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TMI Blog2024 (6) TMI 1403X X X X Extracts X X X X X X X X Extracts X X X X ..... audit report has not been filed along with the return of income - It is the contention of the assessee that the above requirement is only directory in nature and not mandatory requirement. It was contended that denying exemption under section 11 of the Act is bad in law. Admittedly, in this case, audit report was available before the AO when the return of income was processed vide intimation under section 143(1) of the Act. Hon ble Supreme Court in the case of Sambhaji and Others Vs. Gangabai and Others [ 2008 (11) TMI 393 - SUPREME COURT] held that procedure cannot be a tyrant but only a servant. It is not an obstruction in the implementation of the provisions of the Act, but an aid. The Hon ble court further held that the procedures are handmaid and not the mistress. It is a lubricant and not a resistance. A procedural law should not ordinarily be construed as mandatory; the procedural law is always subservient to and is in aid to justice. Thus, we hold that filing of audit report along with return of income is directory in nature and not mandatory and exemption u/s 11 of the Act, cannot be denied when the audit report is available before the AO while passing the intimation under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delay in filing Form 10B. Also delay has been condoned in similar circumstances in case of other Trusts. The Learned Principal Commissioner of Income Tax, (Exemptions) Delhi, passed an order dated 22.09.2023, under section 119(2)(b) of the Act, rejecting the condonation petition filed by the Appellant on the ground that the Appellant has not been able to establish and make out a case of genuine hardship nor bring out reasonable cause for delay in filing audit report. Against the CIT(A) order, the Petitioner is filing this appeal before the Honorable Income Tax Appellant Tribunal, Bangalore. In the normal course, the Petitioner should have filed the appeal before the Income Tax Appellant Tribunal on or before 60 days from the date of receipt of the order passed under section 250. The CIT(A) order was passed on 03.08.2022. 60 days expired on 03.10.2022. There is a delay of 442 days in filing the appeal. The delay is for the reason that the Petitioner had filed a condonation petition before PCCIT and was waiting for the disposal of the condonation petition. The Petitioner was hopeful of a favorable order as the delay in filing Form 10B was 378 days. The Principal Commissioner of Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed the present appeal before the Tribunal on 11.12.2023. 5. The issue raised in the appeal before the Tribunal is with regard to the denial of section 11 of the Act on account of delay in filing the audit report within the due date prescribed. For identical issue, assessee had raised the application before the PCCIT which was rejected as mentioned earlier on 22.09.2023 and the present appeal has been filed within a reasonable time from the date of rejection of Order passed under section 119(2)(b) of the Act on 22.09.2023. It is a settled law that the time taken for pursuing the remedy before another appellate forum is to be excluded for the purpose of computation of period of limitation for filing an appeal. In this context, we rely on the following judicial pronouncements : i) Union Carbide India Ltd. Vs. CC 1998 (77) ECR 376 ii) Karnataka Minerals Mfg. Co. Ltd. Vs. CCE 1998 (101) ELT 627 iii) Bethala Petropacks Pvt. Ltd [TS-363-ITAT-2024(Bang)] 6. In the case of Bangalore Bench Order of ITAT cited supra, delay of more than 2,500 days was condoned since assessee was pursuing an alternative remedy (Page 12 of the Order). Further, we rely on the judgment of the Hon ble Apex Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e preferred an appeal before First Appellate Authority. The CIT(A) passed the impugned order dated 03.08.2022 under section 250 of the Act dismissing the appeal filed by the assessee Trust. 11. Aggrieved by the Order of the CIT(A) dated 03.08.2022, assessee has preferred this appeal before the Tribunal raising the following grounds: 1. The learned Commissioner of Income Tax (Appeals) (hereinafter referred as CIT(A) for brevity) has erred in passing the order in the manner passed by him and the order is bad in law. 2. The learned CIT(A) and learned AO have erred in denying the exemption under section 11 of the Act on the ground that Return of Income, Form 10 and Form 10B are not filed within prescribed due date. 3. The learned CIT(A) and learned AO have erred in not appreciating that the original return of income was filed within the prescribed due date and there is no delay in filing return of income. 4. The learned CIT(A) and learned AO have erred in concluding that Form 10 is not filed before filing the return, which is contrary to facts on record. 5. The Learned CIT(A) has erred in not appreciating that filing of Audit Report along with return of income is directory and not mand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned AR relied on the Hon ble Gujarat High Court judgment in the case of CIT(E), Ahmedabad Vs. Gujarat Energy Development Agency in R/Tax Appeal No.35 of 2024 (order dated 15.01.2024). 15. The learned DR, on the other hand, submitted that the issue in question is covered against the assessee by the Order of the Tribunal in the case of Navodaya Educational Trust V. DCIT reported in (2021) 130 taxmann.com 256 (Bangalore Tribunal). The learned DR also relied on the judgment of the Hon ble Apex Court in the case of PCIT Vs. Wipro Ltd., in Civil Appeal No.1449 of 2022 (Order dated 11.07.2022) to contend if there is delay in filing the audit report, only the administrative PCCIT or the CBDT has got the power to condone the delay. 16. In rejoinder, the learned AR submitted the case laws relied on by learned Standing Counsel is distinguishable to facts of instant case. It was submitted that in the case of Novodaya Educational Society Vs. DCIT (supra), assessee in that case has neither filed Form 10 electronically or manually before the passing of the intimation under section 143(1) of the Act. Assessee in that case filed Form 10 for the first time along with the rectification application u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Book submitted by assessee). The assessee had filed Form 10 electronically on 27.09.2018. So, this reasoning of the CIT(A) for denying the benefit of exemption under section 11 of the Act is also not correct. 