Shree Charitable Trust, Vadodara v. The ITO (Exemption), Vadodara

2. The brief facts of the case is that the assessee is a public trust having the main object of educational, medical and social upliftment of the Public by giving computer training to the students. The Assessee Trust is having registration u/s. 12AA from the A.Y. 2008-09 onwards. For the Assessment Year 2017-18, the assessee filed its Return of Income on 29-01-2018. The CPC vide office communication dated 22-08-2018 and 09-10-2018 sent to the registered email communication address of the assessee directing to file Form No. 10B on or before 07-11-2018.

2.1. In response to the office communication by CPC, the assessee uploaded Form No. 10B on 17-10-2018. However by Intimation order passed by CPC, u/s. 143(1) dated 27-03-2019 denied the benefit of exemption u/s. 11 of the Act observing as follows:

" As per Section-12A(1)(b) of Income tax Act read with 1st Proviso to Rule 12(2) of the Income Tax Rules, where the total income of the trust or institution without giving effect to the provisions of section 11 and section 12 exceeds the maximum amount which is not chargeable to income tax, the audit report in Form-10B has to be E-filed along with the return of income. Since assessee has not E-filed the Audit Report in Form 10B along with or before filing of the Return of income, the exemption u/s.11 i.e. Sl.No. 1 & Sl. No. 4(i) to 4(viii) in Schedule Part B- it is not allowed."

3. Aggrieved against the same, the assessee filed Rectification application dated 16-11-2019 with the Jurisdictional Assessing Officer (JAO). The same was rejected by order dated 05-10-2020 by following Circular No. 10/2019 dated 22-05-2019 that "the delay in filing Form No. 10B, in all such cases where the Audit Report for the previous year has been obtained before the filing of the Return of Income and has been furnished subsequent to the filing of the Return of Income, but before the date specified u/s. 139 of the Act are condoned. However in the case of the assessee the Audit

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Report in Form No. 10B had not filed before the date specified u/s. 139 of the Act. Therefore the assessee is not entitled for the benefit of section 11 of the Act. Accordingly, the rectification application is rejected.

4. Aggrieved against the same, the assesse filed an appeal before Ld. NFAC, Delhi. The Ld. NFAC dismissed the appeal filed by the assessee observing as follows:

"…6.5 In the present case, A.O rejected the rectification petition stating that the assessee did not file the Audit Report in Form 10B before the date specified u/s 139. During the appeal proceedings the appellant did not file a copy of the Audit Report in Form 10B. Appellant stated that CIT, Exemption, Ahmedabad rejected it's application for condoantion of delay in filing the Form No.10B.

Hence respectfully following the above stated Circular of the CBDT and the above stated decisions of the Hon'ble High Court of Kerala and Hon'ble High Court of Bombay the disallowance of exemption claimed u/s 11 and 12 is upheld."

5. Aggrieved against the same, the assessee is in appeal before us raising the following Grounds of Appeal:

1. The NFAC erred in law and in the facts of the case in confirming the order of the AO in denying exemption u/s 11 and 12 of the act.

2. The NFAC erred in law and in the facts of the case in confirming the action of the AO in allowing prima facie adjustment u/s 143(1)(a) of the act.

3. The NFAC erred in law and in the facts of the case in confirming the action of the AO in not allowing rectification of its order u/s 154 of the act.

5.1. Ld. Counsel Shri Tej Shah appearing for the assessee submitted before us that in response to the communication dated 09-10-2018 by CPC, the assessee uploaded its Audit Report in Form No. 10B on 17-10-2018, whereas the assessee was required to response to the CPC on or before 07-11-2018. Without taking

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cognizance of the Form No. 10B uploaded by the assessee on 17- 10-2018, the CPC passed intimation u/s. 143(1) denying the claim of exemption u/s. 11 on the ground that Audit Report in Form No. 10B was not filed along with the Return of Income and determined the total income of the assessee at Rs. 74,18,162/-.

