THE ABILITY PEOPLE,VISAKHAPATNAM V. INCOME TAX OFFICER, EXEMPTION WARD, VISAHAPATNAM

ITA 307/VIZ/2025

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The case involves The Ability People, a society registered under the Andhra Pradesh Societies Registration Act, 2001, which appealed against the denial of exemption under section 11 of the Income Tax Act, 1961 for the assessment year 2024-25. The exemption was initially denied by the Centralized Processing Centre (CPC) due to the late filing of the audit report in Form 10B. The Commissioner of Income Tax (Appeals) upheld this decision. The Tribunal, however, noted that the audit report was available before the processing of the return and cited precedents where delays in procedural filings did not affect substantive rights. The Tribunal's decision emphasized that procedural defaults should not override substantive claims if the conditions for the claim are otherwise satisfied.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 708212 (ITAT-VISAKHAPATNAM)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2024-2025
• Other Referred Cases: Sarvodaya Charitable Trust v. ITO(E), Association of Indian Panel board Manufacturer v. Dy. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution; Benefit of exemption
• Section: 11; 12A; 119(2)(b); 10B

Judgement Text

"आयकर अपीलीय अधिकरण, धिशाखापटणम पीठ, धिशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM “SMC” BENCH, VISAKHAPATNAM (HYBRID HEARING) श्री रिीश सूद ,न्याधयक सदस्य एिं श्री एस बालाक ृष्णन, लेखा सदस्य क े समक्ष BEFORE SHRI RAVISH SOOD, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकर अपील सं./I.T.A.No.307/VIZ/2025 (निर्धारण वर्ा/ Assessment Year: 2024-25) The Ability People 49-27-10, Madhuranagar Visakhapatnam – 530016 Andhra Pradesh. [PAN:AABAT9780E] Vs. Income Tax Officer (Exemption Ward) Income Tax office, Infinity Towers Sankaramatam Road Visakhapatnam – 530016 Andhra Pradesh (अपीलधर्थी/Appellant) (प्रत्यर्थी/Respondent) करदाता का प्रतततितित्व/ Assessee Represented by : Shri Darshan Jakharia, CA राजस्व का प्रतततितित्व/ Department Represented by : Dr.Satyasai Rath, CIT (DR) सुिवाई समाप्त होिे की ततति/ Date of Conclusion of Hearing : 09.07.2025 घोर्णध की तधरीख/Date of Pronouncement : 18.07.2025 आदेश /O R D E R PER SHRI S BALAKRISHNAN, ACCOUNTANT MEMBER: 1. This appeal is filed by the assessee against order of Learned Commissioner of Income Tax (Appeals)/ADDL/JCIT(A)-1, Bengaluru [hereinafter in short “Ld.CIT(A)”] vide DIN & Order No. ITBA/APL/S/250/2024-25/1074672915(1) I.T.A.No.307/VIZ/2025 The Ability People Page. No 2 dated 19.03.2025 for the A.Y.2024-25 arising out of the intimation passed under section 143(1) of Income Tax Act, 1961 (in short ‘Act’) dated 28.01.2025. 2. Brief facts of the case are that, assessee being a society formed in the year 2007 and registered with Registrar of Societies, Visakhapatnam Andhra Pradesh under the Andhra Pradesh Societies Registration Act, 2001 vide registration number 252 of 2007. Assessee for the impugned assessment year filed the audit report in Form 10B on 15.11.2024 whereas it is ought to have been filed on or before 07.10.2024. The Centralized Processing Centre, Bangalore (in short “CPC”) while processing the return denied the exemption claimed by the assessee under section 11 of the Act. 3. Against the denial of exemption claimed under section 11 of the Act, the assessee carried the matter before Ld. CIT(A). The Ld. CIT(A) after perusing the submissions and the decisions relied on by the assessee upheld the order of the Ld. AO by dismissing the appeal of the assessee. 4. On being aggrieved by the order of the Ld. CIT(A), assessee is in appeal before us by raising following grounds of appeal: - “1. The learned CIT(A) erred in confirming the denial of exemption u/s.11 on the premise that audit report in form 10B was not filed within specified due date ignoring that the audit report was filed before processing the return of income and accordingly the exemption u/s 11 should have been allowed. 2.. For these and other ground which may be raised during or before the appeal is heard. It is prayed that the relief be granted. I.T.A.No.307/VIZ/2025 The Ability People Page. No 3 3. The learned Commissioner of Income Tax (Appeals) [CIT(A)] erred in law while passing the order under section 250 of the Act.” 5. Ground Nos. 2 and 3 are general in nature and needs no adjudication. 6. Ground No.1 relates to denial of exemption under section 11 of the Act considering the fact that the audit report in Form 10B was not filed within the due date as prescribed under the Act. 7. On this issue, Ld. Authorised Representative [hereinafter “Ld.AR”] argued that Form 10B could not be filed by the assessee during the impugned assessment year which is not intentional. He further submitted that audit report in Form 10B has been filed before CPC on 15.11.2024 whereas the intimation under section 143(1) of the Act was generated on 28.01.2025. He further pleaded that on the date of processing of the return of income by the CPC, Form 10B is available on record and CPC ought to have considered the audit report in Form 10B before denying the exemption under section 11 of the Act. He also argued that various judicial pronouncements including the coordinate benches of the Tribunal have consistently taken a view that filing of Form 10B is only directory and not mandatory. He also further submitted that the Hon’ble High Courts have held that if the audit report in Form 10B is available before CPC, before processing of the return of income it is deemed to have been filed within the due date. He therefore pleaded that the denial of exemption under section 11 of the Act be deleted. Further, he also submitted that the assessee has filed condonation I.T.A.No.307/VIZ/2025 The Ability People Page. No 4 petition under section 119(2)(b) of the Act before the Ld. CIT(E) which is pending for disposal by the Ld.CIT (Exemption). 