Case Law Details
Mary Queens Mission Hospital Vs CIT (Kerala High Court)
Kerala High Court held that condonation application for delay in filing the audit report in Form-10B should have been considered without being too hyper technical and in a judicious manner.
Facts- The petitioners in these cases are entities registered u/s. 12A of the Income Tax Act, 1961. For the assessment year 2022-2023, the petitioners were required to file their return of income by 31-10-2022 and therefore the audit report in Form-10B had to be filed on or before 30-09-2022. The due date for filing return of income for the assessment year 2022-2023 was extended by the Central Board of Direct Taxes for a period of seven (07) days, as a result of which, the last date for filing return for that year became 07-11-2022 and consequently, the last date for filing audit report in Form-10B was 07-10-2022. The petitioners did not file any audit report in Form-10B within the specified time. However they filed it on or before the date of filing of the return for the assessment year 2022-2023, which was, as already indicated, 07-11-2022. The petitioners, therefore, filed separate applications before the Commissioner of Income Tax (Exemption) u/s. 119(2)(b) of the 1961 Act praying that the delay in filing the audit report in Form-10B be extended. The Commissioner vide the order has rejected the applications for condonation of delay.
Conclusion- Held that the applications for condonation of delay should have been considered without being too hyper technical and in a judicious manner.
Writ petitions are allowed by quashing the orders (Ext.P8 in all cases) issued by the Commissioner of Income Tax (Exemptions), Kochi, dismissing the applications filed by the petitioners under Section 119(2)(b) of the 1961 Act. As a result of this order, the delay on the part of the petitioners in filing the audit report in Form-10B for the assessment year 2022-2023 will stand condoned.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
The issue arising for consideration in these cases is common and these writ petitions can therefore be conveniently disposed of by a common judgment.
2. The petitioners in these cases are entities registered under Section 12A of the Income Tax Act, 1961 (hereinafter referred to as the ‘1961 Act’). For the assessment year 2022-2023, the petitioners were required to file their return of income by 31-10-2022 and therefore the audit report in Form-10B had to be filed on or before 30-09-2022. The due date for filing return of income for the assessment year 2022-2023 was extended by the Central Board of Direct Taxes for a period of seven (07) days, as a result of which, the last date for filing return for that year became 07-11-2022 and consequently, the last date for filing audit report in Form-10B was 07-10-2022. The petitioners did not file any audit report in Form-10B within the specified time. However they filed it on or before the date of filing of the return for the assessment year 2022-2023, which was, as already indicated, 07-11-2022. The petitioners, therefore, filed separate applications before the Commissioner of Income Tax (Exemption) (hereinafter referred to as the ‘Commissioner’) under Section 119(2)(b) of the 1961 Act praying that the delay in filing the audit report in Form-10B be extended. The Commissioner vide the order marked as Ext.P8 (in all these writ petitions) has rejected the applications for condonation of delay.
3. The learned Senior Counsel appearing for the petitioners would submit that the Commissioner has considered the applications for condonation of delay in a highly mechanical manner. It is submitted that considering the facts and circumstances of these cases and also considering the fact that the delay was 30 days or less in each of these cases, the Commissioner ought not to have taken such a strict view and ought to have condoned the delay in filing the audit report, especially taking into consideration the fact that the income tax returns were filed within the due date.
4. Sri. Jose Joseph, the learned Standing Counsel appearing for the Income Tax Department would submit that the reasons mentioned by the petitioners for the delay in filing the audit report are not at all acceptable in the facts and circumstances of these cases. It is submitted that the petitioners contend that they were unable to uphold the audit report on account of certain technical glitches, which cannot be correct, as the audit report itself was prepared much later than the date on which such glitches are reported. It is submitted that the filing of the audit report was mandatory and the Commissioner has considered the contentions taken before him as grounds to condone the delay and has come to the conclusion that there was no reason to exercise the jurisdiction under Section 119(2)(b) of the 1961 Act to condone the delay in filing the audit report.
5. The learned Senior Counsel appearing for the petitioners, in reply, would refer to the judgment of the Division Bench of the Bombay High Court in Al Jamia Mohammediyah Education Society v. Commissioner of Income Tax (Exemptions) and Another; 2024 SCC OnLine Bom 1157, to contend that the applications for condonation of delay should have been considered without being too hyper technical and in a judicious manner.
