M/S. SETH B D GOYAL CHARITABLE TRUST,KOLKATA V. I.T.O. WARD - 1(3), EXEMPTION, KOLKATA

ITA 2267/KOL/2024

AI Insights

The case involves M/s. Seth B D Goyal Charitable Trust appealing against the order of the Ld. Addl./Joint CIT(A) which confirmed the disallowance of exemption under section 11 of the Income Tax Act, 1961, due to the late filing of the audit report in Form No. 10B and the return of income. The Trust argued that the delay was unintentional and explained by the pandemic's impact on their operations. The Tribunal noted precedents and CBDT instructions suggesting that the filing of the audit report is directory, not mandatory, and that procedural lapses should not lead to disallowance without proper notice.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 36255 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2020-2021
• Other Referred Cases: DCIT vs Surendra Steel Pvt. Ltd., Ramkrishna Satynanda Ashram vs ITO, Camellia Educare Trust vs ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Condonation of delay; Set aside; Business income; Reasonable cause; Capital expenditure; Principle of natural justice; Charitable institution; Benefit of exemption
• Section: 250; 143(1); 11; 12AA; 139; 139(4); 10B

Judgement Text

"आयकर अपीलीय अधिकरण कोलकाता 'एसएमसी' पीठ, कोलकाता में IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘SMC’ BENCH, KOLKATA श्री संजय शमाा, न्याधयक सदस्य एवं श्री राक ेश धमश्रा, लेखा सदस्य क े समक्ष Before SHRI SONJOY SARMA, JUDICIAL MEMBER & SHRI RAKESH MISHRA, ACCOUNTANT MEMBER I.T.A. No.: 2267/KOL/2024 Assessment Year: 2020-21 M/s. Seth B D Goyal Charitable Trust Vs. I.T.O. Ward-1(3), Exemption, Kolkata (Appellant) (Respondent) PAN: AABTS7785F Appearances: Assessee represented by : Sunil Surana A.R. Department represented by : Madhumita Das, Addl. CIT, Sr. DR. Date of concluding the hearing : February 25th, 2025 Date of pronouncing the order : April 4th, 2025 ORDER PER RAKESH MISHRA, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the order of the Ld. ADDL/JCIT(A)-1, Surat [hereinafter referred to as “the Ld. Addl./Joint CIT(A)” passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for AY 2020-21dated 24.09.2024, which has been passed against the intimation order u/s 143(1) of the Act, dated 30.11.2021. Page | 2 I.T.A. No.: 2267/KOL/2024 Assessment Year: 2020-21 M/s. Seth B D Goyal Charitable Trust. 2. The assessee is in appeal before the Tribunal raising the following grounds of appeal: “1 For that the Ld. CIT(A) erred in not condoning the delay in filing the appeal even when reasonable cause for not filing the appeal within time was duly explained. 2. For that the Ld. CIT(A) erred in confirming the action of CPC in not issuing any prior intimation 143(1)(a) before making the impugned disallowance of application of income u/s 143(1) of the I.T. Act and therefore the disallowance is liable to be deleted and returned income be accepted. 3. For that the Ld. CIT(A) erred in confirming the action of CPC in disallowing the amount of Rs. 12,96,197/- on account of application of income during the year without assigning any specific reason. 4. For that the Ld. CIT(A) erred in confirming the action of CPC Bangalore in disallowing the claim of exemption u/s 11 in the intimation u/s 143(1) for delay in filing audit report in Form 10B when there was no mismatch of data uploaded in the audit report and the data contained in the return of income which was not disturbed by way of selection under scrutiny. 5. For that the Ld. CIT(A) erred in confirming the action of CPC Bangalore in disallowing the claim of exemption u/s 11 in the intimation u/s 143(1) for delay in filing audit report in Form 10B when the requirement was only directory and not mandatory and therefore the exemption should not be denied only for technical breach of law and procedural irregularities 6. For that the Ld. AO erred in disallowing the claim of exemption in the intimation u/s 143(1) when such adjustment was outside the purview of the section.” 3. Brief facts of the case are that the assessee is a Trust and had filed the return of income on 31.03.2016 showing total income of Rs. ‘NIL’ that is after the due date of filing i.e. 15.02.2021. The return was processed u/s 143(1) of the Act and the exemption claimed by the assessee u/s 11 of the Act was disallowed. Aggrieved with the intimation u/s 143(1)(a) of the Act, the assessee preferred an appeal before the Ld. Addl./Joint CIT(A) who, vide order dated 24.09.2024 Page | 3 I.T.A. No.: 2267/KOL/2024 Assessment Year: 2020-21 M/s. Seth B D Goyal Charitable Trust. dismissed the appeal. Before the Ld. Addl./Joint CIT(A), it was submitted that Form No. 10B was filed online on 09.06.2023, the return of income was filed belatedly on 31.03.2021 i.e. after the due date of 15.02.2021 while the intimation u/s 143(1) of the Act was issued on 30.11.2021. Before the Ld. Addl./Joint CIT(A), the assessee raised a ground that the CPC erred in not issuing any prior show cause notice u/s 