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2025 (4) TMI 846 - AT - Income TaxBenefit of exemption u/sec. 11 - filing its return of income and audit report in Form No.10B beyond the extended due date - HELD THAT - There is no dispute with regard to the fact that the due date for filing the return of income was by 15.02.2021 and that the return of income filed by the assessee belatedly along with Form No.10B audit report was on 03.03.2021. Admittedly there is a delay of 18 days in filing the return of income and audit report. However the fact remains that audit report in Form-10B has been filed before the AO passed the assessment order i.e. on 12.05.2022. The assessee has explained reasons for not filing the return of income and audit report on or before the extended due date i.e. on 15.02.2021. We find that the period is under peak Covid-2019 pandemic outbreak and during the Covid pandemic period the normal life of all the citizens was effected very badly be that an individual or trust. Therefore going by the Covid pandemic situation in our considered view the small delay of 18 days in filing the return of income and audit report in prescribed Form No.10B should have been condoned by the authorities below when the relevant audit report in Form-10B was made available to the AO before the AO passed his assessment order dated 12.05.2022. AO and the learned CIT(A) was erred in rejecting exemption u/sec.11. Thus we set-aside the order of the CIT(A) and direct to the AO to allow the benefit of exemption u/sec.11 - Appeal of the assessee is allowed.
ISSUES PRESENTED and CONSIDERED
The primary issue considered in this judgment is whether the assessee, Prathibha Educational Welfare Society, is entitled to the exemption under Section 11 of the Income Tax Act, 1961, despite filing its return of income and audit report in Form No.10B beyond the extended due date of 15.02.2021. ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents The legal framework central to this case involves Section 11 of the Income Tax Act, 1961, which provides for tax exemptions for income derived from property held under trust wholly for charitable or religious purposes, provided certain conditions are met. One such condition is the timely filing of the return of income and audit report. The Central Board of Direct Taxes (CBDT) had extended the due date for filing the return of income to 15.02.2021 due to the Covid-19 pandemic. Court's Interpretation and Reasoning The Tribunal considered the explanation provided by the assessee for the delay in filing, which was attributed to the disruptions caused by the Covid-19 pandemic. The Tribunal acknowledged the severe impact of the pandemic on normal life, affecting both individuals and organizations, which justified a more lenient approach towards compliance with procedural deadlines. Key Evidence and Findings The Tribunal noted that the assessee filed its return of income and audit report on 03.03.2021, which was 18 days after the extended due date. However, the audit report in Form-10B was submitted before the assessment order was passed on 12.05.2022. The Tribunal found this sequence of events significant, as it demonstrated that the necessary documentation was eventually provided to the Assessing Officer in a timely manner relative to the assessment process. Application of Law to Facts The Tribunal applied the principles of equity and fairness in light of the unprecedented circumstances of the Covid-19 pandemic. It concluded that the minor delay of 18 days should be condoned, given the broader context of the pandemic's impact on societal functions. The Tribunal emphasized that the substantive compliance with the requirement of submitting the audit report before the assessment was a critical factor in its decision to allow the exemption. Treatment of Competing Arguments The Tribunal considered the arguments from both parties. The assessee argued for leniency due to the pandemic, while the Department insisted on strict adherence to the statutory deadlines. The Tribunal found the assessee's argument more compelling due to the exceptional circumstances and the fact that the audit report was submitted before the assessment order. Conclusions The Tribunal concluded that the Assessing Officer and the CIT(A) erred in denying the exemption under Section 11 of the Act. It directed the Assessing Officer to allow the benefit of the exemption as claimed by the assessee. SIGNIFICANT HOLDINGS The Tribunal established a core principle that procedural delays attributable to extraordinary circumstances, such as a global pandemic, should be viewed with leniency, particularly when the substantive requirements are eventually met before the completion of the assessment process. Final Determinations on Each Issue The Tribunal set aside the order of the CIT(A) and directed the Assessing Officer to grant the exemption under Section 11 of the Income Tax Act, 1961, to the assessee, thereby allowing the appeal.
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