SANATHANA DHARMA TRUST V. COMMISSIONER OF INCOME TAX (EXEMPTION)

WP(C)/1663/2023

AI Insights

The case involves Sanathana Dharma Trust, a charitable trust, which has been denied exemption under the Income Tax Act for the assessment year 2018-19 due to the non-uploading of the audit report in Form No.10B. The trust filed an application for condonation of delay under Section 119(2)(b) of the Income Tax Act, which was rejected by the 1st respondent. The trust challenged this rejection in the High Court of Kerala. The court found that the trust's delay in uploading the audit report was within the permissible period as per Circular No.16 of 2022 and directed a reconsideration of the application.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 680293 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 18-01-2023
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961, Foreign Contribution (Regulation) Act, 2010
• Result in Favour of: Applicant
• Court: HIGH COURT
• Department Lawyers: JOSE JOSEPH
• Assessee Lawyers: K I MATHER; S UTHARA ASOKAN
• Keywords: Audit report; Charitable Trust; Condonation of delay; Exemption; Form No. 10B
• Section: 143(1); 119(2)(b); 80G(5)(vi); 12AA(1)(b)(i)

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE GOPINATH P. WEDNESDAY, THE 18TH DAY OF JANUARY 2023 / 28TH POUSHA, 1944 WP(C) NO. 1663 OF 2023 PETITIONER/S: SANATHANA DHARMA TRUST, REG. NO. 238/IV/2009, FIRST FLOOR, THANTHRI TOWER, DIWAN'S ROAD, ERNAKULAM, KOCHI , REPRESENTED BY ITS TRUSTEE -DR. CIJITH , PIN - 682016 BY ADVS. K.I.MAYANKUTTY MATHER S.PARVATHI UTHARA ASOKAN RESPONDENT/S: 1 COMMISSIONER OF INCOME TAX (EXEMPTION) 2ND FLOOR, SANJUAN TOWER, BEHIND CR BUILDING, ERNAKULAM NORTH P.O, KOCHI , PIN - 682018 2 THE ADDITIONAL COMMISSIONER OF INCOME TAX (EXEMPTION) 2ND FLOOR, SANJUAN TOWER, BEHIND CR BUILDING, ERNAKULAM NORTH P.O, KOCHI , PIN - 682018 3 THE INCOME TAX OFFICER (EXEMPTION) 2ND FLOOR, SANJUAN TOWER, BEHIND CR BUILDING, ERNAKULAM NORTH P.O, KOCHI , PIN - 682018 4 INCOME TAX OFFICER NATIONAL E-ASSESSMENT CENTER, INCOME TAX DEPARTMENT, MINISTRY OF FINANCE, ROOM NO. 401, 2ND FLOOR, E-RAMP, JAWAHARLAL STADIUM, NEW DELHI, PIN - 110003 5 THE PRINCIPAL CHIEF COMMISSIONER OF INCOME TAX CENTRAL REVENUE BUILDING, I.S. PRESS ROAD, ERNAKULAM NORTH P.O., KOCHI , PIN - 682018 BY ADV JOSE JOSEPH, SC, INCOME TAX DEPARTMENT, KERALA ADV. CHRISTOPHER ABRAHAM (SC) THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 18.01.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C) NO. 1663 OF 2023 2 JUDGMENT Petitioner is a Charitable Trust entitled to exemption in terms of the provisions contained in Section 80G(5)(vi) of the Income Tax Act, 1961. It also has a registration under Section 12AA(1)(b)(i) of the Income Tax Act, 1961 as well as registration on the Foreign Contribution (Regulation) Act, 2010 to accept foreign contributions to the Trust. 2. The petitioner has been filing regular returns of income since the assessment year 2009-10 and has been availing the benefit of exemption. For the assessment year 2018-19, petitioner has been denied exemption on the ground that the petitioner failed to upload the audit report in Form No.10B of the Income Tax Act. Petitioner, thereupon, filed an application under Section 119(2)(b) of the Income Tax Act, 1961, for condonation of delay and for permission to upload the audit report in Form No.10B of the Act for the assessment year 2018-19. The said application of the petitioner has been rejected by Ext.P18 order and the said order is now under challenge before this Court. 