6. Having heard the learned Senior Counsel appearing for the petitioners and the learned Senior Standing Counsel appearing for the Income Tax Department, I am of the view that the petitioners are entitled to succeed. As rightly pointed out by the learned Senior Counsel for the petitioners, the delay in filing the audit report in Form-10B can at best be 30 days, as the law only requires that the audit report be uploaded atleast a month before the due date for filing returns. Considering the extent of the delay, it should have been appropriate that the Commissioner exercised his jurisdiction under Section 119(2)(b) of the 1961 Act to condone the delay instead of taking a strict view of the matter. The Division Bench of the Bombay High Court in Al Jamia Mohammediyah Education Society (Supra) held as follows:
“6. Admittedly, Petitioner is a charitable trust. Admittedly, Petitioner has been filing its returns and Form 10B for AY 2015-16, for AY 2017-18 to AY 202122 within the due dates. On this ground alone, in our view, delay condonation application should have been allowed because the failure to file returns for AY 201617 could be only due to human error. Even in the impugned order, there is no allegation of malafide. As held by the Gujarat High Court in Sarvodaya Charitable Trust v. Income Tax Officer (Exemption); (2021) 125 taxmann.com 75 (Gujarat), the approach in the cases of the present type should be equitious, balancing and judicious. Technically, strictly and liberally speaking, Respondent No.1 might be justified in denying the exemption by rejecting such condonation application, but an assessee, a public charitable trust with almost over thirty years, which otherwise satisfies the condition for availing such exemption, should not be denied the same merely on the bar of limitation especially when the legislature has conferred wide discretionary powers to condone such delay on the authorities concerned. Paragraphs 30 and 31 of Sarvodaya Charitable Trust (Supra) reads as under:
“30. We may also refer to and rely upon a decision of the Delhi High Court in the case of G.V. Infosutions (P) Ltd. v. Dy: CIT [2019] 102 taxmann.com 397/261 Taxman 482. We may quote the relevant observations thus:
“8. The rejection of the petitioner’s application under section 119(2)(b) is only on the ground that according to the Chief Commissioner’s opinion the plea of omission by the auditor was not substantiated. This court has difficulty to understand what more plea or proof any assessee could have brought on record, to substantiate the inadvertence of its advisor. The net result of the impugned order is in effect that the petitioner’s claim of inadvertent mistake is sought to be characterised as not bona fide. The court is of the opinion that an assessee has to take leave of its senses if it deliberately wishes to forego a substantial amount as the assessee is ascribed to have in the circumstances of this case. “Bona fide” is to be understood in the context of the circumstance of any case. Beyond a plea of the sort the petitioner raises (concededly belatedly), there can not necessarily be independent proof or material to establish that the auditor in fact acted without diligence. The petitioner did not urge any other grounds such as illness of someone etc., which could reasonably have been substantiated by independent material. In the circumstances of the case, the petitioner, in our opinion, was able to show bona fide reasons why the refund claim could not be made in time.
9. The statute or period of limitation prescribed in provisions of law meant to attach finality, and in that sense are statutes of repose; however, wherever the legislature intends relief against hardship in cases where such statutes lead to hardships, the concerned authorities-including Revenue Authorities have to construe them in a reasonable manner. That was the effect and purport of this court’s decision in Indglonal Investment & Finance Ltd.(supra). This court is of the opinion that a similar approach is to be adopted in the circumstances of the case.”
31. Having given our due consideration to all the relevant aspects of the matter, we are of the view that the approach in the cases of the present type should be equitious, balancing and judicious. Technically, strictly and liberally speaking, the respondent no. 2 might be justified in denying the exemption under section 12 of the Act by rejecting such condonation application, but an assessee, a public charitable trust past 30 years who substantially satisfies the condition for availing such exemption, should not be denied the same merely on the bar of limitation especially when the legislature has conferred wide discretionary powers to condone such delay on the authorities concerned.”
7. Moreover, in our opinion, Petitioner does not appear to have been lethargic or lacking in bonafides in making the claim beyond the period of limitation which should have a relevance to the desirability and expedience for exercising such power. We are conscious that such routine exercise of powers would neither be expedient nor desirable, since the entire machinery of tax calculation, processing of assessment and further recoveries or refunds, would get thrown out of gear, if such powers are routinely exercised without considering its desirability and expedience to do so to avoid genuine hardship.
8. In a similar matter in Shree Jain Swetamber Murtipujak Tapagachha Sangh v. Commissioner of Income Tax (Exemptions) and Anr (Writ Petition (L) No.1321 od 2024 decided on 27.3.2024) was also a case where auditor had due to oversight not filed Form 10B. The Court held that the error on the part of auditor cannot be rejected but should be accepted as a reasonable cause shown by the trust management. In that case also, Petitioner did not suo moto realize its mistake and filed a condonation request only after Centralised Processing Centre (“CPC“) sent an intimation about non- filing of Form 10B.
9. Having considered the matter in its entirety, we are satisfied that the delay was not intentional or deliberate. Petitioner cannot be prejudiced on account of an ignorance or error committed by professional engaged by Petitioner. In our view, Respondent No.1 ought to have exercised the powers conferred”.
I am in respectful agreement with the view taken by the Bombay High Court in Al Jamia Mohammediyah Education Society (Supra).
7. Therefore, these writ petitions are allowed by quashing the orders (Ext.P8 in all cases) issued by the Commissioner of Income Tax (Exemptions), Kochi, dismissing the applications filed by the petitioners under Section 119(2)(b) of the 1961 Act. As a result of this order, the delay on the part of the petitioners in filing the audit report in Form-10B for the assessment year 2022-2023 will stand condoned.
Writ petitions are ordered accordingly.
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