Visha Oswal Tap. Shantibhuvan Upashray And Derasar Vs CIT (Gujarat High Court)
The petitioner, a charitable and religious trust registered under the Bombay Public Trust Act, 1950 and under Section 12A of the Income-tax Act, 1961 since 07.08.1979, challenged the order dated 09.09.2019 passed by the Commissioner of Income Tax (Exemption) under Section 119(2)(b) rejecting its application for condonation of delay in filing Form No. 10B for Assessment Year 2015-16.
For the relevant assessment year, the trust reported total income of ₹15,73,887 and application of income of ₹16,13,547, resulting in excess expenditure of ₹39,660. Its books of account were audited on 07.05.2015, and Form No. 10B, being the audit report under Section 12A(b), was also obtained on the same date. The return of income under Section 139(4A) was filed on 26.09.2015 claiming exemption under Section 11. However, Form No. 10B was not uploaded electronically along with the return because of an alleged mistake by the clerical staff of the trust’s Chartered Accountant, who was suffering from a brain tumour, remained bedridden for a prolonged period and subsequently passed away on 14.10.2018.
The return was processed under Section 143(1), and by intimation dated 15.09.2016, exemption under Section 11 was denied for want of Form No. 10B. Income was assessed at ₹15,73,890 and a demand of ₹3,72,480 was raised. The trust thereafter filed multiple rectification applications under Section 154, all of which were rejected. Form No. 10B was ultimately uploaded electronically on 28.03.2018. The trust also filed an appeal before the Commissioner (Appeals) and subsequently sought condonation of delay under Section 119(2)(b). After issuing a show-cause notice and considering the trust’s explanation, the Commissioner rejected the condonation application on 09.09.2019 on the ground that the explanation did not establish genuine hardship. A subsequent application relying upon CBDT Circular No. 6 of 2020 was also not entertained as the earlier application had already been rejected. The present writ petition challenged the order dated 09.09.2019.
The petitioner contended that the audit report had been obtained before the due date and that the delay in electronic filing was unintentional and attributable to the serious illness and subsequent death of its Chartered Accountant. It relied upon CBDT Circulars authorising Commissioners to condone delays in filing Form No. 10B upon satisfaction of genuine hardship and submitted that a charitable trust should not be deprived of exemption under Section 11 solely because Form No. 10B had not been uploaded in time.
The Revenue submitted that Form No. 10B had been filed more than 900 days after the return and only after processing under Section 143(1). According to the Revenue, the delay was unsupported by genuine hardship, the mistake of the Chartered Accountant’s clerical staff did not constitute reasonable cause, filing Form No. 10B was not a mere procedural formality, and the order under Section 119(2)(b) was an administrative order passed within the Commissioner’s discretion.
The High Court observed that it was undisputed that the audit report in Form No. 10B had been obtained on 07.05.2015, prior to the filing of the return on 26.09.2015. It referred to CBDT Circular No. 2 of 2020, which authorises Commissioners to condone delay in filing Form No. 10B where an assessee was prevented by reasonable cause from filing it within the stipulated time. Although the circular expressly referred to Assessment Years 2016-17 and 2017-18, the Court held that the same analogy would apply to Assessment Year 2015-16. The Court found that the delay attributable to the illness of the Chartered Accountant and the consequent failure of his clerical staff to upload the audit report could not be excluded from the ambit of genuine hardship.
The Court further held that the Commissioner adopted a pedantic approach in rejecting the application. Since the audit report had already been issued before the due date of filing the return and only its electronic upload had remained pending, the delay ought to have been condoned instead of rejecting the application on technical grounds.
Accordingly, the High Court allowed the writ petition, quashed and set aside the Commissioner’s order dated 09.09.2019, and directed the respondent to pass an order condoning the delay in filing Form No. 10B so as to enable the petitioner to obtain exemption under Section 11 of the Income-tax Act. Rule was made absolute with no order as to costs.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. Heard learned Senior Advocate Mr.Tushar Hemani with learned advocate Ms.Vaibhavi Parikh for the petitioner and learned Senior Standing Counsel Ms.Maithili Mehta for the respondent.
2. Rule, returnable forthwith. Learned Senior Standing Counsel Ms.Maithili Mehta waives service of notice of rule for and on behalf of the respondent.