5.2. Ld. Counsel further submitted that the rectification petition was also rejected on the ground that Audit Report in Form 10B was not filed before the date specified u/s. 139 of the Act. Thus the assessee relied upon decision of the SMC Bench of this Tribunal in the case of Shardaben Education Trust Vs. ITO (Exemption) in ITA No. 2312/Ahd/2018 dated 16-11-2022 and Mumbai Bench decision in the case of Shree Bhairav Seva Samiti Vs. ITO (Exemption) reported in [2023] 149 taxmann.com 478 and recent Judgment of the Hon'ble High Court of Gujarat in the case of Association of Indian Panel Board Manufacturer Vs. DCIT in Tax Appeal No. 655 of 2022 sated 21-03-2022 and pleaded to set aside the orders of the lower authorities and grant the exemption u/s. 11 of the Act.

6. Per contra, the Ld. Sr. D.R. Shri Atul Pandey appearing for the Revenue supported the orders passed by the Lower Authorities and submitted that the same does not require any interference.

7. We have given our thoughtful consideration and perused the materials available on record. It is an admitted fact pursuant to the communication dated 22-08-2018 and 09-10-2018 received from CPC, the assessee filed its Audit Report in Form No. 10B on 17-10- 2018 which is much before the date given by CPC namely 07-11-

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2018 to comply with the defects. However while passing intimation u/s. 143(1) dated 27-03-2019, the assessee was denied the benefit of exemption u/s. 11 on the ground that Audit Report in Form 10B was not filed along with the Return of Income as per section 12A(1)(b) of the Act read with 1^stproviso to Rule 12(2) of the Rules. When the assessee filed rectification petition before the JAO the same was again rejected following Circular No. 10/2019 dated 22- 05-2019 on the ground that Form 10B was not filed before the date specified u/s. 139 of the Act.

8. It is no more res integra that filing of Form 10B as required u/s. 12A are directory in nature, as such the Assessing Officer are not powerless to allow an assessee to file Audit Report, if not filed along with return, any time before completion of assessment.

8.1. The Hon'ble High Court of Gujarat in the case of Association of Indian Panel Board Manufacturer (cited supra) held as follows:

"….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.

6.1 The appellant assessee has to be held to be eligible and entitled to exemptions under Section 11(1) and 11(2) of the Act and the alleged ground of non-filing of audit report alongwith return of income which was at the best procedural omission, could never to an impediment in law in claiming the exemption."

8.2. On similar set of facts the Mumbai Bench of the Tribunal in the case of Shree Bhairav Seva Samiti (cited supra) held as follows:

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"…9. In the present case, it is undisputed that the assessee trust is registered under section 12AA of the Act for the past 40 years and the said registration is still in existence. It is also not the case of the Revenue that the assessee has ceased to be a religious or charitable institution. Further, it is also not the case of the Revenue that the accounts of the assessee have not been audited by an accountant, and an audit report in Form 10B has not been obtained. Only on the technical aspect that Form 10B was not filed along with the return of income for the relevant assessment year, the exemption claimed under section 11 of the Act has been denied to the assessee without going into the merits. Further, no relief was granted to the assessee even when the assessee filed the application under section 154 of the Act. We find that while dealing with similar facts the Co- ordinate Bench of the Tribunal in Trinity Education Trust vs ITO, ITA No. 669/Srt./2018, vide order dated 28/02/2022, decided the issue in favour of the taxpayer by observing as under:

"8. We have considered the rival submissions both the parties and perused the order of lower authorities carefully. We find that there is no dispute that at the time of filing of return of income, the audit report has required under Form 10B was not uploaded once uploaded on the system consequently the AO/CPC not allowed the exemption claimed under section 11. Assessing Officer/CPC brought the entire receipt as taxable income. On receipt intimation under section 143(1) of the Act the assessee uploaded in Form 10B and filed application for rectification under section 154 of the Act. The application of the assessee was rejected on the ground report in Form 10B was not furnished before due date of return of income. The Id. CIT(A) dismissed the appeal of the assessee by taking view the audit report in Form 10B was not uploaded before due date of return of income.