8. Per contra, Ld. Departmental Representative [hereinafter in short “Ld.DR”] relied on the orders of the Revenue Authorities and fully supported the same. 9. We have heard both the sides and perused the material available on record. It is an undisputed fact that the assessee has filed the audit report much before the processing of the return of income under section 143(1) of the Act before CPC. The CPC has not taken the same into consideration while processing the return of income under section 143(1) of the Act, even though the audit report was very much available at the time of processing of the return of income. However, we note that it is a well settled law that delay in filing the Form 10B is a procedural default should not disentitle assessee from claiming exemption under section 11 of the Act, if the other conditions fulfilled by the assessee for making such claim. Hon’ble Gujarat High court in the case of Sarvodaya Charitable Trust v. ITO(E) [125 taxmann.com 75] held that, where assessee is a public charitable trust registered under section 12A of the Act had substantially satisfied the conditions for availing the benefit of exemption as trust would not be denied the exemption merely on bar of limitation in furnishing of audit report in Form 10B. Further, in the case of Association of Indian Panel board Manufacturer v. Dy. CIT [157 taxmann.com 550], the Hon’ble Gujarat High Court held that once the audit report I.T.A.No.307/VIZ/2025 The Ability People Page. No 5 in Form 10B is found to be available before assessing officer before conclusion of assessment proceedings / processing of the return of income, the requirement of law is satisfied. The Hon’ble Gujarat High Court made the following observations: - “5.7. The tribunal misdirected itself in yet another way when it observed that The Finance Act, 2015 with effect from 1.4.2016, that is from assessment year 2016-17 changed the legal position. There is no such change which could be said to have altered the legal position. The only change is with regard to compulsory filing of audit report in Form 10B in electronically form which is made mandatory under Rule 12(2) of the Income Tax Rules, 1962 but there is no change with regard to the substantive law about filing of audit report as stated above. 6. The moot aspect thus centres around to the requirement of the availability of the audit report when the assessment was undertaken by the Assessing Officer even though the same may not have been filed along with the return of income. Filing of audit report is held to be substantive requirement but not the mode and stage of filing, which is procedural. Once the audit report in Form 12B is filed to be available with the Assessing Officer, before assessment proceedings take place, the requirement of law is satisfied. In that view, the Income-Tax Tribunal was not justified in dismissing the appeal of the assessee.\" 10. Various case laws as relied on by the Ld.AR also have taken similar views while deciding the delay in filing of Form 10B. In view of the above facts and circumstances, we are of the considered view that the delay in filing of Form 10B being a procedural default should not disentitle the assessee the grant of exemption under section 11 of the Act. From the order of the Ld. CIT(A), we found that claim of exemption under section 11 of the Act was denied only on account of delay in filing of audit report in Form 10B within the stipulated time. While setting aside the impugned order, we direct the jurisdictional AO to take I.T.A.No.307/VIZ/2025 The Ability People Page. No 6 on record Form 10B filed by the assessee belatedly and allow the claim of exemption under section 11 of the Act on merits and in accordance with law. We thus allow the ground raised by the assessee for statistical purpose. 11. In the result, appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 18th July, 2025. Sd/- (रिीश सूद) (RAVISH SOOD) न्याधयक सदस्य/JUDICIAL MEMBER Sd/- (एस बालाक ृष्णन) (S. BALAKRISHNAN) लेखा सदस्य/ACCOUNTANT MEMBER Dated:18.07.2025 Giridhar, Sr.PS आदेश की प्रनतनलनप अग्रेनर्त/ Copy of the order forwarded to:- 1. निर्धाररती/ The Assessee : The Ability People 49-27-10, Madhuranagar Visakhapatnam – 530016 Andhra Pradesh. 2. रधजस्व/ The Revenue : Income Tax Officer (Exemption Ward) Income Tax office, Infinity Towers Sankaramatam Road Visakhapatnam – 530016 Andhra Pradesh 3. The Principal Commissioner of Income Tax 4. नवभधगीयप्रनतनिनर्, आयकरअपीलीयअनर्करण, नवशधखधपटणम /DR,ITAT, Visakhapatnam 5. The Commissioner of Income Tax 6. गधर्ाफ़धईल / Guard file आदेशधिुसधर / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam "