Seth Chagan Mall Hira Lall Dugar Charitable Trust Vs ITO (ITAT Kolkata)
Summary: The Income Tax Appellate Tribunal, Kolkata SMC Bench, in Seth Chagan Mall Hira Lall Dugar Charitable Trust Vs ITO, condoned the delay in furnishing Form 9A and restored the charitable trust’s matter to the Commissioner of Income Tax (Exemptions) for fresh consideration in accordance with law. The dispute concerned Assessment Year 2019-20 and the denial of relief in respect of ₹24,22,654 claimed by the trust under Section 11. The assessee had filed its return declaring nil income and exercised an option concerning deemed application of income. However, while processing the return under Section 143(1) of the Income-tax Act, 1961, the Revenue denied the claim because Form 9A had not been furnished along with the return. The first appellate authority also rejected relief on the ground that it lacked power to condone the delay.
The assessee submitted that the omission to furnish Form 9A was bona fide and inadvertent. Upon becoming aware of the omission, the trust uploaded the prescribed form on 18 March 2021. It was explained that the trustee responsible for handling tax-related matters had been diagnosed with COVID-19 and hospitalised on 29 August 2020, after which he had been advised to remain on bed rest for approximately three months. The assessee contended that the delay occurred amid the COVID restrictions and associated difficulties and that its charitable objects and activities were not disputed. The trust also produced the relevant discharge certificate and medical prescription in support of the explanation.
In support of its case, the assessee relied upon several judicial decisions concerning delayed filing of statutory forms and audit reports, including Association of Indian Panelboard Manufacturer Vs DCIT, Bangarh Educational Welfare Trust Vs ITO (Exemptions), Shri Modi Samaj Vikas Trust Vs ITO, Satpuda Foundation Vs ITO, The Bangalore Fruit Commission Agents Association Vs ACIT and JCIT (OSD), Exemption Vs Vadodara Urban Development Authority. The Departmental Representative supported the orders of the lower authorities.
The Tribunal observed that the assessee was a registered charitable trust, that its return and claim had been placed on record, and that the dispute arose essentially from the delayed furnishing of Form 9A. Referring to the Gujarat High Court’s ruling in Association of Indian Panelboard Manufacturer, the Tribunal noted the distinction between substantive compliance with statutory requirements and the procedural stage at which relevant documents were furnished. It also examined the Kolkata Tribunal’s decision in Bangarh Educational Welfare Trust, which had applied the principle that late submission of an audit report should not necessarily defeat a legitimate charitable exemption where substantial compliance was established.
The Tribunal further referred to Sarvodaya Charitable Trust Vs ITO (Exemption) and CIT Vs Gujarat Oil and Allied Industries Ltd., which concerned the procedural character of furnishing audit reports and the relevance of substantial compliance. The decision in Sasha Association for Craft Producers Vs ITO, involving delayed Form 10 compliance, was also considered. Taking account of these authorities and the medical evidence explaining the delay, the Tribunal concluded that the trust’s claim should not be rejected merely because Form 9A had been furnished after the return.
Accordingly, the Tribunal condoned the delay and remitted the matter to CIT (Exemptions) for passing an order in accordance with law. The appeal was allowed for statistical purposes. Importantly, the Tribunal did not finally adjudicate or directly grant the ₹24,22,654 exemption; it restored the matter for reconsideration after accepting the explanation for delayed compliance. The order is relevant to charitable trusts seeking relief against delayed filing of statutory forms, particularly where bona fide circumstances and supporting evidence establish sufficient cause. The distinction between Form 9A, which concerns the option for deemed application, and Form 10B, which concerns the audit report, remains material when applying the precedents discussed.
Cases Discussed:
1. Satpuda Foundation Vs ITO, Ward-2, Exemption, Nagpur, ITA No. 143/Nag/2021, ITAT Nagpur, Order Dated 3 June 2024: Cited by the assessee in support of its case concerning delayed compliance with exemption-related requirements. The present order does not separately reproduce or analyse its findings.
2. The Bangalore Fruit Commission Agents Association Vs ACIT, CPC, Bangalore, ITA No. 417/Bang/2024, ITAT Bangalore, Order Dated 16 April 2024: Cited by the assessee among the decisions relied upon in support of its exemption claim. The Tribunal did not separately analyse its factual background or ratio.
