M.N. CHICKKANNA CHETTIAR TRUST,TIRUPPUR V. ACIT (EXEMPTIONS), COIMBATORE

ITA 1568/CHNY/2025

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The case involves M.N.Chickkanna Chettanna Trust, a charitable trust, which appealed against the order of the Commissioner of Income Tax (Appeals) that upheld the denial of exemption under Section 11 of the Income Tax Act by the CPC, Bengaluru. The CPC had denied the exemption due to the late filing of the audit report in Form 10B. The Tribunal examined whether the filing of Form 10B was a mandatory requirement and concluded that it was directory in nature, referencing several judicial precedents that supported this interpretation. The Tribunal's decision emphasized that procedural lapses should not override substantive rights, particularly in the context of exemptions meant for charitable trusts.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 779765 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2020-2021
• Appeal Filed On: 30-05-2025
• Other Referred Cases: CIT(E) v Shri Laxmanarayan Dev Shrishan Seva Khendra, Sarvodaya Charitable Trust v. ITO, Chandraprabhuji Maharaj Jain v. DCIT, The Shakti Foundation v. ITO, Kaakkum Karangal v. ITO, Alternative India for Development v. ITO, Puran Chand Arora Charitable Trust v. ITO, Trilok Singh Bhandari Charitable Trust v. ITO, Association of Indian Panelboard Manufacturer v. DCIT, CIT v. Xavier Kelavani Mandal (P.) Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R.KAVITHA; C.I.T
• Assessee Lawyers: T. BANUSEKAR
• Keywords: Condonation of delay; Opportunity of being heard; Revised return; Reasonable cause; Question of law; Principle of natural justice; Charitable institution; Benefit of exemption; Maximum Marginal Rate; Procedural lapse
• Section: 11; 12A; 139; 234B; 10B

Judgement Text

" आयकर अपील य अ धकरण, ‘ए’ \u000eयायपीठ, चे\u000eनई IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI \u0015ी एबी ट वक\u0019, \u000eया\u001aयक सद य एवं \u0015ी एस. आर. रघुनाथा, लेखा सद य क े सम$ BEFORE SHRI ABY T VARKEY, JUDICIAL MEMBER AND SHRI S. R. RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.:1568/Chny/2025 \u001aनधा%रण वष% / Assessment Year: 2020-21 M.N.Chickkanna Chettiar Trust, 251, B.S. Sundaram Road, Palayakkadu, Tiruppur – 641 601. vs. ACIT (Exemptions), Coimbatore. [PAN:AAATM-4901-C] (अपीलाथ'/Appellant) (()यथ'/Respondent) अपीलाथ' क* ओर से/Appellant by : Shri. T.Banusekar, Advocate ()यथ' क* ओर से/Respondent by : Ms. R. Kavitha, Addl. C.I.T. सुनवाई क* तार ख/Date of Hearing : 09.09.2025 घोषणा क* तार ख/Date of Pronouncement : 15.10.2025 आदेश /O R D E R PER S. R. RAGHUNATHA, AM: This appeal by the assessee is filed against the order of the Commissioner of Income Tax, Appeal, Addl./JCIT (A)-9, Mumbai, for the assessment year 2020-21, dated 26.03.2025. 2. The assessee has raised the following common grounds of appeal:- 1. For that the order of the Commissioner of Income Tax (Appeals) is contrary to law, facts, and circumstances of the case and is opposed to the principles of equity, natural justice and fair play. Printed from counselvise.com :-2-: ITA. No.:1568/Chny/2025 2. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the order of the CPC, Bengaluru is without jurisdiction. Legal Grounds 3. For that the Commissioner of Income Tax (Appeals) erred in dismissing the appellant’s case without providing the appellant a proper opportunity of being heard. 4. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the intimation issued u/s.143(1) of the Income Tax Act is bad in law. 5. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the intimation u/s.143(1) was passed without complying with the statutory requirement of law. Denial of exemption u/s.11 6. For that the Commissioner of Income Tax (Appeals) erred in upholding the intimation of the CPC, Bengaluru wherein the CPC, Bengaluru denied the exemption claimed by the appellant u/s.11. 7. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the appellant had reasonable cause for non-filing of audit report in Form No. 10B within the prescribed due date. 8. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the appellant is eligible to claim exemption u/s.11 in the facts and circumstances of the case. 9. For that, without prejudice to the above, the Commissioner of Income Tax (Appeals) erred upholding the intimation passed u/s.143(1) in bringing to tax the entire gross receipts of the appellant trust amounting to Rs.2,32,83,425/- without allowing expenditure incurred of Rs.1,64,47,483/- against the same. 10. For that without prejudice to the above, the Commissioner of Income Tax (Appeals) failed to appreciate that the tax liability at best could be computed only on the net income and not on the gross receipts ofRs.2,32,83,425/-. 11. For that, without prejudice to the above, the Commissioner of Income Tax (Appeals) failed to appreciate that the appellant trust ought to be taxed at slab rates and not at Maximum Marginal Rate. Levy of interest u/s.234B and 234C 7. For that the appellant trust objects to the levy of interest under sections 234B and 234C of the Income Tax Act. Printed from counselvise.com :-3-: ITA. No.:1568/Chny/2025 3. The brief facts of the case are that the assessee is a charitable trust registered u/s.12AA of the Income Tax Act, 1961 (in Short ‘the Act’) and filed its return of income for the A.Y. 2020-21on 03.02.2021. The return of income was processed u/s.143(1) on 30.11.2021 determining the total income of the assessee at Rs.2,32,84,425/-, whereby exemption u/s.11 was denied for the reason that audit report in Form No.10B was not filed within the due date prescribed under the Act read with rule 12A(1)(b), thereby assessing the entire gross receipts of Rs.2,32,84,425/- at maximum marginal rate without considering expenditure of Rs.1,64,47,483/- incurred during the previous year relevant to assessment year 2020-21. The assessee had filed its audit report in Form 10B on 03.02.2021 with a delay of 19 days, as against the due date for filing the same was 15.01.2021. 4. Aggrieved, the assessee filed an appeal before the Ld.CIT(A). The Ld.CIT(A) vide order u/s.250 dated 26.03.2025 dismissed the appeal of the assessee stating that the trust has to file petition u/s.119(2)(b) of the Act for condonation of delay before the ld.CIT/ DIT(E). 5. Aggrieved by the order of the Ld. CIT(A), the assessee has filed an instant appeal before this Tribunal. 6. At the outset, it was the vehemently contended by the Ld.AR that the assessee is rightly eligible to claim exemption u/s.11 for the following reasons: a) Provision regarding furnishing of audit report along with the return of income has been held in plethora of cases to be a procedural Printed from counselvise.com :-4-: ITA. No.:1568/Chny/2025 provision. It has been held that furnishing of audit report is directory and not mandatory in nature and its substantial compliance would suffice. b) In the instant case, the due date for filing the audit report was 15.01.2021 and the same has been filed on 03.02.2021 with a delay of 19 days. However, the exemption u/s.11 of the Act has been denied by processing the return of income by the CPC, Bengaluru on 30.11.2021. Therefore it is evident that the audit report was actually filed well before processing the return of income by the CPC, Bengaluru. 7. As regards the contention raised by the Ld.AR in respect of filing of audit report being directory and not mandatory in nature, our attention was drawn to the decision of the Hon’ble Gujarat High Court in the case of CIT(E) v Shri Laxmanarayan Dev Shrishan Seva Khendra 2024 (10) TMI 99 wherein the Hon’ble High Court after considering the decision of the Apex Court in Wipro Limited (supra) held as follows: “5. Reliance placed by the learned Senior Standing Counsel Ms.Maithili Mehta for the assessee on the decision of the Hon’ble Supreme Court in case of The Principal Commissioner of Income Tax-III and Others versus M/s. Wipro Limited in Civil Appeal No.1499 of 2022 would not be applicable in the facts of the case, as in the facts of the present case, the assessee has claimed the exemption under Section 11 read with Section 12A (1) (b) of the Act which required the assessee to file Audit Report in Form of 10B of the Act which has nothing to do with claiming 100% exemption of total income in respect of newly established 100% Export Oriented Undertakings under Section 10B of the Act. Section 10B (8) of Printed from counselvise.com :-5-: ITA. No.:1568/Chny/2025 the Act requires the assessee to file an undertaking before the due date of furnishing of return of income under sub-section (1) of Section 139 of the Act before the Assessing Officer in writing that the provision of Section 10B of the Act may not be made applicable to him, otherwise the provision of this Section shall not apply to him for any of the relevant assessment year. 6. Considering the language of the provision of Section 10B (8) of the Act, the Hon’ble Supreme Court held that it was mandatory on part of the assessee to file declaration before the due date of filing of return under Sub-section (1) of Section 139 of the Act, whereas, in the facts of the said case the assessee filed such undertaking along with the revised return under Sub-section (5) of Section 139 of the Act and in such facts, the Hon’ble Supreme Court held that the twin conditions prescribed under Section 10B (8) of the Act was mandatory to be fulfilled and it cannot be said that though the declaration is mandatory, the filing of such declaration within the due date of filing of return under Sub-section (1) of Section 139 of the Act would be directory. 7. Reference to the aforesaid decision has no connection whatsoever remotely to the facts of the present case and therefore, in the facts of the present case, the Tribunal has rightly followed the decision of this Court in case of Sarvodaya Charitable Trust v. Income Tax Officer (Exemption) in Special Civil Application No. 6097 of 2020 decided on 09th December, 2020 as well as the decision in case of Social Security Scheme of GICEA (supra) to uphold the decision of the CIT (Appeals), wherein this Court has held that the approach of the authority in such type of cases should be equitable, balancing and judicious. In the facts of the case, when the assessee has already filed the audit report in Form 10B electronically on 27.02.2021 during pendency of appellate proceedings along with copy of audited financial statements, delay in filing the said form is rightly condoned by CIT(A) and the Tribunal. 8. In such circumstances, we are of the opinion that the Tribunal has not committed any error by not following the decision in case of M/s.Wipro Limited (supra) as referred to and relied upon by learned advocate for the assessee-Revenue, and has rightly followed the decision of this Court in case of Social Security Scheme of GICEA (supra). 9. In view of the foregoing reasons, we are of the opinion that no question of law much less any substantial question of law arises from the impugned order of the Tribunal. The Appeal is accordingly dismissed.” Printed from counselvise.com :-6-: ITA. No.:1568/Chny/2025 8. The Ld. AR further drew our attention to the decision rendered by the Hon’ble Gujarat High Court in Sarvodaya Charitable Trust v ITO [2021] 125 taxmann.com 75 (Guj) where it was held that benefit of exemption could not be denied merely on bar of limitation in furnishing audit report in Form No.10B. Further, the Ld. AR had also relied upon the decision of the Jurisdictional High Court in the case of Chandraprabhuji Maharaj Jain v DCIT [2019] 110 taxmann.com 11 (Mad) wherein it was held that when the assessee was entitled to a statutory benefit, it would be incumbent upon the concerned authority to examine the admissibility of the benefit than to foreclose the assessee on technicalities. 9. The Ld. AR also drew our attention to the decisions of the coordinate bench of this Tribunal in the case of The Shakti Foundation v ITO in ITA No.226/Chny/2025 and Kaakkum Karangal v ITO in ITA No.1166/Chny/2024 wherein similar issues regarding delay in filing Form 10B were subject matter of consideration and the coordinate bench was of the view that the filing of Form 10B was only directory in nature and not mandatory. 