RAJASTHAN MEDICAL RELIEF SOCIETY, ADMINISTRATIVE BLOCK, V. ITO EXEMPTION WARD, CR BUILDING

ITA 740/JPR/2023

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 3174 (ITAT-JAIPUR)
• Duration Of Justice: 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2018-2019
• Appeal Filed On: 03-12-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution; Condonation of delay
• Section: 12; 154; 11; 80G; 12A; 12AA; 10B; 143(1); 201

Judgement Text

vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, vk;dj vihy la-@ITA No. 740/JP/2023 fu/kZkj.k o"kZ@Assessment Years : 2018-19 Rajasthan Medical Relief Society, Administrative Block, JLN Road, Rajasthan cuke Vs. The Income Tax Officer, Exemption Ward, Central Building LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAATR5218 F vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. Sudhir Sogani (Adv.) jktLo dh vksj ls@ Revenue by : Sh. Ajay Malik (CIT) lquokbZ dh rkjh[k@ Date of Hearing : 29/02/2024 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 01/04/2024 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal filed by assessee is arising out of the order of the National Faceless Appeal Centre, Delhi dated 26/10/2023 [here in after (NFAC)/ ld. CIT(A) ] for assessment year 2018-19 which in turn arise from the rectification order dated 06.01.2020 passed under section 154 of the Income Tax Act, by Asst. Director of Income Tax, CPC. 2. In this appeal, the assessee has raised following grounds: - 2 ITA No. 740/JP/2023 Rajasthan Medical Relief Society vs. ITO(E) “1. That under the facts and circumstances of the case the Learned CIT(A) NFAC has grossly erred in disallowing the claim of the assessee under section 11 of the IT. Act, 1961 and sustaining the disallowance of Rs.3,38,71,393/- resulting in addition of Rs. 3,38,71,393/- to the income of the assessee.” 3. Succinctly, the fact as culled out from the records is that the assessee institution is a Charitable Trust duly registered under section 12A of the IT Act, 1961. This trust is an State Government Controlled working for the aid and assistance of the poor, needy and downtrodden. On receipt of intimation under section 143(1) of the IT Act, 1961, the assessee filed a rectification application under the impression that the authorities will look into the entirety of the details filed in the ITR submitted and not limit itself to the claim made erroneously under section 11 of the IT Act, 1961. It shall be observed that as per the details filed in the ITR there is a net loss as per Income and Expenditure account and there was no necessity for claim made under section 11 of the IT Act, 1961. If any erroneous claim has been made by the assessee that should have been ignored and assessment made on the basis of details filed in the ITR filed. Unfortunately, the same has not been the course of action of the authorities who have only limited there perception on claim made under section 11 of the IT Act, 1961 and as the assessee had not uploaded the Audit Report disallowed the claim 3 ITA No. 740/JP/2023 Rajasthan Medical Relief Society vs. ITO(E) under section 11 of the IT Act, 1961 in view of the provisions under section 12A(1(b) of the IT Act, 1961. 4. Aggrieved from the order of the assessment, assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised the relevant finding of the ld. CIT(A) is reiterated here in below: “Decision 5. I have considered the submissions of the appellant, rectification order u/s 154 and proceed to decide the only ground. As per the provisions of Section 12A(1)(b) r.w. Rule 17B, Audit Report in Form 10B is to be filed before specified date by a trust whose total income exceeds maximum amount not chargeable to tax as computed under the Act before giving effect to the provisions of section 11 and section 12. The specified date for AY 2018- 19 was 30.09.2018 later extended to 15.10.2018. 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. 5.1 The appellant is a registered charitable trust. It filed return on 31.03.2019 (as against due date for filing 31.08.2018) declaring Nil income. As per the appellant, the claim of exemption u/s 11 was denied in the intimation dated 17.10.2019 due to non filing of audit report in Form 10B. The appellant filed rectification application on 11.12.2019. The same was rejected vide order dated 06.01.2020. It is also noted from the submission of the appellant that Form 10B was electronically uploaded on 28.01.2020. From the above details, it is clear that Form 10B was not filed by the appellant along with the return of income as required under section 12A(1)(b). Therefore, the CPC correctly denied the exemption in the intimation. In the absence of the audit report in Form 10B, it cannot be said that there was mistake apparent from record in the intimation dated 17.10.2019 as the Form 4 ITA No. 740/JP/2023 Rajasthan Medical Relief Society vs. ITO(E) 10B was uploaded much later on 28.01.2020. Since there was no mistake apparent from record, the rectification request made by the appellant was correctly denied by the CPC. For the same reason, the appeal filed against the passing of order u/s 154 is non maintainable. 