INDIAN MEDICAL ASSOCIATION PUNE BRANCH,SHUKRAWAR PETH V. DCIT EXEMPTION CIRCLE, PUNE, SWARGATE

ITA 766/PUN/2025

AI Insights

The case involves the Indian Medical Association Pune Branch, a charitable trust, which appealed against the orders of the Ld. Addl. / JCIT(A) for various assessment years, where their claims for exemption under section 11 of the Income Tax Act were denied due to delays in filing the return of income and the audit report in Form 10B. The Tribunal examined the circumstances of the delays, the relevant provisions of the Income Tax Act, and the CBDT circulars that addressed such issues. The Tribunal noted that the returns were filed belatedly but within the extended deadlines provided by the CBDT circulars, and the audit reports were also filed before the intimation orders were passed by the CPC. Based on these findings and the precedents set by various High Courts and other Tribunals, the Tribunal ruled in favor of the assessee, allowing the exemption under section 11.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 713356 (ITAT-PUNE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2020-2021
• Other Referred Cases: Bangarh Educational Welfare Trust vs. ITO, ITO vs. Debendra and Rohini Memorial Trust, CIT v. Laxmanarayan Dev Shrishan Seva Khendra, Sarvodaya Charitable Trust vs. ITO(Exemption), B. R. Hospital Research Institute v. ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAMNATH P MURKUNDE
• Assessee Lawyers: NIKHIL S PATHAK
• Keywords: Condonation of delay; Set aside; Reasonable cause; Question of law; Competent authority; Charitable institution; Benefit of exemption
• Section: 143(3); 11; 12AA; 12A; 139; 12; 119(2)(b); 10B; 139(5)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI R. K. PANDA, VICE PRESIDENT AND MS ASTHA CHANDRA, JUDICIAL MEMBER ITA Nos.761, 762, 763, 765 & 766/PUN/2025 Assessment years : 2014-15, 2017-18, 2018-19, 2019-20 & 2020-21 Indian Medical Association Pune Branch 992, Dr. Nitu Mandke, IMA House, Tilak Road, Pune – 411002 Vs. DCIT, Exemption Circle, Pune PAN : AAATI2653M (Appellant) (Respondent) Assessee by : Shri Nikhil S Pathak Department by : Shri Ramnath P Murkunde Date of hearing : 14-07-2025 Date of pronouncement : 31-07-2025 O R D E R PER R.K. PANDA, V.P: The above batch of 5 appeals filed by the assessee are directed against the separate orders dated 28.02.2025 of the Ld. Addl. / JCIT(A)-5, Delhi relating to different assessment years as mentioned therein. Since common issues are involved in all these appeals, therefore, these were heard together and are being disposed of by this common order for the sake of convenience. 2. First we take up ITA No.761/PUN/2025 for assessment year 2014-15 as the lead case. Facts of the case, in brief, are that the assessee is a charitable trust registered u/s 12A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) which is entitled for claim of exemption u/s 11 of the Act. The assessee filed Printed from counselvise.com 2 ITA Nos.761 to 763 & 765 & 766/PUN/2025 its return of income on 06.07.2015 declaring total income at Nil after claiming the exemption u/s 11 of the Act to the tune of Rs.2,31,46,662/-. The due date for filing of the return of income for the impugned assessment year u/s 139(1) of the Act was 30.09.2014. The CPC disallowed the claim of exemption u/s 11 of the Act on the ground that (a) there was a delay in filing of the return of income and (b) the audit report in Form 10B was furnished belatedly. 3. In appeal the Ld. Addl. / JCIT(A) upheld the action of the Assessing Officer by observing as under: “6. Decision 6.1 The present appeal has been filed by the appellant, Indian Medical Association, a public charitable trust registered under the Bombay Public Trust Act, 1950, bearing registration No. F-166 (Pune). The trust has been filing its income tax returns under the category of Association of Persons (AOP-Trust) in compliance with the provisions of the Income Tax Act, 1961. For the Assessment Year 2014-15, the appellant filed its Income Tax Return (ITR) belatedly on 06.07.2015, declaring a total income of Nil after claiming an exemption under sections 11 and 12 of the Act amounting to Rs.2,31,46,662/. The appellant submitted that the entire income for the year had been applied towards charitable purposes in accordance with the objectives of the trust. However, the return was processed under section 143(1) of the Act, and the exemption claim was not considered. Consequently, the income was computed at Rs.2,31,46,662/-, and a demand of Rs.1,11,56,110/- was raised against the appellant. Aggrieved by this order, the appellant preferred an appeal before this forum. During the appellate proceedings, a notice under section 250 of the Act was issued to the appellant. In response, the appellant submitted that the delay in filing the appeal was due to genuine reasons. It was stated that the intimation under section 143(1) was sent via email, which the office bearers inadvertently failed to notice, leading to an unintentional delay in responding to the demand. Additionally, the appellant submitted that the managing trustee, a paraplegic patient with a 90% locomotor disability, was frequently hospitalized due to severe health issues. Medical reports and supporting documents were furnished to substantiate the claim that the delay in responding to the intimation was due to unavoidable circumstances. Printed from counselvise.com 3 ITA Nos.761 to 763 & 765 & 766/PUN/2025 The appellant also explained that the delay in filing the return was due to the late receipt of the audit report and a lack of awareness of the amended provisions regarding the due date for filing returns by charitable trusts. The appellant further stated that out of the total gross income of Rs.2,31,46,662/- an amount of Rs.2,15,38,004/- was spent on charitable activities, which accounted for 93.05% of the income, and thus, there should be no tax liability in the given year. After examining the submissions, it is observed that the return for the relevant assessment year was filed beyond the due date prescribed under section 139(1) of the Act. Also form 10B has been filed belatedly on 27.04.2021. As per the provisions of the Act, an assessee claiming exemption under section 11 is required to file the return of income and form 10B within the prescribed time limit. The failure to file them within the due date results in the disallowance of the exemption claim. The imperative condition for availing exemption u/s 11 and 12 of the Act is due submission of form 10B along with the return of income filed u/s 139(1) of the Act. In fact, the CBDT has issued circular/instruction form time-to-time for streamlining the delay in filing of audit report in Form 10B by the trust and examining the reason for non-filing of Form No.10B in time wherein the CBDT delegated the power for accepting the belated audit report to the Income Tax Officer after recording reasons for accepting a belated audit report vide CBDT Instruction F. NO. 267/482/77-IT(PART), Dated 9-2-1978, which is reproduced as under- 1. The Board have considered whether the requirement under section 12A(b) of filing audit report 'along with the return of income' is mandatory so as to disentitle the trust from claiming exemption under sections 11 and 12 in case of omission to furnish such report in the prescribed form along with the return. 2. Normally, it should be possible for a charitable or religious trust or institution to file the auditor's report along with the return of total income, where such trust or institution claims exemption under sections 11 and 12. However, in cases where for reasons beyond the control of the assessee some delay has occurred in filing the said report the exemption as available to such trust under sections 11 and 12 may not be denied merely on account of delay in furnishing the auditor's report and the Income-tax Officer should record reasons for accepting a belated audit report. It is pertinent to mention here that the CBDT once again issued a circular no. 10/2019 dated 22.05.2019 which specifies the process of condonation of the delay in filing Form No. 108. The same is reproduced as herewith: Under the provisions of section 12A of Income tax Act, 1961 (hereafter 'Act') where the total income of a trust or institution as computed under the Act without giving effect to the provisions of section 11 and section 12 exceeds the maximum amount which is not chargeable to income tax in any previous year the accounts of the trust or institution for that year have to be audited by an accountant as defined Printed from counselvise.com 4 ITA Nos.761 to 763 & 765 & 766/PUN/2025 in the Explanation below sub-section (2) of section 288 and the person in receipt of the income is required to furnish along with the return of income for the relevant assessment year the report of such audit in the prescribed form duly signed and verified by such accountant and selling forth such particulars as may be prescribed. 