AI Insights
The case involves Bangarh Educational Welfare Trust, a charitable trust, which appealed against the order of the National Faceless Appeal Centre that denied them deductions under sections 11 and 12 of the Income Tax Act for the Assessment Year 2018-19. The primary reasons for denial were the late filing of the income tax return and the audit report in Form 10B. The Tribunal examined whether the Trust's return, filed on 15.11.2018, was within the permissible time frame and whether the late filing of the audit report in Form 10B, submitted on 30.03.2019, affected the Trust's eligibility for deductions. The Tribunal's decision was influenced by the CBDT Circular and the Gujarat High Court's judgment, leading to a ruling in favor of the Trust.
Appeal Details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 128195 (ITAT-KOLKATA)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 1 month(s) 15 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
01-01-2023
Appeal Filed By
Assessee
Order Result
AllowedAllowed
Bench Allotted
A
Next Hearing Date
01-11-2022
Assessment Year
2018-2019
Appeal Filed On
16-11-2021
Judgement Text
आयकर अपीलȣय अͬधकरण, कोलकाता पीठ ‘ए’, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH KOLKATA Įी संजय गग[, ÛयाǓयक सदèय एवं Įी मनीष बोरड, लेखा सदèय के सम¢ Before Shri Sanjay Garg, Judicial Member and Dr. Manish Borad, Accountant Member I.T.A No.496/Kol/2021 Assessment year: 2018-19 Bangarh Educational Welfare Trust........................................................... .... Appellant Village & Post: Bolla, P.S. Balurghat, Dist: Dakshin Dinajpur-733158. [PAN:AACTB0414B] vs. ITO(Exemptions), Ward-2(2), Siliguri............................................................. Respondent Appearances by: Shri S.R. Nag, CA, appeared on behalf of the appellant. Shri Vijay Kumar, Addl. CIT, appeared on behalf of the Respondent. Date of concluding the hearing : November 02, 2022 Date of pronouncing the order : January 02, 2022 आदेश / ORDER मनीष बोरड, लेखा सदèय ɮवारा / Per Manish Borad, Accountant Member: This appeal filed by the assessee pertaining to the Assessment Year (in short “AY”) 2018-19 is directed against the order passed u/s 250 of the Income Tax Act, 1961 (in short the “Act”) by National Faceless Appeal Centre [in short ld. “CIT(A)”] dated 22.09.2021 which is arising out of the assessment order framed u/s 143(3) of the Act dated 26.09.2019. 2. The assessee in this appeal has taken the following grounds of appeal: “1. That the assessment made under section 143(1) by the Learned Dy. Commissioner of Income Tax, CPC, Bengaluru and the appeal preferred u/s 246A thereon and confirming of the assessment and dismissing the said appeal by the Learned Commissioner of Income Tax (Appeals), I.T.A No.496/Kol/2021 Assessment year: 2018-19 Bangarh Educational Welfare Trust 2 National Faceless Appeal centre was not based upon the facts and circumstances of the case and cannot be sustained. 2. That denying of exemption u/s 11 and 12 and disallowing the amount applied during the previous year 2017-18 for revenue account Rs.86,26,702.00 and the capital account Rs.59,48,334.00 and taking unlawfully and arbitrarily the gross receipts as total income instead of net income was against basic tenets of the law and cannot be sustained. 3. That non-consideration of duly been filed audit report in Form no.10B and the I.T. return within due time of filing i.e. 31.03.2018 was not based upon the facts and circumstances of the case and cannot be sustained. 4. That submission or non-submission of audit report in Form no.10B is a debatable issue and it cannot be purview of the section 143(1) of the Income tax Act, 1961. 5. That the appellant trust keeps reserve it’s right to add further ground(s) on or before the hearing of the appeal.” 3. Brief facts of the case as emanated from the record are that the assessee is a charitable trust established with the main object of imparting education to student of rural areas without any profit motive. The trust was granted registration u/s 12AA(b)(i) dated 12.09.2018 and also granted approval u/s 10(23C)(vi) of the Act for A.Y 2019-20 onwards. Return of income e-filed on 15.11.2018 claiming deduction u/s 11 of the Act towards application of income for charitable purposes. The case processed by Central Processing Centre (‘CPC’) vide intimation u/s 143(1) of the Act dated 26.09.2019. The deduction of Rs.13587109/- claimed by the assessee denied. The same is on account of two reasons; firstly the assessee failed to file the return before due date of filing return of income and secondly audit report on Form 10B not filed before the due date prescribed under the Act. I.T.A No.496/Kol/2021 Assessment year: 2018-19 Bangarh Educational Welfare Trust 3 Further, while processing the return, the gross receipts during the year were treated as income. 