Case Law Details
Parul Mahila Pragati Mandal Versus ITO (Exemption) & Anr. (Gujarat High Court)
The Gujarat High Court allowed the writ petition filed by a public charitable trust and set aside orders rejecting condonation of delay in filing Form 10B for Assessment Year 2016–17 under Section 119(2)(b) of the Income Tax Act, 1961. The trust had obtained the audit report within the prescribed due date but failed to electronically upload and confirm Form 10B due to an inadvertent administrative lapse. As a result, the Centralised Processing Centre denied exemption under Sections 11 and 12 and raised a substantial tax demand. The trust subsequently filed Form 10B electronically and sought condonation of delay, which was rejected by the tax authorities on technical grounds, followed by rejection of a review application without reasons. The High Court held that filing of Form 10B is a procedural requirement and that denial of condonation would unjustly deprive the trust of a substantive exemption. It ruled that authorities must exercise discretion under Section 119(2)(b) to alleviate genuine hardship, quashed the impugned orders and demand notice, and directed fresh consideration of the condonation application within a stipulated time.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. Heard learned advocate Ms. Shrunjal T. Shah for learned advocate Mr. Raj S. Tanna for the Petitioner and learned Senior Standing Counsel Ms. Maithili D. Mehta for the Respondents.
2. Rule returnable forthwith. Learned Senior Standing Counsel Ms. Maithili D. Mehta waives service of notice of rule for the Respondents. With the consent of learned advocates for the respective parties, the matter is taken up for hearing, as the issue involved is very short.
3. The brief facts of the case are as follows:
3.1 The Petitioner is a public charitable trust duly constituted in the year 1996 and registered under the provisions of the Bombay Public Trusts Act, 1950. The case of the Petitioner, in nuce, is that, the Petitioner, for the Assessment Year 2016–17, has caused its accounts to be audited and obtained the requisite audit report dated 25.09.2016, well within the due date prescribed for filing of the return of income. The due date for filing such return stood extended from 30.09.2016 to 17.10.2016, in view of the general relaxation granted vide order dated 09.09.2016 issued under Section 119 of the Income Tax Act, 1961.
3.2 The Petitioner further states that although the audit report was duly obtained on 25.09.2016, as mandated under the Act, the same required confirmation and uploading through the designated online portal using the credentials of the authorized trustee. However, owing to an inadvertent administrative lapse and oversight, the said confirmation and e-filing could not be effectuated. Consequently, the audit report was not electronically filed along with the return of income for the relevant assessment year.
3.3 The Centralized Processing Centre (CPC), Bangalore passed an intimation under Section 143(1) of the Income Tax Act, 1961, on 10.02.2018, disallowing the exemption amounting to ₹1,17,54,076/-, 1,17,54,076/-, which the Petitioner claims it was otherwise entitled to under the provisions of the Act.
3.4 The Petitioner asserts that it became aware of the said omission for the first time only upon receipt of the above intimation. The lapse, according to the Petitioner, was purely inadvertent and attributable to bona fide human error, which was neither deliberate nor within the control of the Trust. Upon acquiring knowledge of the said omission, prompt remedial action was taken, and on 03.07.2018, the auditor of the Trust filed Form 10B electronically in accordance with the requirements of Section 12A(1)(b) of the Act.
3.5 Thereafter, the Petitioner addressed a representation dated 23.02.2021 to the Commissioner of Income Tax (Exemption), seeking condonation of delay in filing the audit report. It was submitted therein that the lapse was inadvertent and occurred due to reasonable cause. The Petitioner urged that the pragmatic approach be adopted to prevent disproportionate hardship, especially considering the charitable nature of the Trust’s activities.
3.6 The CIT (Exemption) vide order dated 31.03.2021 rejected the application/letter Condonation of Delay filed by for the Petitioner.
3.7 On 23.04.2021, the Petitioner filed a review application before CIT (Exemption) Under Section 119 (2) (b) of the Act, 1961 for considering the application for Condonation of Delay. Thereafter, vide Order dated 30.04.2021 passed through online portal of Income Tax, the review application filed by the Petitioner was also rejected without mentioning any reasons or explanation.
3.8 The Respondent No. 1 issued demand notice to the Petitioner of Rs. 50,06,270/- dated 06.05.2021 for the Assessment Year 201617 pursuant to rejection of application for Condonation of delay and the review application filed by the Petitioner.
4. This petition has been filed under Article 226 of the Constitution of India challenging the impugned order passed by the Respondent No. 2 under Section 119 (2) of the Income Tax Act, 1961 dated 31.03.2021 with the following prayers:
“A) To admit and allow this petition;
B) To issue any appropriate writ, order or direction to quash and set aside the Impugned orders at Annexure-A to this petition and direct the respondent No.2 to condone the delay;
C) To issue any appropriate writ, order, or direction to quash and set aside the impugned orders at Annexure-1 rejecting the review application filed by petitioner;
D) Pending hearing, admission, and/or final disposal of this petition, Your Lordships may be pleased to stay the implementation and operation of the impugned demand notice 06.05.2021 at Annexure-J;
E) To pass any such other and further orders as Your Lordships may deem, just, fit in the interest of justice;”
5. Ms.Shrunjal T.Shah, learned advocate appearing for the Petitioner has submitted that the Petitioner-Trust had obtained the Audit Report in Form 10B within the due date as prescribed under the Act/Notified by the CBDT. In such circumstances, the non-filing of the same due to a bonafide error would deprive the Trust of the benefit of exemption under Sections 11 and 12 of the Act and would burden the Trust, which is admittedly functioning solely for the betterment of the lot of widowed women, by imparting various vocational training to such needy individuals. She further submitted that the very purpose of the provisions of Section 119(2)(b) of the Act was to use the discretion to remove the hardship that would be caused to the Petitioner and therefore, the impugned Orders passed by the Respondent -Department deserve to be set aside.
6. Per contra, Ms. Maithili Mehta, learned Senior Standing Counsel appearing for the Department submitted that the Petitioner has adopted a lethargic and casual approach inasmuch as, although Form 10B was filed Online on 03.07.2018, the application under Section 119(2)(b) of the Act came to be filed only on 23.02.2021 and therefore, the Department has rightly rejected such application as well as the review thereof.
7. DISCUSSION & FINDINGS :-
7.1 In Association of Indian Panel Board Manufacturers Vs. DCIT, reported in (2023) 157 taxmann.com 550 (Gujarat), this Court has categorically held that filing of Form 10B is only a procedural requirement and the failure to file Form 10B along with the return of income cannot be treated as mandatory requirement for the purpose of claiming exemption under Section 11 and 12 of the Act and even if such Form is filed at a later stage, the Assessee will still be entitled to claim exemption. The aforesaid decision in the case of Association of Indian Panel Board (Supra) has been followed by this Court in case of CIT (Exemption) Vs. Anjana Foundation reported in (2024) 168 taxmann.com 462 (Gujarat). Thus, it will be seen that the Petitioner-Assessee could not be denied the exemption merely because Form 10B was not filed within time. In such circumstances, the denial on the part of the Department to condone the delay in complying with the procedural requirement on the part of the Assessee would result in denial of a substantive right of the Assessee to claim an exemption, which would in turn, result in the Assessee having to pay the demanded amount, thereby unjustly enriching the Department.In such view of the matter in our opinion, the Petitioner would have been caused undue hardship which the Department could have alleviated by allowing the Assessee’s application under Section 119(2)(b) of the Act, which is rejected only on the technical grounds.
7.2 This Court in several recent decisions, namely in the case of M/s. Royal Led Equipments Pvt. Ltd. Vs. Chief Commissioner of Income Tax, Valsad & Ors. (Special Civil Application No. 14786 of 2024) and in the case of Surat Smart City Development Limited Vs. Principal Commissioner of Income Tax, Surat-1 & Anr. (Special Civil Application No. 10397 of 2024) has directed the Department to consider the Assessee’s applications under Section 119(2)(b) of the Act to ensure that the purpose for which the said provision remains on the statute book is carried out and the said provision is not rendered illusory or becomes a dead letter.
8. In view of the aforesaid discussion, the present Petition succeeds and accordingly allowed. The impugned Orders dated 31.03.2021, 30.4.2021 and the Demand Notice dated 06.05.2021 are hereby quashed and set aside. The Respondent No.1 is directed to pass a fresh order upon the Petitioner’s application under Section 119(2)(b) of the Act dated 23.02.2021 within a period of Twelve (12) weeks from the date of receipt of a copy of this judgment and order in light of the findings in Paragraph Nos. 7.1 to 7.2 hereinabove. Rule is made absolute to the aforesaid extent. No order as to costs.
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