SOCIAL SECURITY SCHEME OF GICEA V. COMMISSIONER OF INCOME TAX (EXEMPTIONS), AHMEDABAD

SCA/17612/2022

AI Insights

The case revolves around the Gujarat Institute of Civil Engineers and Architects, a public charitable trust, which faced a denial of tax exemption under Section 11 of the Income Tax Act due to the late filing of an audit report in Form No.10B for the Assessment Year 2016-17. The petitioner argued that the delay was inadvertent and sought condonation under Section 119(2)(b) of the Act, which was initially rejected by the tax authorities. The High Court examined whether the delay in filing the audit report should result in the denial of tax exemption, considering the principles of substantial compliance and the discretionary powers of the tax authorities to condone such delays.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 671681 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 21-12-2022
• Assessment Year: misc
• Other Referred Cases: Sarvodaya Charitable Trust vs. Income Tax Officer (Exemption)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Applicant
• Court: HIGH COURT
• Department Lawyers: MAITHILI MEHTA
• Assessee Lawyers: B S SOPARKAR
• Keywords: Audit report; Charitable Trust; Condone delay; E-filing; Exemption denial
• Section: 154; 143(1); 11; 119(2)(b); 12A(1)(b)

Judgement Text

"C/SCA/17612/2022 ORDER DATED: 21/12/2022 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 17612 of 2022 ========================================================== SOCIAL SECURITY SCHEME OF GICEA Versus COMMISSIONER OF INCOME TAX (EXEMPTIONS), AHMEDABAD ========================================================== Appearance: MR B S SOPARKAR (6851) for the Petitioner(s) No. 1 MS MAITHILI D MEHTA (3206) for the Respondent(s) No. 1 ========================================================== CORAM:HONOURABLE MS. JUSTICE SONIA GOKANI and HONOURABLE MRS. JUSTICE MAUNA M. BHATT Date: 21/12/2022 ORAL ORDER (PER: HONOURABLE MRS. JUSTICE MAUNA M. BHATT) 1. This petition is filed challenging the order dated 12.3.2021,passed by respondent under Section 119(2)(b) of Income Tax Act, 1961 (“The Act” for short), wherein application of the assessee to condone the delay in e-filing the audit report in Form No.10B for Assessment Year 2016-17,has been rejected. Facts: 2. Petitioner is a Public Charitable Trust registered with the Charity Commissioner as well as Income-tax authorities. Petitioner is a Social Security Scheme of Gujarat Institute of Page 1 of 7 C/SCA/17612/2022 ORDER DATED: 21/12/2022 Civil Engineers and Architects which pools contribution from registered civil engineers and architects to disburse to the family members in case of death. It is the case of the petitioner that it has been filing returns of income in time along with audit report under Section 12A(1)(B) of the Act. For the assessment year 2016-2017, the petitioner obtained audit report from Chartered Accountant well before the time limit. However, though the audit report in Form 10B for A.Y. 2016-17 was required to be filed along with return of income, the same could not be uploaded along with return of income inadvertently. In absence of any audit report the Central Processing Centre had not granted exemption under Section 11 of the Act which otherwise was available to it since many years and resultantly demand of Rs.16,39,950/- was raised. The petitioner therefore filed a rectification application u/s 154 of the Act seeking to place on record audit report to the Central Processing Centre but the same was rejected vide order dated 25.1.2019. The reason given in the order dated 25.1.2019 was that Form No.10B audit report, was not filed in time. Relying upon instructions of board, the petitioner filed an application before the CBDT to condone the delay in filing Form No.10B audit report. The same has been rejected, aggrieved by which, the present petition is filed. Page 2 of 7 C/SCA/17612/2022 ORDER DATED: 21/12/2022 Submissions of the petitioner: 3. Heard Mr. B.S.Soparkar, learned advocate for the petitioner. He submitted that the order passed by the respondent dated 12.3.2020 is bad in law because as per CBDT circular No.10 dated 22.5.2019, the Commissioner of Income- tax is required to condone the delay for a reasonable cause. In this case the cause shown by the petitioner is reasonable as it is out of inadvertence, that Form 10B report could not be filed along with return, though the same was obtained before due date of return. The petitioner came to know about the default in filing Form No.10B audit report upon receipt of the intimation under Section 143(1) rejecting the claim of exemption under Section 11 of the Act. He further submitted that merely non-filing of Form No.10B report, for which, the assessing officer could not take up the return filed by the petitioner in scrutiny could not be a ground for denial of exemption. In support of his submission, he relied upon the decision of this Court in the case of Sarvodaya