2. As per Rule 178 of the Income-tax Rules, 1962 (hereafter 'Rules, the audit report of the accounts of such a trust or institution is to be furnished in Form no. 10B. As per Rule 12(2) of the Rules, such audit report is to be furnished electronically. The failure to furnish such report in the prescribed form along with the return of income results in disentitlement of the trust from claiming exemption under sections 11 and 12 of the A cl 3. Representations have been received by the Board/field authorities stating that Form no. 10B could not be filed along with the return of income for AY 2016-17 and AY 2017-18. It has been requested that the delay in filing of Form no. 10B may be condoned. Previously, vide instruction in F.No. 267/482/77- IT(part) dated 09.02.1978, the CBDT had authorized the ITO to accept a belated audit report after recording reasons in cases where some delay has occurred for reasons beyond the control of the assesse. 4. Accordingly, in supersession of earlier Circular/Instruction issued in this regard, and with a view to expedite the disposal of applications filed by such trusts or Institutions for condoning the delay in filing Form no. 108 and in exercise of the powers conferred under section 119(2) of the Act, the Central Board of Direct Taxes hereby directs that:- (i) The delay in filing of Form no. 10B for AY 2016-17 and AY 2017-18, in all such cases where the Audit Report for the previous year has been obtained before the filing of return of income and has been furnished subsequent to the filing of the return of income but before the date specified under section 139 of the Act is condoned (ii) In all other cases of belated applications in filing Form no. 10B for years prior to AY 2018-19, the Commissioners of Income tax arc authorized to admit such applications for condonation of delay u/s 119(2)(b) of the Act. The Commissioners will while entertaining such belated applications in filing Form no.10B shall satisfy themselves that the assessee was prevented by reasonable cause from filing such application within the stipulated time. Further, all such applications shall be disposed off by 30.09.2019. It is pertinent to mention here that after the decisions of various Hon'ble Courts on the issue, the CBDT once again issued a circular no. 2/2020 dated 03.01.2020 which empowers the CIT to condone the delay in filing Form Form No. 10B. The latest CBDT's Circular is reproduced herewith: CIRCULAR NO. 2/2020 [F. NO. 197/55/2018-ITA-I], DATED 3-1-2020 Under the provision of section 12A of Income-tax Act, 1961 (hereafter 'Act') where the total income of a trust or institution as computed under the Act without giving effect to Printed from counselvise.com 5 ITA Nos.761 to 763 & 765 & 766/PUN/2025 the provisions of section 11 and section 12 exceeds the maximum amount which is not chargeable to income tax in any previous year, the accounts of the trust or institution for that year have to be audited by any accountant as defined in the Explanation below sub- section (2) of section 288 and the person in receipt of the income is required to furnish along with the return of income for the relevant assessment year the report of such audit in the prescribed from duly signed and verified by such accountant and setting forth such particulars as may be prescribed. 2. As per Rule 17B of the Income-tax Rules, 1962 (hereafter 'Rules') the audit report of the accounts of such a trust or institution is to be furnished in Form No. 10B. As per Rule 12(2) of the Rules, such audit report is to be furnished electronically. The failure to furnish such report in the prescribed from along with the return of income results in disentitlement of the trust or institution from claiming exemption under sections 11 and 12 of the Act 3. Representations have been received by the Board/field authorities stating that Form No. 10B could not be filed along with the return of income for A. Y. 2016-17 and A.Y. 2017-18, It has been requested that the delay in filing of Form No. 108 may be condoned. Previously, vide instruction in F.No. 267/482/77-IT(part) dated 9-2-1978, the CBDT had authorized the ITO to accept a belated audit report after recording reasons in cases where some delay has occurred for reasons beyond the control of the assessee. 4. Accordingly, the CBDT issued Circular No. 10/2019 circulated through F.No 197/55/2018-ITA-I in supersession of earlier circular/Instruction issued in this regard, and with a view to expedite the disposal of applications filed by such trust or institution for condoning the delay in filing Form No. 10B and in the exercise of the powers conferred undersection 119(2) of the Act, the Central Board of Direct Taxes vide Circular No. 10/2019 dated 23rd May, 2019 and Circular No. 28/2019 dated 27th September, 2019 both issued vide F. No. 197/55/2018-ITA-I has directed that:- (i) The delay in filing of Form No. 10B for A. Y. 2016-17 and A.Y. 2017-18, in all such cases where the Audit Report for the previous year has been obtained before the filing of return of income and has been furnished subsequent to the filing of the return of income but before the date specified under section 139 of the Act is condoned. (ii) In all other cases of belated applications in filing Form No. 10B for years prior to AY. 2018-19, The commissioner of Income-tax are authorized to admit and dispose off by 31-3-2020 such applications for condonation of delay u/s 119(2)(b)of the Act The Commissioner will while entertaining such belated applications in filing Form No. 108 shall satisfy themselves that the assessee was prevented by reasonable cause from filing such application within the stipulated time. 5. In addition to the above, it has also been decided by the CBDT that where there is delay of upto 365 days in filing Form No. 10B for Assessment Year 2018-19 or Printed from counselvise.com 6 ITA Nos.761 to 763 & 765 & 766/PUN/2025 for any subsequent Assessment Years, the Commissioners of Income-tax are hereby authorized to admit such belated applications of condonation of delay under section 119(2) of the IT Act and decide on merits. 6. The Commissioners of Income-tax shall, while entertaining such belated applications in filing Form No. 10B, satisfy themselves that the assessee was prevented by reasonable cause from filing such application within the stipulated time. Perusal of the above CBDT's Circulars reveal that there is no blanket condonation of delay in filing tax audit in Form No. 10B for claim of exemption u/s 11 and 12 of the Act. In fact, certain procedures/conditions have to be followed/fulfilled before allowing the condonation of delay. As can be seen from the above discussion that the appellant has to file an application before the Ld CIT for condonation of delay in filing Form 10B. Further, there is no power vested with JCIT(A) for condonation of delay in filing Form 10B. Since there is no order of Id CIT condoning the delay in filing Form No. 10B, the appellant is still to be treated as non-compliant of statutory provisions of the Income Tax Act. In view of these facts, I am of the opinion that the appellant is not entitled for the said deduction and accordingly, the denial of exemption u/s 11 of the Act is hereby confirmed. Thus, the ground of appeal is dismissed. Therefore, in light of the facts of the case and the applicable legal provisions, the present appeal is dismissed for statistical purposes. However, the appellant is advised to approach the competent authority for condonation of delay under section 119(2)(b) of the Act, which, if granted, would pave way for reconsideration of the appellant's claim of exemption under sections 11 and 12.” 4. Aggrieved with such order of the Ld. Addl. / JCIT(A), the assessee is in appeal before the Tribunal by raising the following grounds: Grounds in ITA No.761/PUN/2025 (A.Y. 2014-15) 1] The learned Addl. CIT(A) erred in holding that the assessee trust was not entitled to claim exemption u/s 11 on the ground that there was delay in filing in Form 10B and return of income on the part of the assesse. 2] The learned Addl. CIT(A) erred in not appreciating that there was a small delay on the part of the assessee in filing its return of income and the same was filed before the intimation order was passed and hence, there was no reason to deny the exemption u/s 11 for not filing the return within the prescribed time limit. Printed from counselvise.com 7 ITA Nos.761 to 763 & 765 & 766/PUN/2025 3] The learned Addl. CIT(A) failed to appreciate that ultimately, the assessee had filed the audit report in Form No. 10B and therefore, there was no reason to deny the exemption claimed u/s 11 of the Act. 4] The learned Addl. CIT(A) failed to appreciate that even if, there was a delay in filing the return of income and the audit report in Form 10B, since the assessee has ultimately filed the same, the claim of exemption u/s 11 ought to have been granted. 