19. Therefore, the only surviving reason for denying claim of exemption under section 11 of the Act, is that audit report has not been filed along with the return of income. It is the contention of the assessee that the above requirement is only directory in nature and not mandatory requirement. It was contended that denying exemption under section 11 of the Act is bad in law. Admittedly, in this case, audit report was available before the AO when the return of income was processed vide intimation under section 143(1) of the Act. The Hon ble Apex Court in the case of Mangalore Fertilizers and Chemicals Vs. Deputy Commissioner 1991(55) ELT 437 (SC) had held as follows: The mere fact that it is statutory does not matter one way or the other. There are conditions and conditions. Some may be substantive, mandatory and based on considerations of policy and some others may merely belong to the area of procedure. It will be erroneous to attach equal importance to the non-observance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... audit report as stated above. 22. We also rely on the following judicial pronouncements wherein it has been held that filing of audit report is procedural in nature : i. CIT vs. Shahzadanand Charity Trust [1998] 96 TAXMAN 494 (PUNJ. HAR.) ii. Sarvodaya Charitable Trust vs. ITO (Exemptions) [2021] 125 taxmann.com 75 (Gujarat) iii. CIT v. Mayur Foundation [2005] 274 ITR 562 (Guj.) iv. CIT v. Xavier Kelavani Mandal (P.). Ltd. [2014] 41 taxmann.com 184]/221 Taxman 43 (Mag) (Guj.) v. CIT v. Andhra Pradesh State Road Transport Corporation [2006] 285 ITR 147(A.P) and vi. CIT v. Rai Bahadur Bissesswarlal Motilal Malwasie Trust [1992] 65 Taxman 273/195 ITR 825 (Cal.) vii. CIT(Exemptions) v Gujarat Energy Development Agency TA No. 35 of 2024. viii. Sri Vetri Vinayagar Educational Trust v ITO (Exemptions) ITA No. 903/Chny/2023. ix. DCIT (Exemption) vs. State Institute of Health Family Welfare 1[2023] 153 taxmann.com 740 (Jaipur - Trib.) x. Sindhi Youth Association Ladies Wing v ITO (1994) 48 ITD 6 (Bang ITAT) 23. The courts in various cases in the context of deduction under section 80IA(7), 10A(5) etc., have held that filing of audit report is directory and not mandatory and the assessee shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the computation that since assessee was a 100% EOU entitled to claim exemption under Section 10B, no loss was being carried forward. Subsequently, assessee filed a declaration dated Oct 24, 2002 with the AO stating that it did not want to avail the benefit under Section 10B (opt out of section 10B claim), and furnished a revised return on Dec 23, 2002 without claiming the exemption under Section 10B, but claiming the carry forward of losses for the first time. Revenue rejected assessee s withdrawal of exemption on the grounds that assessee did not furnish the declaration in writing for opt out before the due date of filing return, i.e., Oct 31, 2001, and thus denied the claim for carry forward of losses. On appeal, CIT(A) upheld the AO s order, whereas ITAT allowed assessee s claim for carry forward of losses. Revenue s appeal before the Hon ble High Court was dismissed, against which Revenue preferred appeal before Hon ble SC. The Hon ble Supreme Court held as follows: For claiming the benefit under Section 10B(8), the twin conditions are required to be complied with. The Hon ble Supreme Court held that assessee was required to fulfil the twin conditions, (i) furnishing a decla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present case, the assessee has claimed exemption under Section 11 r.w.s. 12A(1)(b) of the Act, which has nothing to do with application under Section 10B of the Act. Reliance on the case of Wipro Ltd., (supra) has also been rejected, amongst others, by the Order of the Tribunal in the case of Aprameya Engineering Limited Vs. ITO TS411-ITAT-2024 (Ahd ITAT) and DCIT v Croygas Equipments P Ltd in ITA No 415/Ahd/2020. Even otherwise, various non-jurisdictional Hon ble High Courts have held that filing of Audit report in Form 10B is procedural in nature and delay in filing of Audit Report is not fatal to claim of exemption under section 11 of the Act. The judgment of non-jurisdictional High Court is binding on the Tribunal. In this regard, we rely on the decision of Siro Clinpharma Private Limited v ITA in ITA No. 847/Mum/2016. Relevant findings in this regard read as under: 8. No specific reasons for not following the non-jurisdictional High Court decision in Redington s case (supra) have been pointed out to us. It is not even the case of the assessee, and rightly so, that the issue decided by Hon ble Madras High Court is not the same as we are called upon to decide in this case, that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ho Ram Co. v. Union of India (1989) 3 SCC 151, it was stated by the Supreme Court thus: The binding effect of a decision of this Court (as indeed any superior court) does not depend upon whether a particular argument was considered or not, provided the point with the reference to which the argument is advanced subsequently was actually decided in the earlier decision . The more we ponder upon the correct course to be adopted in such matters as is before us, the more we are convinced with respect to the binding nature of decisions of even Hon ble non-jurisdictional High Courts, unless there are specific good reasons not to do so. The doubts, if at all, and somewhat nightmarish doubts at that, arise about the manner in which Bank of India decision (supra) could be interpreted so as to destabilize the well settled norms of judicial discipline, but neither do we need to perpetuate an error, even if there be any, nor do we need to examine to that aspect any deeper at this stage. There is, thus, no legally sustainable justification, on the facts of this case, to disregard the views expressed by Hon ble Madras High Court in Redington s case (supra). Given the important judicial developmen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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