4. Aggrieved, assessee preferred the appeal before the ld. CIT(A) raising various grounds challenging the action of the CPC mainly stating that the assessee being a charitable trust established for carrying out charitable activities and duly registered u/s 12AA of the Act should have been allowed the benefit of deduction u/s 11 and 12 of the Act, audit report on Form 10B uploaded much before the date of processing of income-tax return and also took an alternative ground that the assessing authorities erred in treating the gross receipts as income ignoring the fact that the excess of income over expenditure during the year was only Rs.3337586/- and only to that extent addition could have been made. However, the ld. CIT(A) mainly highlighting the two facts, that return of income not filed before due date and secondly audit report on Form 10B was not filed on time, held that the assessee’s plea cannot be accepted. The ld. CIT(A) did not give any finding on the alternative submissions made by the assessee regarding addition only to the extent of net income earned during the year. 5. Aggrieved, the assessee is now in appeal before this Tribunal. The ld. counsel for the assessee has filed paper-book dated 23.08.22 running into 149 pages containing the following details: 1 Written Submission 2 The Xerox copy of The Recognition of The National Council for Teacher Education, Eastern Regional Committee, Bhubaneswar. I.T.A No.496/Kol/2021 Assessment year: 2018-19 Bangarh Educational Welfare Trust 4 3 Affiliation of i) University of Gour Banga ii) West Bengal Primary Board ii) The W.B. University of Teachers' Training Education Planning & administration 4 The Registration certificate u/s.12AA(1)(b)(v) of the Income Tax Act,1961 Dated 12.09.2018 5 The Approval u/s.80G(5)(vi) of the Income Tax Act,1961 Dated 27.08.2019 6 The Approval u/s.10(23C)(vi) of the Income Tax Act, 1961 Dated 22.02.2020 7 A Declaration from Mr. Anil Dhanuka The Computerist who was entrusted for e-filing. 8 The Copy of the Communication of proposed Adjustment Dated 01.03.2019 of Learned Dy. Commissioner of Income Tax, CPC, Bengaluru. 9 The Copy of the Audit Report in Form No.10B for The Financial Year 2017-2018 10 The copy of the Assessment (Intimation u/s.143(1) for the assessment year 2018-2019 Corresponding Previous Year 2017-2018; i.e., year under Appeal 11 The copy of the CBDT Circular dated 23.04.2019 12 The copy of the I.T.R-7 of the Trust for the previous year 2017-2018 (Corresponding Assessment year 2018- 2019). 13 The copy of The Financial Audit Report for The Previous year 2017-2018 (Corresponding Assessment year 2018- 2019) i.e., year under Appeal. 14 Copy of Appeal Order u/s. 250 of the I T Act,61 of CIT(Appeals), of our other client on identical grounds 15 The copy of the general power of Attorney. 6. Further, the ld. counsel for the assessee referring to the CBDT Circular dated 23.04.2019 stated that the assessee, which is a trust registered u/s 12AA of the Act in order to avail the benefit of exemption u/s 11 of the Act is required to file the return of income within the time allowed u/s 139 of the Act. Further, since in this Circular, reference is not made to section 139(1) of the Act which deals with the due date, the return of the assessee should be accepted as filed within the time which is in I.T.A No.496/Kol/2021 Assessment year: 2018-19 Bangarh Educational Welfare Trust 5 the case is beyond due date u/s 139(1) of the Act but before the last date of filing the belated returns. So far as, delay in filing of the audit report u/s 10B is concerned, it is submitted that though the assessee is required to file the audit report one month prior to the due date of filing of the return but the delay occurred on account of unforeseen circumstances at the end of the accountant. However, the said report was uploaded much prior to the date of processing of income-tax return. A reference was made to various judgments filed in paper-book and special reference was made to the judgment of Hon’ble Gujarat High Court in the case of Sarvodaya Charitable Trust vs. ITO(Exemption) [2021] 125 taxmann.com 75 (Gujarat) dated 09.12.2020. Further, it is pleaded that ld. CIT(A) has not dealt with the alternative ground raised by the assessee stating that the CPC erred in taxing the gross receipts of the trust because even in case, the assessee is not allowed the benefit of section 11 and is treated as normal assessee then also only the net income earned during the year is subjected to tax and not the gross receipts. 