2024 (9) TMI 292 - HC - Income Tax

Rejection of exemptions u/s 11 and 12 - delay in filing Form 10B - genuine hardship u/s 119(2)(b) - HELD THAT - In the decision of this Court in case of Sarvoday Charitable Trust 2021 (1) TMI 214 - GUJARAT HIGH COURT it is held that furnishing of audit report along with refund filed is to be treated as procedural requirement though it is mandatory in nature but substantial compliance is required to be made. It was further observed that the approach of the authority in such type of case should be equitable and judicious. It is also not in dispute that the petitioner trust for past many years has substantially satisfied the conditions for claiming the exemption which should not be denied for non filing of Form 10B in time. The petitioner has explained the reason for delay in filing Form 10B due to illness of the Accountant who was on leave for a long time due to medical reasons. The petition is allowed. The impugned orders are quashed and set aside. The matter is remanded back to the respondent to pass appropriate order to condone the delay in filing the Form 10B for AY 2018-2019 by the petitioner. Such exercise shall be completed within a period of 12 weeks from the date of receipt of a copy of this order.

Issues Involved:
1. Condonation of delay in filing Form 10B for Assessment Year 2018-2019.
2. Rejection of exemption claims under sections 11 and 12 of the Income Tax Act, 1961.
3. Procedural requirements and substantial compliance for filing Form 10B.
4. Interpretation of "genuine hardship" under section 119(2)(b) of the Income Tax Act.

Detailed Analysis:

1. Condonation of Delay in Filing Form 10B for Assessment Year 2018-2019:
The petitioner, a public charitable trust, sought condonation of a 34-day delay in filing Form 10B for AY 2018-2019. The delay was attributed to a technical error and the long leave of the accountant. The respondent rejected the condonation application, citing the petitioner's failure to furnish specific reasons for the delay in response to letters dated 5.10.2021 and 12.11.2021. The petitioner argued that the delay was not intentional and that similar delays had been condoned in previous years.

2. Rejection of Exemption Claims under Sections 11 and 12 of the Income Tax Act, 1961:
The Centralized Processing Centre (CPC) rejected the exemption claims aggregating to Rs. 3,69,08,845/- due to the failure to file Form 10B within the stipulated time. The petitioner contended that the delay should not bar them from availing of the exemptions, especially since the audit report was obtained before the due date of filing the return.

3. Procedural Requirements and Substantial Compliance for Filing Form 10B:
The court referenced previous judgments, particularly the case of Sarvodaya Charitable Trust vs. Income Tax Officer (Exemption), which held that furnishing the audit report along with the return is a procedural requirement. Substantial compliance with this requirement should suffice, and the approach of the authorities should be equitable, balancing, and judicious. The court emphasized that a public charitable trust satisfying the conditions for exemption should not be denied merely due to a procedural delay.

4. Interpretation of "Genuine Hardship" under Section 119(2)(b) of the Income Tax Act:
The petitioner argued that "genuine hardship" should be construed liberally, citing the case of Sitaldas Motwani v. DIT, which held that the phrase should be interpreted to enable authorities to do substantive justice. The court agreed, noting that the petitioner had complied with the conditions for obtaining the audit report and filing the return, and the delay was due to circumstances beyond their control.

Conclusion:
The court allowed the petition, quashing the impugned orders and remanding the matter back to the respondent to pass an appropriate order to condone the delay in filing Form 10B for AY 2018-2019. The court directed that this exercise be completed within 12 weeks from the date of receipt of the order. The court emphasized the need for a justice-oriented approach, balancing procedural requirements with substantial compliance, and interpreting "genuine hardship" liberally to ensure substantive justice. The rule was made absolute to the extent specified, with no order as to costs.

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