5] Without prejudice to the above grounds, assuming without admitting that the exemption u/s 11 is not allowable to the assessee trust, the learned CPC erred in taxing the gross receipts as an income of the assessee without appreciating that only the net surplus after deducting the expenditure incurred could be taxed as an income of the assessee. 6] The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal. Grounds in ITA No.762/PUN/2025 (A.Y. 2017-18) 1] The learned Addl. CIT(A) erred in holding that the assessee trust was not entitled to claim exemption u/s 11 on the ground that there was delay in filing in Form 10B and return of income on the part of the assesse. 2] The learned Addl. CIT(A) erred in not appreciating that there was a small delay on the part of the assessee in filing its return of income and the same was filed before the intimation order was passed and hence, there was no reason to deny the exemption u/s 11 for not filing the return within the prescribed time limit. 3] The learned Addl. CIT(A) failed to appreciate that ultimately, the assessee had filed the audit report in Form No. 10B and therefore, there was no reason to deny the exemption claimed u/s 11 of the Act. 4] The learned Addl. CIT(A) failed to appreciate that even if, there was a delay in filing the return of income and the audit report in Form 10B, since the assessee has ultimately filed the same, the claim of exemption u/s 11 ought to have been granted. 5] The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal. Grounds in ITA No.763/PUN/2025 (A.Y. 2018-19) 1] The learned Addl. CIT(A) erred in holding that the assessee trust was not entitled to claim exemption u/s 11 on the ground that there was delay in filing in Form 10B and return of income on the part of the assesse. Printed from counselvise.com 8 ITA Nos.761 to 763 & 765 & 766/PUN/2025 2] The learned Addl. CIT(A) erred in not appreciating that there was a small delay on the part of the assessee in filing its return of income and the same was filed before the intimation order was passed and hence, there was no reason to deny the exemption u/s 11 for not filing the return within the prescribed time limit. 3] The learned Addl. CIT(A) failed to appreciate that ultimately, the assessee had filed the audit report in Form No. 10B and therefore, there was no reason to deny the exemption claimed u/s 11 of the Act. 4] The learned Addl. CIT(A) failed to appreciate that even if, there was a delay in filing the return of income and the audit report in Form 10B, since the assessee has ultimately filed the same, the claim of exemption u/s 11 ought to have been granted. 5] Without prejudice to the above grounds, assuming without admitting that the exemption u/s 11 is not allowable to the assessee trust, the learned CPC erred in taxing the gross receipts as an income of the assessee without appreciating that only the net surplus after deducting the expenditure incurred could be taxed as an income of the assessee. 6] The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal. Grounds in ITA No.765/PUN/2025 (A.Y. 2019-20) 1] The learned Addl. CIT(A) erred in holding that the assessee trust was not entitled to claim exemption u/s 11 on the ground that there was delay in filing in Form 10B and return of income on the part of the assesse. 2] The learned Addl. CIT(A) erred in not appreciating that there was a small delay on the part of the assessee in filing its return of income and the same was filed before the intimation order was passed and hence, there was no reason to deny the exemption u/s 11 for not filing the return within the prescribed time limit. 3] The learned Addl. CIT(A) failed to appreciate that ultimately, the assessee had filed the audit report in Form No. 10B and therefore, there was no reason to deny the exemption claimed u/s 11 of the Act. 4] The learned Addl. CIT(A) failed to appreciate that even if, there was a delay in filing the return of income and the audit report in Form 10B, since the assessee has ultimately filed the same, the claim of exemption u/s 11 ought to have been granted. 5] Without prejudice to the above grounds, assuming without admitting that the exemption u/s 11 is not allowable to the assessee trust, the learned CPC Printed from counselvise.com 9 ITA Nos.761 to 763 & 765 & 766/PUN/2025 erred in taxing the gross receipts as an income of the assessee without appreciating that only the net surplus after deducting the expenditure incurred could be taxed as an income of the assessee. 6] The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal. Grounds in ITA No.766/PUN/2025 (A.Y. 2020-21) 1] The learned Addl. CIT(A) erred in holding that the assessee trust was not entitled to claim exemption u/s 11 on the ground that there was delay in filing in Form 10B and return of income on the part of the assesse. 2] The learned Addl. CIT(A) erred in not appreciating that the assessee had filed its return of income and also audit report in Form 10B before the intimation order passed by the learned CPC and hence, there was no reason to deny the claim of exemption claimed u/s 11 of the Act. 3] The learned Addl. CIT(A) failed to appreciate that even if, there was a delay in filing the return of income and the audit report in Form 10B, since the assessee has ultimately filed the same, the claim of exemption u/s 11 ought to have been granted. 4] Without prejudice to the above grounds, assuming without admitting that the exemption u/s 11 is not allowable to the assessee trust, the learned CPC erred in taxing the gross receipts as an income of the assessee without appreciating that only the net surplus after deducting the expenditure incurred could be taxed as an income of the assessee. 5] The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal. 5. So far as the belated filing of the return is concerned, the Ld. Counsel for the assessee referring to the decision of Kolkata Bench of the Tribunal in the case of Bangarh Educational Welfare Trust vs. ITO vide ITA No.496/Kol/2021, for assessment year 2018-19, order dated 02.01.2022 submitted that the Tribunal after considering the CBDT Circular dated 23.04.2019 which is binding on the Revenue authorities has held that the assessee can file return belatedly u/s 139(5) of the Act and the claim of exemption u/s 11 of the Act cannot be denied. Printed from counselvise.com 10 ITA Nos.761 to 763 & 765 & 766/PUN/2025 6. Referring to the decision of the Kolkata Bench of the Tribunal in the case of ITO vs. Debendra and Rohini Memorial Trust (2023) 153 taxmann.com 687 (Kolkata – Trib.), he submitted that the Tribunal in the said decision has held that where assesse trust filed return after time allowed under section 139(4A) but before last day of filing of belated return under section 139(5), same should be treated as due compliance with clause (ba) in sub-section (1) of section 12A and thus, the assessee was entitled for exemption under section 11 of the Act. 7. So far as denial of exemption u/s 11 on account of belated filing of audit report in Form 10B is concerned, the Ld. Counsel for the assessee submitted that the audit report in Form 10B was filed on 27.04.2021, copy of which is placed at pages 42 to 44 of the paper book. He submitted that since the assessee has filed the audit report during the appellate proceedings and the return of income was furnished before the intimation order was passed by the CPC, therefore, the claim of exemption u/s 11 should not be denied. For the above proposition, he relied on the decision of Hon'ble Gujarat High Court in the case of CIT v. Laxmanarayan Dev Shrishan Seva Khendra (2024) 167 taxmann.com 548 (Guj). In that case the Hon’ble High Court has held that where assessee, a public charitable trust, did not upload audit report in Form 10B along with its return of income and CPC processed return under section 143(1) denying benefit of section 11, since assessee had already filed audit report in Form 10B electronically during pendency of appellate proceedings along with copy of audited financial statements, delay in filing said form was to be condoned. The Hon’ble High Court while holding so Printed from counselvise.com 11 ITA Nos.761 to 763 & 765 & 766/PUN/2025 has distinguished the decision of Hon’ble Supreme Court in the case of PCIT vs. Wipro Ltd. (2022) 446 ITR 1 (SC). 