2022 (11) TMI 1173 - AT - Income Tax

Exemption u/s 11 - non-furnishing of audit report in Form 10B through electronic mode - whether willful or intentional delay on the part of assessee? - HELD THAT - CBDT s Circular No. 2/2020 stated that CIT(A) has power for condoning belated application in filing Form No. 10B wherever the assessee was prevented by reasonable cause for filing of such applications within the stipulated time. In the present case before us, the delay is due to bonafide mistake on the part of the assessee which could be condoned as there is a strong reason on the part of assessee. Since the assessee is neither negligent nor willful defaulter in filing Form No. 10B within stipulated time prescribed under law and it was happened due to bonafide mistake on the part of the assessee. Hence, we reverse the orders of lower authorities, condone the delay in filing Form No. 10B and direct the AO to accept the audit report in form No. 10B. Appeal of the assessee is allowed.

Issues Involved:
1. Disallowance of revenue expenditures.
2. Submission of audit report in Form 10B.
3. Denial of exemption under section 11 and 12 of the Income-tax Act.
4. Opportunity for the assessee to rectify defects in the return.
5. Charitable status of the society and its tax exemption.
6. Consideration of additional documents during the hearing.

Detailed Analysis:

1. Disallowance of Revenue Expenditures:
The assessee contended that the CIT(A) failed to understand that tax is payable on income, not on gross receipts, leading to an unlawful and whimsical disallowance of revenue expenditures. The Tribunal noted that the assessee showed total receipts of Rs. 3,15,60,828/- and total expenditure of Rs. 3,07,97,324/-, with an accumulation of Rs. 47,34,124/- under sections 11 and 12 of the Income-tax Act. The return was processed under section 143(1) where the exemption under section 11 was denied.

2. Submission of Audit Report in Form 10B:
The assessee argued that the audit report in Form 10B was completed before the filing of the return but was not submitted electronically due to a bona fide mistake. The Tribunal noted that the audit report was completed on 18.09.2018, and the return was filed on 30.10.2018. The audit report was eventually filed on 04.12.2020. The CIT(A) did not consider this submission and dismissed the appeal, stating that the assessee did not furnish the audit report in Form 10B as required by section 12A(b) of the Act.

3. Denial of Exemption Under Section 11 and 12:
The CIT(A) denied the exemption under section 11 and 12 because the audit report was not submitted on time. The Tribunal highlighted the CBDT Circular No. 2/2020, which allows the CIT to condone delays in filing Form 10B if the delay was due to reasons beyond the control of the assessee. The Tribunal found that the delay was due to a bona fide mistake and not willful or intentional, and thus, the exemption should not have been denied.

4. Opportunity for the Assessee to Rectify Defects:
The assessee claimed that no opportunity was given to rectify the defect of not submitting the audit report. The Tribunal agreed that the assessee should have been given an opportunity to submit the audit report before the assessment was completed under section 143(1). The Tribunal noted that the audit report was eventually submitted before the CIT(A)'s order, and thus, the denial of exemption was erroneous.

5. Charitable Status of the Society and Its Tax Exemption:
The assessee argued that the society is charitable and exempt from tax liability as decided by the Tribunal in a previous case and by virtue of CBDT Circular No. 7/2015. The Tribunal acknowledged the charitable status of the society and noted that the exemption under section 11 should apply, provided the audit report is submitted, even if belatedly.

6. Consideration of Additional Documents During the Hearing:
The assessee contended that the CIT(A) passed the order without allowing the submission of additional documents. The Tribunal found that the CIT(A) did not consider the audit report submitted on 04.12.2020 and dismissed the appeal without considering the assessee's plea.

Conclusion:
The Tribunal concluded that the delay in filing Form 10B was due to a bona fide mistake and not intentional. It reversed the orders of the lower authorities, condoned the delay in filing Form 10B, and directed the AO to accept the audit report. The appeal of the assessee was allowed, and the order was pronounced in the open court on 24.11.2022.

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