Case Law Details
CIT (Exemption) Vs Anjana Foundation (Gujarat High Court)
The appeal before the Gujarat High Court was filed by the Revenue under Section 260A of the Income-tax Act, 1961, challenging the order dated 07.02.2024 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench, for Assessment Year 2021–22. The Revenue proposed questions of law on whether furnishing the audit report in Form 10B is a mandatory requirement under Section 12A(1)(b) or merely procedural, and whether the Tribunal was justified in admitting Form 10B filed after the due date and granting exemption under Section 11.
Read SC Judgment: SC Declines to Entertain delayed Revenue SLIP on Denial of Exemption for Late Form Filing
The assessee is a public charitable trust registered under the Bombay Public Trust Act, 1950. For AY 2021–22, it filed its return of income on 28.12.2021 declaring a nominal income of ₹22,967 against expenditure of ₹74,061, resulting in a deficit of ₹51,094. The return was processed under Section 143(1) by the Centralised Processing Centre (CPC). By intimation dated 20.09.2022, the CPC denied the exemption claimed under Sections 11 and 12 solely on the ground that the audit report in Form 10B had not been filed along with the return of income. Consequently, the CPC treated the entire income of the trust, including corpus donations and voluntary donations, as taxable and raised a demand of ₹8,59,78,930.
Aggrieved by this adjustment, the assessee filed an appeal before the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre. By order dated 09.08.2023, the CIT(A) dismissed the appeal and upheld the CPC’s action. The assessee thereafter approached the Income Tax Appellate Tribunal.
The Tribunal allowed the assessee’s appeal. It recorded that the assessee had demonstrated that Form 10B had been prepared well before the due date of filing the return and was subsequently filed during appellate proceedings. The Tribunal noted that the sole reason for denying exemption was the non-filing of Form 10B along with the return, and once the form was filed, the assessee ought to have been granted the exemption.
In reaching this conclusion, the Tribunal relied on the decision of the Gujarat High Court in Association of Indian Panel Board Manufacturer v. DCIT [2023] 157 taxmann.com 550, which held that filing Form 10B along with the return is a procedural requirement and not a mandatory condition for availing exemption under Sections 11 and 12. The Tribunal also referred to consistent judicial precedents where exemption was allowed when Form 10B was filed at a later stage, including during appellate proceedings, provided the trust was otherwise eligible and the accounts were duly audited.
The Tribunal observed that in the present case, there was no dispute regarding the assessee’s registration as a charitable trust, the charitable nature of its activities, or the fact that its accounts had been audited and an audit report in Form 10B had been obtained. The denial of exemption was purely on a technical ground. Following the binding jurisdictional High Court decision, the Tribunal directed the Assessing Officer/CPC to accept Form 10B and allow the exemption under Section 11 after verifying the claim on merits. Accordingly, the adjustment made under Section 143(1) was directed to be deleted.
The Revenue challenged this order before the High Court, contending that in view of strict interpretation of exemption provisions, the audit report in Form 10B must be furnished within the prescribed time and failure to do so disentitles the assessee from claiming exemption. It was argued that the Tribunal erred in treating the requirement as procedural and in ignoring the delay in filing Form 10B.
The High Court, after considering the Tribunal’s reasoning, held that the issue was squarely covered by its earlier decision relied upon by the Tribunal. The Court found that the Tribunal had correctly applied the binding precedent and that the assessee had complied with the requirement of obtaining and furnishing the audit report, albeit at a later stage. The Court concluded that no question of law, much less any substantial question of law, arose from the Tribunal’s order.
Accordingly, the High Court held that the Revenue’s appeal was devoid of merit and disposed of the appeal, thereby affirming the Tribunal’s decision allowing exemption under Section 11 despite the delayed filing of Form 10B.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
This Tax Appeal filed under Section 260A of the Income Tax Act, 1961 (“the Act” for short). The appellant revenue has proposed the following questions of law arising out of the order dated 07.02.2024 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench (for short “the Tribunal”) in ITA No.695/Ahd/2023 for Assessment Year 2021-2022:
“(i) Whether in the law and facts and circumstances of case, Hon’ble Income Tax Appellate Tribunal was right in holding that furnishing of audit report in form 10B is a procedural provision in spite of specific provisions of clause (b) of subsection (1) of Section 12A of the Income Tax Act, 1961 especially in view of the decision of the Hon’ble Supreme Court in the case of M/s Wipro Ltd in Civil Appeal No.1449 of 2022 wherein it has been held that, “the Exemption provisions are to be strictly and literally complied with an the same cannot be construed as procedural requirement?
(ii) Whether on the facts and in the circumstances of the case and in law, the Hon’ble Tribunal is justified in setting aside the order of CIT(A) and admitting the audit report in Form 10B being fled before the assessment /intimation under section 143(1) of the Act and allowing the benefit of Section 11 to the assessee ignoring the fact that the assessee had not filed the audit report in Form No.10B before due date as prescribed under the Act/notified by the CBDT?”
2. The brief facts are that the respondent – assessee is the Public Charitable Trust registered under the provisions of the Bombay Public Trust Act, 1950.
3. The assessee filed return of income for the Assessment Year 2021-2022 on 28.12.2021 declaring total income of Rs.22,967/- against the expenditure of Rs.74,061/- and shown deficit of Rs.51,094/-.
4. The return was processed under Section 143(1) of the Act by the CPC and by order dated 20.09.2022, adjustments were made on entire income of the assessee trust including the corpus donation, voluntary donation and other income on the ground that the assessee did not filed the requisite form 10B along with the return of income and the CPC assessed the total taxable income entirely by making addition by dis-allowing the exemption claimed by the assessee under Sections 11 and 12 of the Act which raised the demand of Rs.8,59,78,930/-.
5. Being aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax, National Faceless Appeal Centre (NFAC) who vide order dated 09.08.2023 dismissed the appeal filed by the assessee. The assessee, therefore, preferred an appeal before the Tribunal who by impugned order dated 07.02.2024 allowed the appeal relying upon the decision of this Court in the case of Association of Indian Panel Board Manufacturer vs. DCIT reported in [2023] 157 taxmann.com 550 (Gujarat). The Tribunal has observed as under:
“10. In view of the above, it is evident that the assessee had demonstrated to the ld. CIT(A) that the necessary Form 10B had been prepared much in advance before the due date of filing of return of income and had been filed before the ld. CIT(A) also.
11. In the light of the above facts, we hold that since the failure to file Form No.10B was the only reason for the adjustment made to the return of income of the assessee subjecting its entire income to tax on the filing of the Form 10B to the ld. CIT(A), the assessee ought to have been allowed its claim of exemption to its entire income. The Hon’ble jurisdictional High Court in the case of Association of Indian Panel board Manufacturer v Deputy Commissioner of Income Tax [2023] 157 taxmann.com 550 (Gujarat), has categorically held that filing of Form 10B alongwith the return of income is only a procedural requirement and cannot be treated as mandatory requirement for the purpose of claiming exemption u/s 11 & 12 of the Act and even if filed at a later stage the assessee is entitled to exemption claimed. The ITAT Mumbai Bench in the case of Shree Bhairav Seva Samiti vs Income Tax Officer (2023) 149 taxmann.com 478 (Mumbai-Trib) allowed assessee’s claim to exemption u/s 11 of the Act, denied in identical circumstances by the CPC in adjustment made u/s 143(1) of the Act for non-filing of form 10B alongwith return of income, but which subsequently filed by the assessee, following the decision of the Hon’ble Bombay High Court in the case of CIT vs Xavier Kalavani Mandal (P) Ltd which held that even if form 10B is filed at a later stage exemption cannot be denied u/s 11 of the Act. The relevant portion of the order is as under:-
“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 Coordinate Bench of the Tribunal in Trinity Education Trust v. ITO [IT Appeal No. 669 (Srt.) of 2018, 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 ld. 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 v. 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 v. 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 v. Xavier Kalavani Mandal (P.) Ltd. (supra) and in Sarvodaya charitable Trust v. ITO (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. Accordingly, grounds raised by the assessee are allowed for statistical purposes.”
6. In view of the above decision, the Tribunal held that the claim of the assessee for exemption to its entire income under Section 11 of the Act is required to be allowed and AO/CPC was directed accordingly to delete the adjustment made in the intimation under Section 143(1) of the Act.
7. Considering the above reasons assigned by the Tribunal relying upon the decision of this Court, we are of the opinion that no question of law much less any substantial question of law arises out of the impugned order of the Tribunal.
8. The appeal therefore being devoid of any merit is accordingly disposed of.
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