2024 (10) TMI 81 - AT - Income Tax

Denial of exemption claimed u/s 11 - delay in filing form 10B - HELD THAT - There were circulars available at the time when the assessee had made applications to condone the delay in filing form 10B which has not been considered at all. It is further noted that, CIT(A) has also not condoned the delay by observing that there were no sufficient cause explained by the assessee which is contrary to the fact as enumerated here in above. In the interest of justice, we remit this issue to the AO to consider the claim of the assessee in accordance with law by carrying out necessary verification of form 10B filed by the assessee. AO shall take form 10B on record and verify the exemption claimed u/s. 11 in accordance with law. Needless to say that proper opportunity of being heard must be granted to assessee in accordance with law. Grounds raised by the assessee stands partly allowed for statistical purposes.

Issues:
1. Delay in filing the appeal before the Ld.CIT(A) and the subsequent dismissal of the appeal.
2. Denial of exemption claimed by the assessee under section 11 of the Income-tax Act.
3. Consideration of circulars issued by CBDT in the decision-making process.
4. Remittance of the issue back to the Ld.AO for further consideration.

Issue 1: Delay in filing the appeal before the Ld.CIT(A) and the subsequent dismissal of the appeal:
The appellant filed an appeal against an order passed by the Ld.CIT(A), which was dismissed due to a delay of 364 days in filing the appeal. The Ld.CIT(A) refused to condone the delay, citing lack of "sufficient cause" as per the Income Tax Act. However, the Tribunal found that the delay was due to bonafide reasons as the appellant was pursuing an alternative remedy under the act. The Tribunal invoked the principles laid down by the Supreme Court and condoned the delay, noting that no malafide intentions could be attributed to the appellant.

Issue 2: Denial of exemption claimed by the assessee under section 11 of the Income-tax Act:
The appellant, a trust engaged in charitable activities, had filed its return of income with a shortfall in application of income. The denial of exemption claimed under section 11 was based on the belated filing of Form 10B. The Tribunal observed that there are precedents where the filing of Form 10B was considered directory rather than mandatory, especially when the audit report was available during the processing of the return. The Tribunal referred to various decisions supporting this view and remitted the issue back to the Ld.AO for further consideration, emphasizing the need for proper verification and granting the appellant an opportunity to be heard.

Issue 3: Consideration of circulars issued by CBDT in the decision-making process:
The appellant had relied on circulars issued by the CBDT, directing the admission of applications for condonation of delay in filing Form 10B for certain years. These circulars were not considered by the authorities who rejected the appellant's request for condonation of delay. The Tribunal noted that the circulars were available and could have justified the delay in filing Form 10B, which was not taken into account by the authorities. The Tribunal found that the failure to consider these circulars resulted in gross injustice to the appellant.

Issue 4: Remittance of the issue back to the Ld.AO for further consideration:
In the interest of justice, the Tribunal remitted the issue of denial of exemption claimed under section 11 back to the Ld.AO for reconsideration. The Ld.AO was directed to verify the form filed by the appellant and assess the exemption claimed in accordance with the law. The Tribunal emphasized the need for proper verification and granting the appellant a fair opportunity to present their case. The appeal was partly allowed for statistical purposes.

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