2024 (4) TMI 92 - AT - Income Tax

Exemption u/s 11 - benefit denied on delay in filling the audit report - as per DR even the dead line extended by the board was up to 365 days whereas in this case delay is much beyond. Thus, the same is rightly denied to the assessee by the CPC - HELD THAT - Assessee placed on record that an order of the CBDT F.No. 225/358/2018/ITA.II dated 08.10.2018 wherein the due date extended upto 31.10.2018 and the assessee in this case e-filed the form no. 10B on 28.01.2020. The bench also noted that even otherwise the issue that the whether the assessee denied the benefit of exemption as a trust merely on the reason that the audit report in Form no. 10 B filed belated. This issue is decided by Sarvodaya Charitable Trust 2021 (1) TMI 214 - GUJARAT HIGH COURT where assessee, a public charitable trust registered u/s 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 especially when the legislature has conferred wide discretionary powers to condone such delay on the authorities concerned. The similar issue is also dealt in the case of ITO(E) Vs. Shri Laxmanarayan Dev Shrishan Seva Khendra 2023 (7) TMI 293 - ITAT AHMEDABAD and Sh. Rajkot Vishashrimali Jain Samaj 2023 (3) TMI 765 - ITAT RAJKOT . On being consistent to the view in the matter we direct the Jurisdiction Assessing Officer (JAO) to consider the Form no. 10B through belated and allow the claim of exemption u/s. 11 of the Act to the assessee. Appeal of assessee allowed.

Summary

Issues Involved:
1. Disallowance of claim u/s 11 of the IT Act, 1961.
2. Non-filing of Audit Report in Form 10B within the specified date.
3. Denial of exemption u/s 11 due to procedural delay.
4. Applicability of judicial pronouncements on filing Form 10B at a later stage.

Summary:

Disallowance of Claim u/s 11 of the IT Act, 1961:
The assessee, a Charitable Trust registered u/s 12A, filed an appeal against the order of the National Faceless Appeal Centre (NFAC) which sustained the disallowance of Rs. 3,38,71,393/- under section 11 of the IT Act, 1961. The trust argued that the authorities should have considered the entirety of the details filed in the ITR, which indicated a net loss, and therefore, no necessity for the claim under section 11.

Non-filing of Audit Report in Form 10B within the Specified Date:
The trust filed its return on 31.03.2019 but did not upload the Audit Report in Form 10B along with the return. The CPC denied the exemption u/s 11 due to the non-filing of Form 10B before the specified date. The Form 10B was eventually uploaded on 28.01.2020, well beyond the extended due date of 15.10.2018.

Denial of Exemption u/s 11 Due to Procedural Delay:
The CIT(A) upheld the CPC's denial of exemption, stating that the failure to furnish the audit report in the prescribed form along with the return results in disentitlement from claiming exemption under sections 11 and 12. The CIT(A) noted that there was no mistake apparent from the record in the intimation dated 17.10.2019, as the Form 10B was uploaded much later. The CIT(A) also mentioned that the appellant did not file an application for condonation of delay as required by CBDT Circulars.

Applicability of Judicial Pronouncements on Filing Form 10B at a Later Stage:
The assessee argued that the requirement to file the Audit Report u/s 12A(1)(b) is directory in nature and can be complied with at any stage before the completion of the assessment or even at the appellate stage. The assessee cited various judicial pronouncements, including decisions from the Gujarat High Court, supporting the view that substantial compliance with the procedural requirement suffices for claiming exemption u/s 11.

Tribunal's Decision:
The Tribunal noted that the CBDT had extended the due date for filing Form 10B up to 31.10.2018 and that the assessee had filed the form on 28.01.2020. The Tribunal referred to judicial precedents, including the Gujarat High Court's decision in Sarvodaya Charitable Trust Vs. ITO(E), which held that a trust could not be denied exemption merely on the bar of limitation in furnishing the audit report, especially when the legislature has conferred wide discretionary powers to condone such delay. Consistent with this view, the Tribunal directed the Jurisdictional Assessing Officer to consider the belatedly filed Form 10B and allow the claim of exemption u/s 11 to the assessee.

In the result, the appeal of the assessee was allowed.