3. By this petition under Article 227 of the Constitution of India, the petitioner has challenged the order dated 09.09.2019 passed by the respondent-Commissioner of Income Tax (Exemption) under Section 119(2)(b) of the Income Tax Act, 1961 (for short ‘the Act’) whereby, the application for condonation of delay in filing Form No.10B for Assessment Year 2015-16 is rejected.
4.1. The brief facts of the case are that, the petitioner-Trust is engaged in charitable and religious activities. The petitioner-Trust is duly registered under the provisions of the Bombay Public Trust Act, 1950 and is also registered under Section 12A of the Act on 07.08.1979.
4.2. It is the case of the petitioner-Trust that during the financial year 2014-15 relevant to Assessment Year 2015-16, the total income of the petitioner-Trust was Rs.15,73,887/- as against there was
application of income of Rs.16,13,547/-resulting into excess of expenditure over income of Rs.39,660/-.
4.3. The books of accounts of the petitioner-Trust were duly audited by Chartered Accountant-Ramesh Vasa on 07.05.2015 and Form 10B i.e. Audit Report under Section 12A(b) of the Act was also obtained on 07.05.2015.
4.4. The petitioner-Trust filed return of income for Assessment Year 2015-16 under Section 139(4A) of the Act on 26.09.2015 declaring total income at Rs. NIL after claiming exemption under Section 11 of the Act.
4.5. However, Form 10B i.e. Audit Report was not filed electronically along with the return due to the mistake on the part of the clerical staff of the Chartered Accountant who was suffering from brain tumor and was bedridden for a prolonged period and thereafter, the Chartered Account passed away on 14.10.2018.
4.6. The return of income filed by the petitioner was processed under Section 143(1) of the Act and intimation dated 15.09.2016 was issued whereby, the exemption claimed by the petitioner under Section 11 of the Act was denied in absence of the audit report in Form 10B and income was determined at Rs.15,73,890/- and demand of Rs.3,72,480/- was raised.
4.7. The petitioner thereafter filed Rectification Application on 20.12.2016 under Section 154 of the Act against the intimation under Section 143(1) of the Act which was rejected on 20th April, 2017.
4.8. The petitioner thereafter filed the audit report in Form 10B electronically on 28.03.2018.
4.9. The petitioner filed another online Rectification Application under Section 154 of the Act on 07.04.2018 which was also rejected on 23.04.2018 by the Assessing Officer on the ground that the petitioner failed to file the Form 10B electronically till the expiry of the time limit for filing of the return of income.
4.10. The petitioner filed an Appeal against the order of rectification before the CIT (Appeals) electronically on 08.08.2018.
4.11. The petitioner thereafter filed application under Section 119(2)(b) of the Act before the respondent on 04.12.2018 for condonation of delay in filing Form 10B.
4.12. The petitioner filed another on-line Rectification Application under Section 154 of the Act on 08.12.2018 which was also rejected on 29.01.2019.
4.13. The respondent issued a show-cause notice dated 25.01.2019 calling upon the petitioner to show cause as to why the application for condonation of delay in filing Form 10B should not be rejected as the reasons given by the petitioner for delay cannot be considered as “genuine hardship” on the part of the petitioner to file the Form 10B belatedly.
4.14. The petitioner by reply dated 11.02.2019, furnished the explanation for delay in filing the Form 10B.
4.15. The respondent by the impugned order dated 09.09.2019 rejected the application for condonation of delay in filing Form 10B on the ground that the explanation given by the petitioner was not satisfactory.
4.16. The petitioner thereafter again moved an application dated 25th February, 2020 under Section 119(2)(b) of the Act for condonation of delay in filing Form 10B relying upon the Circular No.6 of 2020 dated 19.02.2020 issued by the Central Board of Direct Taxes (for short ‘CBDT’ ) and requested for condonation of delay in filing Form 10B in view of the said circular.
4.17. The respondent by order dated 03.03.2020 held that as the application which was filed on 04.12.2018 was rejected by order dated 09.09.2019, the fresh application dated 25.02.2020 was not entertained.
4.18. The petitioner thereafter filed an Appeal against the intimation passed under Section 143(1) of the Act before the First Appellate Authority on 26th June, 2020.
4.19. Being aggrieved by the order dated 09.09.2019 passed by the respondent rejecting the application for condonation of delay in filing Form 10B, the petitioner has preferred this petition.
5.1. Learned Senior Advocate Mr.Tushar Hemani for the petitioner submitted that the petitioner was prevented by reasonable cause from filing Form 10B within the stipulated time as though the Chartered Accountant of the petitioner has issued the Audit Report in Form 10B on 07.05.2015, the same could not be filed by his clerical staff on account of the ill health of the Chartered Accountant.