8. Referring to the decision of Hon'ble Gujarat High Court in the case of Sarvodaya Charitable Trust reported in 125 taxman.com 75, he submitted that the Hon’ble High Court in the said decision has held that the claim of exemption u/s 11 cannot be denied only on the ground that there was a delay in filing the audit report in Form 10B. He submitted that even in that case, the assessee had not filed audit report and the CPC had passed the order denying the claim of exemption. Thereafter, the assessee uploaded the audit report after filing the Writ before Hon'ble High Court. It was held that the claim of exemption cannot be denied merely because there was a delay in filing the audit report and Hon'ble High Court has held that the exemption u/s 11 should be granted. 9. Referring the decision of the Delhi Bench of the Tribunal in the case of B. R. Hospital Research Institute v. ITO reported in 167 taxmann.com 389, he submitted that in that case also it has been held that the condition of filing the audit report in Form 10B for availing exemption u/s 11 are directory in nature and not mandatory and therefore, even if, the audit report is furnished during the appellate proceedings, the claim of exemption u/s 11 should be granted. He accordingly submitted that for this year exemption u/s 11 should not be denied and the claim of the assessee should be granted. Printed from counselvise.com 12 ITA Nos.761 to 763 & 765 & 766/PUN/2025 10. Without prejudice to the above, the Ld. Counsel for the assessee submitted that the CPC has taxed the entire gross receipt as income of the assessee without considering the expenditure incurred for the objects of the trust totaling to Rs.2,15,38,004/- resulting in net surplus of Rs.16,08,658/- only. He submitted that in case exemption u/s 11 is denied, only the surplus amount after considering the expenditure incurred on the objects of the trust can be disallowed. 11. The Ld. DR on the other hand heavily relied on the order of the Ld. Addl. / JCIT(A). 12. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. Addl. / JCIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessee in the instant case has filed the return of income on 06.07.2015 as against the due date for filing the return u/s 139(1) of the Act on 30.09.2014. The claim of exemption u/s 11 of the Act was denied by the CPC on the ground that (a) there was a delay in filing of the return of income and (b) the audit report in Form 10B was furnished belatedly. We find the Ld. Addl. / JCIT(A) upheld the action of the CPC, the reasons of which have already been reproduced in the preceding paragraphs. It is the submission of the Ld. Counsel for the assessee that in view of the decision of the Kolkata Bench of the Tribunal in the case of ITO vs. Debendra and Rohini Memorial Trust (supra) and various other decisions, filing of the return u/s 139(4A) but before last day of filing of belated Printed from counselvise.com 13 ITA Nos.761 to 763 & 765 & 766/PUN/2025 return under section 139(5) constitutes due compliance with clause (ba) in sub- section (1) of section 12A and the assessee is entitled for exemption under section 11 of the Act. 13. So far as the belated filing of the audit report is concerned, it is the submission of the Ld. Counsel for the assessee that in view of the decision of Hon'ble Gujarat High Court in the case of CIT v. Laxmanarayan Dev Shrishan Seva Khendra (supra), since the assessee had filed the audit report in Form 10B electronically during the pendency of appellate proceedings along with copy of audited financial statements, the delay in filing of the audit report should be condoned. 14. We find some force in the above arguments of the Ld. Counsel for the assessee. There is no dispute to the fact that the return of income was filed belatedly i.e. on 06.07.2015 as against the due date u/s 139(1) of the Act on 30.09.2014. There is also no dispute to the fact that the intimation order was passed on 29.03.2017 and the assessee filed the audit report in Form 10B on 27.04.2021 whereas the Ld. Addl. / JCIT(A) has passed the order on 28.02.2025. Under these circumstances, we have to see as to whether the assessee trust is entitled to claim exemption u/s 11 of the Act or not. 15. We find an identical issue had come up before the Kolkata Bench of the Tribunal in the case of Bangarh Educational Welfare Trust vs. ITO (supra) where Printed from counselvise.com 14 ITA Nos.761 to 763 & 765 & 766/PUN/2025 the claim of exemption u/s 11 of the Act was denied on two counts i.e. the return of income was not filed before the due date as prescribed u/s 139(1) and the audit report in Form 10B was not uploaded before the due date prescribed under the Act. The Tribunal after considering the CBDT Circular and various other decisions allowed the claim of exemption u/s 11 of the Act by observing as under: “8. We have heard the rival contentions and perused the records placed before us. The assessee is a charitable trust established for imparting education to rural areas without any profit motive. It enjoys registration u/s 12AA of the Act granted vide order dated 12.09.2018 effective from A.Y 2018-19 onwards. It claimed benefit u/s 11 and 12 of the Act of Rs. 13587109/-. However, CPC while processing u/s 143(1)(a) of the Act denied the said exemption on account of two reasons; firstly the return of income was not filed before due date as prescribed u/s 139(4) of the Act and secondly audit report on Form 10B not uploaded before due date prescribed under the Act. Now, undisputedly in the case of assessee, the return of income is filed on 15.11.2018 and audit report on form 10B e-filed on 30.03.2019. Now, before adverting to the grounds, we would first like to go through the relevant provisions which have a direct bearing on the issue of requirement of filing of audit report and income tax return by the trust or institutions registered u/s 12A of the Act. Section 12A(1)(b) and 12(1)(ba) of the Act reads as follows: “Conditions for applicability of sections 11 and 12. 12A. (1) The provisions of section-11 and section-12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely:— *** *** *** (b) where the total income of the trust or institution as computed under this Act without giving effect to the provisions of section11 and section-12 exceeds the maximum amount which is not chargeable to income-tax in any previous year, the accounts of the trust or institution for that year have been audited by an accountant as defined in the Explanation below sub- section (2) of section288 48[before the specified date referred to in section- 44AB and the person in receipt of the income furnishes by that date] the report of such audit in the prescribed form49 duly signed and verified by such accountant and setting forth such particulars as may be prescribed;] (ba) the person in receipt of the income has furnished the return of income for the previous year in accordance with the provisions of subsection (4A) of section-139, within the time allowed under that section. *** *** *** Printed from counselvise.com 15 ITA Nos.761 to 763 & 765 & 766/PUN/2025 9. Section 12A(1)(ba) of the Act provides that the provisions of section 11 and 12 shall apply in relation to income of any trust or institution if the person in receipt of the income has furnished the return of income for the previous year in accordance with the provisions of sub-section (4A) of section 139 i.e. within the time allowed under that section. Now, since reference has been made to section 139(4A) of the Act and the same is reproduced below: “S.139(4A) Every person in receipt of income derived from property held under trust or other legal obligation wholly for charitable or religious purposes or in part only for such purposes, or of income being voluntary contributions referred to in sub-clause (iia) of clause (24) of section 2, shall, if the total income in respect of which he is assessable as a representative assessee (the total income for this purpose being computed under this Act without giving effect to the provisions of sections 11 and 12) exceeds the maximum amount which is not chargeable to income-tax, furnish a return of such income of the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and all the provisions of this Act shall, so far may be, apply as if it were a return required to be furnished under sub- section (1).]]” 10. Now, going through the provisions to section 139(4A) of the Act shows that the assessee is required to file the return as per the provisions of section 139(1) of the Act. Now, perusal of section 139(1) shows that in the case of the assessee which is required to get its account audited, the due date is 30.09.2018 and for A.Y 2018- 19 this date was further extended to 31.10.2018 vide CBDT’s order dated 24.09.2018. Now, since the assessee has filed the return on 15.11.2018, it is a belated return. Thus, there remains no dispute to the fact that the return of income filed by the assessee is a belated return which as per section 139(5) of the Act could have been filed latest by 31.03.2019. Now, at this stage, we would like to refer to Circular issued by CBDT on 23.04.2019 giving clarification with regard to time allowed for filing of return of income subsequent to insertion of clause (ba) in sub-section 1 of section 12A of the Act and the same is reproduced below: F.No. 173/193/2019-ITA-I Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes New Delhi, Dated: 23 April, 2019 To, The Pr. DGIT (Systems), New Delhi. Subject: Clarification with regard to the time allowed for filing of return of income subsequent to the insertion of Clause (ba) in subsection 1 of section 12A of the income-tax Act, 1961. Printed from counselvise.com 16 ITA Nos.761 to 763 & 765 & 766/PUN/2025 Sir, Undersigned is directed to refer to the representation (s) received on above mentioned subject stating that while processing of ITR-7 for the A.Y. 2018- 19, in respect of the belated returns filed u/s 139(4) of the Income Tax Act, 1961 (Act), the following is being communicated u/s 143(1)(a) of the Act:- \"As per section 12A(1)(ba) of the Income tax Act, 1961 the person in receipt of the income has furnished the return of income for the previous year in accordance with the provisions of sub-section (4A) of section 139, within the time allowed under that section. Otherwise the exemption u/s-11 ie. sr. no 4(i) and 4 viii in schedule Part BTI is not allowed.\" Based on this, exemption u/s 11 of the Act has been denied to otherwise eligible trust, thereby creating huge demand. 2. In the matter, the memorandum explaining the relevant provisions of the Finance Bill, 2017 reads as under: \"as per the existing provisions of said section, the entities registered under section 12AA are required to file return of income under subsection (4A) of section 139, if the total income without giving effect to 05 Standards & Norms, Legal Series Vol. XII, Issue 1, April 2019 CBDT CLARIFICATION ON PENALTIES FOR DELAYED FILING OF RETURN IN ITR-7 the provisions of sections 11 and 12 exceeds the maximum amount which is not chargeable to income- tax. However, there is no clarity as to whether the said return of income is to be filed within time allowed u/s 139 of the Act or otherwise. In order to provide clarity in this regard, it is proposed to further amend section 12A so as to provide for further condition that the person in receipt of the income chargeable to income tax shall furnish the return of income within the time allowed under section 139 of the Act. These amendments are clarificatory in nature. These amendments will take effect from 1st April, 2018 and will, accordingly, apply in relation to assessment year 2018-19 and subsequent years.\" 3. Additionally, an excerpt of circular 02/2018 dated 15.02.2018 \"Explanatory Notes to the Provisions of the Finance Act, 2017\" on insertion of clause (ba) in Sub section (1) of section 12A is quoted as under: \"the entities registered under section 12AA are required to file return of income under sub-section (4A) of section 139 of the Income tax Act, if the total income without giving effect to the provisions of sections 11 and 12 exceeds the maximum amount which is not chargeable to income-tax. Amendment to section 12A of the Income- Printed from counselvise.com 17 ITA Nos.761 to 763 & 765 & 766/PUN/2025 tax has been made so as to provide for additional condition that the person in receipt of the income chargeable to income-tax shall furnish the return of income within the time allowed under section 139 of the Income-tax Act.\" 3. Thus, for a trust registered U/s 12AA of the Act to avail the benefit of exemption u/s 11 shall inter-alia file its return of income within the time allowed u/s 139 of the Act. Accordingly, orders u/s 143(1)(a) in those cases in which demand has been raised on this issue may please be rectified. This issues with the approval of Chairman (CBDT). (Vinay Sheel Gautam) JCIT (OSD) (ITA-I) Telefax: 011-23093070 E-mail: [e-mail] 11. From perusal of the above referred circular, we find that in Para 3 of the said circular specifically states that a trust registered u/s 12AA of the Act, benefit of section 11 shall be available if the return of income is filed within the time allowed u/s 139 of the Act. It further states that orders u/s 143(1)(a) of the Act in those cases in which demand has been raised on this issue may please be rectified. From the circular, we note that an amendment was brought in by insertion of clause (ba) of section 12A(1) of the Act from 2018-19 onwards through which one of the requirements for claiming the benefit u/s 11 and 12 of the Act was to file the return of income within time allowed u/s 139(4A) of the Act. It seems that specially for A.Y 2018-19, when the Form ITR-7 was being processed and for such belated return, demand was raised, representations were received from various assessees on this issue. Taking note of this issue, the said CBDT Circular has issued and while dealing with this issue, the returns filed within the time allowed u/s 139 of the Act have been directed to be accepted for the purpose of considering benefit of deduction u/s 11 of the Act. Now, since only section 139 of the Act has been mentioned and does not specify whether it is about u/s 139(1) of the Act or section 139(5) of the Act, the view beneficial to the assessee needs to be accepted and, since section 139(1) and section 139(5) are part of section 139 only and in this section 139 and sub-section (5) provides the mechanism to file a belated return, therefore, for A.Y 2018-19, even if the assessee files the return before the last date of filing of belated return the same should be treated as due compliance to section 12A(1)(ba) of the Act. For the year under appeal, the belated return could have been filed before 31.03.2019, and since the assessee has filed the return on 15.11.2018, therefore, considering the directions of CBDT Circular dated 23.04.2019, which are binding on the Revenue authorities, we are of the view that the assessee has fulfilled the conditions provided under sub-clause (ba) of section 12A(1) of the Act and has filed the return of income within the time allowed. 12. Now, the second reason for which lower authorities have denied the deduction u/s 11 of the Act is of filing the belated audit report on form 10B of the Act. Now, clause (b) of section 12A(1) of the Act provides for a condition that if the income of a trust exceeds a maximum amount which is not chargeable to tax in the Printed from counselvise.com 18 ITA Nos.761 to 763 & 765 & 766/PUN/2025 previous year the account have to be audited and the person in receipt of such income furnishes the audit report before the specified date. In the case of the assessee, Form No.10B was to be filed and the relevant rule is rule 17B of the Income Tax Rules which provides that the report of audit of the accounts of a trust or institution which is required to be furnished under Clause (b) of section 12A, shall be in Form No. 10B. 13. Now, on perusal of the Form 10B, we notice that the same is required to be submitted electronically, one month prior to the due date of the filing of return of income. Admittedly, in the case in hand, the audit report on form 10B has been uploaded on 30.03.2019 which is even after the date of filing the return of income on 15.11.2018. Now, before us, it has been contended by the ld. counsel for the assessee that filing of audit report is directory in nature and even if report is submitted in time before the conclusion of the assessment proceedings, the same needs to be considered. Though the assessee referred to the various decisions, we find it pertinent to refer to the judgment of the Hon'ble Gujarat High Court in the case of Sarvodaya Charitable Trust us. ITO(Exemption) (supra) wherein Para 32 of the said judgment reads as follows: \"32. We may also refer to the decision of this Court in CIT v. Gujarat Oil and Allied Industries Ltd. (1993) 201 ITR 325 (Guj), wherein it is held that the provision regarding furnishing of audit report with the return has to be treated as a procedural proviso. It is directory in nature and its substantial compliance would suffice. In that case, the assessee had not produced the audit report along with the return of income but produced the same before the completion of the assessment. This Court took the view that the benefit of exemption should not be denied merely on account of delay in furnishing the same and it is permissible for the assessee to produce the audit report at a later stage either before the Income-tax Officer or before the appellate authority by assigning sufficient cause.