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

ITA 767/PUN/2025

AI Insights

The case involves the Indian Medical Association Pune Branch appealing against the denial of exemption under section 11 of the Income Tax Act, 1961, for the assessment year 2021-22. The exemption was initially denied by the Centralized Processing Centre (CPC) due to the belated filing of the income tax return and the audit report in Form 10B. The Commissioner of Income Tax (Appeals) upheld this decision. The Tribunal, however, found that the return and audit report were filed within the extended deadlines provided by the CBDT circular, and thus, the exemption should be granted. The Tribunal also considered similar cases and precedents where exemptions were allowed despite delays in filing.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 652945 (ITAT-PUNE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2021-2022
• Other Referred Cases: Bangarh Educational Welfare Trust Vs. ITO (Exemptions), ITO (Exemption) Vs. Debendra and Rohini Memorial Trust, Sahaj Seva Trust Vs. ITO, Sarvodaya Charitable Trust us. ITO(Exemption)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DAYANAND JAWALIKAR
• Assessee Lawyers: NIKHIL S. PATHAK
• Keywords: Condonation of delay; Competent authority; Charitable institution; Benefit of exemption
• Section: 143(3); 11; 12AA; 12A; 139; 12; 10B; 139(5)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES “SMC”, PUNE BEFORE DR.MANISH BORAD, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.767/PUN/2025 Assessment Year : 2021-22 Indian Medical Association Pune Branch, 992, Dr. Nitu Mandke, IMA House, Tilak Road, Maharashtra PAN : AAATI2653M Vs. DCIT, Exemption Circle, Pune Appellant Respondent आदेश / ORDER PER DR. MANISH BORAD, ACCOUNTANT MEMBER : This appeal filed by the assessee pertaining to the assessment year 2021-22 is directed against the order dated 28.02.2025 of Addl/JCIT(A)-5, Delhi passed u/s.250 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) arising out of the Intimation Order dated 14.09.2022 passed u/s.143(3)(1)(a) of the Act. 2. In the instant appeal, assessee has raised following grounds of appeal : “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 assessee. 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. Assessee by : Shri Nikhil S. Pathak Revenue by : Shri Dayanand Jawalikar Date of hearing : 10.06.2025 Date of pronouncement : 16.06.2025 ITA No.767/PUN/2025 Indian Medical Association Pune Branch 2 3] The learned Addl. CIT(A) failed to appreciate that even if, there was a small 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] The learned Addl. CIT(A) has incorrectly retained the addition made by CPC of Rs.17,60,362/- which is an amount set apart for future use in current financial year only and the addition is unwarranted and be deleted. 5] The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal.” 3. Brief facts of the case are that the assessee is a Public Charitable Trust formed under Bombay Public Trusts Act, 1950 and is working for last many years. For A.Y. 2021-22, the due date of filing the return was 31.12.2021. Return e-filed on 16.02.2022 and Audit Report on Form No.10B also furnished on 16.02.2022. Centralized Processing Centre (CPC) processed the return and denied exemption u/s.11 of the Act solely for the two reasons firstly that the return filed belatedly and secondly Audit Report on Form No.10B not furnished. Assessee took the matter before ld.CIT(A) who also dismissed the assessee’s appeal for statistical purposes observing that “since income-tax return was filed after the due date and the statutory requirement of furnishing Form 10B within the prescribed time was not met. Eventhough the CBDT has recognised that there are genuine hardships in delay of filing Form 10B and the same can be condoned, however, for the condonation of delay in filing the return and Audit Report on Form 10B, assessee has to approach the competent authority along with justification for the delay”. 4. Now the assessee is in appeal before this Tribunal. 5. Ld. Counsel for the assessee submitted that Audit Report on Form No.10B was filed on 16.02.2022 and at the time of processing the return it was very much available with the CPC but the same ITA No.767/PUN/2025 Indian Medical Association Pune Branch 3 has not been considered. Even otherwise, filing of Audit Report is directory in nature. So far as filing of return belatedly, he submitted that even in case of belated returns the claim of exemption u/s.11 has been allowed by the Hon’ble Benches. He placed reliance on the decision of Coordinate Bench, Kolkata in the case of Bangarh Educational Welfare Trust Vs. ITO (Exemptions) in ITA No.496/Kol/2021 order dated 02.01.2022 which has subsequently been followed in the case of ITO (Exemption) Vs. Debendra and Rohini Memorial Trust reported in (2023) 153 taxmann.com 687 (KolkataTrib.) 6. On the other hand, ld. Departmental Representative vehemently argued supporting the orders of the lower authorities. 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 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 ITA No.767/PUN/2025 Indian Medical Association Pune Branch 4 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: \"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 ITA No.767/PUN/2025 Indian Medical Association Pune Branch 5 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 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. ITA No.767/PUN/2025 Indian Medical Association Pune Branch 6 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 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 ITA No.767/PUN/2025 Indian Medical Association Pune Branch 7 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 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: ITA No.767/PUN/2025 Indian Medical Association Pune Branch 8 \"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 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 ITA No.767/PUN/2025 Indian Medical Association Pune Branch 9 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. 9. In the result, appeal of the assessee is allowed. Order pronounced on this 16th day of June, 2025. Sd/-/- (MANISH BORAD) ACCOUNTANT MEMBER पुणे / Pune; \u0001दनांक / Dated : 16th June, 2025. Satish ITA No.767/PUN/2025 Indian Medical Association Pune Branch 10 आदेश क\u0002 \u0003ितिलिप अ ेिषत / Copy of the Order forwarded to : 1. अपीलाथ / The Appellant. 2. \u000eयथ / The Respondent. 3. The Pr. CIT concerned. 4. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, “SMC” ब\u0014च, पुणे / DR, ITAT, “SMC” Bench, Pune. 5. गाड\u0004 फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune "