Chandi Karakhandar Association Vs ITO [Exemption] (ITAT Pune)
Income Tax Appellate Tribunal (ITAT) Pune has ruled that the timely filing of Form 10B is not a mandatory condition for claiming exemptions under Sections 11 and 12 of the Income Tax Act. This decision came in the case of Chandi Karakhandar Association Vs. ITO (Exemption) for the assessment year 2017-18. The ruling addresses the issue of whether the late submission of the audit report in Form 10B should result in the denial of exemptions for charitable or religious trusts.
The assessee, Chandi Karakhandar Association, had filed an appeal against the order of the Additional/Joint Commissioner of Income Tax (Appeals) [CIT(A)], which upheld the Assessing Officer’s decision to disallow the expenses claimed by the trust due to the late filing of Form 10B. The CIT(A) had confirmed the addition of Rs. 10,39,011, arguing that the trust failed to file Form 10B within the stipulated time. The assessee contended that the CIT(A) had ignored several judicial precedents from various High Courts, which allowed the filing of Form 10B until the completion of the assessment or during any subsequent proceedings.
The ITAT, after hearing both parties, referred to the Gujarat High Court’s ruling in M/s. Social Security Scheme of GICEA vs. CIT(E) [2023] 147 taxmann.com 283 (Guj.). This precedent established that the conditions related to Form 10B are not mandatory for claiming exemptions under Section 11. The ITAT noted that the lower authorities had not adequately considered the mitigating circumstances that led to the delay in submitting Form 10B and had assessed the trust’s entire receipts without accounting for corresponding expenditures.
In light of the Gujarat High Court’s precedent and the procedural shortcomings of the lower authorities, the ITAT decided to remand the case back to the Assessing Officer for a fresh adjudication. The Assessing Officer was directed to conduct the assessment after providing the assessee with three effective opportunities for hearing. This decision emphasizes that the non-mandatory nature of timely Form 10B filing, and the need for a fair assessment of the trust’s income and expenditures. The ITAT allowed the assessee’s appeal for statistical purposes, ensuring a reassessment of the case.
The case was represented by CA Kishor Phadke (Assisted by CA Saurabh Jadhav)