\" 14. In the above judgment, Hon'ble Court has held that filing of audit report is directory in nature and its substantial compliance would suffice. The Id. Departmental Representative failed to place before us any other binding precedents of Hon'ble Jurisdictional High Court or the Hon'ble Apex Court. Therefore, considering the ratio laid down in the Hon'ble Gujarat High Court in the case of Sarvodaya Charitable Trust us. ITO(Exemption) (supra), we find that though the audit report has been uploaded after the filing of return of income but the said report has been signed by the auditor on 28.10.2018 and the copy of this report is placed at 40-41 of paper book and the date of audit report is prior to the filing of the return of income, therefore, it is presumed that conducting of audit for preparation of audit report is before e-filing of the return of income but as claimed by the assessee due to technical glitches, the report was uploaded after filing the return of income. 15. Though the Hon'ble Court holds that the report should be considered even filed in the course of assessment proceedings, or before in appellate authority, however, we notice that in the instant case, the case of the assessee was not selected for scrutiny assessment and it was mere processing of return by the Printed from counselvise.com 19 ITA Nos.761 to 763 & 765 & 766/PUN/2025 computer with the set program. Had it been the case of scrutiny proceeding u/s 143(3) of the Act, the case could have been different. The ld. A.O may had an opportunity to go through the audit report. But still when the issue came before ld. CIT(A) who also possesses co-terminus power with that of A.O and as per section 251(1)(a) of the Act, the Id. CIT(A) in disposing the appeal against order of assessment has the power to confirm, reduce, enhance or annul the assessment, therefore, though, it was not possible to entertain the audit report while processing the return u/s 143(1)(a) of the Act, but the ld. CIT(A) was well within its power to have entertained the said report and examined the same as could have been done by the A.O. 16. We, therefore, in the given facts and circumstances and respectfully following the judgment of Hon'ble Gujarat High Court in the case Sarvodaya Charitable Trust us. ITO(Exemption) (supra) , we are of the considered view that since the case of assessee is for A.Y 2018-19 and CBDT came up with a circular dated 23.04.2019 specially for A.Y 2018-19 providing that return of income to be filed within the time allowed u/s 139 of the Act, the assessee has complied with the conditions provided in sub-clause (b) and (ba) to section 12 and there is no dispute at the end of the revenue authorities that the assessee is carrying on charitable activities, for which it has been granted registration u/s 12A of the Act, the benefit of section 11 and 12 should be given to the assessee and deductions claimed by the assessee are, therefore, allowed. Thus, Ground Nos. 1 to 4 of the assessee are allowed. 17. So far as alternate plea praying that only the net income should have been subjected to tax rather than gross receipts, since we have already allowed the deduction u/s 11 and 12 of the Act to the assessee, this alternate plea becomes academic in nature. Other grounds are general in nature which needs no adjudication.” 16. We find the Hon'ble Gujarat High Court in the case of CIT v. Laxmanarayan Dev Shrishan Seva Khendra (supra) has held that where the assessee, a public charitable trust, did not upload audit report in Form 10B along with its return of income and CPC processed return under section 143(1) denying benefit of section 11, since assessee had already filed audit report in Form 10B electronically during pendency of appellate proceedings along with copy of audited financial statements, delay in filing said form was to be condoned. The relevant observations of Hon’ble High Court read as under: Printed from counselvise.com 20 ITA Nos.761 to 763 & 765 & 766/PUN/2025 “7. Reference to the aforesaid decision has no connection whatsoever remotely to the facts of the present case and therefore, in the facts of the present case, the Tribunal has rightly followed the decision of this Court in case of Sarvodaya Charitable Trust v. Income Tax Officer (Exemption) in Special Civil Application No.6097 of 2020 decided on 09th December, 2020 as well as the decision in case of Social Security Scheme of GICEA (supra) to uphold the decision of the CIT (Appeals), wherein this Court has held that the approach of the authority in such type of cases should be equitable, balancing and judicious. In the facts of the case, when the assessee has already filed the audit report in Form 10B electronically on 27.02.2021 during pendency of appellate proceedings along with copy of audited financial statements, delay in filing the said form is rightly condoned by CIT(A) and the Tribunal. 8. In such circumstances, we are of the opinion that the Tribunal has not committed any error by not following the decision in case of M/s.Wipro Limited (supra) as referred to and relied upon by learned advocate for the appellant- Revenue, and has rightly followed the decision of this Court in case of Social Security Scheme of GICEA (supra). 9. In view of the foregoing reasons, we are of the opinion that no question of law much less any substantial question of law arises from the impugned order of the Tribunal. The Appeal is accordingly dismissed.” 17. In view of the above decisions, we hold that the Ld. Addl. / JCIT(A) was not justified in rejecting the claim of exemption u/s 11 of the Act on account of delay in filing of the return of income as well as delay in uploading the audit report in Form 10B. We, therefore, set aside the order of the Ld. CIT(A) / NFAC and direct the Assessing Officer / CPC to allow the claim of exemption u/s 11 of the IT Act, 1961. The grounds raised by the assessee are accordingly allowed. Since the assessee succeeds on the issue of claim of exemption u/s 11, therefore, the alternate claim of the assessee for taxing the net income rather than gross receipt does not require any adjudication being academic in nature. The appeal of the assessee is accordingly allowed. 18. Identical grounds have been raised by the assessee for assessment years 2017-18, 2018-19 and 2019-20 where in all the cases, the returns of income were Printed from counselvise.com 21 ITA Nos.761 to 763 & 765 & 766/PUN/2025 filed belatedly and the audit reports were also uploaded subsequent to the intimation order passed by the CPC but before the appellate authorities. We have already decided the issue in the preceding paragraphs and allowed the claim of exemption u/s 11 of the Act. Following similar reasonings, we allow the grounds raised by the assessee for the above years also. 19. So far as the assessment year 2020-21 is concerned, we find the assessee filed the return of income on 15.02.2021 as against the due date of filing of return u/s 139(1) on 10.01.2021 and the audit report in Form 10B was filed on 13.01.2021 whereas the due date for filing of the same was 10.01.2021. The CPC passed the intimation order on 30.11.2021. Thus, in the instant case although the return has been filed belatedly but the Form 10B was filed before processing of the return. The CPC rejected the claim of exemption on account of belated filing of the return and uploading of Form 10B belatedly. 20. We find an identical issue had come up before the Pune Bench of the Tribunal in assessee’s own case for assessment year 2021-22. We find the Tribunal vide ITA No.767/PUN/2025 order dated 16.06.2025 allowed the claim of exemption u/s 11 by observing as under: “7. We have heard the rival contentions and perused the record placed before us. Assessee has been denied benefit of exemption u/s.11 of the Act for delay in filing the return as well as delay in uploading the Audit Report on Form 10B. Admittedly, the due date for filing the return for impugned assessment year is 31.12.2021. Return has been filed on 16.02.2022. Last date to file the belated return u/s.139(4) of the Act in 31.03.2022. Thus, assessee has filed valid belated return. Under similar set of facts and circumstances where a belated return has been filed u/s.139(4) of the Act and Audit Report has been furnished after the due Printed from counselvise.com 22 ITA Nos.761 to 763 & 765 & 766/PUN/2025 date, Coordinate Bench, Kolkata in the case of Bangarh Educational Welfare Trust (supra) has examined the issue in detail and granted relief to the assessee observing as follows : “8. We have heard the rival contentions and perused the records placed before us. The assessee is a charitable trust established for imparting education to rural areas without any profit motive. It enjoys registration u/s 12AA of the Act granted vide order dated 12.09.2018 effective from A.Y 2018-19 onwards. It claimed benefit u/s 11 and 12 of the Act of Rs. 13587109/-. However, CPC while processing u/s 143(1)(a) of the Act denied the said exemption on account of two reasons; firstly the return of income was not filed before due date as prescribed u/s 139(4) of the Act and secondly audit report on Form 10B not uploaded before due date prescribed under the Act. Now, undisputedly in the case of assessee, the return of income is filed on 15.11.2018 and audit report on form 10B e- filed on 30.03.2019. Now, before adverting to the grounds, we would first like to go through the relevant provisions which have a direct bearing on the issue of requirement of filing of audit report and income tax return by the trust or institutions registered u/s 12A of the Act. Section 12A(1)(b) and 12(1)(ba) of the Act reads as follows: \"Conditions for applicability of sections 11 and 12. 