3. JCIT (OSD), Exemption, Circle-2, Ahmedabad Vs Vadodara Urban Development Authority, ITA Nos. 333 to 335 and 342 to 344/Ahd/2023, ITAT Ahmedabad, Order Dated 29 February 2024: Cited by the assessee as supporting authority. Its reasoning was not separately discussed in the present order.
4. M/s. Sasha Association for Craft Producers Vs ITO, ITA No. 181/KOL/2021, ITAT Kolkata, Order Dated 16 August 2023: Considered by the Tribunal concerning delayed submission of Form 10. The coordinate Bench had allowed the assessee’s appeal on the issue considered in that decision.
5. Shri Modi Samaj Vikas Trust Vs ITO, Exemption, Palanpur, ITA No. 409/AHD/2022, ITAT Ahmedabad, Order Dated 6 April 2023: Cited by the assessee in support of its challenge to the denial of charitable trust relief. The present Tribunal did not separately discuss its reasoning.
6. Association of Indian Panelboard Manufacturer Vs DCIT, R/Tax Appeal No. 655 of 2022, Gujarat High Court, Order Dated 21 March 2023: Relied upon for distinguishing the substantive requirement of furnishing an audit report from the procedural manner and stage of its filing. The High Court recognised that availability of the audit report before the assessment could satisfy the statutory requirement.
7. Bangarh Educational Welfare Trust Vs ITO (Exemptions), ITA No. 496/KOL/2021, ITAT Kolkata, Order Dated 2 January 2023 as stated in the assessee’s cited-case list; the Tribunal’s later discussion refers to 2 January 2022: Relied upon regarding delayed filing of Form 10B and Section 11 exemption. A corrigendum dated 15 March 2023 is also mentioned in the judgment. The difference in dates is retained as appearing in the supplied source.
8. Sarvodaya Charitable Trust Vs ITO (Exemption), [2021] 125 taxmann.com 75, Gujarat High Court, Decision Dated 9 December 2020: Referred to through the quoted Bangarh Educational Welfare Trust judgment concerning the procedural nature of audit-report submission and the sufficiency of substantial compliance.
9. CIT Vs Gujarat Oil and Allied Industries Ltd., [1993] 201 ITR 325 (Guj), Gujarat High Court: Cited through the Sarvodaya Charitable Trust decision for the proposition that furnishing an audit report with the return is procedural and directory and that subsequent furnishing may be accepted upon sufficient cause.
FULL TEXT OF THE ORIGINAL ORDER OF ITAT KOLKATA
This appeal filed by the assessee pertaining to the Assessment Year (in short ‘AY’) 2019-20 is directed against the order passed u/s 250 of the Income Tax Act, 1961 (in short the ‘Act’) by ld. Commissioner of Income-tax (Appeals)-6, Chennai [in short ld. ‘CIT(A)’] dated 12.06.2024 arising out of the assessment order framed u/s 143(1) of the Act dated 05.06.2020.
1.1. The brief facts of the case of the appellant are that the assessee is a registered Trust filed its return of income for the 19- on 31 .10.2019 declaring total income at ‘NIL’. The return of income of the assessee was processed u/s 143(1) of the Act and an intimation order u/s 143(1) of the Act dated 05.06.2019 received wherein the amount of donation u/s 11(2)(ii) of the Act of Rs. 24,22,654/- has not been treated as deemed application charged to tax on the ground that Form-9A was not filed along with the return of income. The assessee filed an appeal before the ld. CIT (Exemption) wherein also the appeal of the assessee has been dismissed on this ground that the appellate authority is not empowered to condone the delay in filing Form-9A. The ld. Counsel for the assessee challenges the impugned order thereby submitting that the ld. AO as well as ld. CIT (Exemption) have erred in disallowing the application of the income and taxing the non-corpus donation received by the Trust while processing the return on the ground of non-furnishing of Form-9A ignoring the fact that it was inadvertently omitted to be filed along with the return of income and filed the same later on. The ld. Counsel for the assessee submits that when the intimation order and omission of filing of Form-9A came into the notice, the same has been filed by the assessee on 18.03.2021 and according to him it was simply a bona fide omission on the part of the person, said intimation order was issued in the midst of the COVID restriction period. The ld. Counsel for the assessee further stated that trustee responsible for handling tax related matters of the assessee was hospitalized on 29.08.2020 as he was diagnosed with COVID-19 and was on bed rest following three months as per doctor’s advice. The ld. Counsel for the assessee cited several decisions which are as follows:
1. Judgement of the Gujarat High Court in the case of Association of Indian Panelboard Manufacturer vs DCIT in R/Tax Appeal No. 655 of 2022 pronounced on 21.03.2023.