5.2. It was submitted that the delay infillings Form 10B was not intentional or with any ill-motive as the Chartered Accountant of the petitioner was suffering from brain tumor and was bedridden for a prolonged period and eventually passed away on 14.10.2018.
5.3. It was submitted that as per CircularNo.10 dated 22nd May, 2019 followed by Circular No.2 of 2020 dated 03.01.2020 issued by the CBDT authorises the Commissioner to admit the belated application in filing Form 10B for ascertaining the genuine hardship on part of the assessee. It was submitted that the impugned order passed by the respondent is contrary to the circulars issued by the CBDT in asmuch as the petitioner has shown the sufficient cause for genuine hardship on account of the ill health of the Chartered Accountant and the petitioner-Trust is doing charitable activities since 1979 and should not be deprived from exemption under Section 11 of the Act only on non-filing of Form 10B.
5.4. It was therefore submitted that the impugned order passed by the respondent is liable to be quashed and set aside.
6.1. On the other hand, learned Senior Standing Counsel Ms. Maithili Mehta for the respondent referred to and relied upon the following averments made in the affidavit-in-reply filed on behalf of the respondent :
“6. It is submitted that the assessee then filed application u/s 119(2)(b), seeking condonation of delay in filing audit report in form no.10B. The CIT (Exemption) under order dated 09.09.2019, rejected the application seeking condonation of delay against which, present petition is filed. The reply to the petition is as under:
6.1. With reference to contents of para 3.1 and 3.2, it is submitted that the application of the assessee seeking condonation of delay was rejected by passing speaking order therefore present petition is not maintainable.
6.2. With reference to contents of para 3.2.1, it is submitted that the assessee without filing Form No.10B (which is the audit report), filed its return of income. Form no 10B was filed on 28.03.2018, which was late by 908 days and that to after processing of return under Section 143(1) on 15.09.2016. Thus, income was claimed were available for though the entire exempt, no details scrutiny. The form no. 10B was filed after order u/s 143(1) and therefore eligibility or otherwise could not be verified. The filing of form no. 10B belatedly was thus nothing but an afterthought without any genuine hardship to the assesse.
6.3. With reference to contents of para 3.2.2, it is submitted that the assesse in this case filed of Form no. 10B belatedly more than 900 days and that too after return was processed under Section 143(1) of the Act. In absence of audit report in form no. 10B exemption claimed by the assessee could not be verified. Moreover, there is no reasonable cause shown by the assessee in not filing form no.10B within the time stipulated and therefore, the order under Section 119 (2) (b) dated 09.09.2019 is just and proper.
6.4. With reference to contents of para 3.3.1 to 3.3.4, it is submitted that reasons shown by the assessee in its application cannot be stated to be genuine hardship caused which had prevented from timely compliance. When entire income of the assessee was claimed as exemption under the provisions of the Act, the assessee is expected to be vigilant about the provisions of the Act. Moreover, mistake of the clerical staff of the CA cannot be stated to be reasonable cause.
6.5. With reference to contents of para 3.4.1 to 3.4.3, it is submitted that the order under Section 119(2)(b) is an administrative order and it is within the discretion of the authority concerned. The authority considering the grounds stated in the application found as no case of hardship and thus, there is no illegality in the administrative order passed by the authority. In absence of any procedural lacuna in the order dated 09.09.2019, judicial interference may not be warranted.
6.6. With reference to contents of para 3.4 to 3.5.3, it is submitted that extension of time cannot be stated as a vested right when sufficient reasons are not shown in the application. No efforts are made to have timely compliance. Therefore, there is no illegality in the order dated 09.09.2019.
6.7. With reference to contents of para 3.6. to 3.6.2, it is submitted that the petitioner trust is duly registered under Section 12 A on 7.8.1979. They have been filing return of income regularly and being old trust expected to be well aware about the legal provisions of the Act. As stated earlier in absence of any audit report due verification in relation to the exemption claimed by the assessee could be verified.
6.8. With reference to contents of para 3.6.3, it is submitted that the provision of filing form no. 10B along with return of income is not new insertion of provision. The discipline on time limit regarding uploading audit report in the form no. 10 B online has to be complied and respected. The casual approach of the assessee may result into non fulfilling time limit mandated under the provisions of the Act. Therefore, there is no illegality in the order dated 09.09.2019.