12A. (1) The provisions of section-11 and section-12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely:- (b) where the total income of the trust or institution as computed under this Act without giving effect to the provisions of section-11 and section-12 exceeds the maximum amount which is not chargeable to income-tax in any previous year, the accounts of the trust or institution for that year have been audited by an accountant as defined in the Explanation below sub- section (2) of section-288 48/before the specified date referred to in section-44AB and the person in receipt of the income furnishes by that date) the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed;) (ba) the person in receipt of the income has furnished the return of income for the previous year in accordance with the provisions of sub-section (4A) of section-139, within the time allowed under that section. 9. Section 12A(1)(ba) of the Act provides that the provisions of section 11 and 12 shall apply in relation to income of any trust or institution if the person in receipt of the income has furnished the return of income for the previous year in accordance with the provisions of sub-section (4A) of section 139 i.e. within the time allowed under that section. Now, since reference has been made to section 139(4A) of the Act and the same is reproduced below: Printed from counselvise.com 23 ITA Nos.761 to 763 & 765 & 766/PUN/2025 \"S.139(4A) Every person in receipt of income derived from property held under trust or other legal obligation wholly for charitable or religious purposes or in part only for such purposes, or of income being voluntary contributions referred to in sub-clause (iia) of clause (24) of section 2, shall, if the total income in respect of which he is assessable as a representative assessee (the total income for this purpose being computed under this Act without giving effect to the provisions of sections 11 and 12) exceeds the maximum amount which is not chargeable to income-tax, furnish a return of such income of the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and all the provisions of this Act shall, so far may be, apply as if it were a return required to be furnished under sub- section (1).]]\" 10. Now, going through the provisions to section 139(4A) of the Act shows that the assessee is required to file the return as per the provisions of section 139(1) of the Act. Now, perusal of section 139(1) shows that in the case of the assessee which is required to get its account audited, the due date is 30.09.2018 and for A.Y 2018-19 this date was further extended to 31.10.2018 vide CBDT's order dated 24.09.2018. Now, since the assessee has filed the return on 15.11.2018, it is a belated return. Thus, there remains no dispute to the fact that the return of income filed by the assessee is a belated return which as per section 139(5) of the Act could have been filed latest by 31.03.2019. Now, at this stage, we would like to refer to Circular issued by CBDT on 23.04.2019 giving clarification with regard to time allowed for filing of return of income subsequent to insertion of clause (ba) in sub-section 1 of section 12A of the Act and the same is reproduced below: F.No. 173/193/2019-ITA-I Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes New Delhi, Dated: 23 April, 2019 To, The Pr. DGIT (Systems), New Delhi. Subject: Clarification with regard to the time allowed for filing of return of income subsequent to the insertion of Clause (ba) in subsection 1 of section 12A of the income-tax Act, 1961. Sir, Undersigned is directed to refer to the representation (s) received on above mentioned subject stating that while processing of ITR-7 for the A.Y. 2018-19, in Printed from counselvise.com 24 ITA Nos.761 to 763 & 765 & 766/PUN/2025 respect of the belated returns filed u/s 139(4) of the Income Tax Act, 1961 (Act), the following is being communicated u/s 143(1)(a) of the Act:- \"As per section 12A(1)(ba) of the Income tax Act, 1961 the person in receipt of the income has furnished the return of income for the previous year in accordance with the provisions of sub-section (4A) of section 139, within the time allowed under that section. Otherwise the exemption u/s-11 ie. sr. no 4(i) and 4 viii in schedule Part BTI is not allowed.\" Based on this, exemption u/s 11 of the Act has been denied to otherwise eligible trust, thereby creating huge demand. 2. In the matter, the memorandum explaining the relevant provisions of the Finance Bill, 2017 reads as under: \"as per the existing provisions of said section, the entities registered under section 12AA are required to file return of income under subsection (4A) of section 139, if the total income without giving effect to 05 Standards & Norms, Legal Series Vol. XII, Issue 1, April 2019 CBDT CLARIFICATION ON PENALTIES FOR DELAYED FILING OF RETURN IN ITR-7 the provisions of sections 11 and 12 exceeds the maximum amount which is not chargeable to income-tax. However, there is no clarity as to whether the said return of income is to be filed within time allowed u/s 139 of the Act or otherwise. In order to provide clarity in this regard, it is proposed to further amend section 12A so as to provide for further condition that the person in receipt of the income chargeable to income tax shall furnish the return of income within the time allowed under section 139 of the Act. These amendments are clarificatory in nature. These amendments will take effect from 1st April, 2018 and will, accordingly, apply in relation to assessment year 2018-19 and subsequent years.\" 3. Additionally, an excerpt of circular 02/2018 dated 15.02.2018 \"Explanatory Notes to the Provisions of the Finance Act, 2017\" on insertion of clause (ba) in Sub section (1) of section 12A is quoted as under: \"the entities registered under section 12AA are required to file return of income under sub-section (4A) of section 139 of the Income tax Act, if the total income without giving effect to the provisions of sections 11 and 12 exceeds the maximum amount which is not chargeable to income-tax. Amendment to section 12A of the Income-tax has been made so as to provide for additional condition that the person in receipt of the income chargeable to income-tax shall furnish the return of income within the time allowed under section 139 of the Income-tax Act.\" 3. Thus, for a trust registered U/s 12AA of the Act to avail the benefit of exemption u/s 11 shall inter-alia file its return of income within the time Printed from counselvise.com 25 ITA Nos.761 to 763 & 765 & 766/PUN/2025 allowed u/s 139 of the Act. Accordingly, orders u/s 143(1)(a) in those cases in which demand has been raised on this issue may please be rectified. This issues with the approval of Chairman (CBDT). (Vinay Sheel Gautam) JCIT (OSD) (ITA-I) Telefax: 011-23093070 E-mail: [e-mail] 11. From perusal of the above referred circular, we find that in Para 3 of the said circular specifically states that a trust registered u/s 12AA of the Act, benefit of section 11 shall be available if the return of income is filed within the time allowed u/s 139 of the Act. It further states that orders u/s 143(1)(a) of the Act in those cases in which demand has been raised on this issue may please be rectified. From the circular, we note that an amendment was brought in by insertion of clause (ba) of section 12A(1) of the Act from 2018-19 onwards through which one of the requirements for claiming the benefit u/s 11 and 12 of the Act was to file the return of income within time allowed u/s 139(4A) of the Act. It seems that specially for A.Y 2018-19, when the Form ITR-7 was being processed and for such belated return, demand was raised, representations were received from various assessees on this issue. Taking note of this issue, the said CBDT Circular has issued and while dealing with this issue, the returns filed within the time allowed u/s 139 of the Act have been directed to be accepted for the purpose of considering benefit of deduction u/s 11 of the Act. Now, since only section 139 of the Act has been mentioned and does not specify whether it is about u/s 139(1) of the Act or section 139(5) of the Act, the view beneficial to the assessee needs to be accepted and, since section 139(1) and section 139(5) are part of section 139 only and in this section 139 and sub-section (5) provides the mechanism to file a belated return, therefore, for A.Y 2018-19, even if the assessee files the return before the last date of filing of belated return the same should be treated as due compliance to section 12A(1)(ba) of the Act. For the year under appeal, the belated return could have been filed before 31.03.2019, and since the assessee has filed the return on 15.11.2018, therefore, considering the directions of CBDT Circular dated 23.04.2019, which are binding on the Revenue authorities, we are of the view that the assessee has fulfilled the conditions provided under sub-clause (ba) of section 12A(1) of the Act and has filed the return of income within the time allowed. 