2. Judgement of the Kolkata IT AT in the case of Bangarh Educational Welfare Trust vs ITO(Exemptions), Ward-2(2), Siliguri in ITA No. 496/Kol/2021 pronounced on 02.01.2023 and corrigendum pronounced on 15.03.2023.
3. Judgement of the Ahmedabad ITAT in the case of Shri Modi Samaj Vikas Trust vs ITO, Exemption, Palanpur in ITA No. 409/AHD/2022 pronounced on 06.04.2023.
4. Judgement of the Nagpur ITAT in the case of Satpuda Foundation vs ITO, Ward-2, Exemption, Nagpur in ITA No. 143/Nag/2021 pronounced on 03.06.2024.
5. Judgement of the Bangalore ITAT in the case of The Bangalore Fruit Commission Agents Association vs ACIT, CPC, Bangalore in ITA No. 417/Bang/2024 pronounced on 16.04.2024.
6. Judgement of the Ahmedabad ITAT in the-case of The JT. CIT (OSD) Exemption, Circle-2, Ahmedabad vs Vadodara Urban Development Authority in ITA No. 333 to 335 and 342 to 344/Ahd/2023 pronounced on 29.02.2024.
1.2. Contrary to that, the ld. D/R supports the impugned order.
2. On perusal of the records, it admits of no doubt that the assessee is a registered Trust and he filed the return of income for the AY 2019-20 within the due date by exercising the option of accumulation of income u/s 11(2)(ii) of the Act for an amount of Rs. 24,22,654/-. It is also the definite case of the assessee that when he received the notice u/s 143 of the Act regarding non-filing of Form-9A, the assessee filed the prescribed form at a later date on 18.03.2021. The grounds taken by the assessee which has also been before ld. CIT (Exemption) that the trustee responsible for handling tax related matters of the assessee was hospitalized on 29.08.2020 as he was diagnosed with COVID-19 and he had been advised for bed rest. It further appears that the object of the Trust in carrying out the charitable activities are not in dispute. It is simply that the assessee did not file Form-9A in the prescribed limit. It is also not in dispute that the assessee accepted the notice made by it and upon realization of the same, it took action to rectify the mistake. We have gone through the cited decisions and find that Hon’ble Gujarat High Court in the case of Association of Indian Panelboard Manufacturer petitioner by inadvertence did not file the along with the return of income the audit report in Form-10B and it was admittedly filed electronically on later date. Hon’ble High Court has held thus:
“6. The moot aspect thus 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 is 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.”
2.1. We have also gone through the cited judgment passed by the hon ITAT and find that the Coordinate Bench of ITAT, Kolkata in the case of Bangarh Educational Welfare Trust vs ITO(Exemptions) in ITA No. 496/KOL/2021 order dated 02.01.2022 find that the facts of the case were that a Trust was granted registration u/s 12AA(b)(i) of the Act, return of income filed claiming deduction u/s 11 of the Act and the deduction of Rs. 1,35,87,109/- claimed by the assessee denied on the ground that the assessee failed to file the return before the due date and secondly audit report in Form-10B was not filed before the due date prescribed in this Act. The Hon’ble Member has after going over the Circular of CBDT and after discussing several judgments of the hon ITAT has passed the order in favour of the assessee. The operative portion of the aforesaid decision is as thus:
“12. Now, the second reason for which lower authorities have denied the deduction u/s 11 of the Act is of filing the belated audit report on form 10B of the Act. Now, clause (b) of section 12A(1) of the Act provides for a condition that if the income of a trust exceeds a maximum amount which is not chargeable to tax in the previous year the account have to be audited and the person in receipt of such income furnishes the audit report before the specified date. In the case of the assessee, Form No.10B was to be filed and the relevant rule is rule 17B of the Income Tax Rules which provides that the report of audit of the accounts of a trust or institution which is required to be furnished under Clause (b) of section 12A, shall be in Form No.10B.
13. Now, on perusal of the Form 10B, we notice that the same is required to be submitted electronically, one month prior to the due date of the filing of return of income. Admittedly, in the case in hand, the audit report on form 10B has been uploaded on 30.03.2019 which is even after the date of filing the return of income on 15.11.2018. Now, before us, it has been contended by the ld. counsel for the assessee that filing of audit report is directory in nature and even if report is submitted in time before the conclusion of the assessment proceedings, the same needs to be considered. Though the assessee referred to the various decisions, we find it pertinent to refer to the judgment of the Hon’ble Gujarat High Court in the case of Sarvodaya Charitable Trust vs. ITO(Exemption) (supra) wherein Para 32 of the said judgment reads as follows:
“32. We may also refer to the decision of this Court in CIT v. Gujarat Oil and Allied Industries Ltd. [1993] 201 ITR 325 (Guj), wherein it is held that the provision regarding furnishing of audit report with the return has to be treated as a procedural proviso. It is directory in nature and its substantial compliance would suffice. In that case, the assessee had not produced the audit report along with the return of income but produced the same before the completion of the assessment. This Court took the view that the benefit of exemption should not be denied merely on account of delay in furnishing the same and it is permissible for the assessee to produce the audit report at a later stage either before the Income-tax Officer or before the appellate authority by assigning sufficient cause.”
14. In the above judgment, Hon’ble Court has held that filing of audit report is directory in nature and its substantial compliance would suffice. The ld. Departmental Representative failed to place before us any other binding precedents of Hon’ble Jurisdictional High Court or the Hon’ble Apex Court. Therefore, considering the ratio laid down in the Hon’ble Gujarat High Court in the case of Assessment year: 2018-19 Bangarh Educational Welfare Trust Sarvodaya Charitable Trust vs. ITO(Exemption) (supra), we find that though the audit report has been uploaded after the filing of return of income but the said report has been signed by the auditor on 28.10.2018 and the copy of this report is placed at 40- 41 of paper book and the date of audit report is prior to the filing of the return of income, therefore, it is presumed that conducting of audit for preparation of audit report is before e-filing of the return of income but as claimed by the assessee due to technical glitches, the report was uploaded after filing the return of income.
15. Though the Hon’ble Court holds that the report should be considered even filed in the course of assessment proceedings, or before in appellate authority, however, we notice that in the instant case, the case of the assessee was not selected for scrutiny assessment and it was mere processing of return by the computer with the set program. Had it been the case of scrutiny proceeding u/s 143(3) of the Act, the case could have been different. The ld. A.O may had an opportunity to go through the audit report. But still when the issue came before ld. CIT(A) who also possesses co-terminus power with that of A.O and as per section 251(1)(a) of the Act, the ld. CIT(A) in disposing the appeal against order of assessment has the power to confirm, reduce, enhance or annul the assessment, therefore, though, it was not possible to entertain the audit report while processing the return u/s 143(1)(a) of the Act, but the ld. CIT(A) was well within its power to have entertained the said report and examined the same as could have been done by the A.O. Assessment year: 2018-19 Bangarh Educational Welfare Trust.
16. We, therefore, in the given facts and circumstances and respectfully following the judgment of Hon’ble Gujarat High Court in the case Sarvodaya Charitable Trust vs. ITO(Exemption) (supra) , we are of the considered view that since the case of assessee is for A.Y 2018-19 and CBDT came up with a circular dated 23.04.2019 specially for A.Y 2018-19 providing that return of income to be filed within the time allowed u/s 139 of the Act, the assessee has complied with the conditions provided in sub-clause (b) and (ba) to section 12 and there is no dispute at the end of the revenue authorities that the assessee is carrying on charitable activities, for which it has been granted registration u/s 12A of the Act, the benefit of section 11 and 12 should be given to the assessee and deductions claimed by the assessee are, therefore, allowed. Thus, Ground Nos.1 to 4 of the assessee are allowed.”
2.2. We have also gone through the order passed by the cob of ITAT, Kolkata in M/s. Sasha Association for Craft Producers vs. ITO in ITA No. 181/KOL/2021 order dated 16.08.2023 on the issue for non-submission of Form-10, the Hon’ble Member has allowed the appeal of the assessee.
3. Keeping in view the above cited decisions and considering the facts of the present case, we are of this view that the appellant is entitled to deduction and his claim cannot be denied only on this regard that Form-9A has been filed later on, not with the returned income. The appellant has been able to establish his ground of delay that the trustee responsible for handling tax related matters was hospitalized and he had been suffering from severe illness. It is also not in dispute that the copy of discharge certificate and doctor’s prescription has been filed by the assessee before the ld. CIT (Exemption). Accordingly, we condone the delay and the matter is sent back to the file of ld. CIT (Exemption) to pass order as per law. Accordingly, the appeal is hereby allowed.
4. In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 16th October, 2024.