3. Learned Standing Counsel appearing for the respondent department submits that there is absolutely no WP(C) NO. 1663 OF 2023 3 illegality in Ext.P18 order and the 1st respondent has properly considered the application filed for condonation of delay and has rejected the same on the ground that no proper explanation for condonation of delay has been made by the petitioner. It is submitted that the return of the petitioner, for the assessment year 2018-19, was processed under Section 143(1) of the Income Tax Act and it was then noticed that the petitioner had not uploaded the audit report in Form No.10B of the Income Taxt Act, which is mandatory for claiming exemption. It is submitted that the petitioner is, therefore, not entitled to claim any exemption in respect of his income for the assessment year 2018-19. However, it is very fairly pointed out by the learned Standing Counsel that in terms of Circular No.16 of 2022 dated 19.07.2022, the Central Board of Direct Taxes has issued instructions in respect of failure to file audit report in Form No. 10B of the Income Tax Act , in respect of the assessment year 2018-19 and has directed that, for genuine reasons, the delay may be condoned provided the delay is upto a maximum period of three years. It is submitted that the audit report for the assessment year 2018-19 was uploaded by the petitioner on 31.03.2021 and therefore, the petitioner falls within the terms of Circular No.16 of 2022. WP(C) NO. 1663 OF 2023 4 4. Learned counsel appearing for the petitioner, in reply, submits that there was genuine cause for failure to upload audit report in Form No.10B of the Income Tax Act as is evident from a reading of Ext.P18 order itself. It is submitted that the reason is genuine and therefore, the delay ought to have been condoned in terms of the instructions contained in Circular No.16 of 2022 dated 19.07.2022. 5. Having heard the learned counsel appearing for the petitioner and the learned Standing counsel appearing for the respondent-Department, I am of the view that since the petitioner has uploaded its audit report in Form No.10B of the Income Tax Act, on 31.03.2021, the same was within the period specified in the aforesaid Circular No.16 of 2022, which to the extent it is relevant, reads as follows:- ‘’In exercise of the powers conferred under section 119(2) of the Income-tax Act, 1961 (hereinafter referred to as 'Act'), the Central Board of Direct Taxes (CBDT) by Circular NO.2 /2020 [F.No.197/55/2018-ITA-I] dated 03.01.2020 authorized the Commissioners of Income-tax to admit applications of condonation of delay in filing Form No. l0B for AY 2018-19 or for any subsequent Assessment Years where there is delay of upto 365 days and decide on merits. 2. Further to the powers delegated to Commissioners of Income-tax as discussed above, the CBDT hereby directs that 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 Pr. Chief Commissioners of Income-tax/Chief Commissioners of Income-tax are authorized to admit such applications of condonation of delay under section 119(2) of the Act and decide on merits. 