10. In view of the above, the Ld.AR prayed that the assessee be granted exemption u/s.11 since the filing of Form 10B is only directory and not mandatory in nature and that the substantive conditions for claiming exemption were fulfilled in the instant case. 11. On the other hand, the Ld.DR of the Revenue objected to the submissions of the Ld.AR and relied on the findings of the Ld. CIT(A). Printed from counselvise.com :-7-: ITA. No.:1568/Chny/2025 12. We have heard the rival contentions and perused all the material available on record before us and the judicial precedents relied on. We observe that the assessee has to comply with certain conditions failing which the assessee will lose the benefit of claiming exemption u/s.11, one of them being filing of Form 10B one month prior to the due date of filing the return of income u/s.139(1). On consideration of the plethora of cases cited before us, the moot principle coming out of all the said decisions is that the filing of audit report in Form 10B is only directory and not mandatory in nature and thus we are of the considered view that denial of exemption u/s.11 merely on pretext of a delay that has occurred in filing of audit report in Form 10B which is only a procedural irregularity cannot become an impediment in law in claiming the exemption. 13. In addition to the cases cited by the Ld.AR, we note that there are other decisions in which it has been clearly held that filing of Form 10B is only directory and not mandatory in nature, few of which have been stated as under: • Association of Indian Panelboard Manufacturer v DCIT [2023] 157 taxmann.com 550 (Guj) • CIT v Xavier Kelavani Mandal (P.) Ltd. [2014] 41 taxmann.com 184 (Guj) • M/s. Alternative India for Development v ITO in ITA No.2114 / Chny / 2024 – Chennai ITAT • Puran Chand Arora Charitable Trust v ITO [2025] 172 taxmann.com 161 (Del. Trib) Printed from counselvise.com :-8-: ITA. No.:1568/Chny/2025 14. We also note that the Delhi Bench of the Hon’ble Income Tax Appellate Tribunal in the case of Trilok Singh Bhandari Charitable Trust v ITO [2025] 174 taxmann.com 737 (Del. Trib) relying on the decision of the Hon’ble Madras High Court in the case of Chandraprabhuji Maharaj Jain (supra) held that the requirement of filing audit report in Form 10B before the due date as per Rule 12A(1)(b) is directory in nature and not mandatory. 15. We further note that the decision of the Ahmedabad Bench of the Hon’ble Income Tax Appellate Tribunal in Association of Indian Panelboard Manufacturer v DCIT [2022] 143 taxmann.com 418 (Ahmedabad Trib.) referred to by the Ld. CIT(A) stands reversed by the decision of the Hon’ble Gujarat High Court in the case of Association of Indian Panelboard Manufacturer v DCIT [2023] 157 taxmann.com 550 (Guj) and that the decision of the Hon’ble Supreme Court in Wipro Limited (supra) relied upon by the Ld. CIT(A) has clearly been distinguished by the Hon’ble Gujarat High Court in the case of CIT(E) v Shri Laxmanarayan Dev Shrishan Seva Khendra (supra). 16. In view of the above, we are of the opinion that filing of Form 10B is only a procedural-cum-directory requirement and therefore, once the conditions for claiming exemption u/s.11 has been substantively fulfilled, the bar of limitation on furnishing of such audit report would not result in grave consequence of denial of exemption u/s.11 of the Act and thus we direct the AO to grant exemption as claimed by the assessee u/s.11 of the Act. Printed from counselvise.com :-9-: ITA. No.:1568/Chny/2025 17. In the result the appeal of the assessee for the A.Y.2020-21 is allowed. Order pronounced in the open court on 15th October, 2025 at Chennai. Sd/- Sd/- (एबी ट वक\u0019 ) (ABY T VARKEY) \u000eया\u001aयक सद य/Judicial Member (एस. आर. रघुनाथा) (S.R.RAGHUNATHA) लेखासद य/Accountant Member चे\u000eनई/Chennai, .दनांक/Dated, the 15th October, 2025 sp आदेश क* (\u001aत0ल1प अ2े1षत/Copy to: 1. अपीलाथ'/Appellant 2. ()यथ'/Respondent 3.आयकर आयु3त/CIT– Chennai/Coimbatore/Madurai/Salem 4. 1वभागीय (\u001aत\u001aन ध/DR 5. गाड% फाईल/GF Printed from counselvise.com "