5.2 It is noted that in this case, Form 10B was filed belatedly by more than one year. It is submitted that the procedural delay in uploading Form 10B is due to various technical reasons which are explainable. As per appellant, it operates through various Rajasthan Government agencies for creating medical facilities and there was a delay in receipt of accounts from those agencies and hence delay in audit of the accounts, filing of return etc. Wherever there is a delay in filing of Form 10B, an assessee is required to file an application for condonation of delay. Where there is delay of beyond 365 days upto three years in filing Form No. 10B for Assessment Year 2018-19 or for any subsequent Assessment Years, the CBDT Circular No.16 of 2022 authorizes Pr.CCIT/CCIT to admit application of condonation of delay under section 119(2) of the Act and decide the same on merits. Similar powers in respect of delay upto 365 days was given to the CIT (Exemption) vide CBDT Circular 2 of 2020 dated 03.01.2020. Thus, there is a laid down procedure for condonation of delay in filing of Form 10B, if there is a reasonable cause for such delay. The appellant has not mentioned anything about any pending application for condonation of delay in filing Form 10B, in its submission. The decisions relied upon by it are not applicable since there is a laid down procedure for condonation of delay for AY 2018-19. 6. Accordingly, the appeal of the assessee treated as dismissed.” 5. As the assessee did not find any favour from the order of the ld. CIT(A), the assessee has preferred the present appeal before this Tribunal on the ground as reproduced hereinabove. To support the various grounds so raised by the ld. AR of the assessee, has filed the written submissions and the same is reproduced herein below. 5 ITA No. 740/JP/2023 Rajasthan Medical Relief Society vs. ITO(E) “The assessee is in appeal before your honours against the order of the Learned CIT (A-NFAC) dated 26.10.2023. The only ground of grievance/appeal for the year under consideration is denial of deduction under section 11 of the IT Act, 1961 as applicable to a registered charitable trust. The brief facts of the case are that the assessee is a Charitable Trust engaged in various Medical Activities providing medical assistance to the deprived, needy and destitute. It is duly registered with Appropriate Authority (Commissioner of Income-Tax) under section 12AA of the IT Act, 1961 and is also approved for the purpose of section 80G of the IT Act, 1961. The assessee filed its Return of Income for the year under consideration(AY.2018-19) on 31.03.2019 vide acknowledgement no. 456999940310319 declaring NIL income. However, the assessee did not upload the Audit Report in Form 10B along with the Return of Income. The assessee was sent a communication from Computer Processing Centre (CPC), However the assessee could not respond to the above communication because of certain communication gaps. Therefore, the Computer Processing Centre (CPC) processed the Return u/s 143(1) of the IT Act, 1961 dated 17.10.2019 denying the benefit of exemption u/s 11 of the IT Act, 1961 to the assessee and demanded tax of Rs. 1,49,14,805/-. It is thereafter the filing of appeal, the assessee uploaded electronically Form 10B on 28.01.2020 vide acknowledgement no. 297173731280120. (Copy of Acknowledgement Receipt enclosed for ready reference). There has been a procedural delay in furnishing of Form 10B for various technical reasons which are explainable. The assessee trust is a Rajasthan State government Controlled enterprise providing medical assistance of all nature to the needy, destitute, needy citizens of the society. The funds received by it from are also utilized to create medical facilities through various government agencies. During the year under consideration the accounts from these various agencies were not received in time which delayed the finalization of accounts and subsequent delay in audit of the accounts, which resulted in delayed filing of IT Return and uploading of Audit Report. In this regard it was submitted before the Learned CIT(A-NFAC) that even if the Form No. 10B is filed at a later stage, either before the A.O. or before the appellate authorities, it would be a sufficient compliance with requirements of section 12A(1)(b) as these requirements are only directory in nature. This is the view expressed by the Honourable Gujarat High Court in the case of CIT vs. Xavier Kelavani Mandal (P) Ltd as reported 41 Taxmann.com. Furthermore, it was explained before the Learned (CIT-NFAC) that it is a sufficient compliance with the procedure, if the Audit Report u/s 12A(1)(b) is filed 6 ITA No. 740/JP/2023 Rajasthan Medical Relief Society vs. ITO(E) at any stage before the completion of assessment or even at the appellate stage. Thus the CPC cannot