7. On the other hand, the ld. departmental representative vehemently argued relying on the detailed findings of ld. CIT(A) and the relevant extract of the same is reproduced below: “4.8 It is evident that as the return itself was filed belatedly on 15.11.2018 and the Audit Report in Form 10B was also e-filed much later on 30.03.2019, the appellant had clearly failed to comply with the requirement of section 139(4A) r.w.s.139(1) and also the requirements of section 12A(1)(6) and 12A(1)(ba) read with Rule 17B, thus leading to the disentitlement of deduction u/s.11 and 12 of the Act. I.T.A No.496/Kol/2021 Assessment year: 2018-19 Bangarh Educational Welfare Trust 6 5. In appeal, the appellant seeks to condone the delay in filing Audit Report in Form 10B by filing an undated letter from a person named "Anil Dhanuka", claiming to be a professional computer expert, stating that he was given the job of uploading the Income Tax Return and Audit Report by the chairperson of the appellant trust but due to pressure of professional assignments he could not e-file them before 31.10.2018. It is further claimed that due to some personal exigencies, he could file the return only on 15.11.2018 and that by oversight the audit report also was e-filed only later on 30.03.2019. 5.1 It is noted that the said undated letter is not in the form of any affidavit and there is no proof of the identity of the person concerned. It is further seen the Income Tax Return was e-fled on 15.11.2018 using the credentials and DSC of Shri Sudip Ganguly, Chairperson of the appellant Trust and not by any other person/professional. It is pertinent to note that the verification part of Income Tax Return itself is dated 01.11.2018 which is clearly beyond the extended due date of 31.10.2018. Hence, this contention of delay being attributable to a third party is totally irrelevant to the issue. On this ground of failure to furnish the return of income on or before the prescribed due date u/s.139(4A) alone, the appellant's claim of deduction u/s.11 and 12 fails. 5.2 Further, the Audit Report in Form 1OB cannot be filed by a person other than the Chartered Accountant, not even by the appellant, since the Audit Report is to be electronically filed by the CA concerned under his digital signature. In appellant's case, the Audit Report in Form 10B has been electronically filed and digitally signed by the CA, Shri. Sukriti Ranjan Nag on 30.03.2019 and not by the aforesaid person, Anil Dhanuka. 5.3. Preparation and E-filing of Audit Reports is a statutory responsibility of the Chartered Account and a secure activity which cannot be delegated to others. The Chartered Accountant concerned has to be registered as a Tax Professional on the e-filing portal of the department, with complete details including membership number, enrolment date, personal details, PAN, email ID etc., and has to upload the Digital Signature Certificate (DSC). All Communications are sent to the registered mobile number and email provided at the time of registration. Thereafter, the appellant concerned has to login to the e- filing portal of the department and add such registered Chartered Account to its profile. This has to be done for every Forms that are to be e-filed, i.e., Income Tax Return, Tax Audit Reports etc., separately. Only then the Chartered Account will be able to e-file that particular form/document in respect of that assessee for that particular Assessment Year. The Audit Report thereafter, has to be prepared and uploaded by the CA using the secure login facility and not by any other person. It is established beyond doubt that the audit report in Form 10B I.T.A No.496/Kol/2021 Assessment year: 2018-19 Bangarh Educational Welfare Trust 7 was e-filed under the credentials of the concerned Chartered Account Shri Sukriti Ranjan Nag only on 30.03.2019 though the ostensible date of the report is shown as 20.10.2018. Hence, on this count of failure to furnish the audit report in Form 10B along with the return of income as required u/s.12A(1)(b) and rule 12(2) also, appellant's claim for deduction u/s.11 and 12 will fail. 5.4. Therefore, the undated letter purportedly written by the said unknown person "Anil Dhanuka", which is being relied on by the appellant for condonation of delay in furnishing the return of income and audit report in Form 10B does not serve its 6 As per Board's instruction in F. No. 267/482/77-1T (part) dated 09.02.1978, for the delay in furnishing Audit Report in Form No.10B, an application for condonation of delay has to be filed before the Assessing Officer concerned stating the reasons for delay which were beyond its control. Only on getting the delay condoned by the Assessing Officer that the appellant's claim for deduction u/s.11 and 12 could have been considered by CPC while processing the return u/s.143(1). Nevertheless, the appellant's failure to furnish the return of income by itself has resulted in the disentitlement of such deduction in appellant's case. 6.1. It is further seen that during the pendency of this current appeal against the intimation u/s.143(1), CBDT has issued a revised Circular No.2/2020 vide ref. in F.No.197/55/2018-1TA-I dated 3rd January, 2020 in supersession of its earlier instruction and provided for condonation of delay under section 119(2)(b) of the Income-tax Act, 1961 in filing of Form No. 10B for Assessment Year 2018-19 and subsequent years. As per this circular, where there is delay of up to 365 days in filing Form No. 10B for Assessment Year 2018-19 or for any subsequent Assessment Years, the Commissioners of Income-tax are authorized to admit such belated applications of condonation of delay u/s 119(2) of the Act and decide on merits, after satisfying themselves that the assessee was prevented by reasonable cause from filing such application within the stipulated time. 6.2 It is seen that the appellant has not furnished evidence of any such order u/s.119(2)(6) from the Commissioner concerned condoning the delay in furnishing the audit report in Form No.10B for A.Y.2018-19, In the absence of which, the claim of deduction u/s.11 per se could not be considered in appeal also. 7. As noted earlier, approval u/s.10(23C)(vi) of the Income Tax Act has been accorded for Assessment Year 2019-20 onwards only by the Commissioner of Income Tax (Exemptions), Kolkata vide order dated 20.02.2020 in Memo No.CIT(E)/10(23C)(vi)/AACTBO414B/19-20/6056- 58. The appellant is, therefore, not eligible to claim deduction u/s.10(23C) for AY.2018-19. I.T.A No.496/Kol/2021 Assessment year: 2018-19 Bangarh Educational Welfare Trust 8 7.1 Though no claim u/s10(23C) has been made in the return of income filed for A.Y.2018-19 by the appellant, an Audit Report in Form 10BB dated 20.10.2018 claiming deduction u/s.10(23C) for a. sum of Rs 119,64,288/- has been since e-filed on 07.02.2020 during the course of appeal proceedings, a copy of which has been submitted as part of Paper Book. 7.2 In this Form 10BB which is dated 20.10.2018, in Sr.no 6, the date of notification/approval of the trust u/s.10(23C)(vi) is mentioned as 01.01.2020, whereas no such approval has been granted for AY.2018- 19 as per records. It is further quite inexplicable as to how in the audit report bearing the date of 20th October, 2018, details of such approval given in the year 2020 if any could find a mention. It is also pertinent to note that the actual date of e-filing Form 10BB is 07.02.2020 only though it is ante-dated as 20.10.2018. 7.3 It is evident that this alternate claim of deduction u/s.10(23C) is sought to be made by furnishing this backdated audit report in Form 10BB of this current appeal. It is further seen that the appellant has not moved any application for admission of new evidence under Rule 46A and also has not taken any ground in appeal regarding deduction u/s.10(23C). Nevertheless, since the claim of 10(23C) for A.Y.2018-19 per se is not admissible in the absence of the requisite approval of the Commissioner u/s.10(23C) for A.Y.2018-19, this new evidence has no relevance and hence is rejected. 