2024 (7) TMI 284 - HC - Income Tax

Condonation of delay in filing the audit report u/s 119(2)(b) - denial of deduction u/s 11 (1) as Form 10B was filed on 02.09.2023 with a delay of 960 days - as submitted that the petitioner was denied the benefit of exemption only on account of belated filing of the audit report, but Supreme Court held that the benefit of exemption should not be denied only on the ground of belated filing, if the assessee concerned is otherwise eligible for such exemption - HELD THAT - The petitioner has placed on record proof of filing of the return of income for assessment year 2020-2021 on 31.05.2021. Such return refers to the deduction under Section 11 (1) of the Income Tax Act. The acknowledgment of receipt of Form 10B is also on record. This document indicates that it was filed on 31.01.2021. Therefore, the period of delay, as regards filing of the audit report, should be treated as about 134 days and not 960 days. The filing of the return of income as well as the audit report was in May 2021 when the second wave of the Covid-19 pandemic paralysed the entire country. The petitioner has stated that the Managing Trustee as well as the Auditor are senior citizens. As per judgments of this Court and other High Courts, the power under Section 119 (2) (b) is required to be exercised liberally. The main consideration is whether the assessee would suffer genuine hardship. In this case, the assessee is a trust constituted for the welfare of students. In the overall facts and circumstances, the assessee would certainly be put to genuine hardship, unless the delay in filing the audit report is condoned. Thus the impugned order is set aside and the delay in filing the audit report is condoned. As a corollary, the third respondent is directed to receive and act on the audit report while finalizing the petitioner's assessment.

Summary

Issues:
Delay in filing audit report for assessment year 2020-2021 under Section 119 (2) (b) of the Income Tax Act.

Analysis:
The petitioner, a Trust for student welfare, filed the return of income and audit report on 31.05.2021, with the audit report acceptance delayed until 12.09.2023. The petitioner sought condonation of the delay under Section 119 (2) (b), which was rejected on 01.12.2023, leading to this writ petition.

The petitioner's counsel argued that the delay in accepting the audit report was due to the Covid-19 pandemic and technical issues during e-filing services transition. He highlighted that the audit report was filed on 31.05.2023, not 02.09.2023 as erroneously stated, and emphasized the Trust's eligibility for exemption. Citing Supreme Court precedent, he contended that exemption should not be denied solely for delayed filing if the assessee qualifies otherwise.

On the other hand, the senior standing counsel for the respondents acknowledged a 130-day delay in filing the audit report, emphasizing the petitioner's failure to rectify the issue promptly despite a demand under Section 143 (1) of the Income Tax Act on 30.11.2021. He argued that the 960-day delay was inadequately explained by the petitioner.

The Court noted the filing dates of the return of income and audit report, considering the pandemic's impact and the advanced age of the Trust's Managing Trustee and Auditor. Referring to judicial precedents, the Court stressed the need for a liberal exercise of power under Section 119 (2) (b) and assessed the genuine hardship faced by the student welfare Trust. Ultimately, the Court set aside the impugned order, condoning the delay in filing the audit report and directing the respondent to process the audit report for the petitioner's assessment.

In conclusion, the Court disposed of the writ petition without costs, closing connected miscellaneous petitions following the judgment.