Case Law Details
Brahmchari Wadi Trust Vs CIT (Exemption) (Gujarat High Court)
The Gujarat High Court allowed the writ petition filed by a charitable trust and set aside the order rejecting condonation of delay in filing Form No.10 for Assessment Year 2017–18 under Section 119(2)(b) of the Income Tax Act, 1961. The petitioner trust, registered under Section 12AA and engaged in running educational institutions, had claimed exemption under Sections 11 and 12 and exercised the option to accumulate income under Section 11(2). Although the trust filed Form No.10B (audit report) and Form No.10 for accumulation, these were filed after the due date prescribed under Section 139(1).
The Centralised Processing Centre disallowed the accumulation claim under Section 11(2) on the ground of delayed filing of Form No.10 and raised a tax demand. The petitioner sought condonation of delay, explaining the circumstances and subsequently furnishing supporting documents to demonstrate compliance with statutory conditions, including investment of accumulated funds. However, the authority rejected the condonation application, holding that internal administrative issues did not constitute a reasonable cause. Consequential assessment and demand orders were passed, leading the petitioner to pursue appellate remedies and repeated requests for reconsideration.
The High Court noted that the delay in filing Form No.10B had already been condoned by the department and that the petitioner had explained the reasons for delay in filing Form No.10. Relying on its earlier decisions, including those holding that procedural requirements such as filing of Forms 10 and 10B should not defeat substantive exemptions, the Court reiterated that authorities must adopt an equitable, balanced, and judicious approach. The Court distinguished reliance placed on the Supreme Court decision in the Wipro case, observing that strict compliance principles applicable to other statutory provisions could not be mechanically applied where the requirement is procedural and the trust otherwise satisfies substantive conditions.
Applying settled principles that substantive charitable exemptions should not be denied due to minor technical lapses, the Court held that rejection of the condonation application was unsustainable. The impugned orders were quashed, and the matter was remanded to the authority with a direction to pass an appropriate order condoning the delay in filing Form No.10 for AY 2017–18 within twelve weeks.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. Heard learned advocate Mr. Manish J. Shah for the petitioner and learned advocate Ms. Maithili D. Mehta for the respondent.
2. Having regard to the issue involved in this petition which is in a very narrow compass, with the consent of the learned advocates for the respective parties, the matter is taken up for hearing.
3. Rule returnable forthwith. Learned advocate Ms. Maithili Mehta waives services of notice of rule on behalf of the respondent.
4. By this petition under Article 227 of the Constitution of India, the petitioner has prayed for quashing and setting aside the order dated 19.12.2019 passed under section 119(2)(b) of Income Tax Act, 1961 (For short “the Act”) whereby the application filed by the petitioner to condone the delay in filing Form No.10B for Assessment Year 2017-2018 is rejected.
5. Brief facts of the case are that the petitioner is a charitable trust registered with Charity Commissioner, Ahmedabad having Registration No.A-597 dated 29.03.1952. The trust has been granted registration under section 12AA of the Act vide order dated 03.08.1977 and is running educational institutions namely H.K. Arts College of Commerce, Institute of Business Administration etc.
6. The petitioner filed its return of income for the Assessment Year 2017-2018 after claiming benefits under section 11 and 12 of the Act available to a registered trust.
7. The petitioner also filed Form No.10B dated 28.03.2018 which is an audit report prescribed under section 12A(b) of the Act.
8. The petitioner had also exercised the option of accumulation of income as per the provision of section 11(2) of the Act and accordingly filed Form No.10 on 27.03.2018 showing accumulation amounting to Rs. 31,32,000/- which is 31.04% of income of the trust for the year under consideration.
9. The petitioner received notice under section 143(2) of the Act dated 17.08.2018 informing the petitioner about the selection of its case for scrutiny assessment under Computer Aided Scrutiny Selection (CASS).
10. An intimation dated 24.03.2019 under section 143(1) of the Act was issued to the petitioner wherein demand of Rs. 3,09,408/- was raised by disallowing the benefit claimed under section 11(2) of the Act by citing the reason that the petitioner had failed to furnish Form 10 for accumulation of fund under section 11(2) of the Act before the date of furnishing the return under section 139(1) of the Act i.e. 07.11.2017.
