2023 (5) TMI 960 - AT - Income Tax

Exemption u/s.11 denied - delay involved in filing of Form 10B - HELD THAT - As the assessee-trust does not cumulatively satisfy the set of conditions specified in Para 4(i) of the CBDT Circular No.10 and also had not filed any application for condonation of delay u/s.119(2)(b) of the Act as provided in Para 4(ii) of the said circular, therefore, there remains no occasion for condoning the delay involved in filing of Form 10B by the assessee beyond the stipulated time period. Thus, on the basis of my aforesaid observations, find no infirmity in the view taken by the lower authorities who had rightly declined the assessee s claim for exemption u/s.11 of the Act. A.O after declining the assessee s claim for exemption u/s.11 summarily held its gross receipts as its income - AO after treating the assessee as an unregistered trust was obligated to have considered its claim for deduction of expenses as were raised in the income and expenditure account. Accordingly, though uphold the declining of the assessee s claim for exemption u/s.11 of the Act, but at the same time, restore the matter to the file of the A.O with a direction to consider the assessee s claim for deduction of expenses as debited in the income and expenditure account, i.e. to the extent the same are allowable under the Act. Appeal of the assessee partly allowed for statistical purposes.

Summary

Issues Involved:
1. Denial of exemption under Section 11 due to late filing of Form 10B.
2. Condonation of delay in filing Form 10B.
3. Assessment of gross receipts as income without considering allowable expenses.

Summary:

1. Denial of Exemption under Section 11:
The assessee's appeal challenges the denial of exemption under Section 11 amounting to Rs. 24,83,562/- by the CIT(A), who cited the failure to file the audit report in Form No. 10B before the due date of filing the return of income under Section 139. The assessee argued that there was no change in the objects and activities of the trust, and no activity was carried out beyond its objectives, thus the exemption under Section 11 should not be denied.

2. Condonation of Delay in Filing Form 10B:
The appeals involved a delay of one day, which was admitted due to the Supreme Court's orders in Suo Moto Writ Petition (Civil) No.3 of 2020. The assessee trust, a religious-cum-charitable trust registered under Section 12AA(1)(b)(i), filed its return of income for A.Y. 2016-17 on 28.03.2018. The CPC, Bangalore declined the exemption under Section 11(2) because Form 10B was not filed within the "due date" specified under Section 139(1). The CIT(A) upheld this decision, stating that the delay did not fall within the parameters of CBDT Circular No.28/2019 read with Circular No.7/2021. The assessee argued that the delay was due to technical glitches and should be condoned as per CBDT Circular No.10 and Circular No.28.

3. Assessment of Gross Receipts as Income:
The Tribunal observed that even though the exemption under Section 11 was rightly denied due to the late filing of Form 10B, the A.O. should have considered the assessee's claim for deduction of expenses as per the income and expenditure account. The matter was restored to the A.O. to consider these deductions, ensuring a reasonable opportunity for the assessee to be heard.

Conclusion:
The appeals for both A.Y. 2016-17 and A.Y. 2017-18 were partly allowed for statistical purposes. The Tribunal upheld the denial of exemption under Section 11 but directed the A.O. to reassess the allowable expenses for the respective assessment years.