8. From the above, it is established beyond doubt that the appellant had failed to furnish its return of income for A.Y.2018-19 within the time limit given as per section 139(1) as prescribed u/s.139(4A) and has also failed to furnish the Audit Report in Form 10B along with the Return of Income as required u/s.12A(1)(6) and 12A(1)(ba) read with Rule 17B. 9 It is therefore, held that the denial of deduction u/s.11 vide intimation u/s.143(1) by DCIT, CPC, Bangalore is strictly in accordance with the provisions of section 12A(1)(b) / (ba) of the Act. Therefore, there is no reason or ground to interfere with the order of the DCIT, CPC, Bangalore in this regard. Appellant's Ground No.1 to 5 fails and the denial of deduction u/s.11 vide intimation u/s.143(1) issued by the DCIT, CPC, Bangalore is fully confirmed 10. On the issue of charging of interest u/s.234A 234B and 234C, since it is a statutory charge, and is a settled issue as held in the case of Commissioner of Income Tax V Anjum M.H Ghaswala (2001) 252 1TR1 (SC) followed by the decision in the case of Karanvir Singh CGossal v. CIT [20121 25 taxmann.com 213 (SC), no interference is warranted thereon. 11. Levy of late filing fee u/s.234F is also found tenable on facts and in law. In fact, in the return of income at Sr.No.11 (e) of Computation of tax liability on total income in Part B-TTI, the appellant itself has shown a I.T.A No.496/Kol/2021 Assessment year: 2018-19 Bangarh Educational Welfare Trust 9 sum of Rs.1,000/- as "Fee for default in furnishing return of income (Section 234F)". Since the correct fee u/s.234F for the relevant assessment year was Rs.5,000/- in appellant's case, the necessary adjustment has been duly carried out in the intimation issued u/s.143(1) by CPC. Hence, Ground No.6 on the issue is dismissed. 12. Ground No.7 being general is also disposed of accordingly.” 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:— *** *** *** I.T.A No.496/Kol/2021 Assessment year: 2018-19 Bangarh Educational Welfare Trust 10 (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 49 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 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).]]” I.T.A No.496/Kol/2021 Assessment year: 2018-19 Bangarh Educational Welfare Trust 11 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, I.T.A No.496/Kol/2021 Assessment year: 2018-19 Bangarh Educational Welfare Trust 12 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 i.e. 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 incometax 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 I.T.A No.496/Kol/2021 Assessment year: 2018-19 Bangarh Educational Welfare Trust 13 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: vinaysheel.gautam@gov.in 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 I.T.A No.496/Kol/2021 Assessment year: 2018-19 Bangarh Educational Welfare Trust 14 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. I.T.A No.496/Kol/2021 Assessment year: 2018-19 Bangarh Educational Welfare Trust 15 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 vs. 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 ld. 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 I.T.A No.496/Kol/2021 Assessment year: 2018-19 Bangarh Educational Welfare Trust 16 Sarvodaya Charitable Trust vs. 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 ld. 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. I.T.A No.496/Kol/2021 Assessment year: 2018-19 Bangarh Educational Welfare Trust 17 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 vs. 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. 18. In the result, the appeal of the assessee is allowed. Kolkata, the 2 nd January, 2023. Sd/- Sd/- [संजय गग[ /Sanjay Garg] [डॉÈटर मनीष बोरड /Dr. Manish Borad] ÛयाǓयक सदèय /Judicial Member लेखा सदèय /Accountant Member Dated: 2.1.2023. RS I.T.A No.496/Kol/2021 Assessment year: 2018-19 Bangarh Educational Welfare Trust 18 Copy of the order forwarded to: 1. Bangarh Educational Welfare Trust 2. ITO(Exemptions), Ward-2(2), Siliguri 3. CIT(A)- 4. CIT- , 5. CIT(DR), //True copy// By order Assistant Registrar, Kolkata Benches
Other Referred Cases
Sarvodaya Charitable Trust vs. ITO(Exemption) [2021] 125 taxmann.com 75 (Gujarat)
Laws Referred To
Income Tax Act, 1961
1:1 Consultation on Salary Structuring
₹1
Guide to Charitable Trusts: Formation, Benefits, and Compliance
₹0
1:1 Consultation on Business Development
₹1
Research Collaboration Agreement
₹0
HUF Deed
Mehul₹500
Budget 2026: 5 Major Personal Tax Changes Every Taxpayer Must Know
Team Counselvise - February 05, 2026
Finance Bill, 2026: Key Direct Tax Amendments on Assessments and Appeals
Team Counselvise - February 06, 2026
Residency Rules: Income Tax Act, 1961 vs Income Tax Bill, 2025 — A Subtle Yet Significant Shift!
Team Counselvise - February 18, 2026