Case Law Details
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)
FULL TEXT OF THE ORDER OF ITAT PUNE
This assessee’s appeal for assessment year 2017-18, arises against the Addl./JCIT(A)-4, Delhi, Delhi’s Din and Order No.ITBA/APL/S/250/2023-24/1058853900(1), dated 18.12.2023, in proceedings u/s.143(1) of the Income Tax Act, 1961 (in short “the Act”).
Heard both the parties. Case file perused.
2. The assessee pleads the following substantive grounds in the instant appeal :
1) “The learned CIT(A) erred in confirming the addition of Rs.10,39,011/- disallowing the entire amount of expenses incurred for the purpose of the activities to be carried out by the Trust.
2) The learned CIT(A) erred has confirmed the addition on the basis that, Form 10B of the Trust for the year under consideration was not filled within time as laid down in the Act.
3) The learned CIT(A) has completely ignored several case laws where in multiple High Courts have allowed Form 10B to be filed up to the completion of the assessment or during any proceedings.
4) The appellant request your honour to kindly delete the addition made by the learned CIT(A) on account of non-filling of audit report in form 10B and allow the benefit of deduction u/s 11 of the Act and oblige.
5) The appellant craves leave to add, alter, amend, or delete any of the above grounds of appeal.”
3. Both the learned representatives next invited my attention to the impugned lower appellate discussion declining the assessee’s appeal reads as under :
4. Learned counsel vehemently argued during the course of hearing that the lower appellate authority herein has erred in law and on facts not only in refusing to condone delay in submission of form 10B/audit report and also, it’s entire receipts have been added without giving credit of the corresponding expenditure incurred therein.
5. The Revenue on the other hand vehemently submitted that this is an instance of sec.143(1)intimation wherein the learned lower appellate authority has even questioned the corresponding lower appellate order dated 09th March, 2019 vis-à-vis the one dated 23.11.2021 (supra).
6. I have given my thoughtful consideration to the foregoing vehement rival submissions and find no reason to accept either parties stand in entirety at this stage. This is for the precise reason that the learned lower authorities have not given due consideration to the relevant mitigating circumstances resulting in delay in submission of form 10B and they have also assessed it’s entire receipts without computing the income, without prejudice to the foregoing first issue, on netting basis. Case law M/s. Social Security Scheme of GICEA vs. CIT(E) [2023] 147 com 283 (Guj.) has already held the above form 10B conditions as not mandatory in nature for the purpose of claiming sec.11 exemption. Faced with this situation, I hereby restore the assessee’s instant appeal back to learned Assessing Officer for his afresh appropriate adjudication within three effective opportunities of hearing in consequential proceedings at assessee’s risk and responsibility. Ordered accordingly.
7. This assessee’s appeal is allowed for statistical purposes in above terms.
Order pronounced in the open Court on 16.05.2024.
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