deny exemption available u/s 11 of the IT Act, 1961. This view finds strong support from the judicial pronouncements in the following decisions: 1. Sarvodaya Charitable Trust vs. ITO (Exemption) 125 Taxmann.com 75 (Gujarat) 2. CIT vs. Xavier Kelavani Mandal 41 Taxmann.com 184 (Gujarat) 3. Social Security Scheme of GICEA vs. CIT (Exemption) 147 Taxmann.com 283 (Gujarat) Wherein the courts have held the assessee trust having substantially satisfied conditions for availing exemption u/s 11 of the IT Act, 1961, it should not be denied exemption merely on bar of limitation especially when legislature had conferred wide discretionary powers to condone such delay in filing Audit Report in Form 10B. We are enclosing herewith copy of our submissions submitted before the Learned CIT (A-NFAC) as to the fact that the moot question whether it is permissible to produce the Audit Report at the appellate stage is correct in law has been decided by the Honourable Gujarat High Court in the case of Gujarat High Court in the case of CIT vs Gujarat Oil & Allied Industries Ltd 201 ITR 325 wherein it has been held that the provisions regarding furnishing of Audit Report along with the Return of Income has to be treated as a procedural provision. It is directory in nature and its substantial compliance will suffice. The Learned CIT(A-NFAC) has not appreciated the submissions of the appellant as to the fact that filing of Audit Report u/s 12A(1)(b) at any stage before the competition of the assessment or even at the appellate stage is sufficient compliance of the procedure of filing the Audit Report. Rather he has based his decision on an entirely new issue. The Learned CIT(A-NFAC) while pronouncing the decision/order has observed as under: ‘Wherever there is a delay in filing Form 10B, an assessee is required to file an application for condonation of delay. Where there is delay of beyond of 365 days upto three years in filing Form 10B for Assessment Year 2018-19 or for any subsequent Assessment Years, the CBDT Circular No. 16 of 2022 authorizes Pr.CCIT/CCIT to admit application for condonation of delay under section 119(2) of the Act and decide the same on merits. Similar powers in respect of delay upto 365 days was given to the CIT (Exemption) vide CBDT Circular 2 of 2020 dated 03.01.2020. Thus, there is a laid down procedure for condonation of delay in filing of Form 10B, if there is a reasonable cause for such delay. The appellant has not mentioned anything about any pending application for condonation of delay in filing Form 10B, in its submission. The decisions relied upon by it are not applicable since there is a laid down procedure for condonation of delay for AY 2018-19. WE HAVE TO SUBMIT AS UNDER: 7 ITA No. 740/JP/2023 Rajasthan Medical Relief Society vs. ITO(E) The Learned CIT (A-NFAC) has based his decision on the assumption that the assessee appellant has not moved any application for condonation of delay in filing of Form 10B before the Appropriate Authorities and has totally overlooked the observations of the various Higher Courts that even if Form No. 10B is filed at a later stage before the A.O. or before the Appellate Authorities, it would be sufficient compliance with requirements of section 12A(1)(b) of the IT Act, 1961 as these requirements are only directory in nature. Furthermore, we have to submit that it is sufficient compliance with the procedure, if the Audit Report iu/s i12A(1)(b) is filed at any stage before the completition of assessment or even at the appellate stage. Thus the CPC cannot deny exemption available u/s 11 of the IT Act, 1961. This view finds strong support from the judicial pronouncements in the following decisions: 1. Sarvodaya Charitable Trust vs ITO (Exemption) 125 Taxmann.com 75 (Gujarat) 2. CIT vs Xavier Kelavani Mandal 41 Taxmann.com 184 (Gujarat) 3. Social Security Scheme of GICEA vs CIT (Exemption) 147 Taxmann.com 283 (Gujarat). Wherein the courts have held the assessee trust having substantially satisfied conditions for availing exemption u/s 11 of the IT Act, 1961, it should not be denied exemption merely on bar of limitation especially when legislature had conferred wide discretionary powers to condone such delay in filing Audit Report in Form 10B. The moot question whether it is permissible to the assessee to produce the Audit Report at the appellate stage is correct in law has been decided by the Gujarat High Court in the case of CIT vs. Gujarat Oil & Allied Industries Ltd. 201 ITR 325 ( copy of order enclosed for ready reference) wherein it has been held that the provisions regarding furnishing of Audit Report along with the Return of Income has to be treated as a procedural provision. It is directory in nature and its substantial compliance would suffice. Furthermore, io our written submissions before the Learned Appellate Authority dated October 13, 2023 (copy enclosed for ready reference) the assessee appellant had requested the Learned Appellate Authority that in case any