Sindhu Sewa Trust, Jamnagar, Jamnagar V. The DCIT, (CPC), Bangalore, Bangalore

ITA 11/RJT/2022

AI Insights

The case involves the Sindhu Sewa Trust, a public charitable trust, which appealed against the decision of the Commissioner of Income Tax (Appeals) that denied them exemption under sections 11 and 12 of the Income Tax Act, 1961 for the assessment year 2017-18. The denial was based on the late filing of Form No. 10B, which is required to claim exemptions under these sections. The Trust argued that the late filing was a procedural defect and that substantial compliance was met as the form was filed shortly after the initial denial and was available during the appellate proceedings. The Tribunal, referencing various judgments, concluded that the procedural requirement of filing Form No. 10B along with the return of income was not mandatory in the strict sense and that substantial compliance was sufficient.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 133692 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 11-06-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 27-01-2022
• Other Referred Cases: CIT Vs. Rai Bahadur Bissesswarlal Motilal Malwasie Trust, Sarvodaya Charitable Trust Vs. ITO (Exemption), Swajan Pariwar Trust Vs. ACIT (Exemption), CIT Vs. Gujarat Oil and Allied Industries, Social Security Scheme of GICEA Vs. CIT (Exemptions), Association of Indian Panelboard Manufacturer Vs. The Deputy Commissioner of Income Tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rectification of order; Charitable institution; Procedural lapse; Benefit of exemption; Condonation of delay; Set aside
• Section: 12; 154; 11; 10B; 143(1); 195; 201