3. The Pr. Chief Commissioner/Chief Commissioner or Commissioners of Income-tax, as the case may be, while WP(C) NO. 1663 OF 2023 5 entertaining such applications for condonation of delay in filing Form No. l0B, shall satisfy themselves that the applicant was prevented by reasonable cause from filing such Form within the stipulated time.’’ The reasons stated by the petitioner for delay in uploading the audit report also, in my view, qualifies for the condonation of delay as specified in Circular No.16 of 2022. 6. In the light of the above finding, Ext.P18 is quashed. The application for condonation of delay filed by the petitioner (Ext.P13) shall be reconsidered in the light of the stipulations contained in Circular No.16 of 2022 dated 19.07.2022, issued by the Central Board of Direct Taxes and taking into consideration the observations contained above. Any demand pursuant to the assessment order issued for the assessment year 2018-19, shall be kept in abeyance till the matter is reconsidered as above. The 1st respondent shall endeavour to reconsider the matter and pass fresh orders within a period of three months from the date of receipt of a certified copy of this judgment. The writ petition is disposed of as above. sd/- GOPINATH P., JUDGE ajt WP(C) NO. 1663 OF 2023 6 APPENDIX OF WP(C) 1663/2023 PETITIONER EXHIBITS Exhibit P1 A TRUE COPY OF THE PROCEEDINGS OF THE COMMISSIONER INCOME TAX -I, KOCHI DATED 27.03.2013 GRANTING REGISTRATION UNDER SECTION 12AA OF THE INCOME TAX ACT, 1961. Exhibit P2 A TRUE COPY OF THE APPROVAL GIVEN BY THE COMMISSIONER OF INCOME TAX -I, KOCHI DATED 29.11.2013 UNDER SECTION 80G(5)(VI) OF THE INCOME TAX ACT, 1961 Exhibit P3 A TRUE COPY OF THE REGISTRATION CERTIFICATE OBTAINED FROM THE MINISTRY OF HOME AFFAIRS, FOREIGNERS DIVISION (FCRA WING), NEW DELHI DATED 07.09.2020 Exhibit P4 A TRUE COPY OF THE RETURN FILED FOR AY-2017- 18 DATED 30.03.2018 ALONG WITH AUDIT REPORT IN FORM 10B DATED 30.09.2017 Exhibit P5 A TRUE COPY OF THE ACKNOWLEDGMENT OF FILING OF RETURN DATED 17.02.2022 ALONG WITH FORM 10B AUDIT REPORT DATED 15.02.2022 FOR AY- 2021-22 Exhibit P6 TRUE COPY OF THE ACKNOWLEDGMENT OF FILING OF RETURN DATED 06.10.2022 ALONG WITH FORM 10B AUDIT REPORT DATED 06.10.2022 FOR AY- 2022-23 Exhibit P7 TRUE COPY OF THE RETURN FILED BY THE PETITIONER ONLINE FOR THE AY-2018-2019 DATED 31.03.2019 Exhibit P8 TRUE COPY OF THE AUDIT REPORT IN FORM 10B DATED 30.9.2018 FOR AY-2018-2019 Exhibit P9 TRUE COPY OF THE COMMUNICATION ISSUED BY THE ASSISTANT DIRECTOR OF INCOME TAX, CPC TO THE PETITIONER DATED 23.02.2021 Exhibit P10 TRUE COPY OF THE DEMAND NOTICE ISSUED BY THE 3RD RESPONDENT DATED 09.07.2021 Exhibit P11 TRUE COPY OF THE ONLINE RESPONSE GIVEN BY THE PETITIONER TO EXT.P10 Exhibit P12 TRUE COPY OF THE FIRST REMINDER NOTICE (ONLINE) DATED 08.09.2021 ISSUED BY THE 3RD RESPONDENT Exhibit P13 TRUE COPY OF THE REQUEST FOR CONDONATION OF DELAY PUT IN BY THE PETITIONER BEFORE THE 1ST RESPONDENT DATED 15.09.2021 Exhibit P14 TRUE COPY OF THE CIRCULAR NO.10/2019 (F.NO.197/55/2018/-ITA-1) DATED 22.05.2019 WP(C) NO. 1663 OF 2023 7 Exhibit P15 TRUE COPY OF THE CIRCULAR NO.2/2020 (F.NO.197/55/2018/-ITA-1) DATED 03.01.2020 Exhibit P16 TRUE COPY OF THE COMMUNICATION OF THE 1ST RESPONDENT TO THE PETITIONER DATED 22.10.2021 Exhibit P17 TRUE COPY OF THE ONLINE ACKNOWLEDGMENT EVIDENCING SUBMISSION OF THE DOCUMENTS BY THE PETITIONER DATED 22.10.2021 Exhibit P18 TRUE COPY OF THE ORDER ISSUED BY THE 1ST RESPONDENT DATED 06.12.2022 "