Case Law Details
Daroga Family Foundation Vs CIT (Exemption) (ITAT Kolkata)
In the case of Daroga Family Foundation vs. CIT (Exemption), the ITAT Kolkata addressed an appeal related to the assessment year 2021-22. The appeal challenged an order under Section 119(2)(b) of the Income Tax Act, 1961, issued by the Commissioner of Income Tax (Exemption), Kolkata, on 27.07.2023. The dispute centered around the rejection of the appellant’s application for condonation of delay in filing Form-10B, which is crucial for claiming exemption under the Act.
The appellant, a charitable trust, initially filed its return on 02.11.2021. However, a suo motu intimation order dated 07.03.2023 showed a demand due to the non-filing of Form-10B. The trust argued that delays were due to difficulties caused by COVID-19 and issues with electronic filing. The CIT (Exemption) denied the application for condonation, citing insufficient justification for the delay.
On appeal, the ITAT examined whether the delay in filing Form-10B should be excused. It noted that previous ITAT rulings, including those from Ahmedabad and Calcutta High Court, had addressed similar issues, often condoning delays if reasonable grounds were shown. The ITAT decided to follow the precedent set by these rulings, concluding that the delay in filing Form-10B was a procedural lapse rather than a substantial one. ITAT condoned the delay in filing Form-10B in the case of Daroga Family Foundation vs. CIT (Exemption) based on following key factors:
- Reasonable Cause for Delay: The ITAT acknowledged the appellant’s argument that the delay was due to difficulties caused by the COVID-19 pandemic and issues with electronic filing. These difficulties were seen as reasonable grounds for the delay, as the pandemic had created widespread disruptions and challenges for many taxpayers.
- Precedent and Judicial Precedent: The ITAT referenced earlier decisions from other ITAT benches and the Calcutta High Court that had addressed similar issues. These decisions had often allowed for delays in filing Form-10B if the delay was deemed procedural rather than substantial. The ITAT followed this precedent, recognizing that procedural lapses should not prevent the grant of exemptions if reasonable causes are provided.
- Substantive Compliance vs. Procedural Compliance: The ITAT considered the delay in filing Form-10B as a procedural issue rather than a substantive one. They emphasized that the essence of the requirement was to have the audit report available to the assessing officer before the assessment proceedings, which was ultimately achieved. Therefore, the delay in submission was viewed as a minor procedural lapse that should not negate the eligibility for exemption.
The ITAT allowed the appeal, condoning the delay and directing the matter back to the CIT (Exemption) for reconsideration of the exemption claim. This ruling underscores the ITAT’s approach to procedural delays and the importance of considering contextual factors such as the pandemic’s impact.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This appeal filed by the assessee pertaining to the Assessment Year (in short ‘AY’) 2021-22 is directed against the order passed u/s 119(2)(b) of the Income Tax Act, 1961 (in short the ‘Act’) by ld. Commissioner of Income-tax (Exemption), Kolkata [in short ld. ‘CIT(A)’] dated 27.07.2023.
2. The brief facts of the case of the appellant are that the assessee Daroga Family Foundation being a charitable Trust filed its return of income for AY 2021-22 on 02.11.2021. The assessee received an order against his returned income u/s 143(1) of the Act with no payment due. A suo moto intimation order u/s 144 of the Act dated 07.03.2023 received by the assessee showing a net demand of Rs. 3,03,430/- stating the reason that Form-10B has not been filed. The total income has been shown u/s 154 of the Act as Rs. 79,685/-. The assessee submitted application before ld. CIT (Exemption) for condonation of delay in filing Form-10B for AY 2021-22. But ld. CIT (Exemption) u/s 119(2)(b) of the Act rejected the application seeking condonation of delay in filing Form-10B stating the ground that there was no reasonable cause has been shown in the application. Being aggrieved and dissatisfied with the impugned order, the present appeal has been preferred.
3. The ld. Counsel for the assessee submitted that the assessee had filed sufficient bona fide ground and the ground was that consideration of difficulty reported by taxpayers and other stakeholders due to COVID and in electronic filing of various reports of audit. It has been argued that the COVID problem persisted and the Government of West Bengal vide order dated 11.07.2022 informed that post-COVID-19 sequel is emerging. Even though the assessee filed Form-10B despite the difficulty on 02.07.2022. Ld. Counsel for the assessee further drew the attention of this Court on the order of the Assessing Officer (hereinafter referred to as ld. ‘AO’) u/s 143(1) of the Act in which it has mentioned the submission of Form-10B and later on suo moto u/s 154 of the Act it has been mentioned that Form-10B has not been filed and exemption has been denied. The ld. Counsel for the assessee submits that delay was a bona fide and it must be condoned by the ld. CIT (Exemption). He has filed following judgements:
a) Gyandeep Charitable Trust vs. ADIT, CPC in ITA No. 555/AHD/2023 order dated 03.01.2024.
b) Raghav Mahesh Chandra Trivedi vs. CIT in ITA No. 119/AHD/2021 order dated 24.02.2023.
c) ITO vs. Camellia Educare Trust in ITA No. 646/KOL/2022 order dated 30.05.2023 and
d) Hon’ble Calcutta High Court in the case of CIT vs. Rai Bahadur Bissesswarlal Motilal Malwasie Trust reported in [1992] 195 ITR 825 (Calcutta).