11. The petitioner thereafter preferred an application on 24.04.2019 praying for condonation of delay in filing Form No.10 before the respondent.
12. The respondent however, issued a show cause notice dated 09.05.2019 to the petitioner to show cause as to why the condonation application should not be rejected on the ground that no genuine hardship has been shown in the said application.
13. Pursuant to such show cause notice, the respondent addressed another letter dated 24.05.2019 reiterating its stand and requested the respondent to condone the delay in filing Form No.10.
14. The petitioner thereafter through its Chartered Accountant addressed a letter dated 01.08.2019 to the office of respondent submitting copy of Form Nos.10 and 10B along with copies of deposit receipts from HDFC Ltd and Gruh Finance Ltd aggregating to Rs. 38,00,000/- as against the accumulation claim of Rs. 31,32,000/- as per the direction of PCIT to show compliance of pre-conditions laid down under section 11(2) of the Act.
15. The respondent however, passed impugned order dated 19.12.2019 under section 119(2)(b) of the Act rejecting the petitioner’s application for condonation of delay in filing Form No.10 by stating that delay in filing Form 10 had occurred due to internal administrative problems and thus it could not be considered as a reasonable cause for condonation of delay.
16. The Assessing Officer also passed assessment order dated 19.12.2019 under section 143(3) of the Act assessing the total income of the petitioner at Rs. 31,32,000/- after denying the benefit of option under section 11(2) of the Act, as petitioner has failed to file Form No.10 on or before the due date of filing of income tax return under section 139(1) of the Act. Such assessment order was accompanied by the computation sheet and demand notice of even date under section 156 raising demand of Rs. 3,22,950/-.
17. Being aggrieved by the said assessment order, the petitioner preferred an appeal on 09.01.2020 before the Commissioner of Income Tax(Appeals)-9, Ahmedabad by filing Form No.35.
18. The petitioner thereafter received notice dated 22.01.2020 asking the petitioner to pay the demand of Rs.3,22,950/- on or before 27.01.2020.
19. In response to such notice, the petitioner filed stay application on 27.01.2020 before the Assessing Officer requesting him to keep the entire demand in abeyance till the decision is taken by Commissioner of Income Tax (Appeals).
20. The petitioner thereafter once again addressed a letter dated 02.03.2020 to the respondent requesting him to reconsider his decision of rejecting the application for condonation of delay in filing Form No.10.
21. The respondent however, vide letter dated 12.03.2020 rejected the request for reconsideration of order dated 19.12.2019.
22. The petitioner therefore, once again vide letter dated 16.09.2020 requested the respondent to condone the delay in filing Form 10 and Income tax return. The petitioner thereafter once again requested the respondent to condone the delay in filing audit report in Form No.10B in view of CBDT circular No.10.2019 dated 22.05.2019. The respondent vide order dated 22.06.2020 condoned the delay in filing Form No.10B
23. Learned advocate Mr. Manish Shah for the petitioner submitted that the respondent has adopted a pedantic and hyper technical approach while considering the delay condonation application of the petitioner trust in connection with filing of Form NO.10 and income tax return.
24. It was submitted that Circular No.7 of 2018 issued by CBDT was cited before the respondent, but the respondent chose to ignore the directions of the said circular while rejecting the condonation application preferred by the petitioner trust.
25. Relying on the decision in case of CIT v. Mayur Foundation reported in 274 ITR 562, it was submitted that this Court in the said decision has held that Form No.10 for exercising option under section 11(2) of the Act can be submitted at the time of assessment proceedings and the Court accepted the contention of the assessee that proceedings before the Income Tax Appellate Tribunal is a continuation of an assessment proceedings and submission of Form No.10 before the Tribunal can be treated as sufficient compliance under the provision of section 11(2) of the Act.
26. It was further submitted that it is well settled principle of law that substantive exemption cannot be withdrawn because of minor technical lapse and delayed compliance of such requirements which are purely procedural and directory in nature and therefore, the benefit available under section 11(2) of the Act being substantial in nature cannot be withdrawn merely because there is a minor delay in filing Form No.10.
