2024 (5) TMI 1295 - AT - Income Tax

Exemption u/s 11 - belated filing of return of income - mistake in filing the corresponding columns in the return of income - HEL D THAT - The assessee trust is duly registered u/s 12AA of the Act and is eligible to claim deduction as applicable to a charitable trust. Prior to amendment made by the Finance Act, 2016, Section 139(4) provided that a person who has not furnished a return within the time allowed to him under sub-section (1), or within the time allowed under a notice issued under sub-section (1) of section 142, may furnish the return for any previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. This amendment is with effect from 1.4.2017. Therefore, the contention of the counsel for the assessee, that the due date of filing belated return was 31.03.2018 and not 31.03.2017 is correct. CIT(A) is erred in considering the due date u/s 139(4) as 31.03.2017. From the audited financial statements and form 10B submitted by the assessee it could be seen that there are no any amounts spent by the assessee trust for the benefit of persons referred to in section 13(3) of the act. Therefore, as contented by the counsel for the assessee, it is a mistake while filing the return of income to fill the amount of Rs. 40,66,996/- in the column relating to income chargeable under section 12(2) of the Act. As admitted by the assessee, it is mistake in filing the return of income. After perusal of Form No.10B as placed on record, it could be seen that the assessee has applied an amount of Rs. 40,66,996/- for the purpose of charitable objectives of the trust. Merely because there is mistake in filing the corresponding columns in the return of income, the same would not result into enhancement of the assessee s income.Since the return of income filed by the assessee is valid and also processed by CPC Bengaluru u/s 143(1) of the Act, action of CIT(A) in treating the return of income non-est is unjust. Claim denied on late filing of form 10B - HELD THAT - The assessee filed the form 10B along with the return of income i.e. on 31.03.2018 which is beyond the due date. The proviso to section 143(1)(a) of the Act specifically provides that no adjustment shall be made unless (as specified in clause (a) to section 143(1) of the Act) intimation is given to the assessee trust of such adjustment either in writing or in electronic mode and in case response is not received within 30 days the adjustment can be made. In the present case no such notice whatsoever has been given to the assessee. The assessee has also placed reliance on the decision of the coordinate bench in which it is decided, after referring the judgement of Hon ble High Court of Gujarat, that non-filing of Audit Report is a procedural omission and cannot be impediment in law in claiming the exemption and condoned the delay in filing audit report in form 10B. Respectfully following the order of the co-ordinate bench 2024 (2) TMI 629 - ITAT AHMEDABAD , we condone the delay in filing the form 10B. We are of the considered view that the order passed by the Ld. CIT(A) is not sustainable in the eyes of law, hence set aside the same after deleting the addition made on account of income u/s 12(2) and allowing the exemption u/s 11 of the Act to the assessee. Appeal of the assessee is allowed.

Summary

Issues involved:
The judgment addresses the disallowance of exemption u/s 11 of the IT Act, addition of income chargeable u/s 12(2) due to a delay in filing the return of income and Tax Audit Report, misinterpretation of section 12A, and the validity of the order passed by the CIT(A).

Disallowance of exemption u/s 11:
The assessee, a public charitable trust, appealed against the disallowance of exemption u/s 11 in the intimation order passed u/s 143(1) of the IT Act. The CIT(A) upheld the disallowance due to a delay in filing the return of income and Tax Audit Report, despite the substantial charitable activities and valid registration of the appellant. The assessee contended that the delay in filing was procedural and should not result in denial of exemption u/s 11. The Tribunal, after considering the submissions, set aside the CIT(A)'s order, deleted the addition made on account of income u/s 12(2), and allowed the exemption u/s 11 to the assessee.

Misinterpretation of section 12A:
The CIT(A) was criticized for misinterpreting the provisions of section 12A, specifically regarding the condition of filing the return of income before the due date to claim exemption u/s 11. The Tribunal clarified that this condition came into effect from AY 2018-19, rendering the disallowance of exemption due to a filing delay illegal and ultra vires.

Validity of the CIT(A)'s order:
The Tribunal found that the CIT(A) erred in considering the due date of filing the belated return of income as 31.03.2017 instead of 31.03.2018. It was noted that the return of income was valid and processed by the CPC, making the CIT(A)'s treatment of the return as non-est unjust. Additionally, the Tribunal condoned the delay in filing form 10B, following a decision by a coordinate bench, and set aside the CIT(A)'s order after deleting the income addition u/s 12(2) and allowing the exemption u/s 11.

Conclusion:
The Tribunal allowed the appeal of the assessee, emphasizing the eligibility of the trust for deduction as a charitable trust and correcting the errors made by the lower authorities. The judgment was pronounced in the Open Court on 27th May, 2024 at Ahmedabad.