12. Now, the second reason for which lower authorities have denied the deduction u/s 11 of the Act is of filing the belated audit report on form 10B of the Act. Now, clause (b) of section 12A(1) of the Act provides for a condition that if the income of a trust exceeds a maximum amount which is not chargeable to tax in the previous year the account have to be audited and the person in receipt of such income furnishes the audit report before the specified date. In the case of the assessee, Form No.10B was to be filed and the relevant rule is rule 17B of the Income Tax Rules which provides Printed from counselvise.com 26 ITA Nos.761 to 763 & 765 & 766/PUN/2025 that the report of audit of the accounts of a trust or institution which is required to be furnished under Clause (b) of section 12A, shall be in Form No. 10B. 13. Now, on perusal of the Form 10B, we notice that the same is required to be submitted electronically, one month prior to the due date of the filing of return of income. Admittedly, in the case in hand, the audit report on form 10B has been uploaded on 30.03.2019 which is even after the date of filing the return of income on 15.11.2018. Now, before us, it has been contended by the ld. counsel for the assessee that filing of audit report is directory in nature and even if report is submitted in time before the conclusion of the assessment proceedings, the same needs to be considered. Though the assessee referred to the various decisions, we find it pertinent to refer to the judgment of the Hon'ble Gujarat High Court in the case of Sarvodaya Charitable Trust us. ITO(Exemption) (supra) wherein Para 32 of the said judgment reads as follows: \"32. We may also refer to the decision of this Court in CIT v. Gujarat Oil and Allied Industries Ltd. (1993) 201 ITR 325 (Guj), wherein it is held that the provision regarding furnishing of audit report with the return has to be treated as a procedural proviso. It is directory in nature and its substantial compliance would suffice. In that case, the assessee had not produced the audit report along with the return of income but produced the same before the completion of the assessment. This Court took the view that the benefit of exemption should not be denied merely on account of delay in furnishing the same and it is permissible for the assessee to produce the audit report at a later stage either before the Income-tax Officer or before the appellate authority by assigning sufficient cause.\" 14. In the above judgment, Hon'ble Court has held that filing of audit report is directory in nature and its substantial compliance would suffice. The Id. Departmental Representative failed to place before us any other binding precedents of Hon'ble Jurisdictional High Court or the Hon'ble Apex Court. Therefore, considering the ratio laid down in the Hon'ble Gujarat High Court in the case of Sarvodaya Charitable Trust us. ITO(Exemption) (supra), we find that though the audit report has been uploaded after the filing of return of income but the said report has been signed by the auditor on 28.10.2018 and the copy of this report is placed at 40-41 of paper book and the date of audit report is prior to the filing of the return of income, therefore, it is presumed that conducting of audit for preparation of audit report is before e-filing of the return of income but as claimed by the assessee due to technical glitches, the report was uploaded after filing the return of income. 15. Though the Hon'ble Court holds that the report should be considered even filed in the course of assessment proceedings, or before in appellate authority, however, we notice that in the instant case, the case of the assessee was not selected for scrutiny assessment and it was mere processing of return by the computer with the set program. Had it been the Printed from counselvise.com 27 ITA Nos.761 to 763 & 765 & 766/PUN/2025 case of scrutiny proceeding u/s 143(3) of the Act, the case could have been different. The ld. A.O may had an opportunity to go through the audit report. But still when the issue came before ld. CIT(A) who also possesses co-terminus power with that of A.O and as per section 251(1)(a) of the Act, the Id. CIT(A) in disposing the appeal against order of assessment has the power to confirm, reduce, enhance or annul the assessment, therefore, though, it was not possible to entertain the audit report while processing the return u/s 143(1)(a) of the Act, but the ld. CIT(A) was well within its power to have entertained the said report and examined the same as could have been done by the A.O. 16. We, therefore, in the given facts and circumstances and respectfully following the judgment of Hon'ble Gujarat High Court in the case Sarvodaya Charitable Trust us. ITO(Exemption) (supra) , we are of the considered view that since the case of assessee is for A.Y 2018-19 and CBDT came up with a circular dated 23.04.2019 specially for A.Y 2018-19 providing that return of income to be filed within the time allowed u/s 139 of the Act, the assessee has complied with the conditions provided in sub- clause (b) and (ba) to section 12 and there is no dispute at the end of the revenue authorities that the assessee is carrying on charitable activities, for which it has been granted registration u/s 12A of the Act, the benefit of section 11 and 12 should be given to the assessee and deductions claimed by the assessee are, therefore, allowed. Thus, Ground Nos. 1 to 4 of the assessee are allowed. 17. So far as alternate plea praying that only the net income should have been subjected to tax rather than gross receipts, since we have already allowed the deduction u/s 11 and 12 of the Act to the assessee, this alternate plea becomes academic in nature. Other grounds are general in nature which needs no adjudication.” 8. The above decision has subsequently been followed in the case of Debendra and Rohini Memorial Trust (supra) adjudicating similar issue. So far as delay in filing of the Audit Report if available before the Assessing Authority same needs to be considered. For this proposition, we would like to quote the decision of this Coordinate Bench in the case of Sahaj Seva Trust Vs. ITO in ITA No.541/PUN/2025 order dated 06.05.2025. Ld. Departmental Representative failed to controvert the ratio laid down in the above decision by placing any other binding precedent in favour of the Revenue. We therefore respectfully following the decision in the case of Bangarh Educational Welfare Trust (supra) and Sahaj Seva Trust (supra) are inclined to hold that exemption u/s.11 claimed by the assessee deserved to be allowed. Accordingly, effective grounds of appeal raised on merits of the case are allowed.” 21. Since the facts of the instant case are identical to the facts of the case already decided by the Tribunal in assessee’s own case for assessment year 2021-22, Printed from counselvise.com 28 ITA Nos.761 to 763 & 765 & 766/PUN/2025 therefore, in absence of any contrary material brought to our notice, the order of Ld. Addl. / JCIT(A) is set aside and the Assessing Officer / CPC is directed to allow the claim of exemption u/s 11 of the Act. The grounds raised by the assessee are accordingly allowed. 22. In the result, all the 5 appeals filed by the assessee are allowed. Order pronounced in the open Court on 31st July, 2025. Sd/- Sd/- (ASTHA CHANDRA) (R. K. PANDA) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; दिन ांक Dated : 31st July, 2025 GCVSR आदेश की प्रतितिति अग्रेतिि/Copy of the Order is forwarded to: 1. अपीलार्थी / The Appellant; 2. प्रत्यर्थी / The Respondent 3. 4. The concerned Pr.CIT, Pune DR, ITAT, ‘A’ Bench, Pune 5. गार्ड फाईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अधिकरण ,पुणे / ITAT, Pune Printed from counselvise.com 29 ITA Nos.761 to 763 & 765 & 766/PUN/2025 S.No. Details Date Initials Designation 1 Draft dictated on 29.07.2025 Sr. PS/PS 2 Draft placed before author 30.07.2025 Sr. PS/PS 3 Draft proposed & placed before the Second Member JM/AM 4 Draft discussed/approved by Second Member AM/AM 5 Approved Draft comes to the Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr. PS/PS 7 Date of uploading of Order Sr. PS/PS 8 File sent to Bench Clerk Sr. PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R. 11 Date of Dispatch of order Printed from counselvise.com "