further information is desired the same may be called for. The Learned Appellate Authority passed the appeal order under the impression that the assessee appellant has not moved an application before the Learned Appropriate Authority (CIT (exemption) or Pr. CCIT/CCIT as applicable) which is not correct. The assessee appellant had moved application before the Learned CIT for condonation of delay in filing Form 10B of the IT act, 1961 which was rejected by the Learned CIT without giving any opportunity to the assessee of hearing, against which the assessee has fied an appeal before the Honourable ITAT which is pending for disposal. The assessee did not state these facts before the Learned CIT (Appeals-NFAC) under the impression that as per the various 8 ITA No. 740/JP/2023 Rajasthan Medical Relief Society vs. ITO(E) decisions of High Courts (Supra) this fact was not required to be put forward before the Learned CIT(Appeal-NFAC). There was no other reason for not apprising the Learned CIT(Appeal-NFAC) of this fact. Also, in the interest of justice, it was expected of the Learned CIT (Appeal-NFAC) to seek this information from the assessee, if, he was basing his order only on this, which information he did not seek, though the assessee had in his written submission had requested the Appellate Authority to call for any other information if it assits in coming to a justifiable decision. In view of the above facts and position of law a considerate view may kindly be taken and appeal be allowed. ” 6. The ld. AR of the assessee in addition submitted that the assessee cannot be denied the benefit of section 11 of the IT Act merely there is delay in filling the audit report. He further submitted that since the powers of the ld. CIT(A) are co-terminus with the powers of the assessing officer and he should have appreciated that the CBDT has extended the date of furnishing the declaration for the year under consideration up to 31.10.2018 based on the general public representation on account of the technicality of the filling of the said form and the assessee has ultimately submitted the same on 28.01.2020. Therefore, the demand raised in the intimation is incorrect and even the order passed u/s. 154 subsequently that is also incorrect and therefore, he prayed to grant the relief to the assessee. 7. The ld. DR heard who relied on the findings of the lower authorities and submitted that once the assessee failed to file the form no. 10B along with the return of income before the due date of filling the return of income, 9 ITA No. 740/JP/2023 Rajasthan Medical Relief Society vs. ITO(E) the assessee is not eligible to claim the benefit of section 11 & 12. Not only that, even the dead line extended by the board was up to 365 days whereas in this case delay is much beyond. Thus, the same is rightly denied to the assessee by the CPC. 8. We have heard the rival contentions, perused the material placed on record. The ld. AR of the assessee placed on record that an order of the CBDT F.No. 225/358/2018/ITA.II dated 08.10.2018 wherein the due date extended upto 31.10.2018 and the assessee in this case efiled the form no. 10B on 28.01.2020 vide acknowledgement no. 297173731280120. The bench also noted that even otherwise the issue that the whether the assessee denied the benefit of exemption as a trust merely on the reason that the audit report in Form no. 10 B filed belated. This issue is decided by the Gujarat High Court in the case of Sarvodaya Charitable Trust Vs. ITO(E) (2021) 278 Taxman 148 (Guj.) (HC), Where assessee, a public charitable trust registered u/s 12A, had substantially satisfied condition for availing benefit of exemption as a trust, it could not be denied exemption merely on bar of limitation in furnishing audit report in Form No.10B especially when the legislature has conferred wide discretionary powers to 10 ITA No. 740/JP/2023 Rajasthan Medical Relief Society vs. ITO(E) condone such delay on the authorities concerned. The similar issue is also dealt by the coordinate bench of Ahmedabad in the case of ITO(E) Vs. Shri Laxmanarayan Dev Shrishan Seva Khendra ITA No. 410/Ahd/2022 order dt. 19.05.2023 (Ahmedabad) (Trib.) and Rajkot bench in the case of Sh. Rajkot Vishashrimali Jain Samaj Vs. ITO (2023) 200 ITD 662 (Rajkot) (Trib.). On being consistent to the view in the matter we direct the ld. Jurisdiction Assessing Officer (JAO) to consider the Form no. 10B through belated and allow the claim of exemption u/s. 11 of the Act to the assessee. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 01/04/2024. Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 01/04/2024 *Ganesh Kumar, PS vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. The Appellant- Rajasthan Medical Relief Society, JLN Road, Rajasthan 2. izR;FkhZ@ The Respondent- ITO, Exemption Ward, Central Building 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 6. xkMZ QkbZy@ Guard File (ITA No. 740/JP/2023) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar