Case Law Details
SJJPP Rashitrya S Trust Vs ITO (ITAT Bangalore)
In the case of SJJPP Rashtriya S Trust, the Bangalore ITAT dealt with massive delay (over 100 months) in filing appeal and incorrect taxation of gross receipts of a charitable trust.
The CIT(A) had dismissed the appeal in limine solely on delay, without examining merits.
The ITAT took a different view:
- Applied liberal principles of condonation laid down by the Supreme Court.
- Held that technicalities should not defeat substantial justice.
- Noted delay was due to bona fide belief (rectification pending, lack of communication) and not mala fide.
- Condoned the delay, but imposed a ₹5,000 cost to balance equities.
On merits, the Tribunal made an important observation:
- CPC had taxed entire gross receipts (₹8.97 lakh) due to delay in filing Form 10B.
- ITAT held that even if exemption u/s 11 is denied, only net income can be taxed, not gross receipts.
Since facts were not examined:
- Matter restored to AO to verify expenditure and compute taxable income on net basis.
Same view applied for AY 2020-21 as well.
Bottom line: Delay won’t kill justice-but gross taxation surely will. Even for charitable trusts, tax is on real income, not total receipts.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
The present appeals have been instituted by the assessee against the order of the NFAC, Delhi dated 11.11.2025 for AYs 2014-15 and 2020-21.
First, we take up assessee’s appeal in ITA NO. 500/Bang/2026 for A.Y. 2014-15
2. The facts in brief are that the assessee is charitable trust. In the return of income for A.Y. 2014-15, the assessee declared gross receipt of Rs. 8,97,469/- against which deduction under section 11 of the Act was claimed on account of application towards charitable purpose of Rs. 3,96,268/- on revenue expenses and of Rs. 19,27,239/- on capital expenditure. Accordingly, the assessee declared total income at NIL.
3. The return was processed under section 143(1) of the Act vide intimation order dated 31-12-2016 wherein the CPC did not allow the claim of deduction under section 11 of the Act on account of delayed filing of audit report in Form 10B. Thereby, the CPC treated entire gross receipts of Rs. 8,97,469/- as income of the assessee and raised demand.
4. The aggrieved assessee preferred an appeal before the learned CIT(A) as on 31-12-2025 with the delay in filing of appeal for more than 100 months. The assessee along with filed delayed condonation application by submitting that it was unaware of the intimation u/s 143(1) of the Act at the relevant time and came to know of the demand only in June 2017 while checking refund status through its Chartered Accountant. Immediately, a rectification application was filed on 28.06.2017 and it (the assessee) was under a bona fide belief that the issue would be resolved through rectification.
4.1 It was further submitted that subsequent refunds for later years reinforced this belief. The registered email ID belonged to a managing committee member and no communication regarding rejection of rectification was received. The assessee became aware of the rejection only upon receipt of demand intimation dated 24.01.2025. Thereafter, condonation u/s 119(2)(b) was attempted and on professional advice, the present appeal was filed. The delay was thus due to bona fide beliefand lack of communication, and not due to negligence. Hence, condonation was sought for the delayed filing of appeal. However, the learned CIT(A) did not condone the delay and dismissed the appeal in limine.
5. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.
6. The learned AR before us among various other contentions submitted that the gross receipts cannot be brought to tax. Only the net income can be made subject to tax. In the present case, the CPC in the intimation generated under section 143(1) of the Act treated the gross receipts of Rs. 8,97,469/- as income without providing deduction of expenditure. Therefore, the action of the CPC is contrary to the provisions of the Act.
7. On the other hand, the learned DR supported the order of the learned CIT(A) and submitted that the assessee had failed to file the appeal within the prescribed time limit, and the delay of more than 100 months is excessive and unexplained. It was contended that the assessee was not vigilant in pursuing its remedy and merely taking the plea of bona fide belief cannot justify such an inordinate delay. The learned DR further submitted that the provisions relating to limitation are mandatory in nature and the assessee has failed to demonstrate sufficient cause for condonation of delay.
7.1 The learned DR also argued that the CPC has rightly disallowed the claim of exemption under section 11 of the Act due to non-filing of audit report in Form 10B within the prescribed time, which is a mandatory requirement. Therefore, the action of the CPC in treating the gross receipts as income was in accordance with law, and no interference is called for in the order of the learned CIT(A).
8. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we note that the learned CIT(A) has dismissed the appeal of the assessee in limine on the ground of delay in filing the appeal without adjudicating the issue on merits. The assessee had filed an application for condonation of delay explaining the reasons for such delay. However, the learned CIT(A) rejected the same without appreciating the settled legal position governing condonation of delay.
8.1 In our considered view, the approach adopted by the learned CIT(A) is not in consonance with the principles laid down by the Hon’ble Supreme Court in the case of Collector Land Acquisition v. Mst. Katiji reported in 167 ITR 471 and N. Balakrishnan v. M. Krishnamurthy (1998) 7 SCC 123, wherein it has been consistently held that a liberal approach should be adopted while considering applications for condonation of delay so as to advance substantial justice. The Hon’ble Apex Court has clearly held that technical considerations should not come in the way of adjudication of disputes on merits and that a litigant should not be denied an opportunity of hearing merely on account of delay, unless the delay is found to be deliberate or mala fide.
8.2 In the present case, nothing has been brought on record by the Revenue demonstrating that the delay was intentional or that the assessee derived any benefit by delaying the filing of appeal. Therefore, in the interest of substantial justice, the delay deserves to be condoned, and the appeal ought to have been decided on merits by the learned CIT(A).
8.3 However, at the same time, we also note that the assessee has shown negligence in pursuing its appellate remedy within the prescribed time. Therefore, while condoning the delay, we deem it appropriate to impose a cost of Rs. 5,000/- on the assessee, which shall be deposited with the Prime Minister’s National Relief Fund as a measure to balance the equities.
9. Coming to the merits of the issue, we note that the CPC, while processing the return under section 143(1) of the Act, has treated the entire gross receipts of the assessee as taxable income without allowing deduction of application of income or considering the claim of exemption under section 11 of the Act on account of delay in filing of audit report in Form-10B. The contention of the assessee is that being a charitable trust, even if deduction under section 11 of the Act is not allowed, only the net income, after allowing deduction of expenditure incurred and permissible deductions, can be brought to tax.
9.1 In our considered view, this aspect requires proper verification of facts and these aspects have not been examined either by the CPC or by the learned CIT(A), since the appeal itself was dismissed on technical grounds.
9.2 Accordingly, in the interest of justice, we set aside the impugned order of the learned CIT(A) and restore the matter to the file of the AO for fresh adjudication. The AO is directed to examine the claim of the assessee regarding expenditure incurred and permissible deduction as per law. The AO shall compute the net income in accordance with the provisions of the Act after allowing admissible expenditure, and net income shall be brought to tax and not gross receipts. It is also pertinent to record that the assessee is also directed to cooperate in the proceedings and furnish all necessary details in support of its claim.
10. In the result, the appeal of the assessee is allowed for statistical purposes, subject to the condition of payment of cost as stated above.
Coming to assessee’s appeal in ITA No. 502/Bang/2020 for A.Y. 2020-21
11. At the outset, we note that the issues raised by the assessee in its grounds of appeal for the AY 2020-21 are identical to the issue raised by the assessee in ITA No. 500/bang/2026 for the AY 2014-15. Therefore, the findings given in ITA No. 500/Bang/2026 shall also be applicable for the assessment year 2020-21. The appeal of the assessee for the Assessment Year 2014-15 has been decided by us vide paragraph No. 9 of this order in favour of the assessee for statistical purpose subject to payment of cost of Rs. 5000 to Prime Minister’s National Relief Fund. The learned AR and the DR also agreed that whatever the findings are for the assessment year 2014-15 shall also be applied for the assessment year 2020-21. Hence, the ground of appeal filed by the assessee for A.Y. 2020-21 is hereby allowed for statistical purposes subject to payment of cost of Rs. 5000 to Prime Minister’s National Relief Fund.
12. In the result, the appeal of the assessee is allowed for statistical purposes.
13.In the combined result, both the appeals of the assessee are allowed for statistical purposes.
Order pronounced in court on 29th day of April, 2026
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