143(1)(a) of the Act before making the impugned disallowance of application of income u/s 143(1) of the Act and therefore, the disallowance was liable to be deleted as the CPC erred in disallowing the amount of Rs. 12,96,197/- on account of application of income during the year without assigning any reason. The appeal was delayed and the request for condonation of delay was held to be not liable to be accepted and the appeal was liable to be dismissed on this ground only. The Ld. Addl./Joint CIT(A) further went through the submission and ‘disallowed’ the appeal by observing as under: “5.1. However, notwithstanding with the above, for sake of natural justice, the appeal is adjudicated on merit also. The grounds of appeal are pertaining to making adjustment by way of disallowance of deduction under section 11 of the Act during processing of ITR filed for A.Y. 2020-21 u/s. 143(1) of the Act. Aggrieved by the said disallowance, the appellant is in appeal and has raised this ground which is adjudicated hereunder. 5.2. During the appellant proceedings, notices u/s 250 of the Act was issued to the appellant. In response to the notice, the appellant has filed written submission along with evidences in the e-filing portal of the Department. In view of the above facts, I proceed to dispose the appeal of the appellant, accordingly. I have gone through the order passed u/s.143(1) of the Act, grounds of appeal, statement of facts and submission of the appellant. The appellant had filed its original return of income for AY 2020-21 on 31.03.2021 i.e. after the extended due date of 15.02.2021 claiming exemption of Rs. 13,66,994/- u/s. 11 of the I.T. Act however Form 10B was not filed within due date. Page | 4 I.T.A. No.: 2267/KOL/2024 Assessment Year: 2020-21 M/s. Seth B D Goyal Charitable Trust. 5.3. The A.O., CPC disallowed the exemption claimed by the appellant in its ITR under section 11 of the Act during processing of ITR filed for A.Y. 2020- 21 u/s. 143(1) of the Act on a ground that the audit report in Form 10B was furnished after due date by the appellant. 5.4 In this regard, it is to mention that Audit Report in Form 10B was completed on 07.06.2023, that is much after the date of filing of return and after receiving intimation u/s. 143(1) of the Act. Hence, the appellant has not followed the procedural part and filed return without being audited. Nature of adjustment under section 143(1) is as under: Total income or loss is computed under Section 143(1) after making the following adjustments: • Arithmetical error in the return • Any incorrect claim which is apparent from any information in the return where incorrect claim which may include the following: • The claim of an item in the return which is inconsistent with another entry of the same or some other item in such return for example, income from other sources are deducted from business income but not declared under income from other sources. • Disallowance of set-off of loss in the financial year which is carried forward from previous years in which return was filed beyond the specified due date • Disallowance of expenditure is indicated in the audit report but not indicated in the return of income. 5.5 In this case, the appellant has not filed Audit Report within stipulated time, hence, the AO CPC correctly adjusted/disallowed the benefit of section 11 claimed by the appellant. Further, the appellant has raised another ground that no reason has been assigned for disallowing the benefit of section 11, in this regard, it is mentioned that on very first page of intimation u/s. 143(1) it is mentioned that no form has been filled. Further, the case law i.e., DCIT vs Surendra Steel Pvt. Ltd. having ITA No. 217/Kol/2023 is not relevant with the case as facts are different. In that case the form/ITR was not uploaded on due date due to technical reasons however, in the instant Form 10B was filed much after processing of the return. Similarly, another case law relied upon by the appellant i.e., Ramkrishna Satynanda Ashram vs ITO ITA/2114/Kol/2018 is also having different facts. In that case the matter was set aside to the AO. Further, in that case Audit report was obtained by the assessee before filing its ITR, however in the present case Audit Report was uploaded on 07.06.2023 for A.Y. 2020-21 i.e. after 26 months. Hence, the case laws relied upon by the appellant have no Page | 5 I.T.A. No.: 2267/KOL/2024 Assessment Year: 2020-21 M/s. Seth B D Goyal Charitable Trust. relevance with this case. Accordingly, both the grounds raised by the appellant are disallowed. 6. In the result, the appeal is disallowed.” 4. Aggrieved with the order of the Ld. Addl./Joint CIT(A), the assessee has filed this appeal before the Tribunal. 5. Rival submissions were heard, the paper book filed and the submissions made have been examined. As regards the delay in filing the appeal before the Ld. Addl./Joint CIT(A), the assessee has filed an affidavit of Shri Sunil Kumar Jalan (CS), the contents of which are as under: “I, Sunil Kumar Jalan, (CS) and A/R aged about 55 years, residing at 123/4, Bangur Avenue, Block-B, North 24 Parganas, Kolkata-700055 working for gain at 4 Fairlie Place, Kolkata-700001, do solemnly affirm and declare as under: 1. That I was looking after the Audit, Income Tax Return filing and Tax matters of M/s Seth BD Goyal Charitable Trust for Assessment Year-2020-21. 2. That in December 2021, Sri Birdhi Chand Goyal, trustee of M/s Seth B D Goyal Charitable Trust handed me order under section 143(1) dated 30.11.2021 for Assessment Year-2020-21 to file an appeal before CIT(A). 3. That I kept the order on my table. However I could not attend office subsequently as the third Covid wave just started. Later on after a month when I joined, there was huge piling of work on my table. I could not remembrance the pending work and the order got misplaced and therefore I could not keep track of filing the appeal. 4. Later on, in the month of May 2023, the trust wanted to know the status of appeal from me. On searching all the files, it was unfortunately noticed that the order against which appeal was to be filed was by mistake kept in another file. 6. That delay of 384 days in filing appeal was accidental and due to lapse on my part and was unintentional. The trust was not gaining any benefit by delaying the appeal. Page | 6 I.T.A. No.: 2267/KOL/2024 Assessment Year: 2020-21 M/s. Seth B D Goyal Charitable Trust. 7. That the above statements are true to the best of my knowledge and belief. Deponent Date: 15:06.2023 Sunil Kumar Jalan” In view of the affidavit filed, there was sufficient cause for the delay in filing the appeal before the Ld. Addl./Joint CIT(A), which ought to have been condoned. Hence, the delay in filing the appeal before the Ld. Addl./Joint CIT(A) is hereby condoned. 6. The Ld. AR relied upon the decision of the Coordinate Bench of ITAT, Kolkata in the case of ITO vs. Camellia Educare Trust in ITA No. 636/KOL/2022 order dated 30.05.2023 and the judgment of Hon'ble Calcutta High Court in the case of CIT(Exemptions), Kolkata vs. Camellia Educare Trust reported in I.A. No. GA/2/2024 dated 15.05.2024 besides other decisions in support of the claim that belated audit report in Form No. 10B ought to have been accepted as the filing of the same along with the return of income is directory and not mandatory. 7. We have gone through the submissions made. The Hon'ble Calcutta High Court in the case of Camellia Educare Trust (supra) has confirmed the order of the Coordinate Bench dated 30.05.2023. The Hon'ble Tribunal in the case of Camellia Educare Trust (supra) has held as under: “7. We have heard the rival contentions and perused the material available on record and have gone through various references made by both the parties in the course of their arguments. We do find force in the submissions made by the Ld. Counsel for his reliance on the CBDT Instruction extracted above, wherein reference is made to sec. 139 in respect of filing of return for the purpose of claiming benefit of exemption u/s. 11 for trust registered u/s. 12AA of the Act. Clarification given by the CBDT instruction gets verified Page | 7 I.T.A. No.: 2267/KOL/2024 Assessment Year: 2020-21 M/s. Seth B D Goyal Charitable Trust. when we refer to the amendment brought in section 12(1)(ba) which now incorporates the time allowed in sub-section (1) or sub-section (4) of section 139 for the purpose of compliance of sub-section (4A) of the said section in respect of furnishing of return of income. 7.1. Assessee in the present case has filed a belated return u/s. 139(4) of the Act which the department has not held it to be a defective return u/s. 139(9) and has processed it by accepting the revenue and capital expenditure though denying the exemption claimed u/s. 11 and computed the total income equal to the total receipts of the assessee for the year. Once a return has been processed as a valid return, there are restrictions within section 143(1)(a) which lists down six specific adjustments which can be made in the processing of return. 7.2. Further, in respect of any adjustment which is proposed to be made, a prior intimation is required to be served on the assessee, either in writing or electronically, as contained in 1st proviso to section 143(1)(a) of the Act. Ld. Counsel has evidently demonstrated before us, the failure on the part of CPC to issue such prior intimation to the assessee before making an adjustment by way of disallowing the claim of exemption u/s. 11 of the Act. Thus, there are two aspects which emerges on this issue as to whether the disallowance made is a permissible adjustment contained in sec. 143(1)(a) and whether this adjustment, if permissible, has been made in compliance to 1st proviso to sec. 143(1)(a) of the Act. 8. Considering the facts on record and the perusal of the provisions contained in sec. 143(l)(a) of the Act, we find that on both the aspects, the revenue fails. This position has not been controverted by