ITAT allows exemption u/s 11 when audit report in Form 10B was uploaded but could not be approved due to technical glitch
In a recent judgment ITAT has allowed the exemption u/s 11 when audit report in Form 10B was uploaded within due date but could not be approved due to technical glitch
ABCAUS Case Law Citation:
ABCAUS 3876 (2024) (02) ITAT
Important Case Laws relied upon by parties:
M/s. Shrimati Gitadevi Kondoi Seva Nidhi vs. ITO (Exemption)
Pawan Kuamr Agarwal Vs. CIT
In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming the addition to the total income of the appellant Trust by the CPC without giving the benefit of application of income us/ 11 of the Income Tax Act, 1961 (the Act).
The assessee was an Educational Trust registered u/s 12AA of the Act. The Assessee had filed its Income Tax Return mentioning its 12AA registration and claiming charitable status by claiming application of income for charitable purposes u/s 11 and 12 of the Act.
The ITR was processed u/s 143(1) of the Act by the CPC without allowance of application of income for charitable purpose. After receiving intimation u/s 143(1) of the Act, assessee filed rectification application u/s 154 of the Act for reprocessing of Income Tax Return for considering deductions for application of income for charitable purposes under relevant Section 11 and 12 of the Act. Order u/s 154 of the Act was passed again denying the application of income for charitable purpose and demand raised for the tax considering the gross receipt of the trust as its income.
Before the Tribunal, the assessee submitted that CIT(A) had grossly erred in confirming the order made by the CPC without considering the factum of non-adherence to the conditions of Section 143 (1) of the Act.
It was stated that the appellant’s trust had already complied with the filing of Audit Report in Form No. 10B in terms of Circular No. 10/2019 dated 22.05.2019 modified with the Circular No. 7/2021 dated 26.03.2021 and the time limit for the passing of order of condonation in filing of the Audit Report by the PCIT (Exemption) had already expired. It was argued that the CIT(A) had failed to consider the decision of Co-ordinate Bench relied upon by the assessee.
Per contra, the Revenue submitted that the order of the CIT(A) required no interference as the delay in filing Form 10B had not been condoned by the competent authority.
The Tribunal noted that it was the case of the Assessee that the Assessee had uploaded in its Audit Report in Form No. 10B through its auditor, due to some technical mistake in the software the Audit Report uploaded was neither accepted by the system nor was it rejected immediately and no intimation either through e-mail or any post from the Department had given to the Assessee on this regard.
It was seen that the Form No. 10B was ready before filing Return of Income u/s 139 of the Act. After coming to know about the said mistake of not uploading the Audit Report, the same had been uploaded thereafter. The Assessee contended that the return for the relevant year had been uploaded within time showing the very same Audit Report. After coming to know about not uploading the Audit Report, the Assessee filed a letter for condonation of delay uploading the Form 10B along with certificate from auditors explaining the reason for delay and hard copy of Form No. 10B was sent through registered post to the Jurisdictional Commissioner of Income Tax (Exemptions).
The Tribunal observed that the Revenue rejected the plea of the Assessee based on mere technicalities and it was not the case of the Revenue that the Audit Report was not ready as on the date of filing of the return or Assessee was not eligible for any other reason for claiming charitable status by claiming application of income for charitable purpose u/s 11 & 12 of the Act.
The Tribunal further noted that the jurisdictional High Court had observed that the bare reading of the provision of section 154 make it apparent that the power of rectification extends to amendment of an intimation or deemed intimation under Section 143. This power ensures even after the matter has been considered and decided in any proceeding by way of appeal or revision. Necessarily, this power extends even at the stage of the appeal and the further appeal to the ITAT. Even after such decision, it is open to the AO to amend the intimation under Section 143 (1) if the circumstances so warrant. The Hon’ble High Court observed that the technicalities in the given circumstances of the case ought not to obscure the justice. The justice demands, in the peculiar facts of the case, that there is no impediment to relief. The Hon’ble High Court further pointed out that the controlling expression in Section 154 is not “an error” which is somewhat coloured by the exercise of power by the authorities. Instead, the controlling expression is “any mistake” which has wider connotation and includes mistakes committed by the parties also.
The Tribunal stated that it is well settled law that the Revenue Authorities have to tax the right person in right manner and shall not disallow the eligible deductions on mere technicalities. The Revenue authorities have not followed the above ratio laid down by the Hon’ble High Court.
The Tribunal opined that the Revenue Authorities should have allowed the benefit of exemption to the Assessee.
As a result, the Tribunal allowed the Grounds of appeal of the Assessee by deleting the addition made by the A.O, which had been confirmed by the CIT(A).
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