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, राजकोट 瀈यायपीठ 瀈यायपीठ瀈यायपीठ 瀈यायपीठ, , , , राजकोट IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT (Conducted Through Virtual Court) BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER ITA No.11/RJT/2022 [Asst.Year : 2017-18] Sindhu Sewa Trust 159, Rameshwarnagar Co-op Society Nr.K.P. Shah Wadi Jamnagar 361 008. PAN : AABTS 0559 D DCIT, CPC Bangalore. (Applicant) (Responent) Assessee by : Shri Vimal Desai, ld.AR Revenue by : Shri B.D. Gupta, ld.DR स ु नवाई क तार ख/Date of Hearing : 12/06/2023 घोषणा क तार ख /Date of Pronouncement: 04/08/2023 आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER Present appeal has been filed by the assessee against order passed by the ld.Commissioner of Income Tax(Appeals), National Faceless Appeal Centre (“NFAC” for short), Delhi Ahmedabad [hereinafter referred to as “Ld.CIT(A)”] dated 23.12.2021 pertaining to the Asst.Year2017-18under section 250(6) of the Income Tax Act, 1961 (hereinafter referred to as the “Act’ for short). ITA No.11/RJT/2022 2 2. The grounds raised in the appeal are as under: “1. The rectification order u/s.154 is bad in law. 2. The CPC, Bangalore and the ld.CIT(A), NFAC, Delhi have erred in law as well as on facts in not considering belated filed Form 10B for giving exemption u/s.11 & 12 of the Act.” 3. As is evident from the grounds, the sole issue raised by the assessee in its appeal is denial of exemption under sections 11 and 12 of the Act on the ground that the assessee has filed form no.10B belatedly and not filed the same along with filing of the return of income. 4. Brief fact of the case is that the assessee is a public charitable trust registered under section 80G(5) and 12A(a) of the Act since 1992. In all these years, the assessee-trust was claiming exemption under section 11 of the Act. Similarly, the assessee has filed its return of income for the impugned assessment year declaring NIL income after claiming exemptions under section 11 of the Act. The CPC, Bangalore by intimation made under section 143(1) of the Act, dated 09-03-2019 denied the same for the reason that the assessee has not filed audit report in Form No.10B on or before filing of the return of income. Immediately thereafter on 11.6.2019, the assessee-trust e-filed audit report and also filed rectification request on 14.6.2019, but the same were rejected by the CPC on 15.7.2019. The action of the CPC was challenged before the ld.first appellate authority, NFAC, Delhi, however, the ld.CIT(A) confirmed order of the CPC and rejected the appeal of the assessee. Hence, the assessee is now before the Tribunal by way of present appeal. 5. Before us, the ld.counsel for the assessee filed written submissions, pleading interalia that, the assessee-trust was claiming the exemption benefit under section 11 of the Act for all the previous ITA No.11/RJT/2022 3 years, and in the impugned year, the claim of the assessee was scuttled by the Department merely on the ground that the audit report in Form No.10B was not filed on or before filing of the return of income; that finding procedural omission, the assessee immediately filed audit report in prescribed form and submitted to the CPC, Bangalore with a request for rectification and grant of exemption. The same was rejected by the AO. He submitted that the ld.Revenue Authorities failed to appreciate that various higher judicial authorities have dealt with similar issue and held that non- filing of audit report by charitable trust in form no.10B is merely a procedural defect and where such defect had been removed by filing Form No.10B with rectification application under section 154, the assessee was to be given benefit under section 11. For this proposition he relied on various case laws as under: i) CIT Vs. Rai Bahadur Bissesswarlal Motilal Malwasie Trust, (1992) 195 ITR 825 (Calcutta HC); ii) Sarvodaya Charitale Trust Vs. ITO (Exemption), (2021) 125 taxmann.com 75 (Guj HC); iii) SwajanPariwar Trust Vs. ACIT (Exemption), (1997) 57 TTJ 77 (ITAT Mumbai); iv) CIT Vs. Gujarat Oil and Allied Industries, (1993) 201 ITR 325 (Guj HC) Thus, he submitted that since the assessee has complied with substantial requirement of the provisions of the Act as the assessee in fact did file the audit report in Form No.10B and they were available to the lower authorities during the rectification and the appellate proceedings, denial of claim of exemption benefit under section 11 of the Act by the Revenue authorities on account of procedural lapse was unjust. ITA No.11/RJT/2022 4 6. On the other hand, the ld.DR supported orders of the Revenue authorities, and further submitted that the filing of Form No.10B of the Act was a statutory requirement, and the assessee having failed to comply with the same, the ld.CIT(A) rightly rejected the claim benefit of exemption under section 11 of the Act, and it therefore be confirmed. 7. We have heard both the parties, and gone through the orders of the Revenue authorities. We find merit in the contention of the ld.counsel for the assessee, which are based on various judgments relied on by him and cited (supra) that denial of deduction under section 11 and 12 of the Act merely on the ground that the assessee had failed to furnish audit report in form No.10B along with return of income filed was not justified. We find from the record that the CPC on notifying the assessee for not filing the audit report in form No.10B, the assessee immediately e-filed the form 10B on 11.6.2019 and also filed a rectification application on 14.6.2019. In other words, the ld.Revenue authorities had at their command the Form No.10B while deciding the rectification application on 14.6.2019. 8. The appellate proceedings being the continuation of assessment proceedings merely because the assessee has not furnished the audit report along with return of income, but filed during the assessment proceedings, and available even during the appellate proceedings, it cannot be stated that the assessee has failed to comply with the provisions so as to deny rightful claim, which otherwise was allowable. The Hon’ble Jurisdictional High Court in a recent decision in Social Security Scheme of GICEA Vs. CIT (Exemptions), (2023) 147 taxmann.com 283 (Guj) in the matter of exemption provisions contained in section 11/12 of the Act, requiring filing of Form 10B alongwith return of income for claiming ITA No.11/RJT/2022 5 exemption, held the requirement of furnishing of report to be a mandatory requirement while that of filing the report alongwith return of income to be a procedural requirement. Relevant findings of the Hon’ble jurisdictional High Court are as under: “5. Having heard learned advocates for the respective parties and having gone through the material on record, the only question which falls for consideration is whether respondent committed an error in passing the order by not condoning the delay in filing Form No. 10B along with the return filed. In the decision of this Court in Sarvodaya Charitable Trust (supra) this Court has observed that furnishing of audit report along with return filed is to be treated as a procedural requirement. It is though mandatory in nature the substantial compliance is required to be made. In the case of Sarvodaya Charitable Trust (supra) the assessee had produced the audit report after processing the return under section 143(1). This Court in the said order has observed that the approach of the authority in these type of cases should be equitable, balancing and judicious. Technically speaking, respondent No. 2 might be justified in denying the exemption under section 11 of the Act by rejecting such condonation application, but an assessee, which is a public charitable trust for past 30 years which substantially satisfies the conditions for availing such exemption, should not be denied the same merely on the bar of limitation especially when the legislature has conferred wide discretionary powers to condone such delay . Applying the said principle, the petition is allowed. The impugned order passed by respondent dated 12-3-2021 is quashed and aside. The impugned order of rectification under section 154 of the Act dated 25-1-2019 is also quashed and set aside. The application for condonation of delay filed by the petitioner before the respondent is allowed.” We also find, yet in another case on identical issue the Hon’ble jurisdictional High Court in Association of Indian Panelboard Manufacturer Vs. The Deputy Commissioner of Income Tax, R/Tax Appeal No. 655 of 2022, allowed the claim of the assessee. The relevant observation worth to note, which read as under: “6. The moot aspect thus centres around to the requirement of the availability of the audit report when the assessment was undertaken by the Assessing Officer even though the same may not have been filed along with the return of income. Filing of audit report is held to be substantive requirement but not the mode and stage of filing, which is procedural. Once the audit report in Form 12B is filed to be available with the Assessing Officer, before assessment proceedings take place, the requirement of law is satisfied. In that view, the Income Tax Tribunal was not justified in dismissing the appeal of the assessee. ITA No.11/RJT/2022 6 6.1 The appellant assessee has to be held to be eligible and entitled to exemptions under Section 11(1) and 11(2) of the Act and the alleged ground of non-filing of audit report alongwith return of income which was at the best procedural omission, could never to an impediment in law in claiming the exemption. 6.2 Accordingly the substantial questions of law have to be decided in favor of the appellant.” 9. The issue before us being identical to that as dealt with by the Hon’ble jurisdictional High Court, respectfully following the same, we have no hesitation in holding that the Ld.CIT(A) has not appreciated the case of the assessee in the right perspective in the light of various judgments cited by the assessee where it has been held that non-filing of requisite form alongwith return of income is a technical issue, which is curable, and if the assessee has complied with the provisions of the Act in the course of assessment proceedings by curing the defect by filing the audit report, and thereby satisfying substantial compliance, the Revenue cannot ignore the report so filed and reject technically the claim of benefit of exemption under section 11 of the Act, which the assessee was claiming continuously for past so many years, which fact was not disputed by the Department. This being so, we do not find any merit in the order of the ld.CIT(A) on this issue. We, therefore, set aside order of the ld.CIT(A) and allow the grounds of appeal of the assessee. 10. In the result, the appeal of the assessee is allowed. Order pronounced in the Court on 4 th August, 2023 at Ahmedabad. Sd/- Sd/- (T.R. SENTHIL KUMAR) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad, dated 04/08/2023