4. We have perused the fact of the case of the assessee and find that the assessee is a charitable Trust filed its return of income on 02.11.2021 though the due date was 15.03.2022 in which it has been mentioned that Form-10B has been filed. Later on, u/s 154 of the Act it has been found suo moto that Form-10B has not been filed hence, exemption has been denied. The contention of ld. Counsel for the assessee is that when he got notice to file the non-submission of Form-10B, he immediately filed it on 02.07.2022 as according to him that order dated 27.03.2023 rejecting the condonation application was received by E-mail on 07.03.2024. We have gone through the order passed by the ld. CIT (Exemption) u/s 119(2)(b) of the Act and find that— it is observed that the applicant has no reasonable cause regarding the delay in filing Form-10B, assessee applicant has failed to explain the reasonable cause which prevented him from filing Form-10B within the stipulated time. We have gone through the judgement passed by the Coordinate Bench of ITAT, Ahmedabad and find that in ITA No. 555/AHD/2023 the issue was also the same that there was a delay in filing Form-10B i.e. audit report and in the above case Hon’ble Member has discussed the earlier order passed by the Ahmedabad Bench s in the case of Hari Gyan Pracharak Trust vs. DCIT in ITA No. 245/AHD/2021 order dated 16.06.2023 and after discussing the same, condoned the delay and restored the matter to the file of ld. CIT (Exemption). It is essential to quote the order of the ITAT Ahmedabad Bench which is as under:
“9. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we note that this Tribunal in identical facts and circumstances in the case of Hari Gyan Pracharak Trust vs. DCIT vide ITA No. 245/Ahd/2021 order dated 16-06-2023 has decided the issue in favour of the assessee by observing as under:
“7. We have carefully considered the order passed by the authorities below and the judgment passed by the Hon’ble Jurisdictional High Court in case of Association of Indian Panelboard Manufacturer (supra) on the issue involved. While passing order in favour of the assessee, the Hon’ble Jurisdictional High Court has been pleased to observe as follows:
“5.6 The Tribunal further committed an error in appreciating the import of Section 1192(b) of the Act inasmuch as the application contemplated hereunder is only a remedy for the assessee which could not be said to be compulsorily resorted to by the assessee. The circular No 7/18 dated 20.12.2018 issued under Section 119 of the Act could not be, therefore said to have taken away the appellate remedy.
5.7. The tribunal misdirected itself in yet another way when it observed that The Finance Act, 2015 with effect from 1.4.2016, that is from assessment year 2016-17 changed the legal position. There is no such change which could be said to have altered the legal position. The only change is with regard to compulsory filing of audit report in Form 10B in electronically form which is made mandatory under Rule 12(2) of the Income Tax Rules, 1962 but there is no change with regard to the substantive law about fling of audit report as stated above.
6. The moot aspect that centres around to the requirement of the availability of the audit report when the assessment was undertaken by the Assessing Officer even though the same may not have been filed along with the return of income. Filing of audit report held to be substantive requirement but not the mode and stage of filing, which is procedural. Once the audit report in Form 12B is filed to be available with the Assessing Officer before assessment proceedings take place, the requirement of law is satisfied. In that view the Income Tax Tribunal was not justified in dismissing the appeal of the assessee.
6.1. The appellant assessee has to be held to be eligible and entitled to exemptions under Section 11(1) and 112) of the Act and the alleged ground of non-filing of audit report along with return of income which was at the best procedural omission, could never to an impediment in law in claiming the exemption.
6.2. Accordingly the substantial questions of law have to be decided in favour of the appellant.
7. They are accordingly decided. The appeal is allowed.”
8. In view of the ratio laid down by the Hon’ble Jurisdictional High Court holding that non filing of Audit Report along with return of income is a procedural omission and cannot be an impediment in law in claiming the exemption, we allow this appeal condoning the delay in filing the Audit Report in Form No. 10B. However, we also upon condoning the delay, restore the matter to the file of the Ld. CIT(A) to pass order in regard to the exemption claimed by the assessee strictly in accordance with law.
9. In the result, assessee’s appeal is allowed for statistical purposes.”
9.1. Respectfully following the order of Co-ordinate Bench as discussed above, we condone the delay and restore the matter to the file of ld. CIT(A) to allow exemption u/s 11 of the Act to the assessee as per the provisions of law. Hence, the grounds of appeal of the assessee are allowed for statistical purposes.”
4.1. The present case is squarely covered with the above cited decision. The factual position has clearly been explained by the ld. A/R in his argument, reasonable cause has been explained satisfactorily. We are all this few that the matter is again restored to the file of ld. CIT (Exemption) considered the case of the assessee by condoning the delay.
5. In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 12th August, 2024.
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