard. Grievance Resolution Your request has been processed and the issue has been resolved Kindly re-try. If issue persists you are requested to attach and Share following details to efilingwebmanager@incometax.gov.in PAN Error sreen shot * Contract Details * issue description

ITA No.515/SRT/2023 A.Y. 21-22 SMKR Vashi High School it was prevented from the audit report in Form 10B due to technical glitch. Assuming that the issue was not resolved, the assessee had time till 15.02.2022 to get a resolution from e-filing and file the Form 10B, as the due date of filing return was 15.03.2022. Therefore, ld NFAC/Ld. CIT(A) held that there is a clear lapse on the part of assessee, as Form 10B was not filed one month prior to the due date of filing of the return, and therefore, the CPC has correctly disallowed of the exemption u/s 11 of the Act. 9. Aggrieved by the order of NFAC/Ld. CIT(A) the assessee is in appeal further appeal before this Tribunal.

ITA No.515/SRT/2023 A.Y. 21-22 SMKR Vashi High School  Zenith Processing Mills vs. CIT [1996] 219 ITR 721 (Guj)  CIT vs. Gujarat Oil and Allied Industries (1993) 201 ITR 325 (Guj)  CIT vs. Web Commerce Pvt. LTd. 318 ITR 135 (Del)  CIT vs. Dr.L.M.Singhvi 289 ITR 425 (Raj)  Kokan Kala Shikshan Vikaas Sanstha vs. DCIT 645/Pun/2021 (Pune Trib.)  Society for Integrated Development in Urban and Rural Areas vs. DCIT 90 ITD 493 (Hyd. Trib.) 12. On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the ld CIT(A), which we have already noted in our earlier para and is not being repeated for the sake of brevity.

ITA No.515/SRT/2023 A.Y. 21-22 SMKR Vashi High School which was available to the Assessing Officer/CPC, during the assessment proceedings, hence it is a sufficient compliance on the part of the assessee.

“4. We have heard the rival contentions of both the parties; and subject to the provisions of rule 18 of “ITAT Rules”, perused the material placed on record, case laws relied upon by the appellant as well the respondent and duly considered the facts of the case in the light of settled legal position forewarned to either parties. 5. We note that, the ITR for the impugned AY was filed on 13/07/2018 and notice calling the audit report u/s 143(1)(a) was served on 28/02/2019 according thereby 30 days to remove deficiency by filing audit report in Form No 10B, however in the absence of any such compliance from the appellant, ITR was finally processed on 26/06/2019 denying the exemption, which the Ld. FAA upheld quoting equi-reasons. We also note that, the assessee could not attend the communication due to IT-Website technical glitches, however has eventually filed the audit report in Form No 10B on 29/02/2020 and complied with the condition laid in section 12A(1)(b) so as to entitle for a claim of exemption envisaged u/s 11 & 12 of the Act. 6. In the evince of details filed at clause M2 of ITR filed (Internal Page 4 of ITR) on 13/07/2018, it undisputedly establishes that the appellant got its books audited u/s 12A(1)(b) of the Act from M/s S. D. Pednekar & Co which issued & furnished

ITA No.515/SRT/2023 A.Y. 21-22 SMKR Vashi High School the said audit report on 05/07/2017 i.e. prior to filing of ITR for the impugned AY, however the copy thereof remained to be filed alongwith ITR as well in response to communication u/s 143(1)(a) of the Act on account of technical glitches beyond the control of the assessee and the deficiency came to light only upon service of demand u/s 156 of the Act. Thus, the non-compliance with communication u/s 143(1)(a) of the Act due to IT- Website technical glitches was unintentional and beyond the control of the appellant is sufficient to form a reasonable cause for non-compliance and since the procedural compliance has been duly made good by fling the audit report on record, we see no reason to deny the exemption in the present facts and circumstance, ergo we set-aside the order of both the tax authorities below and direct the Ld. AO to grant the claim of exemption in the evince of Form No 10B. 7. Since ground no 1 is adjudicated in favour of the assessee, the balance grounds rendered academic.” 15. On the identical facts, we also rely of the judgment of the Jurisdictional Tribunal Ahmedabad in the case of Gujarat Energy Development Agency, in ITA No.209/SRT/2022, order dated 02.08.2023, wherein it was held as follows:

“3. Solitary issue raised in the appeal of the Revenue is that the AO has disallowed the claim of benefit under section 11 and 12 of the Act to the assessee- trust on the ground that the assessee failed to furnish audit report along with return of income as per the requirement of section 12A(1) of the Act, which the ld.CIT(A) reversed, finding that the assessee had indeed filed the audit report though during the assessment proceedings, which tantamount to sufficient compliance of the relevant provisions in order to claim benefit under sections 11 and 12 of the Act. Briefly put, the fact emerges out from orders of the lower authorities are that assessee is a registered charitable trust under section 12A of the Act and engaged in charitable activities for over 40 years. In the return of income for the assessment year 2018-19 assessee declared total income at Rs.13,54,46,670/-. In the return it had shown business income of Rs.13,54,46,670/- and voluntary contribution of Rs.1,52,03,71,381/-. While processing the return, the CPC, Bangalore disallowed claim of exemption under section 11 of the Act, as audit report in Form No.10B was not e-filed along with return of income. Accordingly, in the intimation made u/s 143(1) of the Act the income was assessed at Rs.1,65,58,18,047/- by making addition of Rs.1,52,03,71,381/- to the declared income. This intimation was challenged by the assessee before the ld.CIT(A), who after detailed discussion and in the light of various judicial pronouncements on the issue of delayed submission of form No.10B, allowed claim of the assessee by observing that the impugned audit report was e-filed to AO in regular assessment

ITA No.515/SRT/2023 A.Y. 21-22 SMKR Vashi High School proceedings, on 6.10.2018 and was available before the AO when he passed the assessment order under section 143(3) on 6.4.2021. Taking note of judicial precedents to the effect that filing of form alongwith return being a procedural requirement, and if the same was available during assessment or in appellate proceedings the assessee should not be denied of the benefit of deduction, he allowed assessee’s claim of deduction u/s 11 of the Act and deleted the addition made to the income of the assessee of Rs.1,52,03,71,381/- 4. Dissatisfied with order of the ld.CIT(A), the Revenue is now before the Tribunal. 5. Before us, the ld.DR while strongly objecting to the finding of the ld.CIT(A) contended that provisions of section 11 and 12 shall not apply in relation to the income of any trust or institution unless the person in receipt of income furnishes along with the return of income for the relevant assessment year the audit report in the prescribed form. And the assessee having failed to fulfill the conditions provided in section 12A(1)(b) of the Act, the assessee cannot claim benefit under section 11 and 12. He accordingly supported order of the AO/CPC. 6. The ld.counsel for the assessee, on the other hand, supported the order of the ld.CIT(A). He further submitted that the law in this regard is settled that benefit of exemption under section 11 and 12 should not be denied merely on account of delay in furnishing the audit report, and it would be sufficient compliance, if the audit report is furnished at a later stage either before the AO during the assessment proceedings or before the ld.CIT(A) in the appellate proceedings. In support of his submissions, the ld.counsel for the assessee drew our attention to a recent judgment of the jurisdictional High Court on identical issue in the case of Social Security Scheme of GICEA Vs. CIT (Exemptions), (2023) 147 taxmann.com 283 (Guj). A copy of judgment of the Hon’ble High Court is placed on record. 7. We have heard both the parties, and we do not find any infirmity in the order of the ld.CIT(A) on the issue. The issue before us is related to denial of deduction under section 11 and 12 of the Act on the ground that the assessee had failed to furnish audit report in form No.10B along with return of income filed. We find, this issue has been discussed and appreciated by the ld.CIT(A) in impugned order in the light of various judicial decisions, and allowed the claim of the assessee, by observing that the assessee did file the audit report and the same was available both during assessment and appellate proceedings, and thereby the assessee has substantially complied with relevant provisions of the Act. The relevant findings of the ld.CIT(A) are as under: “(g) In the instant case the appellant/assessee is a charitable trust registered u/s 12A on 29.01.1980. Thus it is engaged in charitable activities for over 40 years. The audit report in Form 10B was e-filed on 06.10.2018 and was available before the Assessing Officer when he Page | 9