Ld. Sr. DR also. Even if we assume for a moment that such an intimation was given to the assessee in accordance with the 1st proviso, then the second proviso stipulates that if any response is received from the assessee then, the same should be considered before making any adjustment or disallowance. In case, where there is no response received from the assessee then, within thirty days of the issue of such intimation, department is free to make such adjustment or disallowance. The documentary evidence placed on record and the e-proceedings downloaded from the Income Tax portal, no where suggests that such a process has been followed. Thus, we find that the impugned intimation issued u/s. 143(1)(a) of the Act, dated 30.11.2021 is not in compliance with the 1st proviso to section 143(1)(a) of the Act and thus, the impugned intimation is invalid under the Act. 8.1. Further, without prejudice to our above finding, we are in agreement with the submission made by the Id. Counsel that income should be understood in its commercial sense and computing the total income of the Page | 8 I.T.A. No.: 2267/KOL/2024 Assessment Year: 2020-21 M/s. Seth B D Goyal Charitable Trust. assessee equal to the total receipts for the year is not in accordance with the commercial prudence and commercial sense, despite the fact that in the intimation itself, both revenue and capital expenditure have been accepted by CPC in the processing of the return. It is important to note that intimation format contains tabulated columns which runs into several pages. There are two main columns, one column description shows ‘as provided by tax payers’ and the another column shows ‘as computed u/s. 143(1)’. Thus, on pages 21 and 24, in both the columns, the figures claimed by the assessee towards revenue and capital expenditure have been stated which evidently demonstrates that the same have been accepted in the processing of the return. 8.2. Since we have given our observations and findings by taking recourse to CBDT instruction extracted above, read with sect. 139(4) and sec. 12(1)(ba), we do not find any relevance to discuss and adjudicate on the applicability of Taxation and Other Laws (Relaxation and Amendment of certain provisions) Act, 2020 (TOLA), as contended by Ld. Sr. DR in respect of filing of return and Form 10B beyond the extended due date covered by TOLA. 8.3. Considering the above discussion, factual matrix, documentary evidence placed on record, CBDT Instruction and circulars and the applicable provisions of law, we are of the considered view to allow the grounds of Cross objection raised by the assessee and dismiss the grounds raised by the revenue in its appeal. Accordingly, Cross Objection by the assessee is allowed and the appeal of the revenue is dismissed.” 8. The Hon'ble Tribunal has also relied upon the CBDT’s instruction vide F.No.173/193/2019-ITA-I dated 23.04.2019 that the return could be furnished within the time allowed u/s 139 of the Act. We have considered the submissions made and in the interest of justice, we set aside the order of the Ld. Addl./Joint CIT(A) and remand the matter to him to decide the issue in accordance with law as to whether any show cause notice was issued before making the adjustment as the adjustment u/s 143(1)(a) of the Act could not have been made without issuing the show cause notice and whether the exemption was allowable to the assessee as filing of Form No. 10B, i.e. the audit report is held to be directory and not mandatory in the orders Page | 9 I.T.A. No.: 2267/KOL/2024 Assessment Year: 2020-21 M/s. Seth B D Goyal Charitable Trust. of the Tribunal relied upon by the assessee. Prima facie it appears that no show cause notice was issued to the assessee hence there was no justification for making the impugned addition, however, in the absence of any evidence in this regard, the issue is remitted to the Ld. Addl./Joint CIT(A) to decide after ascertaining the facts of the case, and in case no show cause notice was issued, the adjustment made is liable to be deleted. The assessee shall be given a reasonable opportunity to file the required details and rule 46A of the Income Tax Rules, 1962 shall also be followed, if applicable and the assessee shall be at liberty to raise all contentions in support of the relief claimed before the Ld. Addl./Joint CIT(A). 9. In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open Court on 4th April, 2025. Sd/- Sd/- [Sonjoy Sarma] [Rakesh Mishra] Judicial Member Accountant Member Dated: 04.04.2025 Bidhan (P.S.) Page | 10 I.T.A. No.: 2267/KOL/2024 Assessment Year: 2020-21 M/s. Seth B D Goyal Charitable Trust. Copy of the order forwarded to: 1. M/s. Seth B D Goyal Charitable Trust, 40-B, Hariyana Niwas, Vivekananda Road, Girish Park, Kolkata, West Bengal, 700007. 2. I.T.O. Ward-1(3), Exemption, Kolkata. 3. ADDL/JCIT(A)-1, Surat. 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. 6. Guard File. //True copy // By order Assistant Registrar ITAT, Kolkata Benches Kolkata "