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2024 (11) TMI 769 - AT - Income TaxExemption u/s 11 denied - Trust had not e-filed the Audit Report in Form 10BB on or before filing of the return of income - appellant filed application for condonation of delay in filing Form 10BB before the DGIT and application filed by the assessee has been rejected vide order u/s 119(2)(b) HELD THAT - The argument of the assessee is that although the delay in the present case is more than 365 days, in general, but if we exclude the delay covered by the Covid period, then the delay is less than 365 days and accordingly, the appellant ought to have filed petition before the CIT (Exemption) but not before the DGI(Inv.). Further, in the circular issued by the CBDT, there is no clarification as to who will condone the delay, if delay is beyond 3 years. Since there is an ambiguity in the process of condonation of delay in filing of audit report, the assessee has filed further application before the CBDT seeking clarification and also condonation of delay in filing Form 10BB for both the A.Ys. We find that in the Board s Circular No.15 of 2022, dated 19/07/2022, there is a provision for the authorities to condone the delay up to 3 years and there is no provision for condonation of delay or there is no clarification as to who will condone the delay, if delay is beyond 3 years. Since there is an ambiguity in the Circular issued by the CBDT on the issue of condonation of filing of Form 10BB and further the appellant submitted that it has filed a further application before the CBDT for condonation of delay, in our considered view, there is a merit in the argument of the assessee that the learned CIT (A) should have waited till the CBDT finally decides application filed for condonation of delay. Further, in our considered view, when the appellant is otherwise entitled for exemption under the Act, having satisfied all the conditions, the authorities should have taken a lenient view on belated filing or late filing of Form 10BB of the Act. Since the appellant claims that it has filed further application before the CBDT for considering the condonation of delay in Form 10BB for both the A.Ys, in our considered view, the matter needs to be kept alive till such time, the CBDT takes a final decision on the delay in filing Form 10BB. Therefore, we are of the considered view, that the issue needs to go back to the file of the Assessing Officer for fresh consideration. Thus, we set aside the order passed by the learned CIT (A) for both the A.Ys and set aside the issue to the file of the AO and also direct the Assessing Officer to decide the issue of exemption u/s 11 of the Act, for both the A.Ys after the outcome of the application, if any, filed by the assessee, before the CBDT for condonation of delay in filing Form 10BB for both the A.Ys. Assessment of gross receipts as income of the appellant derived from property held under the Trust - Once any Trust/Institution loses its of exemption u/s 11 for any reason, including withdrawal of exemption granted u/s 12AA of the Act, the income of the Trust should be assessed as an AOP and only surplus/profits needs to be taxed. In the present case, it was the contention of the assessee before us that, the Assessing Officer has taxed gross receipts for both the A.Ys without allowing deduction towards various expenditure/application of income towards charitable purposes. If at all, the claim of the assessee is correct, then, in our considered view, the Assessing Officer is grossly erred in taxing gross receipts because in any case, the appellant needs to be assessed as an AOP on surplus/profit only. Therefore, we direct the AO to verify the claim of the assessee and in case as claimed by the assessee, if the gross receipts are brought to tax, then the Assessing Officer is directed to assess only income/profit to tax for both the A.Ys, in case finally the Assessing Officer holds that the assessee is not entitled for exemption u/s 11.
Issues Involved:
1. Condonation of delay in filing appeals and audit reports. 2. Denial of tax exemption under Section 11 of the Income Tax Act, 1961. 3. Assessment of gross receipts as income. 4. Authority and jurisdiction of the CIT (A). Detailed Analysis: 1. Condonation of Delay: The primary issue was the rejection of the condonation of delay in filing appeals and audit reports. The appellants argued that the delay was unintentional, citing the COVID-19 pandemic and related disruptions as significant reasons. The Tribunal acknowledged that the pandemic severely affected normal life and operations, justifying a lenient approach towards condoning delays. The Tribunal found that the delay, excluding the COVID period, was minimal and thus condoned the delay for the appeals related to the assessment years 2019-20 and 2020-21. 2. Denial of Tax Exemption: The denial of tax exemption under Section 11 was a significant issue. The exemption was denied due to the late filing of the audit report in Form 10BB. The Tribunal noted that the appellant was a charitable institution registered under Section 12AA and had not deviated from its objectives. The delay in filing Form 10BB was attributed to unforeseen circumstances, including a search operation and the COVID-19 pandemic. The Tribunal emphasized that the appellant was otherwise entitled to the exemption and that the authorities should have taken a lenient view regarding the late filing. The Tribunal directed that the issue be reconsidered by the Assessing Officer after the Central Board of Direct Taxes (CBDT) decides on the application for condonation of delay. 3. Assessment of Gross Receipts: The Tribunal addressed the issue of assessing gross receipts as income. It was argued that if a trust loses its exemption, only the surplus or profit should be taxed, not the gross receipts. The Tribunal directed the Assessing Officer to verify the appellant's claim and ensure that only the income or profit is taxed if the exemption under Section 11 is ultimately denied. 4. Authority and Jurisdiction of CIT (A): The Tribunal found that the CIT (A) exceeded its jurisdiction by making observations regarding the order passed under Section 154, which was not within the scope of the appeal. The CIT (A) does not have the authority to issue directions or findings on issues not before the appellate authority. The Tribunal deleted the findings of the CIT (A) that were beyond its scope of power. Conclusion: The Tribunal allowed the appeals for statistical purposes, setting aside the orders of the CIT (A) and directing the Assessing Officer to reconsider the issues in light of the Tribunal's observations. The appeals for the respective assessment years 2019-20 and 2020-21 were allowed for statistical purposes, with the matters remanded for fresh consideration by the Assessing Officer.
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