9. We find that the Hon'ble jurisdictional High Court in case of CIT vs. Xavier Kalavani Mandal (P.) Ltd. (supra) held that in order to claim exemption under section 11, the assessee can filed audit report in Form 10B even at later stage either before the Assessing Officer or before appellate authority by showing a sufficient cause. Further, Hon'ble jurisdictional High Court decision in case of Sarvodaya charitable Trust vs. ITO (Exemption) (supra) also held that where the assessee is a public charitable trust registered under section 12A of the Act and substantially satisfied condition for availing benefit of exemption as a charitable could not be denied exemption, the assessee merely on bar of limitation in furnishing audit report in Form 10B. Considering the aforesaid and legal discussion, we find that though the assessee has not filed any return of income at the time, however, it was available before the Id. CIT(A) as it was uploaded much before filing application under section 154. Therefore, respectfully following the decisions of Hon'ble jurisdictional High Court in case of CIT vs. Xavier Kalavani Mandal (P.) Ltd. (supra) and in Sarvodaya charitable Trust vs. ITO

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(Exemption) (supra), we find that the assessee has complied the procedural requirement, therefore, the Assessing Officer/CPC is directed to verify the claim of the assessee and grant necessary deduction under section 11 of IT Act. In the result, the appeal of the assessee is allowed for statistical purposes."

10. As in the present case also the assessee has complied with the procedural requirement of obtaining and filing Form 10B, therefore, respectfully following the aforesaid decision of the Co-ordinate Bench of the Tribunal, the Assessing Officer is directed to decide the claim of the assessee under section 11 on merits, after accepting the Form 10B filed by the assessee.

8.3. Further very same Bench of this Tribunal in the case of ITO Vs. Shri Laxmanarayan Dev Shrishan Seva Khendra in ITA No. 410/Ahd/2022 dated 19-05-2022 held as follows:

"….6. We have given our thoughtful consideration and perused the materials available on record. The moot question whether it is permissible to the assessee to produce the audit report at the appellate stage is correct in law is been decided by the Jurisdictional High Court in the case of CIT Vs. Gujarat Oil & Allied Industries Ltd. [1993] 201 ITR 325 (Guj.) wherein it is held that the provisions regarding furnishing of audit report along with the return has to be treated as a procedural provision. It is directory in nature and its substantial compliance would suffice. Thus the Hon'ble Court Held that the benefit of exemption should not be denied merely on account of delay in furnishing the same.

6.1. Similarly in the case of Social Security Scheme of GICEA (cited supra) the Hon'ble Jurisdictional High Court held as follows:

5. "…..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 (supra) this Court has observed that furnishing of audit report along with return filed is to be 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 (supra) 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

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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 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."

6.2. Respectfully following the above judicial pronouncements by Jurisdictional High Court, we have no hesitation in confirming the order passed by Ld. CIT(A) who has directed the Jurisdictional Assessing Officer (JAO) to verify the Form No. 10B and allow the claim of exemption u/s. 11 and compute the total income. Thus the grounds raised by the Revenue is devoid of merits and the same is liable to be dismissed."

9. In the present case before us Audit Report in Form 10B though filed belatedly by the assessee, the same was not considered and verified by the Assessing Officer both u/s. 143(1) proceeding as well as in u/s. 154 proceeding, so the said orders are hereby set aside. Further there is no regular assessment orders passed u/s. 143(3) of the Act in the assessee case, therefore we hereby direct the Jurisdictional Assessing Officer to verify the Form No. 10B and then allow the claim of exemption u/s. 11 of the Act in accordance with law by giving opportunity to the assessee. Thus the grounds raised by the assessee are hereby allowed.

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10. In the result, the appeal filed by the Assessee is allowed for statistical purposes.

Order pronounced in the open court on 05-07-2023 Sd/- Sd/-

(WASEEM AHMED) (T.R. SENTHIL KUMAR)

ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 05/07/2023

आदेश क त ल प अ े षत / Copy of Order Forwarded to:-

1. Assessee

2. Revenue

3. Concerned CIT

4. CIT (A)

5. DR, ITAT, Ahmedabad

6. Guard file. By order/आदेश से, उप/सहायक पजं ीकार आयकर अपील य अ धकरण, अहमदाबाद

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