6.9. With reference to contents of para 3.7, it is submitted that filing, of form no.10B is also not merely procedural formalities. From the wording of Section 12A(b) of the Act where total income of the trust or institution as computed under this Act without giving effect to the provisions of Section 11 and 12 exceeding the minimum amount which is not chargeable to income tax in any previous year, the account of the trust or institution for that year shall have to be audited by the accountant as defined in explanation below sub-section 2 of Section 288. The person in receipt of income shall have to be furnished along with return of income, the report of such audit in the prescribed format duly signed and verified by the accountant as may be prescribed. Thus, as the assessee has failed in complying with the provisions of the Act, the order dated 09.09.2019 under Section 119 (2) (b) of the Act was passed.”
6.2. Referring to the above averments, it was submitted that the impugned order passed by the respondent is justified and no interference may be made while exercising extra-ordinary jurisdiction under Article 227 of the Constitution of India.
7. Considering the submissions made by learned advocates for the parties, it is not in dispute that the audit report in Form 10B was obtained on 07.05.2015 that is prior to the date of filing of the return on 26.09.2015.
8. Circular No.2 of 2020 issued by the CBDT provides for condonation of delay in filing Form 10B for Assessment Year 2016-17 which reads as under:
“4. Accordingly, the CBDT issued Circular No. 10/2019 circulated through F.No. 197/55/2018-ITA-I in supersession of earlier circular/Instruction issued in this regard, and with a view to expedite the disposal of applications filed by such trust or institution for condoning the delay in filing Form No. 10B and in the exercise of the powers conferred under section 119(2) of the Act, the Central Board of Direct Taxes vide Circular No. 10/2019 dated 23rd May, 2019 and Circular No. 28/2019 dated 27th September, 2019 both issued vide F.No. 197/55/2018-ITA-I has directed that :
i. The delay in filing of Form No. 10B for A. Y. 2016-17 and A.Y. 2017-18, in all such cases where the Audit Report for the previous year has been obtained before the filing of velum of income and has been furnished subsequent to the filing of the return of income but before the date specified under section 139 of the Act is condoned.
ii. In all other cases of belated applications in filing Form No. 10B for years prior to AY. 2018-19, The commissioner of Income-tax are authorized to admit and dispose off by 31-3-2020 such applications for condonation of delay u/s 119(2)(b) of the Act. The Commissioner will while entertaining such belated applications in filing Form No. 10B shall satisly themselves that the assessee was prevented by reasonable cause from filing such application within the stipulated time.”
9. Though the aforesaid circular is issued for Assessment Years 2016-17 and 2017-18, the same analogy would apply for Assessment Year 2015-16 also and as the petitioner has shown the inadvertent delay on part of the clerical staff of the Chartered Accountant who was suffering from brain tumor, the same cannot be discarded from purview of genuine hardship. The reasons assigned by the respondent are also not proper inasmuch as the respondent has adopted a pedantic approach in rejecting the application to condone the delay by observing as under :
“8. Having gone through the above facts, I am of the opinion that the assessee has not shown any genuine hardship on account of which the lapse occurred. It has merely taken the excuse on account of the clerical staff of Chartered Accountant that too without any supporting evidences. By assigning any work to any external agency the onus of statutory duty does not get shifted. As per provisions of section 12A(1)(b) of I.T. Act, the assessee should have ensured that the audit report duly signed by the accountant, as defined in Explanation below sub-section (2) of section 288 of the Act, is submitted alongwith the return of income on time. The assessee has relied upon certain decisions of Honourable Courts. The same have been gone through carefully and found that the facts of those cases are not identical to the facts of the case of assessee. Hence, the cited decisions are not applicable here.
9. Further, as the assessee has preferred an appeal before the Ld.CIT (A)-3, Rajkot which is still pending, the Condonation petition cannot be processed by this office at present.”
10. On perusal of the above findings, it is apparent that the respondent instead of considering the technical compliance of filing audit report which was issued by the Chartered Accountant on 07.05.2015 even prior to the due date of filing of the return which could not be uploaded, ought to have condoned the delay.
11. In view of the foregoing reasons, the petition succeeds and accordingly allowed. The impugned order dated 09.09.2019 is hereby quashed and set aside and the respondent is directed to pass an order to condone the delay in filing the Form 10B i.e. Audit Report so as to enable the petitioner to get the exemption under Section 11 of the Act. Rule is made absolute to the aforesaid extent. No orders as to cost.