27. On the other hand, learned advocate Ms. Maithili D. Mehta for the respondent submitted the petitioner had filed income tax return for AY 2017-2018 on 28.03.2018 and Form No.10 for AY 2017-2018 was e-filed on 27.03.2018 with a delay of approximately 136 days though the due date for filing of the above documents was 07.11.2017 and therefore, the respondent department issued notice under section 143(1) on 17.08.2018 informing the selection of case of the petitioner for scrutiny assessment. Thereafter on 24.03.2019 the respondent further issued intimation under section 143(1) of the Act raising a demand of Rs.3,09,408/- and disallowed the accumulation of Rs.31,32,000/- as claimed by the petitioner under section 11(2) due to delay caused in filing of the said Form No.10.
28. It was submitted that the claims putforth by the petitioner for condonation of delay were completely unsupported by any evidence and therefore, the department issued a show cause notice dated 09.05.2019 directing the petitioner to provide proof for any reasonable cause or genuine hardships to have occurred in filing Form 10 within due date. It was submitted that since the petitioner failed to adduce any evidence to prove a reasonable cause for delay, the respondent vide impugned order dated 19.12.2019 rejected the application of condonation of delay of the applicant trust giving detailed reasons.
29. Referring to the judgment relied upon by the petitioner in case of Mayur Foundation (supra), it was submitted that the issue involved in the said case was regarding additional ground before the Tribunal and not about the rejection of application of condonation of delay filed, due to delay occurred in filing Form No.10.
30. Relying upon the decision of Hon’ble Supreme Court in case of M/s. Wipro Ltd. (Judgment dated 11.07.2020 in Civil Appeal No. 1449 of 2020), it was submitted that requirement of filing of Form 10 before the due date cannot be considered as a procedural requirement but is to be strictly followed since the said requirement is distinctly mentioned under section 11(2) of the Act.
31. Having heard the learned advocates for the respective parties and considering the documents on record, it is not in dispute that the petitioner has explained in detail the cause for late filing of Form 10B. In similar circumstances, this Court in case of Parshwanath Bhakti Vihar Jain Trust v. Commissioner of Income-tax (Exemption) reported in (2024) 166 taxmann.com 732 (Gujarat) relying upon the decision in case of Sarvodaya Chaitable Trust v. ITO (Exemption) reported in (2021) 125 taxmann.com 75 has held as under:
“33. Having heard the learned advocates for the respective parties and considering the facts of the case, it is not in dispute that the petitioner has explained in detail the cause for late filing of Form 10B.
34. It also emerges from the record that the petitioner was under an impression that the delay was condoned however, only when the order under section 154 of the Act was proposed by the Assessing Officer, pursuant to the rejection of the application of the petitioner to condone delay under section 119(2)(b) of the Act by disallowing the amount applied for charitable purpose under section 11 of the Act amounting to Rs. 3,69,08,845/- and thereafter the petitioner has preferred this petition. The petitioner has also placed on record the audited balance sheet dated 27.08.2021. It is also not in dispute that that the petitioner is getting benefit of sections 11 and 12 of the Act for past many years.
35. In the decision of this Court in case of Sarvoday Charitable Trust (supra), it is held that furnishing of audit report along with refund filed is to be treated as procedural requirement though it is mandatory in nature but substantial compliance is required to be made. It was further observed that the approach of the authority in such type of case should be equitable and judicious. It is also not in dispute that the petitioner trust for past many years has substantially satisfied the conditions for claiming the exemption which should not be denied for non filing of Form 10B in time. The petitioner has explained the reason for delay in filing Form 10B due to illness of the Accountant who was on leave for a long time due to medical reasons.
36. In view of foregoing reasons, the petition is allowed. The impugned orders are quashed and set aside. The matter is remanded back to the respondent to pass appropriate order to condone the delay in filing the Form 10B for AY 2018-2019 by the petitioner. Such exercise shall be completed within a period of 12 weeks from the date of receipt of a copy of this order.
37. Petition is accordingly disposed of. Rule is made absolute to the aforesaid extent. No order as to costs.”
32. In view of above dictum of law, the petition is allowed. The impugned orders are quashed and set aside. The matter is remanded back to the respondent to pass appropriate order to condone the delay in filing the Form 10B for AY 2017-2018 by the petitioner. Such exercise shall be completed within a period of twelve (12) weeks from the date of receipt of a copy of this order.
33. Petition is disposed of. Rule is made absolute to the aforesaid extent. No order as to costs.
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