ITA No.515/SRT/2023 A.Y. 21-22 SMKR Vashi High School passed the assessment order under section 143(3) on 06.04.2021. The audit report is also available before the CIT(A) during the appellate proceedings. It has been unambiguously held by the jurisdictional Gujarat High Court [CIT v. Gujarat Oil and Allied Industries Ltd. [1993] 201 ITR 325 (Guj.)] that provisions regarding furnishing of audit report with the return have to be treated as a procedural proviso. It is directory in nature and its substantial compliance would suffice. The Hon'ble Court also took the view that the benefit of exemption should not be denied merely on account of delay in furnishing the audit report and it is permissible for the assessee to produce the audit report at a later stage, either before the AO or the appellate authority. This view has been reiterated by the Hon'ble Court in its recent judgement in Sarvodaya Charitable Trust v. Income Tax Officer. (Exemption) [2021] 125 taxmann.com 75 (Gujarat). Respectfully following the ratio given by the Hon'ble Gujarat High Court (which is jurisdictional High Court), I am of the view that the CPC Bangalore erred in not allowing deduction to the appellant/assessee for the amount applied for the charitable purpose on revenue account as well as capital account. It was merely a procedural lapse on part of assessee to not file Form 10B alongwith return of income. The appellant/assessee uploaded the audit report within a week of filing return of income. It cannot be denied the benefit of exemption under section 11 merely on account of delay in furnishing audit report. Thus the addition made by CPC Bangalore in its order under section 143(1) of the IT Act 1961 dated 17.03.2020 in respect of voluntary contribution other than the corpus received by the appellant trust amounting to Rs.1,52,03,71,381/- is ordered to be deleted.” 8. The appellate proceedings being the continuation of assessment proceedings merely because the assessee has not furnished at the threshold i.e. furnishing the audit report along with return of income, but filed during the assessment proceedings, and available even during the appellate proceedings, it cannot be stated that the assessee has failed to comply with the provisions so as to deny substantial justice by way of granting exemption. The Hon’ble Jurisdictional High Court in a recent decision in Social Security Scheme of GICE Vs. CIT(E) (supra) in the matter of exemption provisions contained in section 11/12 of the Act, requiring filing of Form 10B alongwith return of income for claiming exemption, held the requirement of furnishing of report to be a mandatory requirement while that of filing the report alongwith return of income to be a procedural requirement. Conclusion made by the Hon’ble jurisdictional High Court is as under: “5. Having heard learned advocates for the respective parties and having gone through the material on record, the only question which falls for consideration is whether respondent committed an error in passing the order by not condoning the delay in filing Form No. 10B along with the

ITA No.515/SRT/2023 A.Y. 21-22 SMKR Vashi High School return filed. In the decision of this Court in Sarvodaya Charitable Trust (supra) this Court has observed that furnishing of audit report along with return filed is to be treated as a procedural requirement. It is though mandatory in nature the substantial compliance is required to be made. In the case of Sarvodaya Charitable Trust (supra) the assessee had produced the audit report after processing the return under section 143(1). This Court in the said order has observed that the approach of the authority in these type of cases should be equitable, balancing and judicious. Technically speaking, respondent No. 2 might be justified in denying the exemption under section 11 of the Act by rejecting such condonation application, but an assessee, which is a public charitable trust for past 30 years which substantially satisfies the conditions for availing such exemption, should not be denied the same merely on the bar of limitation especially when the legislature has conferred wide discretionary powers to condone such delay. Applying the said principle, the petition is allowed. The impugned order passed by respondent dated 12-3-2021 is quashed and aside. The impugned order of rectification under section 154 of the Act dated 25-1-2019 is also quashed and set aside. The application for condonation of delay filed by the petitioner before the respondent is allowed.” The issue before us being identical to that as dealt with by the Hon’ble jurisdictional High Court the decision rendered therein will squarely apply to the present case. Following the same, we have no hesitation in holding that the Ld.CIT(A) has rightly held the denial of exemption u/s 11 of the Act for non-filing of requisite form alongwith return of income, to be not as per law, noting the fact that the assessee did file the requisite form during regular assessment proceedings and appellate proceedings before him. We, therefore, uphold order of the ld.CIT(A) and reject the grounds of appeal of the Revenue.” 16. Hon`ble Gujarat High Court in the case of Gujarat Oil & Allied Industries, [1993] 201 ITR 325 (Gujarat), held that where an assessee could not file audit report along with return of income but filed it later before completion of assessment before the Assessing Officer, the assessee was entitled to claim deduction. We note that the law in this regard is settled that benefit of exemption under section 11 and 12 should not be denied merely on account of delay in furnishing the audit report, and it would be sufficient compliance, if the audit report is furnished at a later stage either before the

ITA No.515/SRT/2023 A.Y. 21-22 SMKR Vashi High School assessing officer during the assessment proceedings or before the ld.CIT(A) in the appellate proceedings. Therefore, at the cost of repetition, we state that assessee has filed Form No. 10B on 04.08.2022 (after filing return of income) but before the assessment/ intimation under section 143(1) was made by the Department. The intimation/assessment order was framed under section 143(1) of the Act, on 23.08.2022, hence Form No. 10B was available before the Assessing Officer/CPC, at the time making the assessment/processing the return of income of the assessee. The assessee could not attend the communication due to IT-website technical glitches, however has eventually filed the audit report in Form No 10B on 04.08.2022 and complied with the condition laid in section 12A(1)(b) so as to entitle for a claim of exemption envisaged under sections 11 and 12 of the Act, hence we delete the disallowances made by the Assessing Officer and allow the appeal of the assessee.