Charitable Trust vs. Income Tax Officer (Exemption) in R/Special Civil Application No.6097 of 2020 dated 9.12.2020. He further submitted that the petitioner is otherwise a charitable organization and eligible for exemption u/s 11, as it has received the same benefits since many years. The demand of Rs.16,39,948/- is erroneously raised as the application filed by Page 3 of 7 C/SCA/17612/2022 ORDER DATED: 21/12/2022 the petitioner under Section 119(2)(b) of the Act is rejected. He thus submitted that the petition being meritorious, the same may be allowed and the impugned order may be quashed and set aside. Submissions of the Respondent: 4. Appearing for the respondent, learned senior standing counsel Mr. Maithali Mehta, submitted that in this case the petitioner filed its return of income for A.Y.2016-2017, on 24.8.2016. The due date for filing of Form No.10B was 30.9.2016, which was extended up to 17.10.2016, however, the petitioner sought to file the same on 28.8.2018 which was late by 680 days. The petitioner filed an application u/s.119(2)(b) of the Act seeking condonation of delay in filing audit report in Form No.10B. However, application of the petitioner u/s.119(2)(b) seeking condonation of delay was rejected, as there was no reasonable cause or genuine hardship justifying the belated filing of Form No. 10B. Respondent in the order dated 12.3.2020 has in detail observed that no reasonable cause has been given to condone the delay. Further it has been observed that inadvertence or ignorance of law cannot be a reasonable ground and, therefore, the application was rightly rejected vide order dated 12.3.2020. Page 4 of 7 C/SCA/17612/2022 ORDER DATED: 21/12/2022 4.1. She further submitted that the rectification application filed by the petitioner under Section 154 of the Act, was rejected as the same was not covered under the conditions of the Circular No.10 dated 22.5.2019, relied upon by the petitioner. Admittedly, the petitioner has e-filed Form No.10B on 28.8.2018 which was much beyond the time specified in the said circular. 4.2. Distinguishing the decision of this Court in the case of Sarvodaya Charitable Trust vs. Income Tax Officer (Exemption), she submitted that in the present case assessee failed to justify by placing reasonable cause or the genuine hardship caused. An inadvertence cannot be stated to be sufficient reason and, therefore, the application under Section 119(2)(b) has been rightly rejected by the respondent. Conclusion: 5. Having heard learned advocates for the respective parties and having gone through the material on record, the only question which falls for consideration is whether respondent committed an error in passing the order by not condoning the delay in filing Form No.10B along with the return filed. In the decision of this Court in Sarvodaya Charitable Trust vs. Income Tax Officer (Exemption), this Court has observed that furnishing of audit report along with return filed is to be Page 5 of 7 C/SCA/17612/2022 ORDER DATED: 21/12/2022 treated as a procedural requirement. It is though mandatory in nature the substantial compliance is required to be made. In the case of Sarvodaya Charitable Trust vs. Income Tax Officer (Exemption) the assessee had produced the audit report after processing the return under Section 143(1). This Court in the said order has observed that the approach of the authority in these type of cases should be equitable, balancing and judicious. Technically speaking, respondent No.2 might be justified in denying the exemption under Section 11 of the Act by rejecting such condonation application, but an assessee, which is a public charitable trust for past 30 years which substantially satisfies the conditions for availing such exemption, should not be denied the same merely on the bar of limitation especially when the legislature has conferred wide discretionary powers to condone such delay . Applying the said principle, the petition is allowed. The impugned order passed by respondent dated 12.3.2021 is quashed and aside. The impugned order of rectification under Section 154 of the Act dated 25.1.2019 is also quashed and set aside. The application for condonation of delay filed by the petitioner before the respondent is allowed. 6. The respondent is now directed to process the return in accordance with law. It is noticed that no assessment is framed and only an intimation under Section 143(1) of the Act Page 6 of 7 C/SCA/17612/2022 ORDER DATED: 21/12/2022 was issued. No scrutiny could be carried out by the respondent since the audit report under Section 10B was not on record. Learned advocate for the petitioner Mr. B.S.Soparkar fairly submitted that the issue of benefit of exemption may be examined by issuance of notice u/s 143(1)/ 143(2) and the petitioner shall not object to the said proceedings by taking the ground of limitations. 7. With this the petition stands disposed of. No costs. (SONIA GOKANI, J) (MAUNA M. BHATT, J) NAIR SMITA V. Page 7 of 7 "