2022 (12) TMI 1172 - HC - Income Tax

Condonation of delay in e-filing the audit report in Form No.10B has been rejected - whether respondent committed an error in passing the order by not condoning the delay in filing Form No.10B along with the return filed? - HELD THAT - In the decision of this Court in Sarvodaya Charitable Trust vs. Income Tax Officer (Exemption) 2021 (1) TMI 214 - GUJARAT HIGH COURT this Court has observed that furnishing of audit report along with return filed is to be treated as a procedural requirement. It is though mandatory in nature the substantial compliance is required to be made. In the case of Sarvodaya Charitable Trust 2021 (1) TMI 214 - GUJARAT HIGH COURT the assessee had produced the audit report after processing the return under Section 143(1). This Court in the said order has observed that the approach of the authority in these type of cases should be equitable, balancing and judicious. Technically speaking, respondent No.2 might be justified in denying the exemption under Section 11 of the Act by rejecting such condonation application, but an assessee, which is a public charitable trust for past 30 years which substantially satisfies the conditions for availing such exemption, should not be denied the same merely on the bar of limitation especially when the legislature has conferred wide discretionary powers to condone such delay. Applying the said principle, the petition is allowed. The impugned order passed by respondent dated 12.3.2021 is quashed and aside. The impugned order of rectification under Section 154 of the Act dated 25.1.2019 is also quashed and set aside. The application for condonation of delay filed by the petitioner before the respondent is allowed. Respondent is now directed to process the return in accordance with law. It is noticed that no assessment is framed and only an intimation under Section 143(1) of the Act was issued. No scrutiny could be carried out by the respondent since the audit report under Section 10B was not on record. Learned advocate for the petitioner Mr. B.S.Soparkar fairly submitted that the issue of benefit of exemption may be examined by issuance of notice u/s 143(1)/ 143(2) and the petitioner shall not object to the said proceedings by taking the ground of limitations.

Summary

Issues:
Challenge to order rejecting condonation of delay in e-filing audit report for Assessment Year 2016-17 under Section 119(2)(b) of the Income Tax Act, 1961.

Analysis:

1. Facts and Background:
The petitioner, a Public Charitable Trust, filed a petition challenging the rejection of its application to condone the delay in e-filing the audit report in Form No.10B for Assessment Year 2016-17. The petitioner claimed to have obtained the audit report before the due date but failed to upload it along with the return of income, resulting in the denial of exemption under Section 11 of the Act and a raised demand of Rs.16,39,950. The petitioner's rectification application under Section 154 of the Act was also rejected, leading to the present petition.

2. Submissions of the Petitioner:
The petitioner argued that the delay was due to inadvertence and should be condoned as per CBDT circular No.10 dated 22.5.2019. The petitioner emphasized its charitable status and eligibility for exemption under Section 11, citing a previous court decision. It contended that the denial of exemption based on a procedural lapse was unjustified.

3. Submissions of the Respondent:
The respondent contended that the delay in filing the audit report was not justified, as it was significantly beyond the extended deadline. The respondent rejected the condonation application due to the lack of a reasonable cause or genuine hardship. The respondent distinguished a previous court decision cited by the petitioner, stating that the present case lacked a justifiable reason for the delay.

4. Court's Decision:
The court considered whether the respondent erred in not condoning the delay in filing Form No.10B. Referring to a previous court decision, the court emphasized the need for substantial compliance with procedural requirements and equitable treatment. Despite technical justifications for denial, the court ruled in favor of the petitioner, allowing the petition, quashing the impugned orders, and directing the respondent to process the return. The court also allowed further examination of the exemption issue without limitation objections.

5. Conclusion:
The court allowed the petition, quashed the impugned orders, and directed the respondent to process the return. The court highlighted the importance of equitable treatment and substantial compliance with procedural requirements, especially for long-standing charitable organizations eligible for exemptions. The petitioner was granted relief, emphasizing the discretionary powers of the legislature to condone delays in such cases.